2024 (7) TMI 1632 - AT - Income Tax

Dismissal of the appeal of the assessee by the CIT(A) in limine for want of payment of advance tax u/s 249(4)(2) - HELD THAT - The issue of payment of any advance tax as per the provisions of section 249(4)(b) does not arise as held by this tribunal in case of Deepak Khandelwal 2024 (7) TMI 1629 - ITAT INDORE for filing the appeal before the CIT(A) against the reassessment order passed by the AO the question for payment of advance tax by the assessee as per clause (b) of sub-section (4) of section 249 of the Act does not arise. Accordingly this issue is now covered by the earlier decisions of this tribunal and consequently the impugned order of the CIT(A) is set aside being contrary to the provisions of law. Since the assessment order was also passed ex-parte due to non-appearance of the assessee therefore in the facts and circumstances of the case when the CIT(A) has not adjudicated appeal of the assessee on merits the matter is remanded to the record of the jurisdictional AO for fresh adjudication after considering relevant details/evidences as well as explanation to be filed by the assessee. Needless to say the assessee be given an appropriate opportunity of hearing before passing fresh order. DR has fairly submitted that assessment order is passed ex-pare as best judgment assessment therefore the matter may be remanded to the record of the AO for fresh adjudication. Accordingly the matter is remanded to the record of the AO for fresh adjudication after giving an appropriate opportunity of hearing to the assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal include:

(a) Whether the appeal filed by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)] could be dismissed in limine for non-payment of advance tax under Section 249(4)(b) of the Income Tax Act, 1961, particularly in cases where the assessment is reopened by the Assessing Officer (AO) under Section 147.

(b) Whether the statutory requirement of payment of advance tax as a pre-condition for admission of appeal under Section 249(4)(b) applies to reassessment proceedings initiated by the AO.

(c) Whether the CIT(A) was justified in dismissing the appeal without providing an opportunity of hearing, thereby violating principles of natural justice.

(d) The applicability of the proviso to Section 249(4)(b) which allows exemption from the advance tax payment condition for "good and sufficient reason" recorded in writing.

(e) The question of whether an assessee who has not filed a return of income but claims no tax liability can be compelled to pay advance tax as a precondition to filing an appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Applicability of Section 249(4)(b) to reassessment proceedings and payment of advance tax as condition precedent to admission of appeal

The Tribunal extensively analyzed Section 249(4) of the Income Tax Act which provides that no appeal shall be admitted unless, at the time of filing the appeal, the appellant has paid the tax due on the income returned (if a return is filed) or has paid an amount equal to the advance tax payable (if no return is filed). The relevant sub-section reads:

"(4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal,- (a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or (b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him."

The CIT(A) had dismissed the appeal on the ground that the assessee had not paid advance tax as required under Section 249(4)(b). However, the Tribunal noted that this appeal arises out of reassessment proceedings initiated under Section 147, where the AO reopened the assessment to assess income on account of bank deposits and investments.

The Tribunal relied on its consistent precedents including decisions in cases analogous to the present facts, such as Deepak Khandelwal vs. ITO Sehore, Ramdas Yadav vs. ITO, and M/s Nine Globe Industries Pvt. Ltd. vs. ACIT, which held that the condition of payment of advance tax under Section 249(4)(b) does not apply to reassessment proceedings. The rationale is that advance tax liability arises on the basis of income declared by the assessee in the original return and the reassessment is a subsequent proceeding initiated by the AO for additional income. Therefore, the statutory condition of advance tax payment for admission of appeal is inapplicable in reassessment cases.

The Tribunal emphasized that the CIT(A)'s dismissal of the appeal in limine without considering this legal position was contrary to law and precedent.

Issue (c): Violation of principles of natural justice by dismissing appeal without hearing

The assessee contended that the appeal was dismissed without affording an opportunity to rebut the findings, which is against principles of natural justice. The Tribunal observed that the CIT(A) had not adjudicated the appeal on merits but dismissed it solely on a procedural ground of non-payment of advance tax. Since the assessment order itself was passed ex-parte due to non-appearance of the assessee, the Tribunal found it appropriate to remand the matter to the AO for fresh adjudication after giving the assessee a reasonable opportunity of hearing. This remedial direction ensures compliance with natural justice and fair procedure.

Issue (d): Applicability of proviso to Section 249(4)(b) and exemption from advance tax payment

The Tribunal examined the proviso to Section 249(4)(b) which empowers the CIT(A) to exempt an appellant from the requirement of advance tax payment for "good and sufficient reason" recorded in writing. In the present case, the assessee had not filed a return but claimed no tax liability and had not paid advance tax. The Tribunal referred to a decision from the Raipur Bench in Vishnusharan Chandravanshi vs. ITO, which held that if no obligation to pay advance tax exists because the assessee has no taxable income, the mandatory condition under Section 249(4)(b) does not arise.

The Tribunal noted that the obligation to pay advance tax is triggered only if there is taxable income as per Sections 208 and 209 of the Act. Since the assessee had no taxable income for the relevant assessment year, the condition of advance tax payment could not be insisted upon as a precondition for admission of appeal. The Tribunal also cited decisions from ITAT Bengaluru and Delhi Benches supporting this interpretation.

Issue (e): Requirement of advance tax payment when no return is filed but no tax liability claimed

The Tribunal clarified that the statutory requirement under Section 249(4)(b) applies only where the assessee has an obligation to pay advance tax. If the assessee bona fide believes and states that there is no taxable income, then the condition of paying advance tax cannot be enforced as a precondition to maintain the appeal. The Tribunal held that dismissal of the appeal on this ground without considering the assessee's claim of no tax liability is erroneous.

3. SIGNIFICANT HOLDINGS

The Tribunal crystallized the following crucial legal principles and conclusions:

"The income assessed by the AO in the reassessment proceedings does not attract provisions of section 249(4)(b) of the Act."

"Clause (b) of Section 249(4) of the Act will not apply as there is no question of paying advance tax in reassessment proceedings, even though the assessee did not file return of income."

"In absence of any obligation cast upon the assessee to compute and pay advance tax for the subject year, the CIT(A) could not have held that the assessee failed to comply with statutory conditions contemplated in Section 249(4)(b) of the Act."

"The CIT(A)'s dismissal of the appeal in limine on the ground of non-payment of advance tax is contrary to the provisions of law and deserves to be set aside."

"Where the assessment order was passed ex-parte and the appeal was dismissed without adjudication on merits, the matter is remanded to the AO for fresh adjudication after giving the assessee an opportunity of hearing."

"The proviso to Section 249(4)(b) allows exemption from advance tax payment condition for good and sufficient reason to be recorded in writing."

"The statutory requirement of payment of advance tax as a pre-condition for admission of appeal is triggered only where the assessee has taxable income and an obligation to pay advance tax."

Accordingly, the Tribunal set aside the impugned order of the CIT(A) and remanded the matter to the AO for fresh adjudication on merits after affording the assessee a reasonable opportunity of hearing. The appeal was allowed for statistical purposes.