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2025 (5) TMI 518 - AT - Income TaxOrder passed by Order u/s. 250 dismissing the appeal on the ground of non-payment of amount equal to advance tax - claiming deduction/exemption u/s. 80P(2)(a)(i) - HELD THAT - It is a matter of record that the assessee has not filed the return of income as well as revised income tax return and when the assessee has not filed the return of income as well as revised income tax return the question of claiming deduction/exemption u/s. 80P(2)(a)(i) does not arise. The deductions under Income Tax Act will not be operational unless and until the income has been notified to the tax authorities by way of filing the return of income or revised return of income. Merely keeping the audited annual accounts is not a threshold for claiming deduction u/s. 80P of the Act or any claim of deduction/exemption under the provisions/Sections of Income Tax Act 1961. The assessee at this juncture is showing that the question of advance tax has to be taken into account related to the filing of the appeal as per Section 249(4)(b) of the Act it is a mandate when the assessee has not filed the return of income. If the assessee wanted any exemption for payment of the prescribed mandate for filing Form 35 in respect of filing appeal before the CIT(A) the assessee should have opted for exemption obligation before the appropriate authority as envisaged in the proviso of Section 139 of the Act. But the assessee has not opted the same as well. CIT(A) has rightly dismissed the appeal being infructuous. The decisions filed by the assessee will not be applicable in the present case as the Tribunal has not taken the cognizance of the proviso to Section 139 of the Act where the assessee has no taxable income/no obligation would be cast upon to compute and pay any advance tax u/s. 208 and 209 of the Act even in the scenario where the assessee had not filed his return of income / revised return of income as he had no taxable income. The decision of Ahmedabad Tribunal has not considered the proviso of Section 139 wherein the assessee has to make a proper application before the authorities for taking the exemptions for filing the appeal before the CIT(A) without paying the amount equal to the advance tax. Here the word advance tax should not be taken into account in toto but is merely an indicator as if the assessee has to pay particular/certain amount of tax. The assessee is claiming that the assessee has an exempt income u/s. 80P of the Act but the exemptions can only be operational when the assessee files return of income/revised return of income and not otherwise. To get the benefit of any provisions/Sections of the Income Tax Act the assessee has to fulfill the conditions of the Income Tax Act in totality and not to interpret the provisions/Sections in isolation where it is only a matter of convenience to the assessee to ask for immunity without discharging its obligations of filing the application before the appropriate authorities for calling upon the exemptions of not paying the amount equal to advance tax before filing the appeal before the CIT(A). Hence the appeal of the assessee is rightly dismissed.
Issues Presented and Considered
The core legal questions considered by the Tribunal in this appeal are:
Issue-wise Detailed Analysis 1. Legality of Dismissal of Appeal by CIT(A) on Ground of Non-Payment of Amount Equal to Advance Tax Legal Framework and Precedents: Section 249(4) mandates that an appeal before the CIT(A) shall not be admitted unless the appellant has paid an amount equal to the advance tax payable for the year or such lesser amount as prescribed. The proviso to Section 139 allows exemption from filing return if the income is below taxable limits or certain conditions are met, but requires application to the tax authorities for exemption from advance tax payment before filing appeal. Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) dismissed the appeal because the assessee did not pay the amount equal to advance tax as mandated under Section 249(4). The Tribunal emphasized that this procedural requirement is mandatory and non-compliance justifies dismissal of appeal. The Tribunal rejected the assessee's argument that the order was illegal or against natural justice, holding that the statutory mandate was clear and the assessee had not sought exemption from payment of advance tax before filing appeal. Key Evidence and Findings: The assessee had not filed return of income or revised return, nor had it applied for exemption from advance tax payment as per the proviso to Section 139. The CIT(A) had accordingly dismissed the appeal as infructuous. Application of Law to Facts: Since the assessee failed to comply with the mandatory condition of paying amount equal to advance tax or obtaining exemption, the dismissal of appeal by CIT(A) was upheld. Treatment of Competing Arguments: The assessee argued that it had no taxable income and thus no liability to pay advance tax; however, the Tribunal held that exemption from advance tax payment requires formal application, which was not made. The Tribunal distinguished cases cited by the assessee for non-applicability due to their failure to consider the proviso to Section 139. Conclusion: The dismissal of appeal by CIT(A) on ground of non-payment of amount equal to advance tax under Section 249(4) was lawful and justified. 2. Applicability of Exemption under Section 80P(2)(a)(i) of the Act and Filing of Return Legal Framework and Precedents: Section 80P(2)(a)(i) exempts certain cooperative societies from tax on specified income. However, such exemption is contingent on proper compliance including filing of return of income as per Section 139 of the Act. The proviso to Section 139 requires filing of return or application for exemption from advance tax payment. Court's Interpretation and Reasoning: The Tribunal held that exemption under Section 80P(2)(a)(i) cannot be claimed in absence of filing return of income or revised return. The mere maintenance of audited accounts or claim of exemption in accounts does not suffice. The exemption provisions become operational only when the assessee complies with procedural requirements including filing return. Key Evidence and Findings: The assessee had not filed any return or revised return for the assessment year. The Assessing Officer disallowed exemption claimed under Section 80P(2)(a)(i) on this ground. Application of Law to Facts: Since the assessee did not file return, it was not entitled to exemption under Section 80P(2)(a)(i). Therefore, the Assessing Officer's addition of income and disallowance of exemption was justified. Treatment of Competing Arguments: The assessee contended that income was non-taxable and hence no liability arose. The Tribunal rejected this, emphasizing that statutory compliance is a precondition for claiming exemption. Conclusion: Exemption under Section 80P(2)(a)(i) is not available without filing return of income; therefore, the assessee's claim was not sustainable. 3. Justification for Addition of Interest Income Estimated at 6% on Advances Legal Framework and Precedents: The Assessing Officer has discretion to make best judgment assessment under Section 144 when the assessee fails to provide satisfactory evidence. Estimation of income on reasonable basis such as minimum interest rate is permissible. Court's Interpretation and Reasoning: The Assessing Officer observed that the assessee's financial statements were unsigned and lacked authenticity. The balance sheet showed advances of Rs. 98,99,383/-, but interest income declared was only Rs. 4,53,489/-. The AO estimated interest income at 6% of advances, resulting in addition of Rs. 4,51,568/-. The Tribunal found this estimation reasonable given the lack of credible evidence from the assessee. Key Evidence and Findings: The assessee failed to produce signed financial statements or credible proof of declared interest income. The AO's estimate was based on minimum interest rate and balance sheet figures. Application of Law to Facts: The Tribunal upheld the AO's addition as justified and not arbitrary. Treatment of Competing Arguments: The assessee argued that books were audited by Registrar of Societies and thus estimation was unjustified. The Tribunal held that audit by Registrar of Societies does not substitute tax audit or proof for income tax purposes. Conclusion: The addition of Rs. 4,51,568/- on estimation of interest income was justified. 4. Filing of Return and Its Consequences on Appeal and Assessment Legal Framework and Precedents: Filing of return of income is a fundamental procedural requirement under the Income Tax Act. Non-filing can result in assessment under Section 144 and bar certain claims including exemptions and appeals. Court's Interpretation and Reasoning: The Tribunal emphasized that the assessee's failure to file return or revised return disentitles it from claiming exemption or filing appeal without payment of advance tax. The proviso to Section 139 requires application for exemption from advance tax payment if income is non-taxable, which was not done. Key Evidence and Findings: The assessee did not file any return or revised return for the relevant year. Application of Law to Facts: The Tribunal held that the procedural default by the assessee justified the Assessing Officer's actions and CIT(A)'s dismissal of appeal. Treatment of Competing Arguments: The assessee's reliance on decisions where exemption was granted without filing return was rejected as those decisions did not consider the proviso to Section 139. Conclusion: Non-filing of return precludes exemption claims and filing of appeal without payment of advance tax. Significant Holdings "The deductions under Income Tax Act will not be operational unless and until the income has been notified to the tax authorities by way of filing the return of income or revised return of income. Merely keeping the audited annual accounts is not a threshold for claiming deduction u/s. 80P of the Act or any claim of deduction/exemption under the provisions/Sections of Income Tax Act, 1961." "If the assessee wanted any exemption for payment of the prescribed mandate for filing Form 35 in respect of filing appeal before the CIT(A), the assessee should have opted for exemption obligation before the appropriate authority as envisaged in the proviso of Section 139 of the Act. But the assessee has not opted the same as well. Thus, the CIT(A) has rightly dismissed the appeal being infructuous." "The word 'advance tax' should not be taken into account in toto but is merely an indicator as if the assessee has to pay 'particular/certain amount' of tax. The assessee is claiming that the assessee has an exempt income u/s. 80P of the Act but the exemptions can only be operational when the assessee files return of income/revised return of income and not otherwise." "The Assessing Officer made addition of Rs. 4,51,568/- towards income from loans and advances estimated at 6% of Rs. 98,99,383/-. The estimation of income on a reasonable basis where books are not signed or are not reliable is justified." Final determinations were:
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