2025 (7) TMI 372 - AT - Income Tax

CIT(A) invoking section 249(4)(b) - non admissibility of assessee appeal as assessee not paid the taxes or advance tax - Validity of order passed by NFAC Delhi for the quantum of assessment passed u/s 147 r.w.s. 144 - assessee is mainly aggrieved by dismissal of the order by the CIT (A) by applying the provision of section 249(4)(b) - HELD THAT - Under clause (b) where no return has been filed assessee is required to pay the amount equal to the advance tax which was payable by him or an application should be made on behalf of the assessee to the Ld. CIT(A) showing/giving good and sufficient reason for admitting of the appeal. From the perusal of the assessment order it is seen that although it is an ex-parte order the AO has made addition not only on account of professional fee but also estimated the turnover based on service tax return and also expenditure incurred to credit card and also estimated turnover. There is duplication of additions which has been made. The AO should have at least either estimated the professional income or estimated the net profit but cannot make various additions in the manner in which he has made. CIT (A) should have at least given a show cause notice to the assessee to explain as to why the advance tax has not been paid and even the Ld. CIT(A) has not specified as to what was the amount on which advance tax should be paid. In these facts invocation of section 249(4)(b) is not justified. Accordingly in the interest of justice the matter is remanded back to the file of the Ld. CIT(A) to decide the issue afresh in accordance with law after giving proper opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the delay of 97 days in filing the appeal before the Tribunal is liable to be condoned.

- Whether the invocation of section 249(4)(b) of the Income Tax Act by the Ld. CIT(A) to dismiss the appeal was justified, particularly in the context of non-payment of advance tax and non-filing of return of income by the assessee.

- Whether the additions made by the Assessing Officer (AO) under section 147 r.w.s. 144 of the Act, including professional fees, unexplained expenditure under section 69C, interest income, and turnover based on service tax return, are justified and correctly computed without duplication.

- Whether the Ld. CIT(A) erred in not providing a show cause notice or opportunity of hearing before dismissing the appeal under section 249(4)(b).

2. ISSUE-WISE DETAILED ANALYSIS

Delay in Filing Appeal:

Relevant legal framework includes the provisions for condonation of delay under the Income Tax Act and principles established by precedents emphasizing the need for reasonable cause and bonafide belief in cases of delayed appeals.

The Court observed that the appeal was delayed by 97 days beyond the prescribed period. The assessee cited non-awareness of the order's availability on the ITBA portal, lack of knowledge of appellate procedures, and significant emotional distress due to the demise of his mother, coupled with financial hardship during the relevant period.

In applying the law to these facts, the Court found these reasons constituted a reasonable and bonafide cause for the delay. The Court thus exercised discretion to condone the delay, emphasizing that procedural technicalities should not override substantive justice, especially when the appellant was not notified of the order's availability and was under exceptional personal circumstances.

Invocation of Section 249(4)(b) and Maintainability of Appeal:

Section 249(4)(b) provides that an appeal shall not be admitted unless the appellant has paid the amount of advance tax payable or has obtained permission from the Commissioner of Income Tax (Appeals) by showing good and sufficient reasons.

The Court scrutinized the applicability of this provision in the present case where the assessee had not filed a return of income and no advance tax had been paid. The Tribunal noted that the Ld. CIT(A) dismissed the appeal summarily invoking section 249(4)(b) without issuing any notice or specifying the amount of advance tax payable, thereby denying the assessee an opportunity to explain or rectify.

The Court held that the provision does not apply mechanically in cases where no return has been filed, and the assessee must be given a chance to show cause or seek permission for filing the appeal. The absence of any show cause notice or opportunity to the assessee was a procedural lapse. Hence, the invocation of section 249(4)(b) without due process was unjustified.

The Court remanded the matter to the Ld. CIT(A) for fresh adjudication in accordance with law, directing that the assessee be given proper opportunity of hearing and the issue of advance tax payment be examined with reference to the facts and law.

Validity and Computation of Additions Made by AO:

The AO made additions aggregating Rs. 53,70,610/- under multiple heads: professional fees (Rs. 10,33,712/-), unexplained expenditure via credit card payments under section 69C (Rs. 12,78,903/-), interest income (Rs. 72,300/-), and turnover estimated from service tax returns (Rs. 29,85,696/-).

The Court noted that the AO's approach involved both direct additions based on bank and AIR information and an estimated turnover based on service tax returns. The Tribunal observed that this resulted in duplication of income inclusion, as professional fees and turnover estimation overlapped.

Legal principles require that the AO must avoid double counting and should estimate income either on the basis of professional fees or turnover, but not both cumulatively. The AO should have either estimated net profit or professional income consistently.

Applying these principles, the Court found the AO's assessment to be flawed in methodology and directed that the matter be reconsidered on remand, ensuring that additions are made without duplication and in accordance with statutory provisions and judicial precedents.

Procedural Fairness and Opportunity of Hearing:

The Court emphasized that the Ld. CIT(A) ought to have issued a show cause notice to the assessee before dismissing the appeal under section 249(4)(b). The absence of such procedural safeguards violated principles of natural justice.

The Court also underscored the necessity for the assessee to cooperate and substantiate his case during appellate proceedings to enable a fair and just decision.

3. SIGNIFICANT HOLDINGS

"In view of the aforesaid circumstances that the order of the Ld. CIT(A) was communicated through ITBA portal which the assessee was not aware of and was also on emotional distress due to demise of his mother, therefore we are of the opinion that there was a reasonable and bonafide belief in filing the appeal belatedly. Accordingly, the delay is condoned."

"The invocation of section 249(4)(b) is not justified when the assessee has not filed the return of income and no advance tax has been paid, without giving any show cause notice or opportunity of hearing."

"The AO should have at least either estimated the professional income or estimated the net profit but cannot make various additions in the manner in which he has made, leading to duplication."

"The matter is remanded back to the file of the Ld. CIT(A) to decide the issue afresh in accordance with law after giving proper opportunity of hearing to the assessee."

Core principles established include the necessity of procedural fairness before dismissal of appeals under section 249(4)(b), the requirement to avoid duplication in income assessment, and the discretionary power to condone delay when justified by reasonable cause and bonafide belief.

Final determinations are that the delay in filing appeal is condoned, the dismissal of appeal under section 249(4)(b) without notice is set aside, and the matter is remanded for fresh consideration with due opportunity to the assessee. The appeal is allowed for statistical purposes.