APPEAL PROCEDURES - SECTION 249 AND 253 PROVIDE DIFFERENT SCHEMES RELATING TO PREPAYMENT OF ADMITTED TAX:

[C.A. DEV KUMAR KOTHARI]

Relevant links:

CIT v. Pawan Kumar dt. April 6, 2010 2010 -TMI - 75438 - SUPREME COURT

Chapter XX and in particular section 249 and 253 of Income-tax Act, 1961.

Part X of Income Tax Rules.

Scope of this article:

Scope of this article is restricted to the aspect of appeal before ITAT and condition of prepayment of admitted tax. Other provisions are discussed only to the extent as required in context of the aspect of such condition. Readers should check provisions applicable at any relevant time and in relation to particular matter.

First or second appeal before CIT(A) and Tribunal:

Appeal before CIT(A) will always be first appeal whereas appeal before Tribunal, can be first appeal or second appeal. Assessee can file appeal in several situations and against different type of orders to seek further relief or relief as the case may be. Section 253(1) are reproduced below in first column and in second column brief remarks are made to point out nature of appeal before ITAT:

Appeals to the Appellate Tribunal.	Explanation and Present situation
253. (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order—
(a) an order passed by a [Deputy Commissioner (Appeals)] [before the 1st day of October, 1998] [or, as the case may be, a Commissioner (Appeals)] under [***] [section 154], [***] section 250, [section 271, section 271A or section 272A]; or	Against orders of CIT(A), against different type of orders- these will be second appeal.
[(b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or]	Against block assessments order- first appeal during relevant period. Now first appeal in case of block assessment is also before CIT(A), and then there can be second appeal before ITAT against first appeal order of CIT(A) against block assessment order
[(ba) an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or]	Order of AO excluding assessee from Tonnage tax scheme- first appeal.
(c) an order passed by a Commissioner [under section 12AA [or under clause (vi) of sub-section (5) of section 80G] or] under section 263 [or under section 271] [or under section 272A] [***] or an order passed by him under section 154 amending his order under section 263] [or an order passed by a Chief Commissioner or a Director General or a Director under section 272A; [or]]	Orders of CIT, CCIT or DG etc. in various proceedings related with revisions, approvals, permissions or withdrawal of approvals and approvals etc. First appeal is before Tribunal
[(d) an order passed by an Assessing Officer under sub-section (3) of section 143 or section 147 in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order.]	Against assessment orders order of the AO passed in pursuance of directions of the Dispute Resolution panel or order of rectification of such assessment orders. This is also first appeal against assessment order, however, since it is against assessment order in pursuance of directions of DRP, appeal is provided before ITAT and not before CIT(A).

The above table explains that under law there can be either first appeal or second appeal before ITAT. When it is first appeal, generally the original order is passed by an officer equal to or higher in rank in comparison to CIT(A) or if the A.O. passes an order in pursuance of directions of a senior officer.

Chapter XX and its subchapters relating to appeals and revision:

Chapter XX has sub-chapters under sub-headings for appeals before different forums- CIT(A), ITAT, High Courts and the , Supreme Court, petition for revision before CIT . We find some specific requirements as to appealable orders, forms, limitation to file appeal, payment of fees, and payment of admitted tax etc. in respect of each type of appeals under different sub-headings. Forms and procedure prescribed are also different. Appeals before High Court and Supreme Court are also governed by general laws and Court Rules.

 Sub-chapter F contains some general provisions in relation to appeals and revision.

Precondition of payment of admitted tax is only in case of appeal before CIT(A):

Only in case of first appeal before the CIT(A), there is specific requirement vide S. 249 (4) (a), that assessee should have paid admitted tax. Whereas, in case of appeal before the Tribunal, High Courts and the Supreme Court there are no such specific requirement.

An appeal is a statutory right, it can be curtailed only by specific and categorical provision. Therefore, condition applicable in case of appeal before CIT(A) cannot and should not be read into provisions relating to appeal before other authorities or courts.

First appeal before ITAT:

As discussed earlier we find in S. 253 (1) several situations in which for the first time appeal is filed before ITAT. Out of these the clauses (b) and (ba) pertains to situations in which order is passed by the A.O. mostly and practically independently, still first appeal is provided before ITAT. The newly inserted clause (d) pertains to assessment order etc. passed by the A.O. in pursuance of directions of DRP. Therefore, in some situation even the first appeal is filed before the ITAT instead of before the CIT(A). However, in spite of appeal being first appeal, there is no specific condition to deposit admitted tax.

Sub-heading or sub-chapters:

The schemes of provisions relating to various appeals and revisions under Chapter XX suggest that there are different and independent provisions for different proceedings before different forums. At some places words used are "under this chapter", and such words can mean either under entire chapter or under particular sub-chapter and not necessarily for the whole of Chapter XX. In any case for a particular matter the expression may have to be construed for entire Chapter and whereas for some other issue it may be restricted to particular sub-chapter. This controversy also arose before the Supreme Court and the Supreme Court decided that section 249(4) falling under Chapter XX-A is restricted to appeals before CIT(A) and it cannot be read into in provisions relating to appeal any other proceeding including appeal before ITAT u/s 253(b)- appeal before ITAT against block assessment order- a matter recently considered by the Supreme Court.

The Supreme Court on provisions of S. 253 vis a vis S. 249:

CIT v. Pawan Kumar dt. April 6, 2010 2010 -TMI - 75438 - SUPREME COURT concerns matter about provisions for appeal before Tribunal, filed without full payment of admitted tax was considered. The Supreme court held that one provision of section 249(4)(a) cannot be read into section 253(1)(b). There being is no specific condition of pre deposit of admitted tax , an appeal filed before the ITAT, though without full payment of admitted tax was rightly admitted by Tribunal and rightly so held by the High Court also.

Summary and analysis of facts:

The assessee had admitted tax liability of Rs.26,47,800/- out of which paid a sum of Rs.22,63,600/- before filing of the appeal against Block assessment order. Thus entire admitted tax was not paid. At relevant time appeal before ITAT was filed, (it was first appeal - added by author) against the order under Section 158BC for particular block period. The appeal was filed u/s 253 (1) (b) ,as it applied at relevant time.

ITAT rejected the preliminary objection raised by revenue as to the maintainability of the appeal for nonpayment of entire admitted tax by assessee.

The assessee contended and Tribunal accepted that Section 249(4) concerns appeal before CIT(A) and falls under Chapter XX A of the Act and cannot be read into Section 253(1)(b) which deals with the Appeals to the Appellate Tribunal and which falls in Chapter XX(B).

The revenue carried the matter on preliminary objection itself before the High Court by way of an appeal under Section 260A of 1961 Act.

The MP High Court also approved the view of the Appellate Tribunal. Hence the Revenue preferred appeal before the Supreme Court against judgment of the High Court on such preliminary objection of revenue. As observed by the Supreme Court appeal before ITAT on main issues of tax assessment and demands in appeal were still pending.

Points of facts and law and arguments before the Supreme Court analyzed:

Block Period 1986-1987 to 14th September, 1995 is involved.

Law has since undergone several changes, particularly after 1st October, 1998, in the matter of grant of stay by the Appellate Tribunal under Section 253(7) of 1961 Act, which sub-section did not exist during the relevant period, the matter decided is pertaining to particular period.

The judgment is therefore, to be confined to the period prior to 1st October, 1998.

Assessee remained absent though notice about appeal before SC was served.

As per counsel of revenue section 249(4), inter alia, states that no appeal under this Chapter [i.e., Chapter XX] shall be admitted unless at the time of filing of the appeal, the assessee has paid the admitted tax due on the income returned by him. The present case is covered by Section 249(4)(a) of 1961 Act inasmuch as the assessee did not paid the full amount of admitted tax of Rs.26,47,800/-. The appeal preferred by the assessee, before Tribunal was not maintainable for non compliance of S. 249(4) as admitted tax was not paid entirely.

Learned counsel submitted that Chapter XX of 1961 Act dealt with Appeals and Revision. That Chapter had different Heads at the relevant time in the form of Appeals to Commissioner (Appeals) [Heading `A'], Appeals to the Appellate Tribunal [Heading `B'], Reference to High Court [Heading `C'], Appeals to the Supreme Court [Heading `D' and Revision by the Commissioner [Heading `E'] etc.

According to the learned counsel, in Section 249(4), the words used are "no appeal under `this Chapter' shall be admitted unless at the time of filing of the appeal, the assessee has paid the tax due on the income returned by him".

The learned counsel emphasized the words "this Chapter" in Section 249(4) to mean the whole of Chapter XX and not Chapter XX(A) alone and, consequently, every appellant at the time of filing of appeal under Section 253(1) to the Appellate Tribunal was required to pay the admitted tax due on the income returned by him in terms of Section 249(4)(a) of 1961 Act as condition precedent failing which his appeal was not maintainable.

 Counsel argued that the appeal to the Appellate Tribunal under Section 253(1) (b) should have been dismissed as not maintainable.

Supreme Court's reasoning and Ruling:

Supreme Court did not find no merit in the arguments advanced by counsel of revenue. And considered that the Chapter XX deals with "Appeals and Revisions" is divided into Headings `A' to `F'. A related provision is Section 246 which enumerates a list of Orders of the Assessing Officer against which appeal(s) would lie before CIT(A).In that list of Orders, an appeal to the Appellate Tribunal under Section 253(1) is not mentioned. This is a very important indication to show that each Heading in Chapter XX deals with a different subject- matter and one cannot read the words in Chapter XX(A) into the words used in Chapter XX(B). Chapter XX(A) deals with Appeals to the Deputy Commissioner and Commissioner (Appeals) whereas Chapter XX(B) deals with Appeals to the Appellate Tribunal. Similarly, Reference to the High Court lies under Chapter XX(C). It is for this reason that Supreme Court came to the conclusion that each Heading is a stand-alone item and, therefore, one cannot read the provision of Section 249(4)(a) into Section 253(1)(b) of the Act.

Other reason given by Supreme Court is that If the argument of the Department is to be accepted, then, in that event, no appeal or Reference could lie even to the High Court without complying with the provisions of Section 249(4)(a) of 1961 Act. This cannot be the Scheme of Chapter XX of 1961 Act.

One more reason given by the Court is that Section 249(4)(a) cannot be read into Section 253(1)(b) of 1961 Act. Section 253(1)(b) refers to an assessee filing an appeal to the Appellate Tribunal against an order passed by an Assessing Officer under Section 158BC(c) of 1961 Act. Sub- section (b) came to be inserted into Section 253(1) by the Finance Act, 1995, and, that too, with effect from 1st July, 1995. The very concept of Block Assessment came to be inserted in the Income Tax Act, 1961, vide Finance Act, 1995, with effect from 1st July, 1995, whereas the words "this Chapter" in Section 249(4) came to be inserted in the Income Tax Act, 1961, vide Taxation Laws (Amendment) Act, 1975, with effect from 1st October, 1975. For this reason also the expression "this Chapter" in Section 249(4) confines to Chapter XX(A) without it being extended to Section 253(1)(b) which is in Chapter XX(B). Under the Scheme of Chapter XX, as stated above, no appeal under Section 249(4)(a) in Chapter XX(A) was admissible without the assessee having paid the admitted tax due on the income returned by him.

Supreme court also considered that once Section 249(4)(a) is treated as a mandatory condition for filing an appeal before Commissioner of Income Tax (Appeals) and once that condition stood satisfied at the time of his filing an appeal to Commissioner of Income Tax (Appeals), then, there was no necessity for the assessee to once again pay the admitted tax due as a condition precedent to his filing the appeal before the Appellate Tribunal under Section 253(1)(b) of 1961 Act. ( Per author: there appears some confusion due to lack of material because at the relevant time the first appeal itself was filed before ITAT in case of Block assessment, therefore, compliance of S. 249(4) at first appeal stage before CIT(A) should not have arisen. The counsel of revenue should have cleared this aspect).

That the doctrine of incorporation cannot be invoked by implication. A provision which insists on the assessee satisfying a condition of paying the admitted tax as condition precedent to his filing of appeal under Section 253(1)(b) of 1961 Act is a dis-enabling provision and cannot be read into by courts because a dis-enabling provision must be clearly spelt out by the legislature while enacting the statute.

The Courts have to be careful in reading into the Act such dis-enabling provisions as that would tantamount to judicial legislation which the Courts must eschew.

It is for the Parliament to specifically say that no appeal shall be filed or admitted or maintainable without the assessee(s) paying the admitted tax due. That has been done only in the case of an appeal under Section 249(4)(a) of 1961 Act.

We cannot read such a dis-enabling provision into Section 253(1)(b) of 1961 Act. If we do so, we are judicially legislating by reading something into the Act which is not there.

In such a case, the question would also arise as to why the Appellate Tribunal should not be given the power to dispense with or waive such a condition?

All this would come in the realm of legislation which can be done only by the Legislature. Hence, The Supreme Court did not find merit in civil appeal filed by the Department and dismissed the same.

Thus the Supreme Court dismissed the appeals filed by the Department with no order as to costs. The Supreme Court also directed for expediting the matter so that Tribunal can decide appeals expeditiously.

Provisions remain unchanged in relation to admitted tax:

Provision relating to payment of admitted tax remains unchanged. We find that there is no change in law as it stood during relevant period considered by the Supreme Court in the case discussed hereafter and the legal position as it stand now. There is no provision for condition to make payment of admitted tax before filing an appeal before ITAT, High Court, Supreme Court or revision petition before CIT. Therefore the recent ruling in the case of Pawan Kumar Laddha is applicable even today in relation to appeals before ITAT, HC, SC and also revision petition u/s 264 before CIT.

Suppose an assessee has not paid admitted tax. There is increase in assessed tax liability. The assessee cannot appeal before the CIT(A) without payment of admitted tax. However, the assessee can file an application for revision u/s 264 before the CIT. Suppose the CIT passes an order u/s 263, the assessee can file an appeal against order u/s 263 before ITAT though admitted tax has not been paid.

Conclusion:

There should be specific conditions or disabling provision to deny an opportunity to assessee, courts cannot read or presume such provisions.

The provisions have to be read as they are.

Judicial legislation should be avoided, particularly when it comes to disable litigants to seek justice.

When legislature has not made a condition for appeal before ITAT, the court cannot read such a condition or supply such a condition.

When a Chapter is divided in several sub-chapters, a provision in one chapter may not apply to provisions under other sub-chapter. For this purpose scheme and purposes of different sub-chapters are to be considered.

Appeal being a statutory right should be considered liberally and in purpose seeking manner.