2025 (7) TMI 247 - AT - Income Tax

Ex-parte assessment order - Dismissal of appeal by the assessee in terms of section 249(4)(b) - advance tax payable - as per CIT(A) on or before filing the present appeal the appellant has failed to make the requisite payment of the amount equal to the amount of advance tax which was payable by him - case of the assessee that the AO has made additions towards total credit in the bank account and the income of the assessee for the year under consideration does not exceed the maximum amount which is liable to tax and thus the assessee is not required to make payment of advance tax HELD THAT - Whether the assessee is liable to make an amount equal to the amount of advance tax payable by him needs to be established in light of relevant evidences including books of accounts/financial statements. In the present case the assessee neither furnished return of income nor financial statements to prove its explanation. CIT(A) also dismissed the appeals in light of provisions of section 249(4)(b) of the Act even though there are no evidences with the Ld.CIT(A) to show that the income of the assessee for the year under consideration is above the maximum amount liable for tax. Since the assessment order is ex-parte and the CIT(A) has dismissed the appeal in terms of section 249(4)(b) of the Act in our considered view to give one more opportunity of hearing to the assessee the issue needs to be set aside to the file of the Ld.CIT(A). Thus we set aside the order of the CIT(A) and restore the issue to the file of the Ld.CIT(A) with a direction to reconsider the issue. Appeal filed by the assessee is allowed for statistical purpose.

Issues Presented and Considered

1. Whether the delay in filing the appeal by the assessee, which was time barred by 326 days, could be condoned on the grounds of genuine reasons related to communication lapses by the tax consultant.

2. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in dismissing the appeal filed by the assessee in limine under section 249(4)(b) of the Income Tax Act, 1961, for non-payment of admitted tax or advance tax.

3. Whether the assessee was afforded a reasonable opportunity of hearing before dismissal of the appeal by the CIT(A).

4. Whether the assessee was required to make payment of an amount equal to the advance tax payable before filing the appeal, and if so, whether such liability was established.

5. Whether the matter should be remanded to the CIT(A) for reconsideration after providing the assessee an opportunity to comply with procedural requirements and explain its case.

Issue-wise Detailed Analysis

1. Condonation of Delay in Filing the Appeal

Legal Framework and Precedents: The Income Tax Act allows condonation of delay in filing appeals if the appellant can demonstrate reasonable cause for the delay. Courts have consistently held that procedural delays caused by genuine reasons, such as communication lapses or inadvertent errors, may justify condonation.

Court's Interpretation and Reasoning: The assessee submitted that the delay was due to the tax consultant's failure to update the email ID in the e-filing portal, resulting in non-receipt of deficiency letters and appellate orders. The Tribunal accepted this explanation as a genuine cause.

Key Evidence and Findings: The affidavit explaining the email change and consequent lack of communication was considered. The assessee's claim that the order was known only upon inquiry with the tax consultant was accepted.

Application of Law to Facts: The Tribunal exercised discretion in the interest of justice, condoning the delay and admitting the appeal for hearing.

Treatment of Competing Arguments: The Revenue opposed condonation, arguing the reasons did not constitute reasonable cause. The Tribunal, however, prioritized substantive justice over procedural technicalities.

Conclusion: Delay in filing the appeal was condoned, and the appeal was admitted.

2. Dismissal of Appeal by CIT(A) under Section 249(4)(b) of the Act

Legal Framework and Precedents: Section 249(4)(b) mandates that an appeal before the CIT(A) shall not be admitted unless the appellant has paid the admitted tax or an amount equal to the advance tax payable. However, exemption can be granted if the appellant satisfies the CIT(A) with good and sufficient reasons.

Court's Interpretation and Reasoning: The CIT(A) dismissed the appeal in limine due to the assessee's failure to pay the requisite amount and non-compliance with deficiency notices. The Tribunal noted that the CIT(A) acted in accordance with the statutory mandate but emphasized that the assessee was not provided a reasonable opportunity to explain or rectify the deficiency.

Key Evidence and Findings: The assessment was ex-parte; the assessee neither filed return nor furnished financial details. The CIT(A) issued deficiency letters twice, but the assessee did not respond. The Tribunal observed absence of evidence that the assessee's income exceeded taxable limits.

Application of Law to Facts: The Tribunal held that the statutory requirement under section 249(4)(b) requires the assessee to pay admitted or advance tax unless exempted after showing sufficient cause. Since the assessee neither furnished evidence nor was heard, the dismissal was premature.

Treatment of Competing Arguments: The Revenue stressed the assessee's non-cooperation and upheld the dismissal. The assessee contended lack of opportunity and challenged the ex-parte nature of assessment and appeal dismissal. The Tribunal balanced procedural fairness and statutory compliance.

Conclusion: The order of dismissal by the CIT(A) was set aside, and the matter remanded for fresh consideration after providing the assessee an opportunity to comply and explain.

3. Reasonable Opportunity of Hearing

Legal Framework and Precedents: Principles of natural justice require that an appellant be given a reasonable opportunity to be heard before dismissal of appeal on procedural grounds.

Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not provide the assessee a further opportunity to explain or rectify the defects in the appeal after issuing deficiency notices. This was contrary to the requirement of fair hearing.

Key Evidence and Findings: Deficiency letters were issued, but no response was received from the assessee. The Tribunal noted that absence of response may be due to communication lapses and that the assessee should be given one more chance.

Application of Law to Facts: The Tribunal emphasized that dismissal in limine without hearing or opportunity to cure defects is not in consonance with natural justice.

Treatment of Competing Arguments: The Revenue argued non-cooperation justified dismissal. The Tribunal prioritized procedural fairness and granted the assessee another opportunity.

Conclusion: The assessee must be given a reasonable opportunity to be heard before final dismissal.

4. Liability to Pay Advance Tax or Admitted Tax

Legal Framework and Precedents: Section 249(4)(b) requires payment of admitted tax or advance tax equal to the amount payable before admission of appeal, unless exempted on sufficient cause.

Court's Interpretation and Reasoning: The assessee claimed that its income did not exceed taxable limits and hence no advance tax was payable. However, no evidence such as books of accounts or financial statements was furnished to substantiate this claim.

Key Evidence and Findings: The assessment was ex-parte, and the assessee did not file returns or financial data to prove income below taxable threshold. The CIT(A) had no evidence to confirm or refute the assessee's claim.

Application of Law to Facts: The Tribunal held that the question of tax liability and payment under section 249(4)(b) could not be conclusively determined without proper evidence and opportunity to explain.

Treatment of Competing Arguments: The Revenue relied on non-payment as grounds for dismissal. The assessee argued non-liability but failed to substantiate. The Tribunal required that this be addressed on remand.

Conclusion: Liability to pay advance tax must be established based on evidence and opportunity to explain; this issue requires reconsideration.

5. Remand for Reconsideration

Legal Framework and Precedents: Courts have held that where procedural lapses or lack of opportunity occur, remand for fresh consideration is appropriate to ensure justice.

Court's Interpretation and Reasoning: Given the ex-parte nature of assessment, dismissal of appeal without hearing, and absence of evidence on tax liability, the Tribunal directed remand to CIT(A) for fresh adjudication.

Key Evidence and Findings: No evidence was placed before CIT(A) regarding income or tax liability; assessee was not heard after deficiency notices.

Application of Law to Facts: The Tribunal ordered that the assessee be given one more opportunity to appear, file relevant documents, and satisfy provisions of section 249(4)(b), including seeking exemption with good and sufficient reasons recorded in writing.

Treatment of Competing Arguments: The Revenue's stand on finality was rejected in favor of procedural fairness.

Conclusion: The issue was remanded for fresh consideration after affording opportunity to the assessee.

Significant Holdings

"The delay in filing the appeal is condoned and the appeal is admitted in the interest of justice."

"Whether the assessee is liable to make an amount equal to the amount of advance tax payable by him needs to be established in light of relevant evidences including books of accounts/financial statements."

"The Ld.CIT(A) dismissed the appeal in terms of section 249(4)(b) of the Act, even though there are no evidences with the Ld.CIT(A) to show that the income of the assessee for the year under consideration is above the maximum amount liable for tax."

"To give one more opportunity of hearing to the assessee, the issue needs to be set aside to the file of the Ld.CIT(A)."

"The assessee shall appear before the Ld.CIT(A) and satisfy the provisions of section 249(4)(b) of the Act in light of proviso by filing an application to the Ld.CIT(A) for any good and sufficient reasons to be recorded in writing, seeking exemption from the operation of the provisions of section 249(4)(b) of the Act."

The core principles established are that procedural fairness and natural justice require that an assessee be given reasonable opportunity to comply with statutory requirements before dismissal of appeal; that delay in filing appeals may be condoned for genuine reasons; and that liability to pay advance tax before admission of appeal must be established on evidence and can be exempted on sufficient cause.

Final determinations include condonation of delay, setting aside of the dismissal order under section 249(4)(b), and remand for fresh consideration after providing the assessee an opportunity to comply and explain.

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