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2015 (7) TMI 288 - ITAT MUMBAI

2015 (7) TMI 288 - ITAT MUMBAI - TMI - Dismissal of appeal as un-admitted - payment of tax before filing of the appeal - CIT(A) noticed that the taxes due on the income returned u/s 153A of the Act were not paid by the assessee on the date of filing of the appeal and as a consequence, he invoked the provisions of section 249(4) of the Act and dismissed the appeal - assessee pointed out that though the taxes due on the income returned were not paid by the assessee prior to the date of filing of a .....

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ing such tax before filing of the appeal is essentially directory in nature. According to the Tribunal, where such defect in appeal, being non-payment of tax prior to filing of appeal, has been removed then the earlier filed defective appeal becomes a valid appeal.

Notably, the Tribunal has also referred to the Judgment of Hon’ble Karnataka High Court in the case of D. Komalakshi V. DCIT [2006 (11) TMI 155 - KARNATAKA High Court ] in holding that on removal of defect, the earlier defe .....

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e assessee should have been determined on its merits. Therefore, in the facts and circumstances of the case, we hereby set aside the order of CIT(A) and restore the appeal back to his file for adjudication afresh on merits. - Decided in favour of assessee. - ITA NO.1443/Mum/2013 to ITA NO.1449/Mum/2013 - Dated:- 30-6-2015 - Shri G.S. Pannu and Shri Amit Shukla , JJ. For the Petitioner : Shri Girish Dave & Shri Vinayak Pandya For the Respondent : Shri Premanand J. ORDER Per G.S. Pannu, AM, In .....

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dated 31.12.2012, which in-turn has arisen from an order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961( hereinafter referred to as the Act ) dated 29.12.2008 pertaining to assessment year 2007-08. 4. The assessee is an individual, engaged in the business of manufacture of readymade garments. The assessee belongs to one Mali Group of cases, wherein, a search & seizure action u/s 132(1) of the Act was carried out on 28.06.2006. Consequent to the search action, impugned .....

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quence, he invoked the provisions of section 249(4) of the Act and dismissed the appeal as un-admitted. 6. Before us, the Ld. Representative for the assessee pointed out that though the taxes due on the income returned were not paid by the assessee prior to the date of filing of appeal with the CIT(A) i.e. 27.01.2009 but the same were duly paid much before the CIT(A) passed the impugned order and in this context, he has referred to page 98 of the Paper Book. In the Tabulation placed at page 98 o .....

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as un-admitted inasmuch as defect of non payment of taxes on returned income was rectified by the assessee even before the CIT(A) disposed of the appeal of the assessee. The Ld. Representative has relied upon the decision of Mumbai Bench of the Tribunal in the case of Bhumiraj Construction Vs. Addl. CIT [135 TTJ 357] (Mum.), to point out that the stipulation as to the deposit of such tax before filing of the appeal is only directory and not mandatory. Further, as per the Tribunal, where such tax .....

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the defect in the filing of appeal and, therefore, the appeal was sent back to the file of CIT(A) for adjudication on merits. According to the Ld. Representative, the facts in the instant case stand on a better footing inasmuch as in the present case the tax due on the returned income has been paid even before the CIT(A) has disposed of the appeal of the assessee. 7. On the other hand, the Ld. DR appearing for the Revenue has not contested the factual matrix brought out by the Ld. Representative .....

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8. We have carefully considered the rival submissions. Factually speaking, it is not disputed by the Revenue that assessee has paid the taxes due on the income returned after filing of appeal before the CIT(A) but before its determination by the CIT(A). In this factual background, the CIT(A) has interpreted the condition prescribed in section 249(4) of the Act, regarding payment of tax due on the returned income prior to the filing of appeal, as a mandatory condition. Therefore, he held the app .....

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Tribunal, where such defect in appeal, being non-payment of tax prior to filing of appeal, has been removed then the earlier filed defective appeal becomes a valid appeal. The following discussion in the order of the Tribunal in the case of Bhumiraj Construction (supra) is worthy of notice:- 4. At this stage, it will be fruitful to have a look at the provisions of section 249(4), under which section the impugned order has been passed. It runs as under:" 249(4) No appeal under this Chapter s .....

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to be recorded in writing, exempt him from the operation of the provisions of that clause." 5. On going through the prescription of proviso to subsection (4) it transpires that the CIT(A) has been empowered to grant exemption from the payment of tax equal to the amount of advance tax which was payable by the assessee in a situation where no return is filed by the assessee. It implies that where the assessee did not file any return for the relevant year and still the assessment was made, th .....

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re the return was originally filed by the assessee, the CIT(A) has no power to grant exemption from the making of payment of tax due on the income returned. The requirement of payment of tax in a case covered under clause (a) is to be examined at the time of admission of first appeal. 6. At this juncture, it will be apposite to note the distinction between a mandatory and directory provision. If the non-compliance with the requirement of law exposes the assessee to the penal provision, then it i .....

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ether any penal consequences will follow by the noncompliance with a particular statutory requirement. If no penal consequences are indicated, then it would be safe to infer that the statutory requirement was directory and not obligatory or compulsory.' In reaching this conclusion the Hon'ble High Court relied on the judgment of the Hon'ble Apex Court in State of Uttar Pradesh v. Babu Ram Upadhya AIR 1961 AC 751. 7. It is trite law that omission to comply with a mandatory requirement .....

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urn of income as per the necessity of the relevant section, still the deduction could not be denied if such report was subsequently filed during the course of assessment proceedings. In a case where the assessee failed to submit audit report in support of claim for deduction under sections SOHH and SOJ during the course of assessment proceedings, the Hon'ble High Court in CIT Vs. Trehan Enterprises [2001] 24e ITR 333 /[2000] 108 Taxman 189 (J&K) held that when such report was filed befor .....

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oval of defect, the return becomes valid. In the like manner if the appeal filed by the assessee is only defective, it assumes validity on the removal of such defect or irregularity. 8. In the present case, the Id. CIT(A) granted a time of ten days to the assessee for depositing the tax due. It was only on the failure of the assessee to do so that the appeal was dismissed as unadmitted. If the assessee had made good the deficiency within the period often days, then the appeal would have been adm .....

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st appeal. In case such tax is not paid up to the filing of appeal before the CIT(A), the same shall not be admitted. In other words if the appeal is to be admitted by the first appellate authority, it is sine qua non that the assessee must have made the payment of tax on the income returned. If no payment of tax on the income returned is made at all and the appeal is filed, that cannot be admitted. If however the appeal is filed without the payment of such tax but subsequently the required amou .....

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r to this question needs to be given in affirmative. 9. The objective behind section 249(4) is to ensure the payment of tax on income returned before the admission of appeal. If such payment after the filing of appeal but before it is taken up for disposal validates the defective appeal, then there is no reason as to why the doors of justice be closed on a poor assessee who, could manage to make the payment of tax at a later date, The stipulation as to the payment of such tax ante the filing of .....

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e date when it was originally filed and not when the defect is removed. 10. The Id. AR submitted that the assessee was facing the financial crunch which led to the non-payment of tax on the returned income at the time required by the Id. CIT(A). It was claimed that on making the payment of tax, the appeal ought to have been admitted by the Id. CIT (A). He relied on the order passed by the Mumbai Bench of the Tribunal in the case of Anant R. Thakore v. Asstt. CIT[2006] 5 SOT 298 in which it has b .....

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nt of the Karnataka High Court in the case of D. Komelskshi v. Dy. CIT[2007] 162Taxman)16. 11. In the case of D. Komslakshi (supra), the assessee AOP had three members who had filed returns individually. The assessments were finalized after making some adjustments. After the assessment in the individual capacity, the AOP was also assessed to tax on the same income. However tax paid in individual capacity was not adjusted. Aggrieved thereby, the assessee preferred appeal against the order of the .....

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ase for the revival of appeal was made out. Although the fresh appeal filed was not held to be maintainable, the Hon'ble High Court held that the same could be treated as an application for revival of appeal earlier filed. From this judgment, relied on by the learned Departmental Representative, it can be seen that the contention of the assessee was accepted and the CIT (A) was directed to decide the appeal on merits in accordance with law, Here it is relevant to mention that this judgment h .....

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Hon'ble Karnataka High Court available on the point, relied on by the learned Departmental Representative on this issue. 12. Adverting to the facts of the instant case we find that the assessee paid the tax due on income returned albeit after the disposal of appeal by the Id. CIT(A). On such payment, the defect in the appeal due to noncompliance of a directory requirement of paying such tax before the filing of the appeal, stood removed. Ex consequenti this appeal should have been revived by .....

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