TMI Blog2019 (5) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... this order. Thus, we are of the firm view that if an assessee filed return of income, admitted taxes under self-assessment, then unless these taxes are paid, his appeal will be hit by section 249(4)(a) and it cannot be entertained by the CIT(A). First proposition raised by the ld.counsel for the assessee was that the assessee has not paid tax on the returned income, therefore, return deserves to be treated as defective within meaning of section 139(9) Explanation (c) and if return is defective, then no cognizance of such return for passing assessment order can be taken. If it is construed that no return was filed (being non-est on account of defective return), then case of the assessee will fall within the section 249(4)(b) and CIT(A) could exempt the assessee from payment of alleged advance taxes required to be paid. We do not find any merit in this proposition of the ld.counsel for the assessee. Next proposition raised by the ld.counsel for the assessee before us was that real income ought to have been taxed, and for that purpose, he made reference to the decision of Hon ble Supreme Court in the case of Godhra Electricity Co. Ltd. [ 1997 (4) TMI 4 - SUPREME COURT] and E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld.CIT(A)-XI, Ahmedabad has erred in law and on facts in entertaining the appeal in gross violation of provisions of section 249(4) of the Income Tax Act, 1961 even as the assessee had not paid admitted tax on the returned income. 3. This appeal was heard by the Tribunal on 21.3.2013. However, there was a difference of opinion between Members on the Bench. The ld.Members have drafted their orders and carved out points on which they differ. They formulated question and transmitted to the Hon ble President for making a reference to Third Member or Members as Hon ble President may think fit under section 255(4) of the Income Tax Act, 1961. The Hon ble President has referred following question for opinion of this Bench: 1. Whether, having regard to the provisions of section 249(4) of the Income Tax Act, the ld.CIT(A)-IX, Ahmedabad has erred in law and on facts in entertaining assessee s appeal. 4. We have heard the ld.representatives and with their assistance gone through the record carefully. Brief facts of the case are that the assesseecompany was incorporated on 1.11.1991. It was engaged in the business of manufacturing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd putting reliance upon the order of the ld.Commissioner passed in the Asstt.Year 1994-95 called for a remand report from the AO. He directed the AO to re-compute the income taking into account contentions of the assessee made vide letter dated 23.3.1998. He observed that AO may in his discretion call for a special audit report under section 142(2A) of the Act. Aggrieved with this order, Revenue is in appeal before the Tribunal. 6. The ld.Sr.DR at the very outset contended that if orders of both the ld.Members are being perused, then it would reveal that basically there is no difference between both the ld.Members in so far as interpretation and construction of section 249(4)(a) is concerned. However, the ld.Accountant Member while arriving at a final conclusion agreed with the ld.CIT(A) that the CIT(A) had discretion to examine the facts and to entertain arguments of the assessee. This conclusion summarized in para 7.5 by the ld.AM are contradictory to each other, and therefore, demonstrate a difference in the opinion. He specifically drew or attention towards the following conclusions of the ld.AM: (i) The learned CIT(A) was not right in admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 250 of the Income Tax Act provide procedure required to be followed by the ld.Commissioner(Appeal). Subsection (4) empowers the ld.Commissioner (Appeal) to carry out further investigation and call for remand report. It appears that ld.Accountant Member got influenced with this scheme and recorded a finding that under this section Commissioner (Appeal) can ask for special audit to the Assessing Officer under section 142(2A). Basically, ld.AM has lost sight that sections 249 and 250 if read together for exercising the power under section 254(4), there should be a valid appeal following all the requirements of section 249 of the Income Tax Act. Elaborating his arguments, he submitted that suppose an appeal was not filed within time limit provided in the Act, then unless delay in filing the appeal is being condoned with a plausible explanation by the assessee, the ld.CIT(A) cannot proceed to decide the appeal on merit. This condition is being provided in sub-section (3) of section 249 where the ld.CIT(A) has been empowered to admit an appeal after expiry of limitation if the appellant submits reasons for such delay. Likewise, unless conditions of the section 249(4)(a) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .10 In a case where the assessee has filed a return of income, there is no reason as to why he should not have paid the tax due on the basis of income declared in the return. This is all the more necessary now under the new procedure of assessment, which has become effective from 1 - 4-1989, according to which the assessee must pay at the time of filing the return, not only the tax due on the basis of the returned income, but also the interest due, if any, for late filing of the return and for defaults in the payment of advance tax. In view of this, there is no justification for the said proviso to sub-section (4), at least to the extent it allows discretion to the first appellate authority to admit an appeal even where tax on the basis of the returned income has not been paid. The Amending Act, 1989 has, therefore, amended the said proviso to limit the discretion of the first appellate authorities to admit an appeal only in cases falling in clause (b) of sub-section (4), i.e., where no return has been filed by the assesses and the assessee has not paid an amount equal to the amount of advance tax payable by him. It, therefore, follows that where an assessee has filed a return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Deepak Bajaj Vs. State of Maharashtra Anr. AIR 2009 SC 628. He placed on record copy of this decision on page no.61 to 71 of the paper book. He submitted that view expressed by the ld.Judicial Member is correct view on the interpretation of section 249(4)(a). This ground of appeal of the Revenue deserves to be allowed and the ld.CIT(A) deserves to be quashed. 11. On the other hand, the ld.counsel for the assessee contended that since the assessee did not pay taxes on the returned income therefore, its return deserves to be treated as defective within meaning of section 139(9) Explanation (c) and if the return is defective then no cognizance of such return for passing assessment order can be taken. For buttressing his contentions, the relied upon the following decisions: i) K. Nagesh, 376 ITR 473 (Kar) ii) Harjinder Kaur, 310 ITR 71 (P H) iii) Bake Food Products P.Ltd., 356 ITR 690 (AP) 12. He also contended that ld.DR during the course of hearing made reference to the CBDT circular available on page no.295 of the Department s PB and submitted that defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of taxes on the agreed income and adjudication of the appeal of the assessee at the level of CIT(A). 14. The ld.DR in rebuttal to the proposition of the ld.counsel for the assessee contended that if the Explanation to section 139(9) is being read then non-payment of taxes on admitted income is not recognized as a defect. Subclause (c) of Explanation provides that if the assessee claims that it has deducted taxes or collected tax at source and advance tax or taxes on self-assessment, if any claimed to have been paid, but proof is not being annexed, then AO may call for such proof. In the present case, from the very beginning the assessee has not claimed payment of tax on the admitted income. Therefore, it does not fall within the ambit of defect contemplated in Explanation attached to section 139(9) of the Acts, and its return was not an invalid return. 15. We have duly considered rival contentions and gone through the record carefully. Section 249(4) has a direct bearing on the controversy. Therefore, it is imperative upon us to take note of this clause. It reads as under: (4) No app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this order. Thus, we are of the firm view that if an assessee filed return of income, admitted taxes under self-assessment, then unless these taxes are paid, his appeal will be hit by section 249(4)(a) of the Act and it cannot be entertained by the CIT(A). 17. First proposition raised by the ld.counsel for the assessee was that the assessee has not paid tax on the returned income, therefore, return deserves to be treated as defective within meaning of section 139(9) Explanation (c) and if return is defective, then no cognizance of such return for passing assessment order can be taken. If it is construed that no return was filed (being non-est on account of defective return), then case of the assessee will fall within the section 249(4)(b) and CIT(A) could exempt the assessee from payment of alleged advance taxes required to be paid. We do not find any merit in this proposition of the ld.counsel for the assessee. Section 139(9) along with Explanation provides details of circumstances which could be considered as defective. It reads as under: .. [(9) Where the [Assessing] Officer considers that the return of income furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fifteen days from the date of such intimation or within such further period which on an application made in this behalf by the assessee and considered appropriate by the AO. If the assessee fails to rectify this defect, then return could be considered as invalid return. If the return declared as invalid, then it is to be assumed, as if, the assessee failed to furnish return. Proviso to the sub-clause further empowers the AO to condone the delay in rectification, if such defects were removed within the time period further given by the AO, but before passing of the assessment order. Explanation attached to this clause provides when return could be regarded as defective return. According to this explanation, return will not be regarded as defective unless the conditions enumerated in clause (a) to (c) viz. annexures, statement and columns in the return were not duly filed. The return is not accompanied by a statement showing computation of taxable income etc. 19. The ld.counsel for the assessee made reference to sub-clause (c) of the Explanation , but a perusal of this sub-clause would indicate that it is applicable to those cases where an assessee though not paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso (b) to Section 240 of the Act on the basis of the valid return i.e, the original return filed by the assessee on 31.8.1992 declaring his total income of ₹ 57,810/-. For whatever reasons, if the authorities were barred from framing the assessment/not amenable to self assessment, then the department is precluded from withholding the tax and interest paid by the assessee on the revised return which is held to be invalid in the eye of law. Even assuming, the assessee has admitted certain taxes in an invalid return, such admitted tax cannot be retained by the department unless it is supported by law. In the absence of any such provisions, withholding of the taxes admitted in an invalid return, amounts to tax collected without authority of law, offending Article 265 of the Constitution. 20. Factual difference between the case before us vis- -vis before the Hon ble High Court is that return of the assessee is not defective, and the AO has rightly taken cognizance of such return. Similarly, we need not deal with other case laws i.e. Harjinder Kaur (supra) and Bake Food Ltd. (supra). All these cases are where the returns were treated to be invalid. As far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that ld.CIT(A) has erred in entertaining the appeal of the assessee without payment of taxes. 22. The ld.counsel for the assessee on the strength of Hon ble Karnataka High Court s decision in the case of D. Komlakshi (supra) contended that the assessee be given an opportunity to pay tax on the returned income now, and direct the ld.CIT(A) to decide the appeal on merit. As far as the above contention is concerned, no such plea was raised before the Division Bench who heard the appeal on 21.3.2013. Issue before us is to resolve difference of opinion amongst the members, whether having regard to the provisions of section 249(4)(a) of the Act the ld.CIT(A) has erred in law and on facts in entertaining assessee s appeal. By entertaining the additional plea, we will be enhancing the scope of reference which is not within the power of this Bench. Hence, this plea cannot be examined in the present proceedings. Therefore, in view of the above discussion, we agree with the ld.Judicial Member and hold that the ld.CIT(A) has erred in entertaining the assessee s appeal without fulfilling conditions of section 249(4)(a) of the Act. 23. Let the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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