Shri Bharatkumar Sakhsaria vs Deputy Commissioner of Income Tax

R.M. Savant, J.—The above Appeal is filed challenging the order of the Income Tax Appellate Tribunal dated 31-10-2001, by which order the Appeal filed by the Appellant was held to be not maintainable u/s 249(4) of the Income Tax Act, 1961 (for short the said Act).

The Appeal raises the following substantial question of law:

Whether on the facts and in the circumstances of the case, and in law, the Hon''ble Tribunal was right in holding that Section 249(4) is to be so construed to mean that there is absolute bar to right of appeal in a case where the assessee has not paid the entire self assessment tax at the time of filing of the appeal, even if the said assessment tax is paid soon after filing the appeal and before the hearing of the appeal has taken place?

The facts giving rise to the filing of the above Appeal can be stated thus:

The Department carried out search and seizure operation at the premises of the Appellant on 9-12-1997. During the said search operation, apart from other things, the Department seized cash of Rs. 1,80,000/-. Thereafter, a notice u/s 158BC of the Said Act was issued to the Appellant requiring him to file block return. The return was filed on 27-11-1998, as per the return, the income disclosed by the Appellant was Rs. 10,00,000/- and the tax payable thereon came to Rs. 6,12,000/-. It is the case of the Appellant that he could not make the payment of the self assessment tax on account of liquidity crunch. However, it is the case of the Appellant that he requested the Respondents to adjust the cash already seized against his cash liability.

The Department thereafter took up assessment of the block period sometime in August 1999 and the block assessment order u/s 158BC was passed on 23-2-1000 assessing income at Rs. 3,52,45,418/- and rising tax demand of Rs. 2,15,70,195/- The Respondent adjusted the refund of Rs. 27,830/- pertaining to Assessment Year 1998-1999 against the demand so raised by the Respondent. The Appellant, it seems, received the said order dated 23-2-2000 passed by the Respondent No. 1, on 25-2-2000 and in terms of the provisions of the said Act, the Appellant was required to file an Appeal within 30 days of the receipt i.e. on or before 26-3-2000. The Appeal was filed by the Appellant on 24-3-2000. In so far as, the statutory provisions governing the filing of an Appeal are concerned, it is required to be noted that the Assessee who has preferred an Appeal before the First Appellate Authority, is required to pay tax as per income declared before his Appeal can be admitted. In so far as the payment of the said amount is concerned, the tax payable by the Appellant as per the return filed by him was Rs. 6,12,000/-. The Appellant had already asked the Respondent to adjust the seized amount of Rs. 1,80,000/- against the said tax and Rs. 27,830/- arising out of the refund of Assessment Year 1998-1999, was already adjusted by the Respondent against the said tax. It is the case of the Appellant that on 15-3-2000, he had asked his accountant to pay Rs. 4,00,000/- towards the balance tax payable. However, through inadvertence the Accountant, while filing the challan, by mistake wrote the Assessment Year 2000-01 against the column wherein the Assessment Year is to be mentioned, instead of writing block period 1-4-1987 to 8-12-1997. Oblivious of this mistake, the Appellant had filed an Appeal before the First Appellate Authority i.e. the Commissioner of Income Tax Appeals on 24-3-2000. However, after filing the Appeal, the mistake was realised and the Appellant after arranging further funds had paid Rs. 5,00,000/- towards the self assessment tax for the block period on 31-3-2000 i.e. within 5 days after filing of the Appeal. The Appellant , therefore, address a communication dated 26-1-2001 to the CIT (Appeals), requesting him to condone the delay in filing the Appeal by treating the Appeal as filed on 31-3-2000 i.e. the date when the Appellant paid the balance tax payable. The CIT (Appeals) by order dated 7-12-2001 held that the case of the Appellant was hit by Section 249(4) and accordingly the CIT (Appeals) held that the Appeal filed was not maintainable and for that reason, it was held as infructuous. The said order was further carried in Appeal by the Appellant before the Income Tax Appellate Tribunal. The Tribunal also decided the Appeal only on the preliminary ground and dismissed the said Appeal on the ground that it was not maintainable in terms of Section 249(4) of the said Act. The Tribunal, inter alia held that since there was a change in the statutory provisions as regards condonation of delay the Judgments on which reliance was placed on behalf of the Appellant before the Tribunal being u/s 30 of the Income Tax Act 1922 and especially Sub-section (2) thereof, wherein specific power was rested with the First Appellate Authority to admit an appeal after the expiration of period of filing of the Appeal, if the First Appellate Authority was satisfied that the Appellant had shown sufficient cause for not presenting the Appeal within time. Whereas according to the Tribunal, there was no such power vested with the First Appellate Authority under the Income Tax Act, 1961.

We have heard Shri J.D. Mistry, Senior Counsel for the Appellant and Mr. Suresh Kumar the Learned Counsel for the Respondent. The principal contention of the Learned Counsel for the Appellant was that since the Appellant had paid the tax payable on 31-3-2000, it is the said date which has to be taken as a date of filing of the Appeal and if the said date is taken into consideration, then there is a delay of about 4 days in filing the Appeal. The Learned Counsel submitted that the Tribunal has proceeded on erroneous premise that no power is vested with the Tribunal u/s 249 to condone the delay in filing the Appeal. The Learned Counsel drew our attention to Sub-section (3) of Section 249 and contended that the First Appellate Authority has the power to condone the delay if sufficient reasons are made out for the same. The Learned Counsel further submitted that since the Appellant had deposited the balance of the tax payable on 31-3-2000, the Appeal can be said to be filed on the said date though it has been filed earlier on 24-3-2000. The Learned Counsel in support of the said submission relied upon the Judgment of the Apex Court reported in 1961 10 LII 163 in the matter of Commissioner of Income Tax, Bombay v. Filmistan Ltd. The Learned Counsel lastly submitted that the Tribunal has unnecessarily mixed up two issues i.e. the issue regarding the condonation of delay in filing the Appeal and the issue as regards the condonation of delay in making payment of the tax and thereby fell into an error in rejecting the application of the Appellant. Per Contra the Learned Counsel for the Respondents supported the impugned orders, but fairly conceded that the First Appellate Authority is rested with the power of condonation of delay u/s 249(3) of the said Act.

We have considered the rival contentions. In the light of submissions made by the Learned Senior Counsel for the Appellant that there was no dispute that in so far as, the Appellant is concerned, the balance self assessment tax payable, was paid by him on 31-3-2000. In the said factual back ground the proposition laid down by the Apex court in the Judgment in Filmstan Ltd. (Supra) would have to be considered. The relevant paragraph of the said Judgment, is reproduced herein under for convenience sake.

The Controversy between the parties revolves round the words "no appeal shall lie". The contention which was raised before us was that these words mean that there is no right of appeal till the tax is paid and, therefore, if the tax has not been paid the memorandum of appeal cannot be fled and if filed it is merely a waste paper. In our opinion the meaning of the words "no appeal shall lie" in the proviso is not that no memorandum of appeal can be presented. All that it means is that the appeal will not be held to be properly filed until the tax has been paid. If, for instance, the memorandum of appeal is filed on the 20th day i.e. 10 days before the period of limitation expires and the tax is paid within the rest of the 10 days, the appeal will be a proper appeal; it will be within time and no question of limitation will arise but if the tax is paid after the period of limitation has expired it will be taken to have been filed on the day when the tax is paid even though the memorandum of appeal was presented earlier and within the period of limitation. The question will then have to be decided whether there was sufficient cause for condonation of delay and that is exactly what the Tribunal had ordered and that in our opinion is the effect of the proviso to Section 30(1) read with Sub-section (2) of Section 30 of the Act. It is unnecessary, therefore, to refer to the two cases referred to by the High Court, i.e. Raja of Venkatagiri v. Commissioner of Income Tax and Kamdar Bros. v. Commissioner of Income Tax.

As can be seen, the Apex Court in the said Judgment was concerned with the interpretation of the words "no Appeal shall lie", appearing in the proviso of Section 46 of the Income Tax 1922. The Apex Court held that the meaning of the words "no appeal shall lie" in the proviso is not that no memorandum of Appeal can be presented and all that it mean is that the Appeal will not be held to be properly filed until the tax has been paid. Applying the said principles laid down by the Apex Court to the facts of the instant case, the Appeal as filed by the Appellant on 24-3-2000 can be said to be filed on 31-3-2000, when the payment of the balance self assessment tax was made by the Appellant.

Though various Judgments were cited on behalf of the Appellant in support of his case for condonation of delay, the Tribunal has not even adverted to them and has held that the said Judgments are not applicable, as they were under Income Tax Act, 1922, wherein there was a specific provision for condonation of delay in Section 30 and since in the Income Tax Act 1961, there is no analogous provision, the said Judgments would not be applicable. In our view, the Tribunal has proceeded on totally erroneous premise. The Tribunal, it seems, has glossed over Section 249(3) of the Income Tax Act, 1961, where there is a specific provision for condonation of delay which power is vested with the CIT (Appeals), if he satisfied that the Appellant had sufficient cause for not presenting the Appeal within time. Both, the CIT (Appeals) and the Tribunal have, therefore, erred in rejecting the applications of the Appellant as not maintainable in view of Section 249(4) of the said Income Tax Act, 1961. The filing of the Appeal could not have been refused as the Appeal rejected on the said ground. The Appellant thereafter, would have been entitled to make out a case for condonation of delay in filing the appeal on such grounds as he deemed appropriate. The Tribunal, in our view, has also erred in mixing up the issue of condonation of delay in filing the appeal, with the issue of condonation of delay in paying the tax. The said issues could not have been mixed up by the Tribunal in the teeth of Section 249(3) of the said Act. It has to be borne in mind that a right of appeal is an important right provided under the Act and, therefore, any interpretation which whittles down such a right should be strictly avoided.

For the reasons mentioned herein above, the impugned order would have to be set aside and the question of law would have to be answered in favour of the Assessee and against the Revenue. Resultantly, the Appeal is allowed and the following directions are issued.

(i) The appeal filed by the Appellant before the CIT (Appeals) is restored to file.

(ii) The Appellant would be entitled to file a further representation/application in furtherance of his case for condonation of delay. The same to be done by 25-10-2010.

(iii) The Appellant to appear before the Commissioner (Appeals) XLI, Mumbai on 26-10-2010 at 3.00 p.m.

(iv) The Commissioner (Appeals) XLI, Mumbai to decide the said Application for condonation of delay within 6 weeks from 26-10-2010.

(v) If the delay is condoned, the Commissioner to decide the Appeal within three months of the decision on the application for condonation of delay.

(vi) The Appellant to co-operate in the disposal of the application for condonation of delay and thereafter the appeal, in case the same is required to be decided and not seek unnecessary adjournments.