Madhya Pradesh High Court
Shyam Electric Works vs Cit on 22 March, 2005
Equivalent citations: (2006)199CTR(MP)400
Author: A.M. Sapre
Bench: A.M. Sapre
JUDGMENT A.M. Sapre, J.
This is an Income Tax Reference made by the Tribunal at the instance of assessee under section 256(1) of the Income Tax Act in RA No. 77/Ind/1991, arising out of an order dated 31-1-1991, passed by Tribunal in ITA No. 578/Ind/1987 to answer following questions of law :
"1. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the order of the Commissioner (Appeals) is bad because no application for exemption from operation of proviso to section 249(4) was filed before the Commissioner (Appeals) and the Commissioner (Appeals) has not expressly passed an order exempting the assessee from payment of tax ?
2. Whether, in the facts and circumstances of the case, the Commissioner (Appeals) would impliedly be deemed to have exercised his powers under the proviso to section 249(4) of the Income Tax Act and exempting the assessee from payment of tax, when he proceeded to dispose of the appeal on merits ?
3. Whether the Tribunal is correct in law in relying upon the decision under the proviso to section 30 of the Income Tax Act, 1922, in the instant case, when there is a material difference between the relevant provisions in section 30 of the 1922 Act and section 249(4) of the Income Tax Act, 1961 ?
4. Whether, in the facts and circumstances of the case, the Tribunal is correct in not remanding the case to the Commissioner (Appeals) to deal with the appeal before him in accordance with law ?
5. Whether the Tribunal was justified in observing that "even otherwise, there is no substance in the contention of the assessee that the assessment should have been cancelled by the Commissioner (Appeals)", when it held that the appeal before the Commissioner (Appeals) was incompetent ?"
2. Heard Shri G.M. Chafekar, learned senior counsel with Shri D.S. Kale, learned counsel for the applicant, and Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the revenue.
3. The issue relates to assessment year 1982-83. On 30-9-1982, the assessee-a firm, filed the return. However, no self-assessment tax was paid by the assessee. The return also had several defects. The assessing officer called upon the assessee to cure the defects. Eventually on 31-3-1985 the assessing officer completed the assessment under section 144 of Income Tax Act. It is against this order of assessment, the assessee filed appeal to Commissioner (Appeals). In the appeal, the assessee raised several grounds including some preliminary objection about passing of the ex parte assessment proceedings. The Commissioner (Appeals) allowed the appeal and while setting aside the assessment order, remanded the case to assessing officer for making de novo assessment. In this view, he, i.e., Commissioner (Appeals) did not consider other issues on merits which were raised by the assessee.
4. It is against this order, the revenue (CIT) filed an appeal to Tribunal whereas assessee filed cross-objection. By impugned order the Tribunal allowed the appeal filed by the revenue and dismissed the cross-objection filed by the assessee. In the opinion of learned member of Tribunal, since the assessee while filing the appeal before Commissioner (Appeals) had failed to comply (with) the requirements of section 249(4) of the Act, and hence, Commissioner (Appeals) was in error in admitting the appeal and in consequence allowing the appeal. In other words, the Tribunal held that since the assessee failed to pay the tax as contemplated under section 249(4) and hence, Commissioner (Appeals) had no jurisdiction to entertain the appeal filed by the assessee. It was on this ground, the Tribunal allowed the appeal filed by the revenue and dismissed the appeal filed by the assessee before Commissioner (Appeals). As a consequence, the order of Commissioner (Appeals) which has resulted in setting aside of the assessment order and remand for making fresh assessment was set aside resulting in upholding of the original assessment order. It is against this order, the assessee has felt aggrieved and prayed for the reference to this Court. The Tribunal acceded to the request and accordingly made this reference on the questions, referred supra.
5. Having heard learned counsel for the parties and having perused record of the case, we are inclined to answer the questions in favour of assessee and against the revenue as indicated infra.
6. The issue in question centers around section 249(4) of the Act. It reads as under :
"Section 249(1). Every appeal under this Chapter shah be in the prescribed form and shall be verified in the prescribed manner and shall, in case of an appeal made to the Commissioner (Appeals) on or after the 1-10-1998, irrespective of the date of initiation of the assessment proceedings relating thereto be accompanied by a fee of
(i) where the total income of the assessee as computed by the assessing officer in the case to which the appeal relates is one hundred thousand rupees or less, two hundred fifty rupees;
(ii) where,the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than one hundred thousand rupees but not more than two hundred thousand rupees, five hundred rupees;
(iii) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than two hundred thousand rupees, one thousand rupees;
(iv) where the subject-matter of an appeal is not covered under clauses (i), (ii) and (iii), two hundred fifty rupees;
(4) No appeal under this chapter shall be admitted unless at the time of filing of the appeal,
(a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or
(b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him :
Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause."
7. The proviso to sub-section (4) quoted supra vests the discretion with the Commissioner (Appeals) to exempt any appellant (assessee) from payment of tax as defined under sub-clause (a) or (b) as the case may be provided assessee is able to make out good and sufficient reason expressing his inability to pay. So far as this case is concerned, the law as it stood prior to 1-4-1989 will apply because the appeal filed before the Commissioner (Appeals) was prior to 1-4-1989 amendment incorporated by Direct Tax Laws (Amendment) Act, 1989 with effect from 1-4-1989 in the proviso restricting applicability of proviso to only cases falling in clause (b).
8. In our opinion, if the Tribunal came to a conclusion and rightly so that appeal filed by the assessee before Commissioner (Appeals) was not in accordance with the requirement of section 249(4) proviso, then the Tribunal while setting aside the order should have remanded the case to Commissioner (Appeals) by granting an opportunity to the assessee to make an application as required under section 249(4) proviso, seeking exemption from payment of tax. Indeed, this right of the assessee could not have been taken away.
9. In our opinion, the compliance of section 249(4) is mandatory before the appeal is entertained. Indeed, the jurisdiction of Commissioner (Appeals) in hearing and then deciding the appeal depends upon the strict compliance of requirements contained in S. 249(4) ibid. If the appellant fails to deposit the tax strictly in accordance with the requirement of clause (a) or (b) as the case may be, the appeal has to be dismissed as not maintainable. If the appellant makes an application as contemplated under proviso to sub-section (4) then it is the duty of Commissioner (Appeals) to pass an appropriate order on the application so made by either granting an exemption from payment of tax or refuse the prayer. Depending upon the outcome of the application, the Commissioner (Appeals) has to proceed. In other words, if the application is rejected, then appellant has to deposit the tax strictly in accordance with the requirement of clause (a) or (b) as the case may be, to enable the Commissioner (Appeals) to admit the appeal and then proceed to decide the same finally. In case, if the Commissioner (Appeals) allows the application and grants exemption as prayed, then the appeal can be heard without making any compliance of section 249(4) ibid.
However, in either case, the right to file an application claiming exemption being a statutory one, cannot be taken away.
10. In this view of the matter, we answer the question Nos. 1, 2 and 3 in favour of CIT and against the assessee and answer question Nos. 4 and 5 in favour of assessee and against the CIT.