Income Tax Appellate Tribunal - Pune
Mayfair Builders And Developers vs Deputy Commissioner Of Income Tax on 1 June, 2007
Equivalent citations: (2008)115TTJ(PUNE)550
ORDER
Ahmad Fareed, A.M.
1. This appeal by the assessee is directed against the order of CIT(A) dt. 31st Aug., 2004 for the block period ending 25th June, 1998.
2. The grounds raised by the assessee in this appeal are as under:
1. The learned CIT(A) erred in holding the appeal as non-maintainable on the ground that the order of the learned AO had merged with the order of CIT passed under Section 264. The learned CIT(A) failed to appreciate that the appellant had filed an appeal before making on application under Section 264, which appeal was not admitted for non-payment of taxes under Section 249(4)(a). In view of this fact and in view of the decision of the Bombay High Court in Manmala Exhibitors v. M.C. Joshi CIT , the order of CIT-II passed under Section 264 is without jurisdiction and therefore is bad in law ab initio.
2. The learned CIT(A) further erred in holding that the order of CIT passed under Section 264 was an order on merits as against the fact that the application-under Section 264 was not admitted on the ground of limitation.
3. The learned CIT(A) erred in not condoning the delay in filing the appeal even though the appellant was prevented by a sufficient cause from filing appeal within the prescribed time.
4. The learned CIT(A) erred in not deciding the appeal on merits.
3. The facts of the case, in brief, are as follows. The assessee was a partnership firm having three partners and was engaged in the business of construction/development of immovable properties. A search was conducted at the business premises of the assessee under Section 132 of the Act on 25th June, 1998. In response to the notice under Section 158BC issued on 9th Nov. 1998, the assessee declared undisclosed income of Rs. 97,70,000 for the block period ending 25th June, 1998, in the return filed in Form No. 2B. In the assessment order passed under Section 158BC(c) of the Act on 30th June, 2000 the total undisclosed income was assessed at Rs. 4,34,64,022 as under:
Particulars (Rs.)
Total undisclosed income-as returned 97,70,000
Add : Undisclosed income
(i) On-money 2,49,37,771
(ii) Undisclosed income in Mayfair 50,015
(iii) Undisclosed income for asst. yr. 1997-98 34,86,361
(iv) Undisclosed income in garage and extra work 52,19,875
---------------
Total undisclosed income 4,34,64,022
---------------
4. The assessee challenged the aforesaid assessment order before the CIT(A) by filing an appeal on 31st July, 2000. A revision petition under Section 264 was also filed before the CIT on 2nd Aug., 2000. The petition filed under Section 264 was rejected by CIT-II, Pune vide his order dt. 2nd Feb., 2001, inter alia, on the ground that the assessee had filed an appeal before the CIT(A). The CIT observed in his order as under:
A petition under Section 264 of the IT Act 1961 for the block period 1st April, 1988 to 25th June, 1998 has been filed on 2nd Aug., 2000 against AO's order under Section 158BC of the IT Act 1961 dt. 13th June, 2000. The application is in time and is accompanied by proof of payment of revision fees. An opportunity of being heard was allowed to the petitioner vide this office letter dt. 5th Oct., 2000 and hearing was fixed on 18th Oct., 2000. On 18th Oct., 2000 an application for adjournment was filed on the ground that it was not convenient for the assessee representative to attend the hearing. Again the case was fixed for hearing on 28th Nov., 2000. On 27th Nov., 2000 adjournment was sought on the same ground that it was not convenient for the representative to attend. Once again vide this office letter dt. 16th Oct., 2000 hearing was fixed on 30th Jan., 2001 and once again identical letter was filed seeking adjournment on the ground that it was not convenient for the representative to attend. The abovementioned facts prove that the assessee is not interested in getting the petition decided. Further it is seen that an appeal has been filed before the CIT(A)-II Pune on 31st July, 2000 vide Appeal No. 193 and therefore, the petition under Section 264 does not lie.
2. In view of the facts mentioned above, the assessee's petition is rejected.
5. While deciding the appeal the CIT(A) noticed that the assessee had not paid full taxes due on the undisclosed income declared in the return, filed in response to the notice under Section 158BC. He, therefore, held, vide his order dt. 5th Feb., 2002, that the appeal filed by the assessee could not be admitted in view of the provisions of Section 249(4)(a). The observations made by the CIT(A) in paras 3 and 4 of his order are as under:
3 Mr. V.L. Jain, C.R. and the Authorised Representative of the appellant, who appeared on 5th Feb., 2002 in response to the letter dt. 1st Feb., 2002, fairly admitted that tax due on the income returned by the appellant had not been paid and the case of the appellant fell within the provisions of Section 249(4)(a) of the Act, as extracted below:
(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 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.
4. In view of the facts mentioned above and the specific provisions of Section 249(4)(a), appeal cannot be admitted. Accordingly, the appeal filed on 31st July, 2000 is dismissed.
6. The assessee filed yet another petition under Section 264 of the Act before the CIT on 28th Feb., 2002. This petition was also rejected by the CIT-II, Pune vide his order dt. 25th March, 2003. The CIT refused to condone the delay of about 8 months in filing of this petition. He also considered the petition on merits and rejected it. The observations made in para 10 of his order are as under:
10. Even considering the petition on merits, I find from the records that the following additions have been made and all the additions are supported by the evidence collected during search and the examination of relevant documents, statements and accounts.
(Rs.)
(a) On-money 2,49,37,771
(b) Undisclosed income in Mayfair 50,015
(c) Undisclosed income for asst. yr. 1997-98 34,86,361
(d) Undisclosed income in garage and extra work 52,19,875
---------------
Total 3,36,94,002
---------------
It is seen that the above additions were made as per the seized documents as noted in the body of the assessment order. The assessee's plea that the assessment is done on estimate, suspicion and conjecture, is not tenable in view of the fact that the AO has based the assessment on the relevant seized documents.
7. It appears that, subsequently, the assessee paid the taxes on the undisclosed income declared in the return filed in Form No. 2B and thereafter filed a fresh appeal before the CIT(A) on 9th Feb., 2004 along with a request for the condonation of delay. In other words the assessee complied with the requirement of the provisions of Section 249(4)(a) of the Act before filing this appeal for second time before the CIT(A). This appeal was once again rejected by the CIT(A) vide his order dt. 31st Aug., 2004, inter alia, on the following grounds as under:
that the order of CIT under Section 264 dt. 25th March, 2003 was in existence and had not been challenged by the assessee in the Court of law.
that the CIT, in his order dt. 25th March, 2003 had considered the petition of the assessee even on merits.
that the order passed by the AO was non-appealable before the CIT(A) on the same matter which was decided by the CIT under Section 264 on merits.
that the inordinate delay of more than 3 years and 6 months was not satisfactorily explained and that there was no sufficient cause.
that the appeal was not admitted and was therefore rejected at the threshold.
8. It is the aforesaid order of the CIT(A) dt. 31st Aug., 2004 which has been challenged by the assessee in the present appeal.
9. Shri V.L. Jain, the learned Authorised Representative reiterated the submissions made on behalf of the assessee before the CIT(A). The submissions made by him are summarized below:
that the first appeal before the CIT(A) was filed in time.
that the CIT(A) was approached the second time after payment of taxes.
that the orders passed by the CIT under Section 264 were without jurisdiction.
that even after order passed by the CIT under Section 264 alternative remedy was available under Section 246A.
that reliance was placed, inter alia, on the decisions in the following cases:
(i) J.K. Chaturvedi v. Asstt. CIT ;
(ii) Collector, Land Acquisition v. Mst. Katiji and Ors. ;
(iii) Prem Chand Bansal & Sons v. 1TO ;
(iv) Manmala Exhibitors v. M.C. Joshi, CIT ;
(v) Williamson Financial Services Ltd. v. CIT ;
(vi) CIT v. D. Lakshminarayanapathi .
10. Shri Pradeep Sharma, the learned Departmental Representative supported the order of the CIT(A). The submissions made by him are summarized as under:
that an appeal, without compliance with the provisions of 249(4)(a) cannot be called the first appeal.
that the appeal filed on 9th Feb., 2004 was late by 3 years 6 months and 9 days.
that the CIT-II, Pune, vide his order dt. 25th March, 2003 rejected the petition filed under Section 264 on account of delay as well as on merits.
that after the CIT(A), vide his order dt. 5th Feb., 2002, held that the appeal was not maintainable in view of Section 249(4)(a), the matter ended there.
that the order of the AO had merged with the order of the CIT under Section 264 dt. 25th March, 2003.
that the assessee had declared undisclosed income of Rs. 97,70,000 but preferred not to pay the taxes thereon for more than four years.
that the order passed by the CIT under Section 264 could be challenged only through a writ before the High Court.
11. We have considered the rival submissions in the light of material on record and the precedents cited. When an assessee is aggrieved by an assessment order passed by the AO he has two options-either to file an appeal before the CIT(A) under Section 246A or to file a revision petition before the CIT under Section 264 of the Act.
12. The CIT is empowered under Section 264 of the Act to call for the records of any proceeding under the Act, either on his own motion or on an application made by the assessee, and to pass such order thereon not being an order prejudicial to the assessee. However the Sub-section (4) of Section 264 places a ban on the CIT to revise an order in certain situations. It reads as under:
(4) The CIT shall not revise any order under the section in the following cases:
(a) where an appeal against the order lies to the Dy. CIT(A) or to the CIT(A) or to the Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the CIT(A) or to the Tribunal, the assessee has not waived his right of appeal; or
(b) where the order is pending on an appeal before the Dy. CIT(A); or
(c) where the order has been made the subject of an appeal, to the CIT(A) or to the Tribunal.
13. In the present case, the assessee filed an appeal before the CIT(A) on 31st July, 2000 and also a revision petition under Section 264 before the CIT on 2nd Aug., 2000. Because of the ban imposed by Sub-section (4) of Section 264, the CIT rejected the petition filed under Section 264 vide his order dt. 2nd Feb., 2001, as mentioned in para 4 above.
14. Also, because of the failure on the part of the assessee to comply with the provisions of Section 249(4) (a) of the Act, the appeal filed before the CIT(A) was rejected vide order dt. 5th Feb., 2002. In our opinion, this order of the CIT(A) was appealable before the Tribunal under Section 253 of the Act and consequently, the ban imposed by Section 264(4) of the Act continued to operate. This view of ours gets support from the decisions discussed below.
15. In the case of CIT v. Shahzadi Begum and Ors. , the Supreme Court [sic-the Madras High Court] observed that if an appeal was dismissed as incompetent or was rejected as it was filed out of time and no sufficient cause was established, it resulted in an affirmation of the order appealed against.
16. In the case of K.K. Porbunderwalla v. CIT , Chagla, C.J. observed that although the AAC did not hear the appeal on merits and held that the appeal was barred by limitation his order was under Section 31 (s. 251 of 1961 Act) and the effect of that order was to confirm the assessment which had been made by the AO.
17. In the case of Mela Ram & Sons v. CIT the Supreme Court held that an order passed by the AAC, holding that there was no sufficient reason for excusing delay under Section 30(2) [s. 249(2) and (3) of 1961 Act] and rejecting the appeal as time-barred was an order passed under Section 31 (s. 251 of the 1961 Act) and an appeal lay from that order to the Tribunal and it made no difference whether the order of dismissal was made before or after the appeal was admitted.
18. In the case of CIT v. Kalipada Chose (1987) 60 CTR (Ori) 96 : (1987) 167 ITR 173 (Ori), the Orissa High Court held that an order of the AAC dismissing an appeal for non-compliance with Section 249(4) of the Act came within the ambit of Section 250 and was appealable before the Tribunal under Section 253 and therefore the Tribunal, committed no illegality in entertaining the appeal and in condoning the delay and remitting the case to the AAC for disposal on merits.
19. In view of the above position in law a revision petition under Section 264 did not lie before the CIT at the stage when the appeal had been dismissed by the CIT(A) on 5th Feb., 2002 on the ground that the assessee had not complied with the provisions of Section 249(4)(a). Therefore the second petition filed by the assessee before the CIT under Section 264 on 28th Feb., 2002 was merely an infructuous exercise, as the CIT was barred, under Sub-section (4) of Section 264, from acting on this petition.
20. It appears that the assessee, in the meantime, paid the taxes on the undisclosed income shown in the return and filed an appeal before the CIT(A), for the second time, on 9th Feb., 2004 with an application for condonation of delay. The CIT(A) refused to codone the delay and dismissed the appeal, vide his order dt. 31st Aug., 2004, as mentioned in para 7 above. In our opinion this order of the CIT(A) cannot be sustained because when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. In taking this view we are fortified by the decision of the Supreme Court in the case of Collector, Land Acquisition us. Mst. Katiji &. Ors. (supra).
21. In the case of Mst Katiji and Ors. (supra) the Supreme Court, while holding that liberal approach should be adopted while exercising discretion in matters of condonation of delay in filing of the appeal, observed as under:
1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
3. 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay ? The doctrine must be applied in a rational, commonsense and pragmatic manner.
4. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
6. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
22. To conclude-the petition filed by the assessee under Section 264 on 2nd Aug., 2000 could not be acted upon by the CIT because of the ban imposed by Sub-section (4) of Section 264, as an appeal filed by the assessee before CIT(A) on 31st July, 2000 was pending; the appeal pending before the CIT(A) was dismissed because of non-compliance with Section 249(4)(a); the assessee filed before the CIT another petition under Section 264 on 28th Feb., 2002 which was nothing but an infructuous exercise; the assessee, later, complied with Section 249(4)(a) and filed a fresh appeal before CIT(A) on 9th Feb., 2004 with a request for condonation of delay, but the CIT(A) refused to condone the delay and dismissed the appeal on 31st Aug., 2004. We find that the CIT(A), in his order dt. 31st Aug., 2004, failed to examine whether there existed sufficient reasons on the part of the assessee for non-compliance with the provisions of Section 249(4)(a) of the Act. In our opinion, the C1T(A) was not justified in refusing to condone the delay without examining this aspect of the matter.
23. In view of the facts and circumstances of the case and the position in law, as discussed in the above paras, we consider it appropriate to remit this matter back to the file of the CIT(A). He is directed to examine, after bringing the relevant material on record, whether there existed sufficient reasons for failure on the part of the assessee to comply with the provisions of Section 249(4)(a) of the Act. If the CIT(A) finds that there existed sufficient reasons for failure on the part of the assessee to comply with the provisions of Section 249(4) (a) of the Act, in that case he shall condone the delay and shall hear and decide the appeal on merits. While doing so, the CIT(A) shall keep in mind the ratio laid down by the Supreme Court in this regard, in the case of Mst. Katyi and Ors. (supra), that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred.
24. The CIT(A) shall comply with the above directions and shall, accordingly, pass a fresh order after giving adequate opportunity of being heard to the assessee.
25. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.