Income Tax Appellate Tribunal - Madras
V.N. Sudhakaran vs Assistant Commissioner Of Income Tax on 30 April, 2001
Equivalent citations: [2002]83ITD159(CHENNAI)
ORDER
A. Kalyanasundharam, Senior Vice President
1. The assessee, in his capacity as an individual has filed this petition praying for stay of demand of tax of Rs. 78,29,323 that has raised on him consequent to an assessment that is framed on him with reference to the provisions contained in Chapter XIV-B of the IT Act, 1961 (hereinafter referred to as the Act). The assessment has been framed under Section 158BC of the Act consequent to a search made on his premises. The assessee had filed a return consequent to a notice that was issued to him indicating therein the undisclosed income at Rs. 63,93,720. The assessee was assessed for undisclosed income of Rs. 2,06,21,470 and a tax demand of Rs. 1,23,72,882 was raised on 29th Oct., 1997. The assessee in his petition for stay of demand of tax had mentioned that the tax of Rs. 45,43,559 had been paid leaving a balance tax of Rs. 78,29,323. This balance tax, the assessee by means of this petition prays for stay on the recovery by the Department.
2. The Departmental Representative Mr. Narayanan raised a preliminary objection to the stay petition and this was that the provision contained in Section 249(4) of the Act required the payment of admitted tax on the income returned failing which the appellate authority could not admit the appeal. He contended that when the appeal itself is not maintainable and could not be admitted, all proceedings before the Tribunal would be infructuous. He insisted that the Tribunal should dispose of this issue of admissibility of appeal by means of a separate order.
Considering the proposition that the appeal, if could not be admitted both the stay petition and the appeal would have to be dismissed, we permitted the Departmental Representative to make his submissions with reference to this issue. The counsel for the appellant had placed "his written arguments.
3. Departmental Representative referred to the provisions of Section 249 of the Act and submitted that the section starts with the words 'every appeal under this chapter' and Sub-section (4) of Section 249 of the Act states 'no appeal shall be admitted unless at the time of filing of an appeal the assessee has paid the tax due on his returned income'. He, submitted that the section places a condition for admission of an appeal and this preliminary condition if found not satisfied, the first appellate authority would have to hold the appeal as not maintainable and dismiss it on that ground itself.
He submitted that the Tribunal in V. Bhaskaran IT(SS)A No. 238 (Mad) of 1997, dt. 7th Aug., 1998 was in error in offering an opportunity to the appellant to make good the unpaid admitted tax though it held that the requirement are mandatory in nature. He contended that the Section 249(4) of the Act had two portions, the first placing restriction on admission of an appeal subject to payment of tax on returned income and the second the power to waive the said restriction for valid reasons. The discretionary power to the first appellate authority to waive the condition of payment of admitted tax on returned income was withdrawn and, therefore, the first appellate authority has only to examine whether tax on the returned income had been paid and on failure to do so, the appeal could not be admitted.
He contended that the Tribunal has been made the appellate authority to hear appeals from the orders, that are framed consequent to the search and thus it being the first appellate authority, the provision that are contained as are applicable to the first appellate authority apply with full force to the appeals before the Tribunal in cases of assessments made under Chapter XIV-B of the Act, This applicability is accepted in the order of the Tribunal in V. Bhaskaran (supra). He pleaded that despite this order of the Tribunal, the Tribunal in few other cases had taken a view contrary and had held that the provision of Section 249(4) of the Act do not apply to the appeals filed before the Tribunal.
He contended that the Tribunal in S. Venkatesh in IT (SS) A No. 318 (Mad) 1997 dt. 21st Sept., 1999 though both the members agreed on the conclusion but strangely enough they gave their independent reasons. He contended that Members who decided the appeal of Mrs: T.L. Sakthi in IT(SS)A No. 114 Mad 1998 in their order dt. 2nd Aug., 2000 (one of us was a party to the said order) could not appreciate the purpose of the enactment especially the use of the words 'under this chapter' that governs the appeal procedures. The appeals arising from the orders of assessment have all been placed under Chapter XX of the Act and the use of the words 'under this chapter' has to be construed as governing the entire chapter and it is not limited to the appeal filed before the CIT(A) or Dy. CIT(A).
He pleaded that 'the consideration of payment of tax is related to the returned income and consequent to this returned income is converted to assessed income and demand of tax is raised from which appeal is preferred by the assessee, it is the first appeal. The Tribunal is the first appellate forum for an assessment made under Section 158BC of the Act and therefore, the requirement of payment of admitted tax on the returned income is a condition precedent to the admission of an appeal by such first appellate authority. He contended that when the provisions are read in sequence and the words 'under this chapter' covering the entire chapter, it leaves no doubt at all that the provision of Section 249(4) of the Act governs all appeals arising from the order of an assessment and by this proposition the appeal to the Tribunal from an assessment of undisclosed income could be admitted on the fulfilment of the condition of payment of tax on the returned undisclosed income. He pleaded that the Tribunal would be ridiculing the provisions by holding that the assessee who files an appeal disrespecting the provisions that require him to pay the admitted tax would be admitted and entertained.
He drew our attention to the orders of the Tribunal as above and submitted that the Members unnecessarily travelled into territories that are not necessary like the appeal should be in the prescribed form and the form as prescribed in the rule. He submitted that Form No. 35 does contain the column to indicate the tax payable on the returned income and it is not contained in Form No. 36 which form is meant for appeal to be filed to the Tribunal. He submitted that the rule and the forms under the rule always follow the Act and are for the easy application of the Act. He pleaded that non-mention of the payment of tax on the returned income in the form of appeal before the Tribunal could not be taken to nullify the provisions of Section 249(4) of the Act and if it in anyway affects in the application of the section of Act, it should be ignored.
He vehemently contended that the Tribunal being a creature of the Act and having been held to be not a Court could not refuse to apply the law as it stands. He submitted that the Tribunal is not a Court had been so held by the Madras High Court in CIT v. P. Manonmani (2000) 245 ITR 48 (Mad)(FB), Smt. R.V. Sarojini Devi v. IAC (2000) 242 ITR 329 (Mad) and in CIT v. Sundaram Clayton Ltd. (1997) 226 ITR 81 (Mad). He also contended that the decision of the Madhya Pradesh High Court in CIT v. Smt. Nanhibai Jaiswal (1988) 171 ITR 646 (MP) is related to the asst. yr. 1976-77 in which it was decided that the appeal could be admitted on non-payment of tax and this was so rendered because the assessment was made before the provision was introduced. In the instant case, the provision of Section 249(4) of the Act existed when Chapter XIV-B was introduced and therefore, those provisions are applicable to all first appeals.
4. The written submissions of the counsel for the assessee touches upon the various aspects of the issue with reference to decisions of the Tribunal that are in favour of the assessee. It also states that the statutory right of appeal to the Tribunal is provided in Section 253 of the Act and it does not contain any indication that the provisions of Section 249(4) are applicable to appeals that may be filed consequent to an assessment made for undisclosed income followed by a search.
5. We have given our very careful consideration to the submissions of both parties and to the case laws as are relied upon by the parties. At the outset we may observe that the Departmental Representative either innocently or deliberately did not even make a reference to the basis or the background to the enactment of Section 249(4) of the Act. If only this had been referred to, the preliminary objection as raised and as vehemently insisted upon may not have been taken up at all.
Sec. 249(4) of the Act underwent an amendment by the Taxation Laws (Amendment) Bill, 1973 that was introduced in the Parliament on 9th May, 1973. The bill as was placed in February, 1973 the views of the Review Committee was called for and the bill was presented to the Parliament in May 1993 after obtaining the report of the review committee. The Bill as was presented to the Parliament in May, 1993 is available in (1973) 89 ITR (St) 33 to 140. The amendment proposed to Sub-sections (2) and (4) to Section 249 of the Act is given in Clause 60 of the Bill. The Notes on Clauses contain the background information that led to the proposed amendment to the Act and the Notes on Clauses contain the notes for Clause 60 of the Bill and this is contained at pp. 116 and 117 of the report as mentioned earlier. The amendment of the sub-sections are not brought here because, we felt that the reproduction of the Notes on Clauses itself would drive the point across. "Clause 60:.
This clause seeks to substitute Clause (b) of Sub-section (2) of Section 249 of the Act by a new clause so as to provide that in counting the period of limitation for filing of an appeal to the Dy. CIT(A) against an assessment order in a case in which an application had been filed under Section 146 of the Act for reopening the assessment, the period from the date on which the application under Section 146 was made to the date of service of the order on such application shall be excluded. The new clause also seeks 'to provide that an appeal to the Dy. CIT(A) against an assessment order would be barred unless the admitted portion of the tax has been paid before filing the appeal. The Dy. CIT(A), however, is being given the power to waive this requirement in appropriate cases for reasons to be recorded in writing."
The reading of the note on Clause 60 as above makes it clear that the new clause to be added to the statute is with reference to an appeal that is filed before the Deputy Commissioner (Appeals) [Dy. CIT(A) for short]. This has been placed in two parts, the first placing of restriction of admitting of the appeal filed before him must be preceded by payment of tax on the returned income and the second, the power to waive the said condition in appropriate cases by recording reasons in writing. The lawmakers subsequently withdrew the second part relating to the waiver of the condition of payment of admitted tax in 1989. It is also clear that the amendment as was proposed does not speak of first appeal and the Act also does not use the term 'first appellate authorities'. All it states is that when any one prefers an appeal to the Dy. CIT(A)against an order of assessment, Dy. CIT(A) shall not admit it unless the tax on the returned income has been paid.
The fundamental rule of interpretation of a statute is that the Act has to be applied-in the manner it was intended to by the legislature and it is not open to the Tribunal or any Court to substitute any word, add or delete any word in the Act when it is so applied to a circumstance. Therefore, it is quite clear that the claim of Departmental Representative that the appeal in the instant case could not be admitted by the Tribunal because the assessee had not paid the tax on the returned undisclosed income as is required by Section 249(4) of the Act is an unacceptable proposition as it goes against the very intention of the legislature. What the lawmakers never intended could not be assumed by any party more especially by the Department because, its functions are limited to the application of the Act as was stated by the lawmakers.
Departmental Representative or the Department could not rewrite the law to suit it because it finds that there is lack of equity as is in the instant case of non-payment of tax on returned undisclosed income before filing of appeal. Likewise no Tribunal or the Court who are required to apply the enacted law could not take the role of lawmakers because they find that the assessee who does not pay or refuses to pay the admitted tax on returned undisclosed income would be tolerated. They have no choice in the matter but to admit the appeal without the payment of tax on the returned undisclosed income because, the Act does not place any restriction for admission of an appeal by the Tribunal or the Court. Much argument was placed by Departmental Representative on the use of the term 'under this chapter' because the appeals, before CIT(A) and Tribunal are placed under Chapter XX of the Act. This Chapter XX covers appeals and revision. This Chapter is divided into six parts (now it has seven parts consequent to the provision of appeals from the orders of the Tribunal). The first part 'A' deals with 'Appeals to the Dy. CIT(A) and CIT(A)1 the second part 'B' talks of 'Appeals to the Appellate Tribunal'; part 'C' refers to 'Reference to High Court'; part 'D' relates to 'Appeals to the Supreme Court1 part 'E' relates to 'Revision by the CIT' and part 'F' is 'General'.
Part 'A' covers Sections 246 to 251 of the Act and deals with 'Appealable orders'; 'Appealable orders before CIT(A)'; 'Appeal by a partner'; 'Appeal by person denying liability to deduct tax'; 'Form of appeal and limitation' and 'Procedure in appeal'. The second part 'B' covers 'Appellate Tribunal'; 'Appeals to the Appellate Tribunal'; 'Orders of Appellate Tribunal' and 'Procedure of Appellate Tribunal'. Part 'C' covers 'Reference to High Court'; 'Statement of case of the High Court'; 'Statement of case to Supreme Court in certain cases; 'Power of High Court' or Supreme Court to require statement to be amended'; 'Case before High Court to be heard by not less than two Judges' and 'Decision of High Court or Supreme Court on the case stated'. Part 'D' deals with 'Appeals to the Supreme Court' and 'Hearing before Supreme Court'. Part 'E' covers the revision by the CIT of an order of assessment prejudicial to the interest of Revenue and other orders of assessment. Part 'F' covers general topics like Tax to be paid notwithstanding reference, etc.'; 'Execution for costs awarded by Supreme Court'; 'Amendment of assessment on appeal'; 'Exclusion of time taken for copy' and definition of 'High Court'.
The Chapter XX as indicated above has six parts and each part covers a particular appeal aspect considering the flow of events, the appeal to Dy. CIT(A) or CIT(A) is placed at the start in part 'A' because it immediately follows the orders of assessment and part 'B' is an event that flows from 'A' and parts 'C' and 'D' are events that flow from 'B'. If the proposition of the Departmental Representative is to be accepted the question wpuld arise why the lawmaker repeated certain principle more than once. For example, part 'B' contains a provision in Section 253(5) of the Act that reads 'The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in Sub-section (3) or Sub-section (4), if it is satisfied that th'ere was sufficient cause for not presenting it within that period'. Part 'A' contains an identical provision that reads 'The CIT(A) may admit an appeal after the expiration of the said period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.' The intention of the lawmaker is therefore clear that they wanted each appeal procedure to be comprehensive and complete and thus, placed them in separate compartments or groups and called them 'A', 'B' and so on under Chapter XX.
One other example would clarify further the intention of the lawmaker that each part is complete by itself and this is with reference to Section 265 of the Act. This states 'Notwithstanding that a reference has been made to the High Court or the Supreme Court or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case. In CIT v. Bansi Dhar & Sons (1986) 157 ITR 665 (SC) the Supreme Court was considering a question of stay of tax on assessed income when the matter is pending in reference before High Court and Supreme Court. It was held that 'Tribunal retains the appellate powers till reference is disposed of. Because the Tribunal would have to dispose of the appeal in accordance with the opinions expressed or answers given by the High Courts or the Supreme Court, under the scheme the appeal is kept pending with the Tribunal and the appellate jurisdiction is retained by the Tribunal till the High Court or the Supreme Court answers the question referred. Further the High Court has no inherent power or incidental power in the matter of a reference pending before it to grant stay of realization or to grant injunction. That must remain within the jurisdiction of the appellate authority.' This case is related to asst. yr. 1962-63 and at that time there existed a provision that stated tax shall be paid on assessed income despite the matter is in reference before High Court or the Supreme Court. The word used in section was 'shall' which is indicative of leaving no choice with the assessee. Despite this compulsory provision for payment of tax on assessed income the apex Court held that the power to grant stay on tax payable lies with the Tribunal that is seized of the matter till the reference is answered by the High Court or the Supreme Court. This has been brought out for the sole purpose to make it clear that the Courts do realize the constraint placed on them by the Act.
The provision of Section 265 of the Act as was examined by the apex Court (supra) remains in the Act without any change but the lawmakers only felt the need of restricting of appeal to be entertained by the Dy. CIT(A) unless the tax on admitted income is paid before the filing of the appeal before Dy. CIT(A). The provisions of Chapter XIV-B were brought into the statute for speedier assessment in cases of search. The lawmaker initially felt that the assessment must be framed by the AO with the previous approval of the CIT or Director and appreciating the need to provide appeal against such assessment before CIT(A) may not be proper, introduced a provision under Section 253 of the Act for filing of an appeal before the Tribunal from such orders. Subsequently the lawmakers felt that the assessment must be made with the previous approval of Joint CIT or Joint Director both of whom hold a lower position in hierarchy of the Department and accordingly introduced an amendment in Section 246 of the Act and the orders were made appealable to CIT(A).
The provisions of Section 249(4) were in the Act when Chapter XIV-B was added and part of the Act. The lawmakers perhaps considering that Chapter XIV-B talked of income that was not disclosed by an assessee did not feel the necessity to introduce provision similar to the one as in Section 249(4) of the Act. The lawmaker had placed stages of appeal in individual parts and there is no indication made by them that any portion of the enactment of any part is to extend to or govern another part containing appeal procedures. Going by the proposition advanced by the Departmental Representative it would mean that the Tribunal would have to hold that the provision of Section 265 that is still retained in the Act is redundant. If the lawmaker had intended that the provision of Section 249(4) was to apply to all appeals that arise from the order of assessment, and that w.e.f. 1st Oct., 1998, the appeal being provided from the orders of the Tribunal to the High Court, it was totally unnecessary to retain Section 265 as it is.
Therefore, it is clear without any shade of doubt that the provisions grouped in each part of Chapter XX of the Act are meant to be applicable within that part and not to travel into other parts of said chapter. The Madras High Court in Mrs. R.V. v. Sarojini Devi's case (supra) had reiterated principles of interpretation of tax statute by observing that 'it is necessary to look at the language employed in the statutory provision, regard must be given to the context in which it occurs, the purpose it seeks to achieve, the scheme that is set in the enactment and ascertain the legislative intent. We had earlier brought out the legislative intent in introducing Section 249(4) of the Act and that it is to ensure that the appeal before Dy. CIT(A) are filed only on payment of tax on returned income. Filing of an appeal before Dy. CIT(A) has not been categorized anywhere in the Act as 'filing of first appeal' and filing of appeal before Tribunal as 'filing of second appeal' but, there is recognition of hierarchy of judicial forums like CIT(A) or Dy. CIT(A), Tribunal, now High Court and the stages of movement of appeal are from CIT(A) or Dy. CIT(A) to Tribunal and from Tribunal to High Court. Merely for the reason for certain issues the appeal from the order of assessment lies before the Tribunal and by this process, it is termed as first appeal as a matter of expression by the parties, it does not lead to the conclusion that curtailment of admission of appeal before Dy. CIT(A) is to be extended to Tribunal, more so when as observed earlier the legislature never intended so. The Tribunal is a creature of the tax statute and it has no powers under the Act to rewrite the law at the instance of either of the parties more so at the instance of the Department who is a mere implementers of Act. Law and equity are strangers is often quoted in many judicial decisions, and therefore, the feeling of inequity could not be the basis for the Department to contend that the equity must be introduced by the Tribunal.
Departmental Representative also made a stubborn plea that the issue of admission of appeal by the Tribunal in a case where admitted tax has not been paid on the returned undisclosed income as is in the instant case should be referred to a larger Bench. This plea to our opinion is baseless and is rejected because the intention of the lawmaker which was reproduced earlier clearly pointing out that the restriction of admission of an appeal is conditional on payment of admitted tax on returned income is placed on Dy. CIT(A). We had observed earlier that Tribunal as a creature of law must apply the law as it stands and has no power to rewrite the law and could never take over the role of lawmaker. Therefore, the restriction of admitting of an appeal subject to payment of tax being limited to appeal filed before Dy. CIT(A) and so clearly specified by the legislature, it is not open to the Department to contend otherwise because, it would mean asking the Tribunal to write the law for which the Tribunal is not created.
The assessee had stated in its stay petition that authorities under several statutes had attached all his properties in connection with various proceedings. Considering the gravity of the situation and the proceedings under various enactments, we are of the opinion that this is not a fit case for granting of stay of demand. Even granting of early hearing to this appeal may not be fruitful to resolve the issue because almost all the items are related to Enforcement Directorate, corruption and other offences and proceeding are stated as pending before Civil and Criminal Courts. The assessment is based with reference to proceedings under other Acts as well and much of the finding in the instant case would depend on the finality in those cases. In view of this feature, granting of early hearing may result in repeated adjournment on the plea that the proceedings before Courts are in process. We are of the opinion that posting of this appeal for hearing it on merits would be considered on an application moved by either of the parties placing information with the registry of the Tribunal that matters under other Acts have become final and that proceeding with the appeal of the assessee would not in anyway jeopardise or run parallel to any proceeding under other Courts. This petition for the aforesaid reasons is rejected.