Income Tax Appellate Tribunal - Ahmedabad
The Acit, Circle-5, Ahmedabad vs M/S Redex Protech P Ltd, Ahmedabad on 7 May, 2019
आयकर अपील य अ धकरण, ' वशेष यायपीठ' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL,
"SPECIAL BENCH", AHMEDABAD
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#ी राजपाल यादव, या(यक सद य एवं #ी द प कुमार के डया, लेखा सद य
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ITA No.462/Ahd/2002
With
CO No.28/Ahd/2002
AND
ITA No.823/Ahd/2004
(नधा-रण वष-/ Asstt. Year: 1995-96
ACIT, Cir.5 Redex Protech P.Ltd.
Ahmedabad. Vs. A/5, Jaymala House
Opp: Gandhigram Rly. Station
Ahmedabad.
(Applicant) (Responent)
Revenue by : Shri O.P. Sharma, CIT-DR
Shri Vinod Tanwani,Sr.DR
Shri Mudit Nagpal, Sr.DR
Assessee by : Shri S.N. Soparkar with
Shri P.M. Mehta and
Shri Parin Shah
सन
ु वाई क तार ख/ Dateof Hearing : 13/02/2019
घोषणा क तार ख / Date of Pronouncement: 07/05/2019
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-XI, Ahmedabad dated 31.12.2001 passed for the Asstt.Year 1995-
96. On receipt of notice in the Revenue's appeal, the assessee has filed cross objection bearing no.28/Ahd/2002.
ITA No.462/Ahd/2002 & Others with CO (Special Bench) 22. In the first ground of appeal, the Revenue has pleaded as under:
"1. 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 assessee- company was incorporated on 1.11.1991. It was engaged in the business of manufacturing of fire-fighting equipments. The due date for filing of the return of income for the Asstt.Year 1995-96 under section 139(1) was 30.11.1995, but it was filed on 31.3.1997 declaring total income at Rs.1,07,02,530/- after claiming deduction under section 80IA at the rate of 30%. Shri Tanwani, ld.DR while appraising us with the facts contended that sum of Rs.41,52,109/- being tax was required to be paid by the assessee under self-assessment on the returned income. But along with return of income, the assessee did not pay this tax. He pointed out that this return was processed under section 143(1)(a) on 1.3.1998, and a small adjustment was ITA No.462/Ahd/2002 & Others with CO (Special Bench) 3 made in the working of deduction admissible under section 80IA. Thereafter the case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. The ld.AO has passed assessment order under section 143(3) on 19.3.1998 and determined taxable income at Rs.2,47,81,040/-. The ld.DR further contended that in the similar manner, the assessee has filed return for the Financial Year 1992-93 and 1993-94. For F.Y.1993-94 (Asstt.Year 1994-95) due date for filing of return was 30.11.1994, but was filed belatedly on 3.3.1996. In this year also no taxes were paid on the returned income. The assessee has filed appeal against the assessment order, but the appeal was withdrawn on 29.4.1997 and it moved a petition under section 264 of the Income Tax Act to the ld.Administrative Commissioner who passed an order on 11.12.2001. In the petition before the ld.Commissioner, it was contended by the assessee that it has no real income, rather a fictitious income was returned by the assessee. The ld.Commissioner accepted this contention of the assessee. He set aside the assessment order dated 31.3.1997 in the Asstt.Year 1994-95. On the basis of procedure adopted in the Asstt.Year 1994-95, the assessee moved a letter to the AO on 24.3.1998 submitting therein that it has returned a fictitious income and requested that in the light of 264-order in earlier year, investigation be made. But the assessment order has already been passed in the Asstt.Year 1995-96 on 19.3.1998.
5. Against the assessment order dated 19.3.1998 passed in the Asstt.Year 1995-96, the assessee went in appeal before the ld.CIT(A) who had entertained the appeal of the assessee and 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 ITA No.462/Ahd/2002 & Others with CO (Special Bench) 4 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 admitting the appeal which is against the provisions of section 249(4) of the Act.
(ii) However, he is right in directing the learned AO to examine the facts described by the assessee and if necessary by invoking his discretion u/s 142(2A) of the - Act for conduct special audit in order to ascertain the taxable income of the assessee as it is nothing but a form of seeking remand report from the learned AO.
(iii) Further, the learned CIT(A) is not justified in directing the learned AO to re-compute the income of the assessee only based on audit report u/s 142(2A) of the Act without exercising his inherent statutory powers of probing into the books of account and statement of affairs of the assessee."
7. The ld.Sr.DR in his first fold of submissions contended that right of appeal is not an inherent right or fundamental right, but it is a statutory right. It is always upon the Legislature to give or not to give right of appeal against ITA No.462/Ahd/2002 & Others with CO (Special Bench) 5 decision made by the authorities. The right of appeal whenever conferred by the statute has to be exercised strictly in conformity with statutory provisions. If the statutory put any restriction then such right would be available along with such restrictions. For buttressing his contention he made reference to the decision of Hon'ble Supreme Court in the case of Vijay Prakash D. Mehta Vs. Collector of Customs, AIR (1998) SC 2010. He took us through the following finding of the Hon'ble Supreme Court:
"Right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant. It is not the law that adjudication by itself following the rules of natural justice would be violative of any right, constitutional or statutory, without any right of appeal, as such. If a statute gives a right to appeal upon certain conditions, it is upon fulfillment of those conditions that the right becomes vested and exercisable to the appellant. The purpose of s. 129E of the Customs Act is to act in terrorem to make the people comply with the provisions of law. {129E of the Customs Act is analogus to 249(4) of IT Act}
8. He further contended that section 250 of the Income Tax Act provide procedure required to be followed by the ld.Commissioner(Appeal). Sub- section (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 ITA No.462/Ahd/2002 & Others with CO (Special Bench) 6 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 fulfilled, appeal cannot be entertained.
9. In his next fold of submissions, the ld.Sr.DR appraised us with the scheme of section 249(4) and how changes have taken place. In the paper book, he placed on record sections 249, 201 and 140 as they stood in 1961 and 1964. How changes have been made in the scheme in 1976 and 1989. He briefly took us through this historical development and pointed out that earlier in 1970s the advance tax was required to be paid on the demand made by the AO. After 1989 amendment, there is considerable change in the scheme and section 210 was brought in the Act, wherein for the first time, the assessee was to pay advance tax "on his own accord". Power initially assigned to the AO to demand advance tax by issuing notice under section 156 as per his estimate of the income was thus withdrawn. Similarly, prior to 1989 if there was a reasonable cause for non-payment of taxes on the returned income, the ld.CIT(A) could permit an assessee to prosecute his appeal by recording reasons and exempting the assessee from operation of provision. Thiss, power is available to the CIT(A) for the cases falling in section 249(4)(b). For buttressing his contention, he took us through Direct Tax Code Amendment Act 1989 wherein section 249(4) has been amended and the Note given in the Finance Act. These have been placed on page no.29 of the paper book. It reads as under:
"DIRECT TAX LAWS (AMENDMENT) ACT, 1989 ITA No.462/Ahd/2002 & Others with CO (Special Bench) 7 Amendment of sub-section (4) of section 249 dealing with the payment of tax due on the returned income before filing an appeal 10-9 Sub-section (4) of section 249 of the Income-tax Act provides that no appeal shall be admitted unless, at the time of filing the appeal, the assessee has,--
(a) where a return has been filed by him, paid the tax due on the income returned by him, or
(b) where no return has been filed by him, paid an amount equal to the amount of advance tax which was payable by him.
Under the old provisions of a proviso to the said sub-section (4), discretion was allowed to the first appellate authority, i.e., any Deputy Commissioner (Appeals) or the Commissioner (Appeals) to waive the above requirement for good and sufficient reasons.
DIRECT TAX LAWS (AMENDMENT) ACT, 1989 10.10 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 income, his appeal will now be admitted by the first appellate authority only if he has paid the tax due on the returned income.
10. On the strength of the above, the ld.DR contended that the ld.AM has misread the provision as well as ignored the explanation given by the Board ITA No.462/Ahd/2002 & Others with CO (Special Bench) 8 in its Circular bearing no.559/1990 explaining the background for incorporating section 249(4)(a) of the Act. He submitted that the ld.AO has made reference to Hon'ble High Court's decision in the case of T. Govindappa Setty vs. ITO, (1998) 231 ITR 892 (Kar). According to the ld.DR this has wrongly been construed by the ld.AM. He pointed out that in this case assessee was a HUF who in the returned income put a note mentioning the fact that HUF has been discontinued. The assessee wrote a letter to the AO before return was processed even under section 143(1)(a) that HUF has discontinued and no cognizance be taken. But the AO took cognizance. In the present case, the assessee wrote a letter to the AO on 24.3.1998 wherein a scrutiny assessment was passed on 19.3.1998. Thus, according to the ld.DR, there are specific differences on the facts between the case in hand vis-à-vis before the Hon'ble High Court. Thereafter, he made reference to the decision of Hon'ble Karnataka High Court in the case of D. Komlakshi D. Rajkumar Vs. DCIT (2006) 292 ITR 99 (Kar) and submitted that in this case Hon'ble High Curt has again considered the mandatory condition requires to be fulfilled under section 249(4) of the Act and held that unless taxes are being paid on the self-assessed income admitted by way of the returned income, appeal cannot be entertained by the ld.CIT(A). This decision is subsequent to the earlier one and requires to be followed. He further contended that if this type of modus operandi at the end of the assessee is allowed to be happen then it will cause a serious threat to the public policy and destroy sanctity of return of income submitted by an assessee. That means, any assessee after filing return can plead that return be ignored. He pointed out that the assessee-company is a listed company with Stock Exchange and first trade of the assessee-company BSE occurred on 12- 2-1993. It has adopted fraudulent means of showing income to dupe investors, therefore, there should not be any sympathy for such violator. He ITA No.462/Ahd/2002 & Others with CO (Special Bench) 9 further relied upon the decision of Hon'ble Supreme Court 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 defective return, if not rectified, then become non est return, and accordingly , provisions of section 249(4)(a) would not apply to the facts of the present case. But in the decision referred above, in the case of K. Nagesh and others (supra) Hon'ble High Courts were unanimous in their conclusion that if the return is defective, then no cognizance can be taken on such return. He further drew attention to the judgment of Hon'ble Delhi High Court in the case of Pramod Kumar Dang, 361 ITR 137 (Del). He submitted that the tax payable by an assessee on an admitted income, if not paid then such return would be construed as defective return. Elaborating further, he took us through decision of Punjab & Haryana High Court in the case of ITA No.462/Ahd/2002 & Others with CO (Special Bench) 10 Harijinder Kaur (supra) and submitted that if an assessee fails to rectify defect, then it would be construed as invalid return and no assessment can be made on an invalid return. In his alternative contention, he submitted that Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd., 225 ITR 746 (SC) and Excel Industries Ltd., 358 ITR 295 (SC) propounded that real income or actual income ought to be taxed. In the case of the assessee in one assessment year, order under section 264 has already been passed by the Commissioner recognizing the fact that the assessee has no real income. This order of the Commissioner has been upheld by the Hon'ble High Court also. It will suggest that the assessee has no real income basically, and the AO ought to have not passed the assessment order under section 143(3) taxable the returned income by a substantial higher figure.
13. With regard to the contention of the ld.DR that if the action of the assessee is upheld in law by entertaining such an appeal, then it will be against the public policy. He submitted that income tax proceedings do not have any relevance with public policy. What should be taxed is real income. He made reference to the Hon'ble Supreme court's decision in the case of Dr.T.A. Quereshi, 287 ITR 547 (SC). Alternatively, he further contended that in the case of D. Komalkshi referred by the ld.DR, the Hon'ble Court while adjudicating the appeal of the assessee provided further opportunity for payment of taxes and entertainment of the appeal on merit. Following this decision, one more opportunity be given to the assessee for payment 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 ITA No.462/Ahd/2002 & Others with CO (Special Bench) 11 non-payment of taxes on admitted income is not recognized as a defect. Sub- clause (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 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."
16. A perusal of the above would indicate that sub-clause (a) contemplates in unambiguous term that where an assessee has filed return, then unless he pays tax on the returned income, his appeal could not be admitted. With regard to the assessee falling in clause (b) i.e. those who have not filed return then discretion has been given to the CIT(A) to exempt him from payment of ITA No.462/Ahd/2002 & Others with CO (Special Bench) 12 amount equal to the advance tax which was payable by him for entertaining his appeal. The ld.CIT(A) may exempt such an assessee if sufficient reasons are being shown by the assessee for non-payment of tax. Section 249(4)(a) postulates a mandatory condition; in other words, the right of appeal is subjected to this condition. This clause whittles down this right of appeal and cannot be regarded as mere rule of procedure. At the time of hearing, Shri Tanvani, ld.Sr.DR made reference to the decision of Hon'ble Supreme Court in the case of Vijay Prakash D. Mehta (supra). This decision is with regard to section 129E of the Customs Act, which is analogous to section 249(4) of the Income Tax Act. While construing section 129E, Hon'ble Supreme Court has observed that purpose of conditions incorporated in section 129E is to make people to comply with the provisions. Similar object is being achieved with the help of section 249(4)(a) of the Act. With regard to other cases, and to take care of hardship of tax payers, remedy is being provided in sub-clause (b) of section 249(4). It is pertinent to observe that at the time of hearing, the ld.counsel for the assessee also not disputed this construction of section 249(4)(a) of the Act. He raised alternative submissions, which we are going to deal with in the later part of 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 ITA No.462/Ahd/2002 & Others with CO (Special Bench) 13 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 furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the [Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the [Assessing] Officer may condone the delay and treat the return as a valid return.
Explanation.--For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :--
(a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in;
(aa) [***]
(b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return;
[(bb) the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to ITA No.462/Ahd/2002 & Others with CO (Special Bench) 14 the furnishing of the return, by a copy of such report together with proof of furnishing the report;]
(c) the return is accompanied by proof of--
(i) the tax, if any, claimed to have been deducted [or collected] at source [***] and the advance tax and tax on self-
assessment, if any, claimed to have been paid :
18. A bare perusal of sub-section (9) of section 139 would indicate that this clause contemplates that where the AO considers that return of income furnished by an assessee is defective, he may provide an opportunity to the assessee to remove this defect. He will give an intimation requiring the assessee to rectify this defect within a period of 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 the tax, but ITA No.462/Ahd/2002 & Others with CO (Special Bench) 15 claimed payment of such taxes on self-assessment, and if he failed to give proof of such payment, then the AO would call for furnishing such proof, only then the return will be treated as defective. In the present case, the assessee nowhere claimed payment of self-assessment taxes along with return. Therefore, no inquiry was required to be made for furnishing evidence in support of such claim. The return of the assessee cannot necessarily be treated as defective return. The ld.counsel for the assessee made reference to the decision of Hon'ble Karnataka High Court in the case of K. Nagesh (supra). In that case the assessee has filed revised return, which was declared to be invalid, hence, the assessee claimed refund of tax and interest paid on revised return. Hon'ble High Court in those circumstances concluded that such taxes and interest cannot be retained by the Revenue. They deserve to be repaid because revised return was an invalid return and no cognizance of such return could be taken. The discussion made by the Hon'ble High Court in para 17 is worth to note. It reads as under:
"17. Considering the scheme of the Act, the word 'return' in Section 240 of the Act, should be understood as a 'return' in terms of Section 139 of the Act. If the return furnished is not in conformity with Section 139, it ceases to be a return under the Act. The word 'return', thus means, a legal and valid return. The understanding of the Tribunal, that the word 'return' employed in this provision includes both valid as well as invalid return, is not justifiable. If such an interpretation is given to the word 'return', it would defeat the intent of the provision itself. It is clear from the said provision that the assessee is entitled to the tax paid in excess of the tax chargeable on the total income declared by the assessee in his return. No tax shall be levied or collected except with authority of law, as enjoined by Article 265 of Constitution of India. If the return itself is declared to be invalid by the authorities as well as by the Tribunal, such return does not exist. i.e., it is void ab initio and non est in the eye of law which has no legal sanctity. If that is so, then the invalid return has to be ignored and we have to examine the refund to be payable by the department under the proviso (b) to Section 240 of the Act on the basis of the valid return i.e, ITA No.462/Ahd/2002 & Others with CO (Special Bench) 16 the original return filed by the assessee on 31.8.1992 declaring his total income of Rs.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-à-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 the case of Pramod Kumar Dang (supra) is concerned, during the course of search a sum of Rs.4.60 lakhs was seized by the Department. The assessee filed an application before the tax authorities to appropriate this cash qua the demand against self-assessment case. Department did not give effect to this request of the assessee, and ultimately matter travelled to the Hon'ble High Court. The Hon'ble High Court has observed that since money of the assessee was lying with the Revenue, and it is to be construed that the assessee has paid taxes on self-assessment tax, and if that money is being used qua the advance tax require to be paid by the assessee, then it was construed as a compliance of section 249(4)(a) of the Act. No such circumstances are available before us.
21. 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. (supra) and Excel Industries Ltd. (supra). On due ITA No.462/Ahd/2002 & Others with CO (Special Bench) 17 consideration of the above proposition, we are of the view that all these arguments on merit can possibly be raised if there is a valid appeal before the ld.CIT(A). Upto and until, the assessee pays tax on self-assessment/returned income, no other plea could be entertained. By entertaining such plea, we will be committing same mistake as has been committed by the ld.CIT(A). As far as decisions in the cases of Dr.T.A. Quereshi (supra) and Satyam Computers are concerned, they are also not related to the controversy in hand. In the case of Dr.T.A. Quereshi (supra) during the course of search heroine drugs were seized which were formed part of stock-in-trade of the assessee. The issue before Hon'ble Court was whether this could be allwed as a business loss. Hon'ble Court has held that the business losses are allowable on ordinary commercial principle in computing profit. This judgment was put in service by the ld.counsel for the assessee to address that in income-tax proceedings, there is no relevancy with regard to the public policy. We are of the view that this is not a relevant question for our adjudication and we need not to comment on this aspect. In view of the above discussion, we concur with the view of the ld.Judicial Member and hold 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 ITA No.462/Ahd/2002 & Others with CO (Special Bench) 18 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 record be placed before the Division Bench for deciding remaining appeal and other grounds, if any.
Order pronounced in the Court on 7th May, 2019 at Ahmedabad.
Sd/- Sd/- Sd/- PRADIP KEDIA JUSTICE (SHRI) P.P.BHATT RAJPAL YADAV (ACCOUNTANT MEMBER) (PRESIDENT) (JUDICIAL MEMBER)