2003-VIL-199-ITAT-AHM

Equivalent Citation: [2004] 82 TTJ 284, [2004] 3 SOT 456

Income Tax Appellate Tribunal AHMEDABAD

IT Appeal Nos. 505, 1916, 2325 (Ahd.) of 1997

Date: 05.09.2003

J.K. CHATURVEDI

Vs

ASSISTANT COMMISSIONER OF INCOME-TAX

For the Appellant : M. K. Patel
For the Respondent : Banwari Lal

BENCH

B. M. Kothari (Accountant Member) And Rajpal Yadav (Judicial Member)

JUDGMENT

Rajpal Yadav (Judicial Member)

In the present three appeals, a pure question of law as to scope and ambit of Tribunal's powers contemplated in s. 254(1) falls for consideration.

2. Filtering out unnecessary details, the factual background relevant for adjudication in the present dispute is as follows.

3. The appellant, an individual, assessed to tax, was partner with one Shri Jagdish Mehta since 1982. In October, 1993, there had been a dispute between the partners and they separated themselves. The appellant took over the business including liabilities of the partnership firm, namely, M/s J.K. Enterprises. A search operation was carried out at the residential as well as business premises of the assessee on 30th June, 1994. During the search, various incriminating material was found and seized. In order to understand the factual background in a better way, it is worth to take note of the following details compiled by the assessee in paper books of respective appeals :

Shri J.K. Chaturvedi

Asst. yr. 1991-92

Return under s. 148 was filed on	29th March, 1995
	Rs.
Total income as per return under s. 148	17,45,940
Tax payable as per return	8,68,830
Interest 234B	8,34,076
Interest 234C	27,367
Total tax & interest payable	17,30,273

Orders passed

Under section	Date of order	Assessed income (Rs.)	Demand raised (Rs.)
			Tax	Interest	Total
143(1)(a)	31-3-1995	17,45,940	9,41,438	9,71,858	18,54,896
154	9-8-1995	17,45,940	3,83,038	3,08,930	6,91,968
144 r/w s. 147	21-1-1997	25,16,390	8,13,456	10,85,478	18,98,934

Appeal is filed against the assessment order dt. 21st Jan., 1997 (before the Tribunal)

Details of taxes paid :

	Rs.
Advance tax paid as per return	83,808
Adjustment made on 14-3-1995	1,035
Self assessment tax paid under s. 140A on 30-3-1995	5,00,000

Regular tax paid to TRO

1.	28-2-1997	1,00,000
2.	29-3-1997	1,00,000
3.	30-5-1997	25,000
4.	31-7-1997	3,00,000
5.	27-8-1997	3,00,000
6.	3-10-1977	3,00,000
7.	29-10-1997	3,00,000
8.	Sept., 1997	3,00,000
9.	2-12-1997	3,00,000	20,25,000
			26,09,843

Appeal before the CIT(A) was filed on 26th Feb., 1997

Shri J.K. Chaturvedi

Asst. yr. 1992-93

Return under s. 148 was filed on	29th March, 1995
Return was received on	9th Oct., 1995
Total income as per return	Rs. 18,87,168
Tax payable as per return	Rs. 10,03,517
Interest payable	Rs. 5,25,079
Total tax & interest payable	Rs. 15,28,596

 

Order passed Under ss.	Date of order	Assessed income (Rs.)	Demand raised (Rs.)
			Tax	Interest	Total
143(1)(a)	27-10-1995	18,87,168	10,03,517	5,25,079	15,28,596
154	18-9-1995	18,87,168	9,04,789	4,63,810	13,68,599
144 r/w s. 147	21-1-1997	30,91,325	14,74,516	22,68,435	37,42,951

Appeal is filed against the assessment order dt. 21st Jan., 1997 (before the Tribunal)

Details of taxes paid :

Regular tax paid to TRO

	Rs.
30-12-1997	3,00,000
30-11-1999	25,000
14-12-1999	25,000
6-1-2000	1,00,000
31-1-2000	74,955
31-1-2000	35,000

Regular tax paid :

30-6-1999	1,00,000
1-8-2000	3,00,000
1-8-2000	11,753
1-8-2000	25,008
31-8-2000	5,50,000
10-10-2000	5,00,000
8-12-2000	5,00,000
Total	25,46,716

Appeal before the CIT(A) was filed on 26th Feb., 1996

Shri J.K. Chaturvedi

Asst. yr. 1993-94

Return was filed on	31st March, 1995
	Rs.
Total income as per return	15,91,231
Tax payable as per return	6,20,431
Interest	3,24,257
Total tax & interest payable	9,44,688

Order passed

Under section	Date of order	Assessed income (Rs.)	Demand raised (Rs.)
			Tax	Interest	Total
143(1)(a)	31-3-1995	15,62,760	6,72,129	4,49,791	11,21,920
143(3)	27-1-1996	20,14,730	8,67,456	9,00,372	17,67,828

Appeal is filed against the assessment order dt. 27th March, 1996 (before the Tribunal)

Details of taxes paid :

Regular tax paid

	Rs.
22-6-2000	1,00,000
2-5-2000	1,00,000
1-5-2000	1,22,000
28-4-2000	13,000
27-4-2000	5,935
23-3-2000	1,00,000
29-2-2000	1,00,000

Tax paid to TRO

20-2-1998	2,00,000
23-2-998	3,00,000
23-2-1998	25,000
12-3-1998	1,00,000
11-2-1998	2,05,000
16-3-1998	2,25,000
24-3-1998	2,09,892
24-3-1998	2,00,000
31-3-1998	1,00,000
31-3-1998	1,00,000
	22,05,827

Appeal before the CIT(A) was filed on 12th April, 1996

4. Thus, from the details extracted above, it is explicit clear that assessee has to revise his returns consequent to the disclosure made during the search and this has given a substantial rise on tax liability to the assessee.

5. The assessment under s. 143(3) in asst. yr. 1993-94 and under s. 144 r/w s. 147 were framed in asst. yrs. 1991-92 and 1992-93, thereby learned AO made number of additions. Since the issue regarding addition on quantum has not been agitated before us, thus, for the time being it is necessary to divulge those details.

6. Aggrieved with the assessments, the assessee carried the matter in appeals before the CIT(A). The learned first appellate authority has dismissed all the appeals vide impugned orders on the ground that according to sub-s. (4) of s. 249, the assessee was required to pay agreed tax on the returned income. Since assessee failed to pay the taxes, therefore, his appeals could not be admitted and, thus, learned first appellate authority dismissed them in limine.

7. In support of the appeals, Shri M.K. Patel, learned counsel for the assessee took us through ss. 249, 250 and 254 of the IT Act and contended that although the appellant was required to discharge the liability of agreed tax prior to institution of appeals before the CIT(A), but even in not doing so, the appeal, at the most, could be termed as defective one. According to the learned counsel, there would be two courses available with the assessee that he ought to have waited for filing appeal before the CIT(A) upto and until agreed taxes are paid and then should have filed appeal along with application for condondation of delay or the assessee could adopt the course as one adopted by him presently. On the strength of phraseology, "such orders thereon as it thinks fit" used in s. 254(1), the learned counsel submitted that Tribunal has plenary powers to condone the delay and restore the appeal before the CIT(A) for deciding them on merit because by now assessee has paid all the agreed taxes. He further took us through the details of such payments available in the paper books. He submitted that by end of 2000, assessee had made payment of tax more than Rs. 75 lacs. He further contended that idea behind incorporating sub-s. (4) in s. 249 was to ascertain the fact regarding payment of taxes or the assessee can be forced to at least make the payment of agreed taxes before disputing any addition made by the AO. On the strength of Bombay Tribunal decision in ITA No. 5655 of 2001, he argued that true procedure is a handmade justice, such technical provisions should be liberally construed so that controversies could be decided on merit. The learned counsel further submitted that valuable shares were in the possession of the Department, assessee could not sell them and non-availability of fund is a reasonable cause for not making the payment of taxes in time and should be considered for condonation of delay.

8. The learned Departmental Representative, while controverting the argument of learned counsel, specifically pointed out that word "shall" has been used in sub-s. (4) of s. 249, which contemplates that no appeal under this chapter can be entertained upto and until compliance of s. 249(4) is made. He contended that for the learned first appellate authority there is no option except to dismiss the appeals in limine as the assessee had not paid the agreed taxes. Therefore, these appeals also deserve to be dismissed.

9. We have duly considered the rival contentions. From the perusal of record and on consideration of respective arguments, following points have emerged out for our adjudication :

(1) Whether the Tribunal has powers under s. 254(1) to give a finding that an appeal filed in violation of s. 249(4) would be termed as defective one and the moment the defect is cured by making payment of agreed tax, the appeal can be decided on merit subject to limitation provided in s. 249(2) and its condonation thereof as per s. 249(3).

(2) Whether non-availability of funds for making payment of agreed taxes with the assessee could be considered as a reasonable cause for filing defective appeals in violation of s. 249(4) of the Act.

(3) Whether sufficient reason exists for curing this defect after expiry of limitation provided in s. 249(2) of the Act.

10. It is undisputed proposition of law that appeal is a continuation of the original proceedings and right of appeal is not an inherent right but it is a statutory right. It is open to the legislature to give or not to give a right of appeal against decisions made by authorities. The right of appeal wherever conferred by statute has to be exercised strictly in conformity with the statutory provisions, which create it. If the statute put any restriction then, such right would be available along with such restrictions. It is also not disputed before us that assessee had made the payment of agreed tax during the pendency of these appeals. Before embarking upon the jurisdiction of the Tribunal whether these appeals can be restored back to the CIT(A) or not, it is salutary to take note of sub-ss. (3) and (4) of s. 249 and sub-s. (1) of s. 254 because these provisions have direct bearing on the controversy :

Sec. 249(3) : "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."

Sec. 249(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 filling under cl. (b) and on an application made by the appellant in this behalf, the CIT(A) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause."

Sec. 254(1) : "The Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit."

11. For considering the powers of Tribunal contemplated in sub-s. (1) of s. 254, it would be imperative for us to refer the judgment of the Hon'ble Supreme Court rendered in the case of Hukmichand Mills Ltd. vs. CIT (1967) 63 ITR 232(SC). Therein the Hon'ble Supreme Court had considered the ambit and scope of expression "pass such orders therein as it thinks fit", used in s. 33(4) of IT Act, 1922, which is analogous to 254(1) to 1961 Act, At p. 237, the Hon'ble Supreme Court made following observation :

"The word 'thereof', of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The words "pass such orders as the Tribunal thinks fit" include all the powers (except possibly the power of enhancement) which are conferred upon the AAC by s. 31 of the Act. Consequently, the Tribunal has authority under this section to direct the AAC or the ITO to hold a further enquiry and dispose of the case on the basis of such enquiry."

12. Then again this expression fell for consideration before the Hon'ble Supreme Court in the case of CIT vs. Assam Travels Shipping Service (1993) 199 ITR 1(SC). In this case, assessee filed the return late for asst. yrs. 1963-64 and 1964-65. Thus, violated s. 271(1)(a)(2) of the Act. The learned AO levied the penalty. However, while calculating the penalty, he worked out the amount at a very lower figure. He levied the penalty at Rs. 6,494 and Rs. 70,118 for asst. yrs. 1963-64 and 1964-65 respectively as against the amount of Rs. 65,700 and Rs. 93,564. The assessee challenged this levy of penalty before the CIT(A). The learned CIT(A) quashed the penalty on the ground that the AO levied the penalty contrary to the provisions of s. 271(1). The matter further travelled to the Tribunal. The Tribunal has also dismissed the appeal of the Department by confirming the order of the CIT(A) on the ground that Tribunal has no power to enhance the penalty. In such a situation, it can do nothing except affirming the order of the CIT(A). Ultimately, the matter went up before the Hon'ble Supreme Court. The Hon'ble Supreme Court has observed as under while elaborating the scope of expression "pass such orders thereon as it thinks fit." :

"The expression "as it thinks fit" is wide enough to including the power of remand to the authority competent to make the requisite order in accordance with law in such a case even though the Tribunal itself could not have made the order enhancing the amount of penalty. The power of the AAC under s. 251(1)(b) includes the power even to enhance the penalty subject to the requirement of sub-s. (2) of s. 251 of a reasonable opportunity of showing cause against such enhancement being given to the appellant assessed. This could have been done in the assessee's appeal itself filed in the present case. The power of the Tribunal to make an order of remand in such a situation is well-settled in Hukumchand Mills Ltd. vs. CIT (1967) 63 ITR 232(SC)."

13. On plain reading of sub-s. (3) of s. 249 shall reveal that if the assessee showed sufficient reasons for late filing of his appeals, then such delay can be condoned and controversy would be silenced on merit. Similarly, for sake of explanation, if an assessee did not have sufficient funds for complying the requirement of s. 249(4) and has not filed the appeal within the time provided under s. 249(2), subsequent to expiry of limitation, he made compliance of s. 249(4) and filed the appeal with a prayer of condonation of delay then it would be in discretion of the first appellate authority to see whether sufficient reasons for late filing of appeal exist or not. If the learned CIT(A) arrived at a conclusion that sufficient reasons exist then again the controversy would be decided on merit. Thus, on conjoint reading of sub-ss. (3) and (4), it is inferred that defect arises due to non-compliance of s. 249(4) is a curable one and in a given case if the Tribunal is satisfied that there exist sufficient reasons for curing such defects after expiry of limitation, it would be in the realm of Tribunal's discretion to restore such matters to the file of the CIT(A) for deciding the controversy on merit because sub-s. (1) of s. 254 provides wide powers to the Tribunal for passing such orders thereon as it thinks fit in the interest of justice.

14. On personal of record, we find that the assessee has discharged the huge tax liability of more than Rs. 75 lacs in instalments. Thus, it would be totally unfair for not providing an opportunity to him for disputing the additions made by the AO on merit. The Hon'ble Full Bench of Delhi High Court in J.T. (India) Exports & Anr. vs. Union of India & Anr. (2002) 177 CTR (Del)(FB) 108: (2003) 262 ITR 269(Del)(FB), while elaborating the principle of natural justice along with the legal justice, has observed as under :

"Natural justice is another name for commonsense justice. Rules of natural justice are not codified canons. But they are principles ingrained into the conscience of man. Natural justice is the administration of justice in a commonsense liberal way. Justice is based substantially on natural ideals and human values. The administration of justice is to be freed from the narrow and restricted considerations which are usually associated with a formulated law involving linguistic technicalities and grammatical niceties. It is the substance of justice which has to determine its form.

The expression, 'natural justice and legal justice' do not present a water-tight classification. It is the substance of justice which is to be secured by both, and whenever legal justice fails to achieve this solemn purpose, natural justice is called in aid of legal justice. Natural justice relieves legal justice from unnecessary technically, grammatical pedantry or logical prevarication. It supplies the omissions of a formulated law.

The adherence to principle of natural justice as recognized by all civilized states is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties."

15. From the judgment of Hon'ble Delhi High Court, it is clear that whenever legal justice fails to achieve the solemn purpose of securing justice then natural justice is called in aid of legal justice. From the details submitted by the assessee in the paper book as extracted by us, it reveals that assessee kept on making the payment of tax along with interest in instalments. Had the assessee was having sufficient fund with him, then no prudent businessman would allow to swell the liability of interest in such a way. For example, the total tax required to be paid by the assessee in asst. yr. 1991-92 on the agreed return along with interest was Rs. 17,30,273. Against it, by the end of December, 1997, assessee has paid Rs. 26,09,843. Thus, it clearly indicates that assessee was not having sufficient funds at the relevant time for compliance of s. 249(4), which rendered the appeals of the assessee as defective one. In the interest of justice, we are of the opinion that these appeals deserve to be allowed by setting aside the impugned order of the CIT(A) and restoring the same before the learned first appellate authority for adjudication on merit. For our above view, we are supported by the decision of Hon'ble Orissa High Court given in the case of CIT vs. Kalipada Ghose (1987) 60 CTR (Ori) 96: (1987) 167 ITR 173(Ori). Though the issue before the Hon'ble High Court was on a little different footing, but an inference can be drawn from the judgment that in such cases the right course would be restoring the appeal before the CIT(A). Before the Hon'ble Orissa High Court, the issue relates to asst. yrs. 1974-75 and 1975-76. The learned AO determined the income of assessee at Rs. 17,500 and Rs. 30,000. Against this order, the appeals were filed before the first appellate authority on 29th Oct., 1975. By then s. 249 has been amended by incorporating sub-s. (4) w.e.f. 1st Oct., 1975. The learned first appellate authority dismissed the appeal of the assessee in limine on the ground that assessee failed to pay the agreed tax at the time of filing of the appeal. During the pendency of appeal before the Tribunal, the assessee paid agreed tax on 15th June, 1976. The Tribunal set aside the order of the learned CIT(A) and restored the matter back to the file of first appellate authority. The Revenue has challenged the order of the Tribunal on the ground that decision given by the first appellate authority was not one under s. 250 of the Act and, therefore, no appeal would lie to the Tribunal and the Tribunal has no jurisdiction under s. 253 for setting aside the order of first appellate authority and directing the first appellate authority to decide the issue afresh on merit. The Hon'ble High Court rejected the contention of the Revenue and upheld the order of the Tribunal. While doing so, the Hon'ble High Court at p. 176 observed as under :

"On the aforesaid analysis, it has to be held that the order of the AAC dismissing the appeals for non-compliance with s. 249(4) of the Act came within the ambit of s. 250 of the Act and was appealable before the Tribunal under s. 253 of the Act. The Tribunal, therefore, committed no illegality in entertaining the appeals and in condoning the delay on being satisfied, on the facts and circumstances of the case, that there was sufficient cause for the assessee's failure to comply with s. 249(4) of the Act and in remitting the cases to the first appellate forum for disposal on merits. Accordingly, the question referred is answered in the affirmative."

Thus, we are fortified for our view by the above decision of the Hon'ble High Court.

16. The next issue for our adjudication is whether sufficient reasons exist for curing defect after expiry of limitation provided under s. 249(2) of the Act. Since, we have held in the upper part of the order that appeal filed in violation of s. 249(4) would be termed as a defective one and the moment defect is cured then those can be disposed of on merit subject to limitation. The Courts and the quasi-judicial bodies are empowered to condone the delay if a litigant satisfies the Court that there were sufficient reasons for availing the remedy after expiry of limitation. Such reasoning should be to the satisfaction of the Court. The expression "sufficient cause or reason", as provided in sub-s. (3) of s. 249 of the Act, is used in identical position in a number of statutes and the Hon'ble Supreme Court as well as the Hon'ble High Courts have time and again held that expression "sufficient cause" for condonation of a delay should receive a liberal construction so as to advance substantial justice when no negligence or inaction or want of bona fide is imputable to a party because the judiciary is expected 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. A litigant does not stand to benefit by resorting the delay or breaching any provision of a statute. The Hon'ble Supreme Court in Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 62 CTR (SC) 23: (1987) 167 ITR 471(SC) has observed that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. Thus, considering the hardship of the assessee, we are of the opinion that there exist sufficient reasons for not filing a valid effective appeal before the CIT(A). It is aptly said that facts should be viewed in a natural perspective having regard to the compulsion of circumstances of a case where it is possible to draw inferences from the facts and where there is no evidence of any dishonest or improper motive on the part of the assessee it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hypertechnical or legalized approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. Hence, taking into consideration the overall facts and circumstances of the case we are of the opinion that these appeals deserve to be allowed and, accordingly, allowed. We set aside the order of the learned CIT(A) and restore the matters before him for deciding the controversy on merit.

17. In the result, all the appeals are allowed for statistical purposes.

 

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