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D. Komalakshi v. The Dy. Commissioner Of Income Tax
Factual and Procedural Background
Two connected appeals (ITA No. 768/2006 by Smt. D. Komalakshi and ITA No. 769/2006 by Sri D. Rajkumar) were heard together because they involved similar facts and legal questions. The husband's premises (Sri D. Rajkumar) were searched under Section 132 of the Income Tax Act. Notices under Section 158BC were issued to both assessees, who thereafter filed returns for the block period.
Smt. D. Komalakshi declared undisclosed income of Rs. 19,32,838 and total tax payable of Rs. 11,82,896 (inclusive of surcharge). Sri D. Rajkumar declared undisclosed income of Rs. 1,07,96,536 and tax payable of Rs. 66,07,480 (inclusive of surcharge). The Assessing Officer credited Rs. 53,00,000 seized during the search against the husband's liability, leaving a balance tax due of Rs. 13,07,480 for him. The Assessing Officer assessed total undisclosed income for Komalakshi at Rs. 83,19,650, and assessed total undisclosed income for Rajkumar at Rs. 4,64,85,100 with tax payable Rs. 2,78,91,060.
Both appellants appealed to the Commissioner (Appeals), who rejected the appeals as not maintainable under Section 249(4) of the Act. The Income Tax Appellate Tribunal (the Tribunal) upheld the Commissioner’s orders. The present appeals challenge the common order of the Tribunal.
Legal Issues Presented
- Whether the appeals are maintainable under Section 249(4) of the Income Tax Act when the tax due on the income returned has not been paid at the time of filing the appeal.
- Whether there was any "admitted" tax liability for the purposes of Section 249(4) where the appellants challenge the tax liability itself.
- Whether the search conducted under Section 132 and the jurisdiction to proceed under Section 158BC are invalid (as alleged by the appellants), and whether those contentions affect maintainability under Section 249(4).
- Whether the Commissioner (Appeals) and the Tribunal committed legal error in holding the appeals not maintainable under Section 249(4).
Arguments of the Parties
Appellants' Arguments
- Commissioner and the Tribunal erred in rejecting the appeals as not maintainable under Section 249(4) of the Act.
- There is no admitted fact: the appellants challenge the tax liability itself, and therefore the requirement to pay tax on "admitted" income should not bar admission.
- The search under Section 132 was bad in law and void ab initio.
- The jurisdiction to proceed under Section 158BC was questioned, implying absence of admitted tax liability under Section 249(4)(a).
- Reliance was placed on two reported judgments: "231 ITR 892" (a judgment of this Court) and "187 ITR 688" (a Supreme Court judgment).
Respondent (Revenue)
The opinion does not contain a detailed account of the respondent's legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| 231 ITR 892 | Relied upon by the appellants (as a judgment of this Court). | The provided opinion records that the appellants relied on this judgment; the court's reasons do not expressly discuss or apply this precedent in the written analysis included in the opinion. |
| 187 ITR 688 | Relied upon by the appellants (as a Supreme Court judgment). | The provided opinion records that the appellants relied on this judgment; the court's reasons do not expressly discuss or apply this precedent in the written analysis included in the opinion. |
Court's Reasoning and Analysis
The court examined the material on record and the procedural history: both appellants filed returns after the search and seizure; the Assessing Officer considered those returns and passed adverse block assessment orders; the Commissioner (Appeals) held that the appeals were not maintainable under Section 249(4) and did not admit them; the Tribunal affirmed the Commissioner’s decision.
The court analysed Section 249(4) (reproduced in the opinion) and observed that admission of an appeal is subject to payment of the tax due on the income returned by the assessee at the time of filing the appeal. The court treated this provision as a mandatory condition for admission of the appeal and noted that it appears to have been introduced to secure revenue by requiring payment of admitted tax.
The court found from the records that the tax due at the time of filing the appeals had not been paid in accordance with Section 249(4). The appellants themselves stated in their objections that they lacked the source to raise funds to pay the tax and acknowledged that, under Section 249A (as referenced in the opinion), an appeal cannot be admitted without payment of tax on the admitted income. On this basis, the court concluded there were no legal errors in the Commissioner’s or the Tribunal’s orders refusing to admit the appeals.
Although concluding that the appeals were properly rejected on maintainability grounds, the court exercised discretion to grant a limited extension: counsel for appellants asked for time to make the admitted tax payment; taking the facts and circumstances into account, the court allowed four weeks for payment. The court directed that if the admitted amounts are paid within that period, the Commissioner (Appeals) shall consider the appeals on merits and pass appropriate orders in accordance with law, uninfluenced by earlier proceedings. The court expressly declined to express any opinion on the merits and left all contentions open.
Holding and Implications
Holding: Both appeals are liable to be rejected for non-admission under Section 249(4) of the Income Tax Act.
Implications / Consequences:
- Because the tax due on the income returned was not paid at the time of filing the appeals, the Commissioner (Appeals) properly declined to admit the appeals and the Tribunal properly affirmed that decision.
- The court granted the appellants four (4) weeks to pay the admitted tax amounts; if payment is made within that period, the Commissioner (Appeals) must consider the appeals on merits and pass appropriate orders in accordance with law, without being influenced by earlier proceedings.
- The court did not express any opinion on the merits of the appeals; all substantive contentions of either party are left open for determination if the appeals are admitted after payment.
- No costs were ordered.
- The opinion does not indicate that it establishes any new legal precedent beyond its application of Section 249(4) to the facts before the court.
Gururajan, J.:—
Both these appeals are taken up together for hearing and we pass a common order since the facts, grounds and questions of law involved in both these appeals are same or similar.
2. ITA No. 768/2006 is filed by Smt. D. Komalakshi and ITA No. 769/2006 is filed by Sri D. Rajkumar. They are husband and wife.
3. The premises of the husband Sri D. Rajkumar was searched by the Department under Section 132 of the Income Tax Act (for short ‘the Act’). Thereafter, notices under Section 158 BC of the Act were issued to the assessees namely Smt. D. Komalakshi and Sri D. Rajkumar. In response to these notices, both the appellants filed returns. Smt. D. Komalakshi filed her return, declaring Rs. 19,32,838/- as total undisclosed income for the block period. As per the returns, the total tax payable was declared to be Rs. 11,82,896/ including surcharge. In the connected appeal, the husband-Sri D. Rajkumar declared Rs. 1,07,96,536/- as total undisclosed income for the said block period. As per his return, the total tax payable was declared to be Rs. 66,07,480/-, including surcharge. The Assessing Officer gave credit for a sum of Rs. 53,00,000/-, which was seized during the course of search. The balance tax due from Sri. D. Rajkumar was Rs. 13,07,480/-. The Assessing Officer concluded the block assessment of the appellant-Smt. D. Komalakshi and determined the total undisclosed income at Rs. 83,19,650/-.
4. In ITA No. 769/2006, the Assessing Officer concluded the block assessment of the husband-appellant and determined the total undisclosed income at Rs. 4,64,85,100/- and the tax payable at Rs. 2,78,91,060/-. Both the appellants filed appeals before the Commissioner. The Commissioner (Appeals) rejected the appeals on the ground of maintainability in the light of Section 249/(4) of the Act. Aggrieved by the orders passed by the Commissioner/Appellate Authority, appeals were filed before the Tribunal. The Tribunal by a common order accepted the order of the Commissioner. This common order is challenged by both Smt. D. Komalakshi and Sri D. Rajkumar in these two appeals.
5. Sri A. Shankar, Learned Counsel for the assessees would take us through the material on record to say that the Commissioner and the Tribunal have committed serious errors in rejecting the apeals as not maintainable in terms of Section 249(4) of the Act. He would say that in the case on hand, there is no admitted fact as such. On the other hand, tax liability itself is challenged by the appellants. He also says that even the search operation carried out under Section 132 of the Act is bad in law and ab-initio void. He would also say that the very jurisdiction of proceeding under Section 158BC of the Act was questioned and therefore, there is no admitted tax liability under Section 249(4)(a) of the Act. He would also strongly rely on a Judgment of this Court, reported in 231 ITR 892. He would also rely on a Judgment of the Supreme Court, reported in 187 ITR 688.
6. After hearing, we have carefully perused the material on record.
7. Both the appellants have filed return after the search and seizure in terms of the material on record. The returns were considered by the Assessing Officer and thereafter, adverse orders were passed by him. When the same were challenged before the Appellate Commissioner, the Appellate Commissioner by a detailed order, has chosen to hold that the appeals filed by the assessees are not maintainable in terms of Section 249(4) of the Act. When the same was challenged before the Tribunal, the Tribunal has accepted the order passed by the Commissioner.
8. Thus, we have to see as to whether the order of the Commissioner, confirmed in the appeal before the Tribunal is sustainable or not in terms of the material placed before us or in terms of the submission made by the Learned Counsel for the assessees.
9. Section 249 of the Act provides for ‘Form of appeal and limitation’. Section 249(4) of the Act would provide for payment of the tax due on the income returned by him for the purpose of admi ssion of the appeal. The said Section would read as under:—
“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 falling under clause (b) and] on an application made by the appellant in this behalf, the (***) ‘Commissioner (Appeals)] may, for any good ana sufficient reason to be recorded in writing, exempt him from the operation of the provisions of [that clause)]”
10. A reading of this Section makes it very clear to us that admission of an appeal is subject to payment of tax due on the income returned and the same has been introduced, probably in the larger interest of the revenue collection by way of payment of admitted tax for the purpose of appeal. It is clear to us that the Commissioner (Appeals), after noticing the material aspects of the matter, has come to the conclusion that appeal is not maintainable and therefore, not admitted the appeal as per the provisions of Section 249-A of the Act.
11. When the order passed by the Commissioner (Appeals) was challenged before the Tribunal, the Tribunal has accepted the order of the Commissioner. From a reading of the order of the Commissioner and the Tribunal, it is clear to us that tax due at the time of filing of appeal was not made over in terms of Section-249A of the Act. It is also to be noticed at this stage by us that the appellants, in terms of the material on record have chosen say that in unmistakable terms that they did not have any source to raise funds to make good tax due at the time of filing the appeal. They have further stated in their statement of objections that in terms of Section-249A of the Act, the appeal cannot be admitted in the absence of tax on the admitted income. This very statement of the appellants before the authority would go to show that the appellants have failed even according to them to comply with the mandatory requirement of Section-249A of the Act. Under the facts of the case and in the given circumstances, we are satisfied that there exist no legal errors either in the order of the Commissioner or in the Order of the Tribunal. The orders are therefore, accepted by us in the case on hand, particularly, in the light of the admitted facts in terms of the return and in terms of the submission as we see from the material on record. Under the circumstances, we hold that both the appeals are liable to be rejected by answering the questions of law against the assessee.
12. At this stage, Sri A. Shankar, Learned Counsel for the assessees would say that he would advise his clients to make good the admitted tax in terms of the returns filed by them for the purpose of consideration of appeals, for which, he wants some breathing time for making such payment.
13. In the normal course, we would not have considered such requests from the assessee. However, taking into consideration the facts and circumstances of the case, we deem it proper to accept the submission made by the Learned Counsel for the assessees. We therefore, give him four (4) weeks time to make over admitted amounts before the authority. If payment is made by the assesses-appellants in terms of this order, the Commissioner (Appeals) shall consider the appeals on merits and pass appropriate orders in accordance with law, without in any way being influenced by the earlier proceedings. No opinion on merits is expressed by us. All contentions of either of the parties are left open. Ordered accordingly. No costs.
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