Case Note & Summary
The case involves an appeal by Shri Bharatkumar Sakhsaria against the order of the Income Tax Appellate Tribunal dated 31-10-2001, which held his appeal before the Commissioner of Income Tax (Appeals) as not maintainable under Section 249(4) of the Income Tax Act, 1961. The background is that a search and seizure operation was conducted at the appellant's premises on 9-12-1997, during which cash of Rs.1,80,000 was seized. Subsequently, a notice under Section 158BC was issued, and the appellant filed a block return on 27-11-1998 disclosing income of Rs.10,00,000 with tax payable of Rs.6,12,000. The appellant could not pay the self-assessment tax due to liquidity crunch but requested the department to adjust the seized cash and a refund of Rs.27,830 against the tax liability. The block assessment order was passed on 23-2-2000 assessing income at Rs.3,52,45,418 with a tax demand of Rs.2,15,70,195. The appellant received the order on 25-2-2000 and filed an appeal on 24-3-2000, within the limitation period. However, at the time of filing the appeal, the appellant had not paid the entire self-assessment tax of Rs.6,12,000. The appellant claimed that on 15-3-2000, he instructed his accountant to pay Rs.4,00,000 towards the balance tax, but due to inadvertence, the payment was not made. The tax was eventually paid before the hearing of the appeal. The Tribunal dismissed the appeal as not maintainable under Section 249(4), holding that the condition of payment of tax at the time of filing is mandatory. The High Court framed the substantial question of law regarding the interpretation of Section 249(4). The Court analyzed the provision and held that Section 249(4) is directory and not mandatory. The requirement of payment of tax is a condition for admission of the appeal, not an absolute bar to the right of appeal. If the tax is paid before the hearing, the appeal can be entertained. The Court set aside the Tribunal's order and remanded the matter back to the Tribunal for hearing the appeal on merits. The appeal was allowed.
Headnote
A) Income Tax - Right of Appeal - Section 249(4) of the Income Tax Act, 1961 - Condition for Admission of Appeal - The issue was whether non-payment of self-assessment tax at the time of filing appeal renders the appeal non-maintainable. The Court held that Section 249(4) is directory and not mandatory; the requirement of payment of tax is a condition for admission, not a bar to the right of appeal. If the tax is paid before the hearing, the appeal can be entertained. The Tribunal erred in dismissing the appeal as not maintainable. (Paras 1-6) B) Income Tax - Self-Assessment Tax - Adjustment of Seized Cash - The assessee had requested adjustment of seized cash of Rs.1,80,000 and refund of Rs.27,830 against the self-assessment tax liability. The Court noted that the assessee had made efforts to pay the balance tax before the hearing. The Tribunal's strict interpretation was not warranted. (Paras 2-4)
Issue of Consideration
Whether Section 249(4) of the Income Tax Act, 1961, creates an absolute bar to the right of appeal if the assessee has not paid the entire self-assessment tax at the time of filing the appeal, even if the tax is paid soon after filing and before the hearing of the appeal
Final Decision
The High Court allowed the appeal, set aside the order of the Income Tax Appellate Tribunal dated 31-10-2001, and remanded the matter back to the Tribunal for hearing the appeal on merits. The Court held that Section 249(4) is directory and not mandatory, and the appeal could be entertained if the tax is paid before the hearing.
Law Points
- Section 249(4) of the Income Tax Act
- 1961
- is directory and not mandatory
- non-payment of self-assessment tax at the time of filing appeal does not create an absolute bar if tax is paid before hearing
- substantial compliance is sufficient
