IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR WEDNESDAY, THE 23RD JULY 2008 / 1ST SRAVANA 1930 WP(C).No. 28277 of 2004(N) -------------------------- PETITIONER: ------------ SUSHIL THOMAS ABRAHAM, HOLEC BUILDERS, THYCAUD, THIRUVANANTHAPURAM. BY ADV. SRI.DALE P.KURIEN RESPONDENTS: ------------- 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I (2), THIRUVANANTHAPURAM. 2. TAX RECOVERY OFFICER, RANGE-I, KOWDIAR, THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE K.GEORGE SRI.GEORGE K. GEORGE, SC FOR IT THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23/07/2008, THE COURT ON 23/07/2008 DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S EXHIBITS: P1: TRUE COPY OF INTIMATION U/S.143(1)(a) DT.24.3.1997 ISSUED BY R1 TO THE PETITIONER. P2: TRUE COPY OF ASSESSMENT ORDER DT.21.3.1997 FOR THE ASSESSMENT YEAR 1996-97 PASSED BY R1. P3: TRUE COPY OF TDS RETURN FOR THE ASSESSMENT YEAR 1996-97 SHOWING COLLECTION OF TDS DT.15.10.96. P4: TRUE COPY OF ORDER PASSED BY COMMISSIONER OF INCOME-TAX(APPEALS), TRIVANDRUM DT.31.12.1997. P5: TRUE COPY OF TRIBUNAL ORDER DT.4.11.2003 FOR THE ASSESSMENT YEAR 1996-97 IN ITA NO.93/C/98 PASSED BY INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. P6: TRUE COPY OF NOTICE DT.1.9.2004 ISSUED BY R2 TAX RECOVERY OFFICER, KAWDIAR, TRIVANDRUM TO THE PETITIONER. P7: TRUE COPY OF ORDER DT.4.11.2003 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN DIRECTING TO ACCEPT THE INCOME RETURNED FOR THE PREVIOUS ASSESSMENT YEAR 1995-96. TRUE COPY PA TO JUDGE C.R. C.N.RAMACHANDRAN NAIR, J. .................................................................... W.P.(C) No.28277 of 2004 .................................................................... Dated this the 23rd day of July, 2008. JUDGMENT The petitioner, an assessee under the Income Tax Act filed Ext.P3 return for the assessment year 1996-97. Even though petitioner declared a business profit of Rs.6,08,680/- and tax liability of Rs.1,57,969/-, the petitioner did not remit the admitted tax before filing of the income tax return as required under Section 140A of the Income Tax Act, 1961. On processing Ext.P3 return, the Assessing Officer noticed that the calculation of tax on the returned income is incorrect and petitioner was liable to pay interest under Sections 234A, 234B and 234C of the Act. He accordingly sent intimation under Section 143(1a) of the Act vide Ext.P1 demanding payment of Rs.2,81,473/-. After sending intimation vide Ext.P1 dated 24.3.1997, the Assessing Officer took up assessment under Section 143(3) which led to an additional demand of Rs.10,61,252/- vide Ext.P2 besides the demand under Ext.P1. When petitioner filed appeal against regular assessment completed under Section 143(3) before the Commissioner of Income Tax (Appeals), the C.I.T.(Appeals) noticed that appeal was not maintainable without payment of admitted tax as required under Section 249 2 (4)(a) of the Act. Since the assessee did not pay admitted tax, the C.I.T. (Appeals) rejected the appeal vide Ext.P4. Against this order, petitioner filed second appeal before the Tribunal, which vide Ext.P5 remanded the case back to the Assessing Officer for redoing regular assessment under Section 143(3) of the Act. However, the Assessing Officer insisted on payment of admitted tax before revision of assessment in terms of Tribunal's order. In between, the Tax Recovery Officer initiated recovery proceedings vide Ext.P6. The petitioner's case is that Ext.P1 intimation under Section 143(1)(a) and the Assessing Officer's refusal to revise the assessment pursuant to order issued by the Tribunal are illegal and arbitrary and liable to be interfered by this court. When the W.P. came up for admission before this court, this court felt that Ext.P5 order of the Tribunal is without jurisdiction because once the first appeal was rejected as one not maintainable on account of non-payment of admitted tax in terms of Section 249(4)(a) of the Act, appeal against such order of the Commissioner (Appeals) is not maintainable before the Tribunal and appeal provided against C.I.T.(Appeals)'s order is only against order on merits passed under Section 250 of the Act. This court through an interim order dated 28.9.2004 3 directed the assessee to show cause why Tribunal's order vide Ext.P5 should not be vacated by this court in exercise of powers conferred under Article 227 of the Constitution of India. The petitioner has filed an affidavit supporting maintainability of the Tribunal's order. I have gone through the W.P., documents annexed thereto and the affidavit filed by the petitioner pursuant to interim order dated 28.9.2004 and heard Standing Counsel appearing for the respondents. 2. Challenge against Ext.P1 is not maintainable because it is only an intimation issued under Section 143(1)(a) of the Act determining tax liability and interest payable based on income returned by the petitioner vide Ext.P3 return furnished by him. It is clear from Ext.P3 that the tax calculated by the petitioner on the income returned was incorrect. Moreover, petitioner has admitted that he has not paid any self-assessed tax before filing the return which is the requirement of Section 140(A) of the Act. In fact the credit of tax claimed by the petitioner in the return filed is tax deducted at source amounting to Rs.6,688/-. The petitioner himself has computed interest liability under Section 234A, 234B and 234C at Rs.35,607/-. However, even after conceding a tax liability of Rs.1,57,969/- 4 and interest liability of Rs.35,607/-, petitioner has not paid any amount before or at the time of filing of the return. The Assessing Officer has only determined the tax payable on the income declared by the petitioner in Ext.P1 intimation sent under Section 143(1)(a) of the Income Tax Act. Even though regular assessment under Section 143(3) was later taken up and completed vide Ext.P2, petitioner's case that Ext.P1 merges with Ext.P2 is not legally or factually true. In the first place, the additional tax demanded under Ext.P2 is over and above the tax due under Ext.P1 which is seen set off in the final demand shown in Ext.P2. Both intimation under Section 143(1)(a) and regular assessment under Section 143(3) are different proceedings, even though challenge against regular assessment may lead to redressal of grievance against intimation issued under Section 143(1)(a) also. The petitioner has no case that the Assessing Officer has committed any mistake in Ext.P1 and if so, he would have filed atleast an application for rectification of such mistake. The petitioner also did not file objection against Ext.P1 probably because there is nothing adverse against him in Ext.P1 as there is no adjustment towards disallowance besides demanding of tax and interest on the actual income returned by the petitioner. 5 Therefore, I reject the challenge against Ext.P1 proceedings issued under Section 143(1)(a) of the Act. 3. The next question to be considered is whether Ext.P5 order of the Tribunal interfering with Ext.P4 order of the C.I.T.(Appeals) rejecting the appeal as one not maintainable for non-payment of admitted tax under Section 249(4)(a) of the Act is maintainable or not. Section 249(4) of the Act is as follows: "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." It is clear from the above that in a case where assessee has filed return, appeal against assessment is maintainable only if assessee has paid the tax due on the income returned atleast at the time of filing the appeal. In fact return itself has to be filed after remittance of tax due on the income returned in terms of Section 140(A) of the Act. Assessee gets another chance to remit the admitted tax, if the assessee is desirous of filing an 6 appeal against assessment. However, the appellate authority has no authority to entertain appeal unless atleast at the time of filing the appeal, the assessee has paid tax due on the income returned by him. The proceedings under Section 249(4)(a) is in the nature of a scrutiny of appeal and if on such scrutiny the appellate authority finds that tax due on the income admitted in the return is not paid at the time of filing the appeal, he has no jurisdiction to entertain the appeal and such appeal has to be rejected in limine as one not maintainable. The Commissioner of Income Tax (Appeals) is authorised to dispose of the appeal on merits under Section 250 of the Act only if it is one found maintainable among other things, in regard to satisfaction of Section 249(4)(a) of the Act i.e. payment of tax on admitted income. In this case it is clear from Ext.P4 that appeal was not entertained and the same was dismissed by the Commissioner(Appeals) on the ground that it is not maintainable for non-payment of tax on income admitted in the return. 4. The next question to be considered is whether Tribunal was justified in entertaining appeal under Section 253 against Ext.P4 order of the C.I.T.(Appeals). The orders against which appeals are maintainable 7 before the Tribunal under Section 253 include an order passed under Section 250 of the Act which is an order in appeal passed by the Commissioner on merits after entertaining the appeal. However, no appeal is provided against order of the Commissioner(Appeals) declining to entertain appeal as defective or one not maintainable on account of non- payment of tax admitted in the return filed by the assessee. In fact, it is seen that the Tribunal has considered the objection raised by the C.I.T.(Appeals), but without even finding that the petitioner has paid the admitted tax, the Tribunal has chosen to interfere with the order of the Commissioner (Appeals). I am of the view that appeal itself was not maintainable against Ext.P4 order of the Commissioner (Appeals) rejecting the appeal against assessment as one not maintainable for non-payment of admitted tax. Even if appeal is to be entertained by the Tribunal, the scope of appeal is limited to the question whether the assessee has paid the admitted tax and if the Tribunal is satisfied that the tax due on the income admitted in the return is paid by the assessee in compliance with Section 249(4)(a) of the Act, the Tribunal can probably interfere with the order and direct the C.I.T.(Appeals) to entertain the appeal and decide the matter on merits. However, the 8 Tribunal has no authority to consider the merits of assessment in an appeal filed against order of the C.I.T.(Appeals) declining to entertain appeal filed against assessment. I am unable to accept the contentions raised by the assessee in the affidavit filed in support of the Tribunal's order. I, therefore, hold that Ext.P5 order is beyond the jurisdiction of the Tribunal and the same is vacated in exercise of powers conferred on this court under Article 227 of the Constitution of India. However, I give opportunity to the petitioner to pay the admitted tax and interest thereon within six weeks from now and if payment is made, there will be direction to the C.I.T.(Appeals) to entertain the appeal and decide the case on merits. If assessee does not comply with the above direction, it will be open to the department to proceed for recovery treating Exts.P1 and P4 orders have become final. The W.P. is disposed of as above. C.N.RAMACHANDRAN NAIR Judge pms