Orders made under section 143(1) were orders contemplated and covered by section 246(1)(c) [Now section 246(1)(a)] and were, therefore, appealable.
It is pertinent to note that the words "an order against the assessee where the assessee denies his liability to be assessed under this Act" do not specify whether such order is passed under section 143(3) or section 143(1). The words immediately following the aforesaid words specifically refer to any order of assessment under section 143(3) or 144. Therefore, it is apparent that the words "an order against the assessee where the assessee denies his liability to be assessed under this Act" refer to any order subjecting the assessee to liability under the Income Tax Act, 1961. Therefore, even the orders under section 143(1) made by the assessing officer are orders contemplated and covered by section 246(1)(c). It is also apparent that the impugned orders passed by the assessing officer are against the assessee and the assessee totally denies his liability to be assessed under the Income Tax Act. The mere fact that the order passed by the assessing officer purports to be under a section in which no appeal is provided does not conclude the question of appealability; if the assessee can show the circumstances of the case which bring it within the scope of a particular section against which the appeal lies to the appellate authority, the appeal to the appellate authority would be competent.
Also to current assessment years though, by the Finance Act, 1994, order under s. 143(1) is specifically made appealable.
Tax collected from assessee was required to be refunded, where his pension income was not liable to tax in India in view of Double Taxation Avoidance Agreement, as the assessment made under section 143(1) is liable to be set aside.
The issue is squarely covered by the Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion between the Government of India and the Government of Great Britain. In as much as the pension received from Great Britain by the assessee is not taxable in India, the assessments made by the assessing officer under section 143(1) for these years are liable to be set aside. As a consequence, the tax collected from the assessee for these years, if any, is required to be refunded.
1. These appeals by the assessee are consolidated and disposed of by this common order for the sake of convenience as they relate to the same assessee and arise out of the consolidated order of the Dy. CIT (Appeals), Coimbatore dated 5-2-1992. These appeals pertain to the assessment years 1982-83, 1983-84, 1984-85 and 1985-86. The Dy. CIT (Appeals) dismissed the appeals filed by the assessee on the short ground that the appeals are not maintainable as the assessment orders were made under Section 143(1). The assessee has taken common grounds to urge that the Dy. CIT (Appeals) erred in dismissing the appeals. The appeals were filed denying the assessee's liability to tax. The returns of income were non est and the assessments were not valid. The tax collected was not legal. Therefore, it was prayed that the appeals filed by the assessee be allowed and the tax paid be refunded.
2. The relevant facts of the case are that the assessee is an individual who receives pension from the Government of United Kingdom of Great Britain after retirement from Defence Service. He is getting pension from the Government of Great Britain through State Bank of India, Coimbatore Branch under the Foreign Exchange Regulation Act.
After making enquiries, the Department set in motion the assessment proceedings by issuing statutory notice under Section 139(2) on 16-12-1972. The assessee is being regularly assessed to tax as an individual resident and ordinarily resident from the assessment year 1972-73 onwards under Section 143(1). On the same lines, the impugned assessments for the assessment years 1982-83 to 1985-86 were completed under Section 143(1) and the Assessing Officer has raised demand separately as detailed in the accompanying Demand Notices.
3. Coming to know that an agreement for avoidance of double taxation and prevention of fiscal evasion with the Government of Great Britain was signed by the Government of India vide Notification No. GSR 612(E), dated 23-11-1981 and Article 19(3) of the said Convention rendered the pension received by the assessee in India is taxable only in the Contracting State and not liable to be taxed in India from the assessment year 1982-83 onwards, the assessee filed appeals before the First Appellate Authority.
4. The First Appellate Authority dismissed the appeals on the ground that the assessments have been made under Section 143(1) accepting the income returned and the appeals were not maintainable.
5. At the time of hearing, the learned counsel for the assessee brought to my attention the Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion entered into by the Government of India with the Government of Great Britain contained in 133 ITR (St.) 34. He pointed out that Clause 3 of Article 19 of the said Convention stated that any pension paid by the Government of Contracting State to any individual in respect of service rendered to that Government shall be taxable only in that Contracting State. Therefore, he vehemently contended that the assessee had denied his liability to be assessed under the IT Act, 1961 and, therefore, the appeals filed by the assessee were maintainable under Section 264(1)(c) (up to 31-3-1989 but under Section 246(1)(a) from 1-4-1989). Therefore, he urged that the Deputy CIT (Appeals) was not justified in dismissing the appeals filed by the assessee inasmuch as the pension received by the assessee from the Government of United Kingdom of Great Britain and Northern Ireland was not taxable income at all. Therefore, it is urged the tax paid is to be refunded to the assessee.
6. The learned Departmental Representative on the other hand contended that inasmuch as the assessee has consented and filed the return of income for these years under appeal and inasmuch as the income returned by the assessee was accepted under Section 143(1), there could be no grievance to contest the matter in appeal. His further contention was that such assessments made under Section 143(1) are not appealable and, therefore, the only course left to the assessee was to resort to Section 264 proceedings before the concerned Commissioner of Income-tax by filing petition for condonation of delay for revision. In short, though he conceded that on merits there is a case for the assessee inasmuch as the pension received by him is not taxable income, for technical reasons, the right forum of ventilating the grievances is not appellate authorities but the administrative authorities.
7. In reply, the learned counsel for the assessee maintained that inasmuch as the case of the assessee squarely falls within the specific clause of Section 264(1)(c), the appeals filed by the assessee were maintainable and remedies available to the assessee can be obtained from the Appellate Forum.
8. After due consideration of the rival submissions and the records, I agree that the submission of the learned counsel for the assessee that the appeals filed by the assessee were maintainable under Section 246(1)(c). As indicated above, the assessee has been brought into tax net as a result of enquiries made by the assessing authorities and issued statutory notice under Section 139(2) as per which regular assessments have been made right from assessment year 1972-73.
Therefore, the assessee was under the same impression that he is liable to be taxed on the pension income received from the Government of Great Britain and hence filed the return for these years under consideration, admitting the pension income. As usual, the assessments have been made accepting the income returned though it is obligatory on the part of the Assessing Officer to apply the correct principle of law for taxation. It is for the assessing authority to point out the law and exempt the income in view of the Convention signed by the Government of India with Great Britain for Avoidance of Double Taxation and Prevention of Fiscal Evasion. The Assessing Officer failed to do so though he is duty bound to levy tax, only in accordance with law and not otherwise. Therefore, the contention of the learned Departmental Representative that the appeals can be taken as maintainable only if the assessee refused to file the return of income on the ground that the pension received from the Government of Great Britain was not taxable income but yet assessments were made by the Assessing Officer ignoring the contention of the assessee. In other words, he made out a case of distinction without there being any difference. There is hardly any difference between the assessee filing the return unknowingly and knowingly under statutory compulsion of notices issued by the department regarding claim of exemption. Therefore, the contention advanced by the learned Departmental Representative in support of the order of the Dy. CIT (Appeals) that the appeals were not maintainable is not correct.
246(1)(c). An order against the assessee, where the assessee denies his liability to be assessed under this Act or any order of assessment under Sub-section 3 of Section 143 or Section 144, where the assessee objects to the amount of income assessed, to the amount of tax determined or to the amount of loss computed to the status under which he is assessed.
10. It is pertinent to note that the words "an order against the assessee where the assessee denies his liability to be assessed under this Act" do not specify whether such order is passed under Section 143(3) or Section 143(1). The words immediately following the aforesaid words specifically refer to any order of assessment under Section 143(3) or 144. Therefore, it is apparent that the words "an order against the assessee where the assessee denies his liability to be assessed under this Act" refer to any order subjecting the assessee to liability under the IT Act, 1961. Therefore, even the orders under Section 143(1) made by the Assessing Officer for these years under appeal are orders contemplated and covered by Section 246(1)(c). It is also apparent that the impugned orders passed by the Assessing Officer are against the assessee and the assessee totally denies his liability to be assessed under the IT Act in terms of the Convention signed by the Government of India and the Government of Great Britain in general and Article 19(3) in particular. The Supreme Court had an occasion to consider the scope of the relevant section under the IT Act, 1922 in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225. At page 229 of the Report, the Supreme Court observed as under : Under Section 30 an assessee objecting to the amount of income assessed under Section 23 or the amount of tax determined under the said section or denying his liability to be assessed under the Act can prefer an appeal against the order of the Income-tax Officer to the Appellate Assistant Commissioner. It is said that an order made by the Income-tax Officer rejecting the plea of an association of persons that the members thereof shall be assessed individually does not fall under one or other of the three heads mentioned above. What is the substance of the objection of the assessee The assessee denies his liability to be assessed under the Act in the circumstances of the case and pleads that the members of association shall be assessed only individually. The expression 'denial of liability' is comprehensive enough to take in not only the total denial of liability but also the liability to tax under particular circumstances. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the Act and in the other case the assessee denies his liability to tax under the provisions of the Act if the option given to the appropriate officer under the provision of the Act is judicially exercised. We, therefore, hold that such an assessee has a right of appeal under Section 30 of the Act against the order of the Income-tax Officer assessing the association of members instead of the members thereof individually.
It is clear from the above extract that the expression "denial of liability" is comprehensive to include not only total denial of liability but also the liability to tax under particular circumstances.
In the instant case, no doubt, the assessee is an individual resident and ordinary resident and has been receiving pension income and has been taxed thereon. The denial of liability arose in the particular circumstance under which there is an existing Convention between the Government of India and the Government of Great Britain which overrides or supersedes all other provisions of the IT Act because it is an agreement between the two sovereign States and, therefore, binding on the Governments. The Madras High Court had an occasion to consider in the case of M.M. Muthuwappa v. CIT [1962] 46 ITR 1107 where the question of non-liability to tax could be raised in appeal from an order of assessment under Section 23(4) of the IT Act, 1922 which is the best judgment which is equivalent to Section 144 assessment under the IT Act, 1961. The Madras High Court held that in the case of best judgment assessment, it is open to the assessee to raise question of nonliability to be assessed under the Act at the appellate stage even if no such contention is raised by the ITO, who made the assessment under Section 23(4). The question of non-liability to be assessed must, however, be based on grounds other than those on which no liability to best judgment assessment can be raised. The High Court of Madhya Bharat in the case of Sarupchand & Hukumchand v. Union of India [1953] 23 ITR 382 (FB) (at page 409) held that an assessee who denies his liability of being assessed is entitled to appeal on that ground only after assessment is made. No appeal lies before any assessment is made.
11. Even in the instant case, the assessee has disputed his liability to be assessed before the first appellate authority only after the assessments were made. Courts have held that it is not incumbent or necessary that an assessee should have denied his liability before the Assessing Officer and then only he can prefer an appeal on that ground - Rani Anand Kunwar v. CIT [1940] 8ITR 126 (Oudh) and MM. Muthuwappa's case (supra). They also held that mere filing of return cannot be said to be tantamount to an admission by the person submitting the return that he is liable to assessment - Rani Anand Kunwar's case (supra). The Mysore High Court in the case of Narsepalli Oil Mills v. State of Mysore [1973] 32 STC 599 held that "if an assessee makes a mistake in submitting a return and submits to be assessed on a particular income before the assessing authority, he is not estopped or precluded by law from preferring an appeal and showing to the appellate authority that the income is, in fact, either wholly or partially, not exigible to tax. If such a contention is taken, it is the duty of the appellate authority to examine the matter and determine the proper tax leviable.
There is no question of invoking the doctrine of estoppel in such a case".
12. It is clear from the abovesaid extract of the decision that it is not open to the department to deny the assessee's liability to be assessed under the Act, just because the assessee has filed his return and submitted to be assessed.
13. The mere fact that the order passed by the Assessing Officer purports to be under a section in which no appeal is provided does not conclude the question of appealability; if the assessee can show the circumstances of the case which bring it within the scope of a particular section against which the appeal lies to the appellate authority, the appeal to the appellate authority would be competent - CIT v. Tirur Medical Hall [1980] 126 ITR 395 (Ker.).
14. Keeping in view the aforesaid rulings of the Courts, it is crystal clear that the appellant assessee is entitled to deny his liability to be assessed under the IT Act, 1961 in view of Article 19(3) of the Convention signed by the Government of India and Government of Great Britain which is effective from the assessment year 1982-83 onwards.
Therefore, I am of the opinion that the Dy. CIT (Appeals) was wrong in concluding that the appeals were not maintainable and thus dismissing the appeals filed by the assessee, denying his liability to be assessed under the IT Act. Therefore, the orders of the Dy. CIT (Appeals) are modified and the appeals are held to be maintainable under Section 246(1)(c).
15. A question may arise regarding the maintainability of the appeal filed by the assessee before the Tribunal inasmuch as the Dy. CIT (Appeals) has simply dismissed the appeals on the ground that the appeals against the assessment orders under Section 143(1) are not maintainable. This question is squarely answered by the Supreme Court in the case of Mela Ram & Sons v. CIT [1956] 29 ITR 607 wherein the order passed by the Appellate Assistant Commissioner holding that there was no sufficient reason for excusing the delay in filing the appeal under Section 30(2) of the IT Act, 1922 and rejecting the appeal as time barred was held to be an order passed under Section 31 (equivalent to Section 246 of the IT Act, 1961)and an appeal lies from that order to the Appellate Tribunal. It was held that it makes no difference whether the order of dismissal was made before or after the appeal was admitted. When once it is held that the appeals are maintainable for the reasons stated above, the decision on the merits of the case is a fore-gone conclusion inasmuch as the issue is squarely covered by Article 19(3) of the Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion between the Government of India and the Government of Great Britain. Inasmuch as the pension received from Great Britain by the assessee is not taxable in India, the assessments made by the Assessing Officer for these years under consideration are liable to be set aside. As a consequence, the tax collected from the assessee for these years, if any, is required to be refunded.