This appeal has been filed by the assessee directed against the order of Commissioner (Appeals) dated 29-10-2002 for block period from 1-4-1989 to 11-1-2000. Following grounds of appeal are taken by the assessee : Being aggrieved by the order passed by the Commissioner (Appeals)-XX, Mumbai (hereinafter referred to as the 'Commissioner (Appeals)'), the appellant begs to present the appeal to the Honourable Tribunal on following grounds amongst others which are in alternative and without prejudice to each other.
1. The learned Commissioner (Appeals) erred in dismissing the appeal in limine on the ground that the appellant has not paid full self-assessment tax on block return of income and hence the appeal cannot be admitted as per provisions of section 249(4)(a) of the Income Tax Act, 1961.
2.1 The learned Commissioner (Appeals) erred in holding that, the appellant for assessment year 1991-92, having not filed his return of income under section 139, the share of income from M/s. Anant & Co. is to be treated as undisclosed income and further erred in holding that since the assessment of the firm was completed before filing of the block return, it is share in assessed income which is to be considered as undisclosed income for the purpose of block return.
2.2 The learned Commissioner (Appeals) failed to appreciate that since the firm Anant & Co., has already filed return under section 139 disclosing the share of the partners, the said share does not fall within the definition of undisclosed income under section 158B(b).
2.3 The learned Commissioner (Appeals) ought to have held that since at the relevant time the additions made in the firms assessment for the assessment year 1991-92 were contested before the appropriate appellate authority, it is the income returned by the firm which is to be considered and not the income assessed, which has not become final.
2.4 The learned Commissioner (Appeals) erred in relying on provisions of section 158BB(1)(c) for holding the share income of 50% of Anant & Co. as undisclosed income, without first ascertaining whether it amounts to undisclosed income as defined under section 158B(b).
2.5 The appellant submits that there is no estoppel against the law and hence is entitled to correct the mistakes committed at the time of filing the block return.
3.1 The learned Commissioner (Appeals) erred in considering the rectification application filed in the course of assessment proceedings as revised return.
3.2 The learned Commissioner (Appeals) ought to have appreciated that the rectification application filed in the course of assessment proceedings and thereafter, does not amount to filing of revised return and even otherwise the applications made does not fall within the provisions of section 139(5) read with proviso to section 158BC.The appellant, therefore, prays Yours Honourable Tribunal for the following relief : (a) To direct the Commissioner (Appeals) to admit the appeal and further direct the Commissioner (Appeals) to decide the appeal on merits.
(b) To direct the Commissioner (Appeals) to treat the share of returned income from Anant & Co. as disclosed income.
(c) To direct the Commissioner (Appeals) not to treat the rectification application amounting to filing of revised return.
Brief facts of the case are that assessee filed return of Block on 22-1-2001 for the block period from 1-4-1989 to 11-1-2000 declaring undisclosed income of Rs. 30,40,262; for this undisclosed income, the assessee had paid tax of Rs. 5,24,157 on 28-1-2001 and assessee did not pay the balance self-assessment tax liability of Rs. 13,00,000 till filing of the return. Subsequently, the assessing officer passed the order under section 158BC on 28-3-2002 and determined the tax liability at Rs. 70,47,660 which was appealed against on 26-4-2002, but again, did not pay the balance self-assessment tax on returned income. The assessee did not pay the balance self-assessment tax because of poor financial condition.
The matter was carried before the First Appellate Authority wherein it was submitted that during the course of assessment proceedings, the assessee has filed a rectification application for rectifying the income for assessment year 1991-92 in return of block. The income disclosed for assessment year 1991-92 in return of block had to be rectified as the amount inadvertently reported in block return was assessed share of the profit of the firm in place of returned share of the firm. The firm has filed an appeal against the addition made by assessing officer in firm's order, so assessed share of income cannot be taken as undisclosed income of the partner, i.e., assessee. It was also submitted that in case assessed share of partnership firm for the assessment year 1991-92 is excluded and the returned share of firm is considered, then the rectified undisclosed income comes to Rs. 8,22,507. On this, the tax liability comes to Rs. 4,93,504 against which the assessee had paid self-assessment tax of Rs. 5,24,157. Thus, according to the assessee, self-assessment tax has been paid on rectified returned income. The Commissioner (Appeals) observed that assessee has not filed a return of income as per provisions of section 139(4) (1991-92). Thus, the share of income earned by the assessee is undisclosed income. As per provisions of section 158BB(1)(c) where due date for filing of income has expired but no return of income has been filed when the returned income is to be considered as 'Nil. As a result, the share income of 50% from Anant & Co. has to be considered as undisclosed income. This share income from firm is to be taken as assessed income as the assessment of the said firm was already completed before filing of the return of block and the said assessment order of the firm was also confirmed by the Commissioner (Appeals).
Thus, the assessee has correctly taken assessed share of income in his block return as undisclosed share income from the firm for assessment year 1991-92. Further, even otherwise, proviso to section 158BC prohibits revising of return of block. Further on merit also, no rectification is possible as the correctly taken assessed share income from the firm is undisclosed income in the return of block. Thus, as per the provisions of section 249(4)(a), the appeal cannot be admitted as the assessee has not paid his full self-assessment tax liability of return of block till filing of the appeal or even till date of disposal of that appeal. In the case of Bharatkumar Sekhsaria v. Dy. CIT (2002) 82 ITD 512 (Mum), the Mumbai Tribunal has held that if the assessee fails to pay self-assessment tax liability prior to filing of the appeal, then such appeal is not maintainable as per section 249(4)(a).
Accordingly, the appeal was disposed of in limine.
Before us, the learned Authorised Representative of the assessee placed on record copy of order of Hon'ble Mumbai High Court wherein appeal in firm's case has been admitted, accordingly he submitted that the firm's matter is sub-judice. It was also submitted that as soon as the assessee came to know its mistake regarding self-assessment, he made rectification application which has not been disposed of till date. The learned A.R. relied on the Nagpur Bench decision in Dy. CIT v.Sanmukhdas Wadhwani (2003) 80 TTJ (Nag) 648 and submitted that rectification is not prohibited for downward declaration. The learned A.R. also, in alternative, submitted that subsequently before final hearing before the ITAT, the balance self-assessment tax liability has been paid by the assessee. Accordingly, the matter should be restored to the file of Commissioner (Appeals) to be decided afresh on merit.
For same, assessee relied on ratio of decision in the case of CIT v.Filmistan Ltd. (1961) 42 ITR 163 (SC), CIT v. Ashoka Engg. Co. (1992) 194 ITR 645 (SC) and Kashiram BhajanlaI v. CIT (1962) 45 ITR (All). The learned A.R. also submitted that the facts in the case of Bharatkumar Sekhsaria (supra) is not applicable to assessee's case. Moreover, appeal against the same has also been admitted by the Honourable jurisdictional High Court. Apart from this, the learned A.R. also relied on the decision of Ahmedabad Tribunal in J.K. Chaturvedi v.Asstt. CIT (2004) 82 TTJ (Ahd) 284 wherein similar issue has been claimed to be decided in favour of assessee. In nutshell, it was submitted that facts of assessee's case are only loaded with equality, so the matter be restored to Commissioner (Appeals) to decide on merit since rectification application has not been disposed of and in alternative self-assessment tax liability has already been paid. On the other hand, the learned D.R. submitted that provisions of section 249(4)(a) are mandatory and relevant provision should be given strict interpretation. The ratio of decision relied by the A.R. is not of any help to the assessee. The assessee is not justified in raising the ground of absence of opportunity of hearing by the authorities below.
The learned D.R. heavily relied on the ratio of decision in the case of Bharatkumar Sekhsaria (supra). The learned D.R. was fair enough on the point that he is not aware of the fact whether the rectification application is rejected or not. The learned D.R. also relied on the decision of Ahmedabad Bench in Khushmanlal Hiralal v. Asstt. CIT (1996) 57 ITD 531 (Ahd) and strongly pleaded to uphold the order of Commissioner (Appeals).
After going through the rival submissions and material placed on record, we find that the assessee has filed the return of block on 22-1-2001 for block period from 1-4-1989 to 11-1-2000 declaring undisclosed income of Rs. 30,40,262 on which assessee had paid tax of Rs. 5,24, 157 on 28-1-2001. The assessee did not pay the balance self-assessment tax liability till filing of appeal before Commissioner (Appeals). However, the same has been paid before final hearing before the Tribunal. Regarding rectification application moved before the assessing officer., it is undisputed that the same has not been disposed of till date. Section 249(4) of Income Tax Act, 1961 reads as under : "(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 on 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;" Hon'ble Karnataka High Court in the case of T. Govindappa Setty v.Income Tax Officer (1998) 231 ITR 892 held that where the liability of tax was disputed on the ground that the assessee could not have been assessed as an HUF as on the date of filing of the return and on date of assessment, there was no HUF in existence. A guarantee to petitioner to prefer an appeal cannot be deprived off by taking a view that the petitioner has failed to pay tax due on income shown in the return filed. We are of the view that rectification application mentioned above amounts to dispute the self-assessment tax liability. Revenue has not disputed that fact and rectification application has not been disposed of till date. Hon'ble Allahabad High Court in the case of Kashiram Bajanlal (supra) held that even if tax is paid on due date of hearing of appeal, the appeal would be accepted and the case would be heard on merit. Hon'ble Supreme Court in Filmistan Ltd.'s case (supra) has held that if the tax was not paid before filing of the appeal, the right to appeal was not destroyed. It was only treated as having been filed on the day the tax is paid. The Hon'ble Supreme Court in the case of Hoosein Kasam Dada (I) Ltd. v. State of M.P. AIR 1953 SC 221 has observed that while considering similar decision relating to change of law affecting the right of appeal and requiring payment of tax admitted as condition precedent for entertaining the appeal-the right of appeal is merely not a matter of procedure. It is a matter of substantive right. This right of appeal, from decision of inferior Tribunal to superior Tribunal, becomes vested in a party when proceedings are first initiated in and before the decision is given, be an inferior Court. A pre-existing right of appeal is not destroyed by virtue of an amendment which is not made retrospectively by expressed words or necessary intendment. The Ahmedabad Bench of ITAT in the case of J.K. Chaturvedi (supra) has taken liberal view on the issue. We find that the Nagpur Bench of Tribunal held in the case of Sanmukhdas Wadhwani (supra). "In Search and Seizure action under section 158BC during-Block assessment in search cases,-Commissioner (Appeals) directed assessing officer to adopt lower figures of undisclosed income on basis of submission made by assessee during assessment as against that declared originally in return for block period. Issue arose whether amount which is taxable as undisclosed income in block assessment should fall within scope and ambit of definition expressly given in Chapter XIV-B and amount which is not covered by said definition cannot be subjected to tax in block assessment even though declared as such by an assessee commit a patent mistake of fact or law while filing his return of undisclosed income under section 158BC, he cannot be assessed on such incorrect income merely on basis of admission made in return-This issue was held in favour of assessee. Another issue arose whether where assessee himself returned his undisclosed income for block period on ad hoc basis without giving any break-up of said amount and a detailed working made subsequently by assessee revealed that total undisclosed income assessable in his hands was lower than returned income, same had to be assessed at such lower amount going by concept of real income, especially when said working was verified and found to be correct by assessing officer. This issue was also held in favour of assessee." In present case assessee realized the mistake regarding self-assessment tax liability and as soon as he realized its mistake he made rectification for downward self assessment tax liability which has not been decided by concerned assessing officer. So, the ratio in the case of Bharatkumar Sekhsaria (supra) is not applicable to facts of assessee's case. It is undisputed proposition of law that appeal is a continuation of original proceedings. The strict interpretation of provision is not applicable to downward revised return as held by Nagpur Bench in Sanmukhdas Wadhwani's case (supra). The expression used in taxing statute would ordinarily be understood in the sense in which it was harmonius with object of the statute to effectuate the legislature animation. The provisions of statute should be interpreted with reference to the context in which the provision is found. We are of the view that assessee is heavily loaded with equity after making balanced payment of self assessment tax liability. In facts and circumstances of the case, in the interest of justice and keeping in mind the object and scheme of the Act, we set aside the order of Commissioner (Appeals) and restore the matter to him with direction to decide the same on merit after providing opportunity of bearing to both the parties. It is pertinent to mention here that since we are setting aside the order of Commissioner (Appeals) passed on preliminary issue/technical issue, we are refraining ourselves from making any comment on merit of the case.