1. These three appeals by the assessee are arising out of three different orders of the CIT(A), Madurai, and pertain to asst. yrs.
1986-87 and 1987-88.
2. ITA No. 452/Mad/1993 is against the assessment framed under Section 143(3) r/w Section 144 of the IT Act, 1961. ITA No. 303/Mad/2000 is against the penalty order under Section 271(1)(c) of the Act, for concealment of income and ITA No. 246/Mad/1993 is against assessment under Section 143(3) of the Act.
3. First we will deal with ITA No. 452/Mad/1993. The only issue in the assessee's appeal is against dismissal of appeal by CIT(A) as "not maintainable", as admitted tax was not paid as per the provisions of Section 249(4)(a) of the IT Act, 1961. Before the CIT(A), the AO reported that the assessee has not paid the admitted tax on income before the date of filing of the appeal. The assessee, in appeal memo, the details of payment of tax are shown as follows: The CIT(A) has seen from the record that the assessee has filed a return of income as unregistered firm showing an income of Rs. 20,780 and the admitted tax was more than Rs. 500. On these facts a letter was sent to the assessee to state whether it has paid the full amount of admitted tax before filing of the appeal or not. But no response was received from the assessee by the CIT(A). Accordingly he has not admitted the appeal as the assessee has not paid the tax due on the return income. The CIT(A) has given his finding in para '4' which reads as under: The appeal has been filed on 8th May, 1989, under Section 249(4)(a), no appeal shall be admitted unless at the time of filing of the appeal, the assessee has paid the tax due on the income returned.
Upto 31st March, 1989, the appellate authority had a discretion to exempt the appellant from the operations of the provisions of Section 249(4)(a) for good and sufficient reason to be recorded in writing and on an application made by the appellant. After 1st April, 1989, the appellate authority has no discretion to exempt any appellant from the operation of the provisions of Section 249(4)(a).
Since the appeal has been filed on 8th May, 1989, I have to hold that the appellant is covered by the amended provisions. Even assuming that the provisions prior to 1st April, 1989 are applicable, the appellant has not filed any application requesting for exemption from the operation of Section 249(4)(a). Thus, in either cases, I have to hold that the appeal filed by the appellant against the assessment order for the asst. yr. 1986-87 cannot be admitted in view of the fact that the appellant did not pay the tax due on the income returned at the time of filing of the appeal.
4. Aggrieved the assessee filed a second appeal before the Tribunal.
Before us the learned Counsel of the assessee, Smt. Chitra Venkataraman, senior advocate argued on behalf of the assessee. On behalf of Revenue, Shri A. Dhanaraj, Sh. Venkateshwaralu and Sh. Sunder Singh, the learned Departmental Representatives argued. The learned Counsel of the assessee Smt. Chitra Venkataraman argued that upto 31st March, 1989 as admitted by the CIT(A), the first appellate authority had a discretion to exempt the assessee from the operations of the provisions of Section 249(4)(a) of the Act for good and sufficient reasons to be recorded in writing on an application made by the assessee. But after 1st April, 1989, the appellate authority has no discretion to exempt the assessee from the operation of provisions of Section 249(4)(a) of the Act. The learned Counsel of the assessee on this argued that the relevant assessment year involved in this appeal is 1986-87 and the appeal before the CIT(A) was filed on 8th May, 1989 and in this case the provisions of Section 249(4)(a) of the Act, as was before amendment, will apply. The learned Counsel of the assessee also gave details of tax payments which reads as under:Details of tax paymentTax on admitted income: For Rs. 20,700 = Rs. 675.00 For Rs. 90 = Rs. 22.50Total Rs. 20,790 = Rs. 697.50 (Rounding of to2. Payment made along with return = Rs. 500Payment made on 3-8-1993 = Rs. 200 -------------Order now impugned = Rs. 733 (difference is by reason4. By abundant caution further = Rs. 200payment paid on 27-2-2000 In view of these facts she argued that the difference of Rs. 33 to be paid is by reason of inclusion of surcharge, which is not there is the table enclosed. She argued that this difference has arisen due to bona fide reasons that whether the surcharge is applicable to the present case or not. She further argued that it is an admitted fact that the assessee before the filing of appeal has paid only a sum of Rs. 700 and remaining Rs. 33 was not paid. But by abundant caution the assessee has further paid a sum of Rs. 200 on 27th Feb., 2000. Further she argued that in this case the return of income was filed on 31st March, 1987 and notice under Section 143(2) of the Act along with questionnaire was issued on or before 30th April, 1988. Even in the assessment order it is mentioned that the information was asked vide Income-tax Office letter dt. 13th July, 1988 to furnish the details of creditors. This means that notice under Section 143(2) of the Act was issued prior to 1st April, 1989, when the amended provision will be made applicable to the filing of appeals. On this aspect she relied on the case law of Hon'ble apex Court in the case of Hoosein Kasam Dada (India) Ltd. v.State of Madhya Pradesh and Ors. (1953) 4 STC 114 (SC). She further relied on the case law of Hon'ble apex Court in the case of Vijay Prakash D. Mehta and Anr. v. Collector of Customs (1988) 175 ITR 640 (SC) and Hon'ble Kerala High Court in the case of CIT v. Kerala Transport Co. .
5. On the other hand the learned Departmental Representative argued that no doubt the relevant assessment year involved in the appeal is 1986-87 but the appeal in this case was filed on 8th May, 1989 to the CIT(A) where it is admitted that the admitted tax have been paid short by Rs. 33. The issuance of notice under Section 143(2) of the Act before 1st April, 1989 when the amended provisions came into force have no consequence. Accordingly the amended provisions of Section 249(4) of the Act will apply to the present case. He further argued that provisions of Section 249(4) of the Act are mandatory and in order to get its appeal admitted by the CIT(A), the assessee must comply with the mandatory requirement of the provisions of the main Sub-section (4) of Section 249. He further argued that as far as the payment of tax due on return of income is concerned, wherever before expiry of period of limitation for filing of an appeal or make an application under the proviso to Section 249(4) of the Act for exemption from the operation of the provisions of Clause (b) of the main sub-section (sic).
Accordingly the learned Departmental Representative argued that CIT(A) has rightly not admitted the appeal as "not maintainable" in view of the amended provisions of Section 249(4) of the Act.
6. We have heard both the sides and gone through the case records including the provisions of the Act and case laws cited by both the sides. The admitted and undisputed facts in this case are that the relevant assessment year involved in this appeal is 1986-87 and the return of income was filed on 31st March, 1987 and notice under Section 143(2) of the Act was issued much before the amendment under Section 249(4) i.e. before 1st April, 1989. Even the assessment was completed in this case on 30th March, 1989 and the appeal before the CIT(A) was filed on 8th May, 1989. It is also an admitted fact that the tax payable on returned income comes to Rs. 733. The assessee has paid a sum of Rs. 500 along with the return of income and a sum of Rs. 200 wag paid after the order of CIT(A) received on 3rd Aug., 1993 and further a sum of Rs. 200 was paid on 27th Feb., 2000. In view of these facts it is an admitted position that the assessee has not paid the admitted tax before the filing of appeal before the CIT(A). The CIT(A) has dismissed the assessee's appeal in limine without admitting the same as the admitted tax was not paid by the assessee. From the above argument of the learned Counsel of the assessee as well as the learned Departmental Representative, now the question remains whether the amended provisions of Section 249(4) of the Act will apply to the present appeal or the unamended provisions as they stood before the amendment prior to 1st April, 1989 will apply. The CIT(A) has held that the assessee is covered by the amended provisions and he argued that if the provisions prior to 1st April, 1989 are applicable, the appellant has not filed any application requesting for exemption from the operation of Section 249(4)(a) of the Act. Even in the case law cited by learned Counsel of the assessee of Hon'ble Kerala High Court in the case of Kerala Transport Company (supra) the return of income for the asst. yr.
1986-87 has been filed prior to 1st April, 1989 and notice under Section 143(2) of the Act was issued prior to 1st April, 1989, it was decided by the Hon'ble Kerala High Court that the appeal against the assessment order for that year has to be maintained on the basis of law as it stood prior to 1st April, 1989. Although such appeal has been preferred after that date i.e. 1st April, 1989, the Hon'ble Kerala High Court cited above has held as under : (i) The CIT(A) is right and within the jurisdiction in entertaining the appeal and also in deciding the same on merits? (ii) and also in view of the words 'at the time of filing of the appeal' occurring in Section 249(4) of the IT Act, the Tribunal is right in law in holding that if an appeal filed after 1st April, 1989, the provision prior to 1st April, 1989, will apply?" The same is the subject-matter of adjudication in IT Ref. No. 174 of 1997. As indicated above, learned Counsel for the assessee raised a point about the jurisdiction of the Tribunal to pass such an order in IT Ref. No. 111 of 1998. But, we do not think it necessary to adjudicate that question.
Coming back to the reference filed by the Revenue, it is to be noted that the position under Section 249 before the amendment and the after amendment w.e.f. 1st April, 1989, is as follows: '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 himPrior to 1-4-1989 With effect from 1-4-1989Provided that on an application made Provided that, in a case falling underby the appellant Clause (b):CIT(A) may for any good and Dy. CIT(A) or, as the case may be,sufficient reason to be recorded in the CIT(A) may; for any good andwriting exempt him from the sufficient reason to be recorded inoperation of the provisions of this sub- writing, exempt him from thesection.
operation of the provisions of that clause.
The relevant question to decide the applicability of the provision is the date on which the lis for the dispute arose. In the case at hand, the lis can be stated to have commenced latest by the date when the notice under Section 143(2) of the Act was issued that is a date prior to 1st April, 1989. In Hoosem Kasam Dada (India) Ltd. v. State of Madhya Pradesh similar position relating to change of law affecting the right to appeal and requiring payment of tax admitted to be due as condition precedent for entertaining the appeal, the apex Court held that a right of appeal is not merely a matter of procedure. It is a matter of substantive right. This right of appeal from the decision of an inferior Tribunal to a superior Tribunal becomes vested in a party when proceedings are first initiated in and before a decision is given, by the inferior Court. A pre-existing right of appeal is not destroyed by an amendment if the amendment is not made retrospective by express words or necessary intendment. The fact that the pre-existing right of appeal continues to exist must, in its turn, necessarily imply that the old law which created that right of appeal must also exist to support the continuation of that right. As the old law continues to exist for the purpose of supporting the pre-existing right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can then be no question of the amended provision preventing the exercise of that right, A provision which is calculated to deprive an assessee of the unfettered right of appeal cannot be regarded as a mere alteration in procedure. For the purposes of the accrual of the right of appeal the critical and relevant date is the date of initiation of the proceedings and not the decision itself.
At this juncture, it is also necessary to take note of another decision of the apex Court in Ramesh Singh v. Cinta Devi relating to maintainability of the appeal vis-a-vis a prescription mandating deposit of requisite amount as condition precedent for entertaining an appeal. Following the decision in Hoosein Kasam Dada (India) Ltd. v. State of Madhya PradeshState of Bombay v. Supreme General Films Exchange Ltd. and Vithalbhai Naranbhai Patel CST , it was observed that unless the new provision expressly or by necessary implication makes the provision retrospective in character, the right to appeal which is already crystallized will not be affected. This position was illuminatingly stated in Kirpa Singh v. Rasalldar Ajaipal Singh AIR 1928 Lah 627 (FB). A vested right of appeal can be taken away by a subsequent enactment, if it so provides expressly or by necessary implication, as was observed by the apex Court in Garikapati Veeraya v. N. Subbiah Chowdhry assessment proceedings. The right of appeal is a substantive right which gets crystallised when assessment proceedings are initiated.
The right of appeal is a substantive right conferred on a party by the statute. The conferring of a right of appeal is not circumscribed by the right being available at the time of the institution of the cause in the Court of the first instance. The right of appeal in a given case may already be available at the institution of the cause in the Court of the first instance or may even be subsequently conferred. In either situation, without any distinction such right is conferred by statute (see Special Military Estates Officer v. Munivenkataramiah 7. As the facts before us are exactly identical to the case law of Hon'ble Kerala High Court referred and cited above, we can draw strength from the Hon'ble Kerala High Court's decision. Further the Hon'ble apex Court in the case of Hoosein Kasam Dada (India) Ltd, v.State of Madhya Pradesh (supra) held that imposition of restriction by the amendment of section could not affect the assessee's right of appeal from a decision in proceedings which commenced prior to such amendment and right of appeal was free from such restriction under Section 249(4) of the Act as it stood at the time of commencement of the proceedings. Consequently the assessee's appeal should not have been rejected on the ground that it was not accompanied by satisfactory proof of the payment of the assessed tax. As the assessee did not admit that any amount was due by it, it was entitled to file its appeal when deposition (sic) any sum of money. The new requirement in the proviso to Section 22(1) of the Sales-tax Act could not be said merely to regulate the exercise of the assessee's pre-existing right but no truth whittles 'down. The right itself could not be regarded as a mere rule of procedure. The Hon'ble apex Court has finally held as under: In our view the above observation is apposite and applies to the case before us. The true implication of the above observation as of the decisions in the other cases referred to above is that the pre-existing right of appeal is not destroyed by the amendment if the amendment is not made retrospective by express words or necessary intendment. The fact that the pre-existing right of appeal continues to exist must, in its turn, necessarily imply that the old law which created that right of appeal must also exist to support the continuation of that right: As the old law continues to exist for the purpose of supporting the preexisting right of appeal that old law must govern the exercise and enforcement of that right of appeal and there can then be no question of the amended provision preventing the exercise of that right. The argument that the authority has no option or jurisdiction to admit the appeal unless it be is accompanied by the deposit of the assessed tax as required by the amended proviso to Section 22(1) of the Act overlooks the fact of existence of the old law for the purpose of supporting the pre-existing right and really amounts to begging the question, The new proviso is wholly inapplicable in such a situation and the jurisdiction of the authority has to be exercised under the old law which so continues to exist. The argument of Sri Ganapathy Aiyar on this point, therefore, cannot be accepted.
The learned advocate urges that the requirement as to the deposit of the amount of the assessed tax does not affect the right of appeal itself which still remains intact, but only introduces a new matter of procedure. He contends that this case is quite different from the case of Sardar Ali v. Dalimuddin (1929) ILR 56 Cal 512 for in this case it is entirely in the power of the appellant to deposit the tax if he chooses to do so whereas it was not within the power of the appellant in that case "to secure a certificate from the learned Single Judge who disposed of the second appeal. In the first place the onerous condition may in a given case prevent the exercise of the right of appeal, for the assessee may not be in a position to find the necessary money in time, Further this argument cannot prevail in view of the decision of the Calcutta High Court in Nagendra Nath Bose v. Mon Mohan Singha (1930) 34 CWN 1009. No cogent argument has been adduced before us to show that that decision is not correct, There can be no doubt that the new requirement "touches" the substantive right of appeal vested in the appellant.
Nor can it be overlooked that such a requirement is calculated to interfere with or fetter, if not to impair or imperil, the substantive right. The right that the amended section gives is certainly less than the right which was available before. A provision which is calculated to deprive the appellant of the unfettered right of appeal cannot be regarded as a mere alteration in procedure. Indeed the new requirement cannot be said merely to regulate the exercise of the appellant's pre-existing right but in truth whittles down the right itself and cannot be regarded as a mere rule of procedure.
Finally, Sri Ganapathy Aiyar faintly urges that until actual assessment there can be no "lis" and therefore, no right of appeal can accrue before that event. There are two answers to this plea.
Whenever there is a proposition by one party and an opposition to that proposition by another a "lis" arises. It may be conceded, though not deciding it, that when the assessee files his return a "lis" may not immediately arise, for under Section 11(1) the authority may accept the return as correct and complete. But if the authority is not satisfied as to the correctness of the return and calls for evidence, surely a controversy arises involving a proposition by the assessee and an opposition by the State. The circumstance that the authority who raises the dispute is himself the Judge can make no difference, for the authority raises the dispute in the interest of the State and in so acting only represents the State. It will appear from the dates given above that in this case the "lis" in the sense explained above arose before the date of amendment of the section. Further, even if the "lis" is to be taken as arising only on the date of assessment, there was a possibility of such a "lis" arising as soon as proceedings started with the filing of the return or, at any rate, when the authority called for evidence and started the hearing and the right of appeal must be taken to have been in existence even at those dates. For the purposes of the accrual of the right of appeal the critical and relevant date is the date of initiation of the proceedings and not the decision itself.
For all the reasons given above we are of the opinion that the appellant's appeal should not have been rejected on the ground that it was not accompanied by satisfactory proof of the payment of the assessed tax. As the appellant did not admit that any amount was due by it, it was under the section as it stood previously entitled to file its appeal without depositing any sum of money. We, therefore, allow this appeal and direct that the appeal be admitted by the CIT and be decided in accordance with law. The appellant is entitled to the costs of this appeal and we order accordingly.
8. From the above case laws of Hon'ble apex Court and of Hon'ble Kerala High Court, it may be concluded that though not deciding it, but when an assessee files his return, a "lis" may not immediately arise but it can be presumed that under Section 143(1) of the Act, the assessing authority may accept the return as correct and complete. If the authority is not satisfied as to the correctness of the return and selects the case by issuing notice under Section 143(2) of the Act and make assessment under Section 143(3) then there is every possibility of a controversy arising involving a proposition by the assessee and an opposition by the Department. For the purpose of accrual of the right of appeal the critical and relevant date, is the date of assessment proceedings, i.e., date of issue of notice under Section 143(2) of the Act. In the present case the notice under Section 143(2) of the Act was issued much before the amended section came into force on 1st April, 1989. When a "lis" commenced, all rights came into action and no bar on a likely appeal can be put, unless the change in law is made retrospectively by express or clear implication. In the present case in hand the amended provisions under Section 249(4) of the Act were amended w.e.f. 1st April, 1989 and these are not retrospective at all.
To sum up, it can be easily said, that a right of appeal being a substantive right, the institution of a suit carries with it the implication with all successive operations available under the law then force would be preserved to the parties (to) suit throughout the rest of the career of suit. To this proposition only two exceptions will apply i.e. (i) by virtue of this statute such right of appeal is taken away retrospectively by expressly or impliedly, and, (ii) to the appropriate remedy is abolished.
9. In view of the above discussion and going through the facts of the case and the authorities of Hon'ble apex Court as well as of Hon'ble Kerala High Court cited above, we are of the view that the pre-amended provisions of Section 249(4) of the Act prior to 1st April, 1989 will apply to the appeal before the CIT(A). Further, from the facts of the above case it seems that the assessee has paid a sum of Rs. 500 along with the return of income as admitted tax whereas admitted tax as per the computation by CIT(A) is Rs. 733 and this difference is by reason of inclusion of surcharge, which is not there in the table enclosed. A sum of Rs. 200 was paid on 3rd Aug., 1993 thereby total payment made was Rs. 700 and the assessee further paid a sum of Rs. 200 on 27th Feb., 2000 by abundant caution. Accordingly we fairly feel that there seems no mala fide intention on the part of the assessee not to pay up this undisputed tax of Rs. 233 before the appeal filed by the assessee to the CIT(A). Accordingly the CIT(A) is directed to go into the relevant material and find out whether there exists a good and sufficient reason for non-payment and accordingly decide the issue after taking material from the assessee and giving reasonable opportunity of being heard. Further, if the CIT(A) admits the appeal then he will decide the issue on merits. Accordingly this appeal is set aside to the file of the CIT(A). In the result, the assessee's appeal is allowed for statistical purposes.
10. Now we will take up ITA No. 303/Mad/2000. This appeal pertains to the penalty levied by AO and confirmed by CIT(A) vide its order dt.
15th Oct., 1999. At the outset it is seen that the quantum appeal has been set aside to the file of CIT(A) to decide whether the appeal is maintainable or not, in view of the facts and circumstances narrated in that case. This being a penalty appeal, under Section 271(1)(c) of the Act for concealment of income, we fairly feel that this should also be set aside to the file of the AO and he will decide this penalty after the quantum appeal is decided by the CIT(A). The AO will give reasonable opportunity of being heard to the assessee before deciding this penalty. In the result this appeal of the assessee is allowed for statistical purposes.
11. Now coming to ITA No. 246/Mad/1993, it is seen that the first issue raised by the assessee in ground No. '3' is that the CIT(A) erred in passing order ex parte, and ought to have given further opportunity to the appellant. At the outset it is seen from the order of the CIT(A) vide para '2' which reads as under: The appeal was posted for hearing on 20th Oct., 1992 when Shri B. Rajadurai, CA appeared and requested for adjournment. It is seen from the records that during the year 1992 this appeal was posted for hearing on six occasions. Prior to that it was posted for hearing on four occasions. Invariably on every occasion the appellant was asking for adjournment. It should also be noted that when the appeal was posted for hearing on 6th Oct., 1992, Shri Rajadurai asked for adjournment on the ground that the appellant-firm had handed over the papers to him in connection with the appeal and requested for adjournment. Accordingly, it was adjourned to 20th Oct., 1992. Even now Shri Rajadurai requests for further adjournment. I have informed him that since sufficient opportunities have already been granted, no further adjournment can be granted. Accordingly I proceed to dispose of the appeal on merits.
12. From the above it is clear that appeal was posted in the month of October, 1992 i.e. on 6th Oct., 1992 and last opportunity was provided on 20th Oct., 1992 and on 20th Oct., 1992 the assessee's counsel Shri Rajadurai, CA requested for further adjournment. The CIT(A) rejected the adjournment request by giving the reason that sufficient opportunities have already been granted. Hence no further adjournments can be granted and he proposed to decide the appeal on merits. We have seen that number of opportunities have been provided by the CIT(A) to the assessee which are dt. 6th Oct., 1992 and 20th Oct., 1992 and the order was passed on 19th Nov., 1992 by the CIT(A). We are of the considered view that the assessee has not been provided proper opportunity of being heard by the CIT(A) as it is clear from the abovementioned facts. We fairly feel that the assessee should be heard reasonably before deciding the appeal ex parte. Accordingly this appeal is set aside to the file of the CIT(A) to give reasonable opportunity of being heard to the assessee and decide the issue on merits.
Accordingly this appeal is allowed for statistical purposes.
13. In the result, these three appeals of the assessee are allowed for statistical purposes.