Wp/5974/2005 Of S.ravinder v. The Commissioner Of Income Tax-Iv

HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD(Special Original Jurisdiction) FRIDAY, THE TWENTY FIFTH DAY OF JUNETWO THOUSAND AND TWENTY ONE PRESENT THE HON'BLE SRI JUSTICE M.S. RAMACHANDRA RAOAND THE HON'BLE SRI JUSTICE T. VINOD KUMAR WRIT PETITION NO: 5974 OF 2005 Between: S. Ravinder, S/o. Late S.Balaiah, 5-8-619, Abids, Hyderabad. .,.PETITIONER AND 1. The Commissioner of lncome Tax-lV, Hyderabad. 2, The Commissioner of lncome Tax(Appeals)-V, Hyderabad. 3. The lncome Tax Officer - 5(3), Hyderabad. ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in thecircumstances stated in the affidavit filed therewith, the High Court may be pleased toissue a Writ, order or direction one in the nature of Mandamus declaring that theproceedings of the 1st respondent dt.30-09-2004 passed u/s.264 of the lncome TaxAct, 1961 for the assessment year 1997-98 as arbitrary, illegal and bad in law andissue a Writ, order or direction one in the nature of Mandamus declaring that theproceedings of the 1st respondent dt.30-09-2004 passed u/s.264 of the lncome TaxAct, 1961 for the assessment year 1997-98 as arbitrary, illegal and bad in law andconsequently set aside the assessment d1.31.03.2003 made by the lncome TaxOfficer, ward 5(3), Hyderabad i.e., the 3rd respondent herein, under section 144 rlw.section 147 of the lncome Tax Act, 1961 .Officer, ward 5(3), Hyderabad i.e., the 3rd respondent herein, under section 144 rlw.section 147 of the lncome Tax Act, 1961 . Counsel for the Petitioner: SRl. A.V. KRISHNA KOUNDINYA Counsel for the Respondents: SRI J.V. PRASAD SC FOR SENIOR S.C. INCOME TAX The Court made the following: ORDER THE HON'BLE SRI [JUSTICE M,S.RAMACHANDRA ] ANDTHE HON,BLE USTICE T.VINOD ] wPON No.5 974 [of ][20][05] oDR i(per Hon'ble [Sri ][Justice ][T.Vinod ][Kuna)] In this writ [petition, ][the ][petitioner ][assails ][the ][correctness ][of ][the]proceeding, dt.30.09.2004, [passed ][by ][the ][lst ][respondent' under ][Section]of [the ][Income-tax ][Act, ][1961](for short, 'the [Act'), ][for ][the]264(6) Assessment [Year ][1997-98.] 2,HeardSriA.V.SivaKarthikeya,learnedCounse|forthepetitioner,and sri l.V.Prasad, [learned ][senior standing counsel, ][appearing ][on ][behalf]of the respondents. 3. The [petitioner contends ][that the ][3'd ][respondent ][passed ][an Order ][of]Assessment [dt.31.03.2003, ][for ][the ][Assessment ][Year ][1997-98 ][under]Section [144 ][read ][with ][Section ][147 ][of ][the Act' on the ][father ][of ][the]petitioner, represented [by ][the ][petitioner as ][the ][son ][and ][legal ][heir; that]aggrieved [by the ][said ][Assessment ][Order' ][the ][petitioner ][had ][filed ][an]appeal before [the ][2nd ][respondent, ][as ][provided ][under ][the ][AcU ][the ][said]appeal [flled by ][the ][petitioner was ][dismissed ][by ][the ][2nd ][respondent' ][by]order dt.09.07.2003, [holding ][that the ][appeal ][filed ][was ][void ][ab ][initio ][and]cannot be [admitted, ][since ][the ][appellant had failed ][to ][pay ][the ][admitted ][tax]due, as [per ][the ][return ][of ][income ][filed voluntarily on 31'03'2003; and the]2nd respondent, [thus, ][held ][that ][no adjudication ][on ][merits of ][the ][appeal' ][is]warranted, [having regard ][to the ][express provisions ][of ][Section ][249(4Xa) ][of]the Act. 4. Petitioner [fufther ][contends ][that' ][upon ][the ][rejection ][of ][the ][appeal]by the [2.d ][respondent (as ][cannot ][be ][admitted)' ][the ][petitioner ][invoked the] 4. Petitioner [fufther ][contends ][that' ][upon ][the ][rejection ][of ][the ][appeal]by the [2.d ][respondent (as ][cannot ][be ][admitted)' ][the ][petitioner ][invoked the] power of Revision conferred on the 1s respondent under Section 264 ofthe Act, and filed an application on 29.03.2004, seeking Revision of thethe Act, and filed an application on 29.03.2004, seeking Revision of theassessment order dt. 31.03.2003 made by the 3'd respbndent. In the saidRevision preferred, the petitioner sought for reconsideration of the issuerelating to proceeds from sale of agricultural land by the petitioner's fatherbeing subjected to Long Term Capital Gains, applying the provisions ofSection 54-F of the Act.being subjected to Long Term Capital Gains, applying the provisions ofSection 54-F of the Act. 5. The 1't respondent by order dt.30.09.2004, rejected the saidRevision application filed by the petitioner. In the order, the1st respondent stated the reason for such rejection as, since, thepetitioner/assessee filed an appeal against the Assessment Order of the3'd respondent, dt.31.03.2003 before the 2nd respondent under Section246 of the Act, and the 2nd respondent having dismissed the same byorder dt.09.07.2003, the provisions of Section 264(4) of the Act wouldstand attracted. According to the 1st respondent, as per the mandate ofprovisions of Section 26a() of the Act, the l't respondent shall notexercise the power of revision in respect of an order that has been made"subject of an appeal" to the Commissioner of Appeals or the AppellateTribunal. Thus, the 1st respondent rejected the Revision petition withoutadmitting the same. 6. The petitioner contends that the rejection of the Revjsion petitionby the 1't respondent, is without proper appreciation and understandingof the scope and application of provisions of Section 2649) of the Act;that since the appeal filed by the petitioner to the 2,d respondent havingnot been adjudicated, on merits and having been rejected as void ab initiodue to non-payment of admitted tax due, the same cannot beconsidered as an "appeal adjudicated" under Section 251 of the AcU andalso that the rejection of the revision petition by the 1st respondent is also contrary to Circular No.367, dt.26.05.1983, issued by the Central Board ofDirect Taxes, wherein it has been clarified tiat "where the appeal wasdismissed on the ground that the appeal was incompetent", the samecannot be said to have made"subject of an appeal' under Section 251(1)or Section 254(1) of the Act, thereby, attracting [provisions ]of Section264(4)(c) of the Act [preventing/precluding ]the exercise of [powers ]by the1* respondent under Section 264 of the Act. 7. On the othelr hand, learned Senior Standing Counsel [placing]reliance on the counter-affidavit supports the impugned order [passed ]bythe 1't respondent under Section 264(6) of the Act and seeks [for]sustaining the same. B. We have given due consideration to the submissions made by thelearned counsel appearing for the [parties.] 9. The short [question ]that falls for our consideration in this [writ]petition is "Whether the rejection of the appeal by the Zd respondent asvoid ab initio for having been filed without complying [with ][mandatory]provisions of Section 249(4)(a) of the Act, can be considered as a matterhaving been "subject of an appeal'i to oust or [prevent ]the ld [respondent]from exercising the [power ]of Revision conferred [on ][him ][under ][Section ][264]of the Act?" 10. Admittedly, in the facts of [the ][present ][case, ][the ][appeal ][filed ][by the]petitioner against the order of the 3'd respondent dt.31.03.2003, [had ][been]filed without [payment ]of admitted [tax ][due as ][per ][the ][return ][of ][income.]Since, the admitted tax due [is ][required ][to ][be ][paid ][for ][filing ][the ][appeal]before the 2nd respondent [for ][it ][to ][be ][entertained, and ][the ][appeal ][having]been filed by the [petitioner ]without [making ][such ][payment, ][the ][said]appeal, even if filed, cannot be [considered as ][a validly ][presented ][appeal.] 10. Admittedly, in the facts of [the ][present ][case, ][the ][appeal ][filed ][by the]petitioner against the order of the 3'd respondent dt.31.03.2003, [had ][been]filed without [payment ]of admitted [tax ][due as ][per ][the ][return ][of ][income.]Since, the admitted tax due [is ][required ][to ][be ][paid ][for ][filing ][the ][appeal]before the 2nd respondent [for ][it ][to ][be ][entertained, and ][the ][appeal ][having]been filed by the [petitioner ]without [making ][such ][payment, ][the ][said]appeal, even if filed, cannot be [considered as ][a validly ][presented ][appeal.] It is for the said reason, the 2nd respondent, without adjudicating thematter on merits, has rejected the appeal as void ab initio, though byusing the term as " dismissed'. 11. Any appeal, which is not accompanied either by the requisite Couftfee, or any other mandatory payment required to be made as per theprovisions of the relevant Statute, cannot be considered as a validlypresented appeal, and such appeal would be non-est in the eye of law.Once an appeal is considered as non-est in the eye of law, any orderimpugned in such appeal cannot be considered as "subject of an appeal,,as there is no asceftainment or adjudication of the issues raised in theappeal on its merits. 12. The expression " subject of an appeal, as used ln Section 264 ofAct, is analogous to the language used in Section 34 of Madras GeneralSales Tax Act, 1959 (for short, 'the Sales Tax Act), dealing the power ofreview conferred on Board of Revenue. The Hon,ble Supreme Court inBOARD OF REVENUE V/s, RAJ BROTHERS AGENCIEI, whileconstruing the meaning of the expression "fhe order has been madesubject of an appeal' as used in the Sales Tax Act, in deciding thequestion, whether an appeal against an order, which was dismissed, ashaving been barred by tlme, can be considered as an order, which hadbeen subject of an appeal, held that - "This questlon does present some difficulty. But in vlew of thecircumstances, which we shall presently set out, we wi/l not bejustifled ln examining the correctness of the conclusion reachedby the High Court. As far back as 1963 the scope of Section 34came up for consideration before the Madras High Court inERODE YARN STORES V/s. STATE OF MADRA*. Therein,the assessee contended that once an appeal is fited before aTribunal, -the [Board ][is ][precluded ][from ][invoking ][its ][power under]Section 34. The State of Madras controverted ihat position. r (1973) 3l sTC 434 SC. 2 (1963) 14 STC 724 Mad I / Therein the State contended that before the jurisdiction of theBzard to exercise its power under Section 34 can be held to betaken away, the appeal filed before the Tribunal must havebeen an eFfective appeal and that an appeal which wasdismissed on the ground of limitation is not an effective appeal.The High Court of Madras accepted that contention anddecided the case in favour of the State. In arriving at theconclusion that the words "subject of an appeal" mean subjectof an "effective appeal'i the High Court took into considerationthe mischief that would otherwise arise, namely, all that anassesseel who wants to stifle the Boardb suo motto power ofrevision, has to do is to file a time-barred appeal and get itdismissed. It was because of that difficulty the High Couft inErode Yarn Stores' case came to the conclusion that theexpression "the order which has been the subject of an appeal"as meaning "subject of an effective appeal"." 13. In CHIRANJILAL DAGA V/s, COIT1MISSIONER OF INCOME 13. In CHIRANJILAL DAGA V/s, COIT1MISSIONER OF INCOME Tile, the Madras High Court, while construing Section 33A of the IndianIncome Tax Act, 7922, which corresponds to Section 264 of the Act,expressed the view that an order is made the " subject of an appeal'within the meaning of Clause (c) of the first proviso to Sub-section (2) ofSection 33A, only when it is the subject-matter of an "effectivd' appeal.The Madras High Court also held that if an appeal to the AppellateTribunal under Section 33 is not admitted and is disposed of on theground that it was filed after the prescribed time, the order cannot be saidto be the " subject of an appeal. 14. The Kerala High Court in C.C. JAYARAM V/s. CIta also expressed a similar view and held that- "There is no effective disposal of the petitioner's appeal eitherby the Commissioner of Income Tax [(Appeals) ]or by theIncome Tax Appellate Tribunal. In exhibit P-2, theCommissioner of Income Tax [(Appeals) ]refused to entertaln theappeal filed by the [petitioner ]on the [ground ]that the [petitioner]failed to pay the admitted tax and the said decision wasconfirmed by exhibit P-3 order of the Appellate [Tribunal, ]somuch so that there is no effective disposal of the [petitioner's]appea/ and, consequently, the first respondent has [jurisdiction]to revise the order whtch has been made the subject of appealbefore the Appellate Tribunal."by the Commissioner of Income Tax [(Appeals) ]or by theIncome Tax Appellate Tribunal. In exhibit P-2, theCommissioner of Income Tax [(Appeals) ]refused to entertaln theappeal filed by the [petitioner ]on the [ground ]that the [petitioner]failed to pay the admitted tax and the said decision wasconfirmed by exhibit P-3 order of the Appellate [Tribunal, ]somuch so that there is no effective disposal of the [petitioner's]appea/ and, consequently, the first respondent has [jurisdiction]to revise the order whtch has been made the subject of appealbefore the Appellate Tribunal." 3 (1978) 113ITR 363 Mad 4 ll994l 2O7 ITR 662 Ker. 15. It is also to be noted that Section 251(1Xa) of the Act stipulatesthat an appeal filed before the appellate authority to be considered asdisposed, would require such order under challenge to be eitherconfirmed, reduced, enhanced or annulled. It goes without saying thatthe disposal is by considering the merits of the matter. In the facts of thepresent case, the order passed by the 2'd respondent, in rejecting theappeal as void ab initio, cannot be considered as disposing the appeal byany of the above modes specified. Thus, it cannot be said that the orderof assessment of the 3'd respondent is " subject of an appeal' placingembargo/ousting the jurisdiction of the lst respondent under Section264(4) of the Act. 16. Fufther, the Circular No.367, issued by the Central Board of DirectTaxes, also supports the contention of the petitioner. It is trite law thatthe Circulars issued by the CBDT are binding on the Revenue, in view ofthe authoritative pronouncement of the Apex Court in COMMISSIONEROF CUSTOMS V/5. INDIAN OIL CORPORATION LIMITEf. ThCSupreme Couft after examining the entire case law, culled out thefollowing principles: (iv) It is not open to the Revenue to advance an argumentor file an appeal contrary to the circulars. L7. Having regard to the [position ]of law elucidated above, this Coutt [is]of the considered view that the impugned order [passed ]by the1't respondent under Section 246(6) of the Act, refusing to exerciseRevisional [power ]conferred on him under Section 264(4) of the Act, onthe ground that the order of the 3'd respondent dt.31.03.2003 was"subiect of an appeal"(underlining supplied by the Couft) before the 2ndrespondent, cannot be sustained. (iv) It is not open to the Revenue to advance an argumentor file an appeal contrary to the circulars. L7. Having regard to the [position ]of law elucidated above, this Coutt [is]of the considered view that the impugned order [passed ]by the1't respondent under Section 246(6) of the Act, refusing to exerciseRevisional [power ]conferred on him under Section 264(4) of the Act, onthe ground that the order of the 3'd respondent dt.31.03.2003 was"subiect of an appeal"(underlining supplied by the Couft) before the 2ndrespondent, cannot be sustained. 18. Accordingly, [.the ]Writ Petition is allowed; the impugned orderdt.30.09.2004, [passed ]by the 1't respondent, is set aside; the matter [is]remitted back to the 1't respondent [(or ]the concerned Commissioner, [in]view of passage of time and change of [jurisdiction); ]the [1st ]respondent(or the concerned Commissioner) is directed to dispose of the Revisionpetition filed by the petitioner within a period of three [(3) ]months fromthe date of receipt of a copy of this order, by [passing ]a [reasoned ][order ][in]accordance with law, after affording [personal hearing ][to the petitioner ][and]communicate the same to the [petitioner.] 19. Pending misiellaneous [petitions, ]if any, shall [stand closed ][in ][the]light of this final order. No order as to costs. That Rule Nisi has been made absolute as above. Witness the Hon'ble the Chief Justice HIMA KOHLI, on this Friday, theTwenty Fifth day of June, Two Thousand and Twenty One. SD/.T.TIRUMALA DEVIASSISTANT REGISRAR,TRUE COPY//SECTION OFFICER To, 1. The Commissioner of lncome Tax-lV, Hyderabad. 2. The Commissioner of lncome Tax(Appeals)-V, Hyderabad. 3. The lncome Tax Officer [[- ]]5(3), Hyderabad. [[- ]]4. 1'1 L.R. Copies.5. The Under Secretary, Union of lndia, Ministry of Law, Justice and CompanyAffairs, New Delhi.4. 1'1 L.R. Copies.5. The Under Secretary, Union of lndia, Ministry of Law, Justice and CompanyAffairs, New Delhi. 6. The Secretary, Telangana Advocates Association Library, High Court for theState of Telangana at Hyderabad. 7. One CC to Sri A.V. Krishna Koundinya, Advocate 8. One CC to Sri J.V. Prasad, Senior S.C. for lncome Tax 9. Two CD Copies HIGH COURT DATED:2510612021 ORDER W.P.No.5974 of 2005 ALLOWING THE WRIT PETITIONWITHOUT COSTS ct 5iArE o)\ts?\o1t [tut].,i4L)toFS?;.1