ORDER
J.P. Bengra, Judicial Member
1. This is an appeal by the assessee against an order refusing to grant exemption under Section 249(4) of the Income-tax Act, 1961 passed by the CIT(A)-IX, New Delhi pertaining to the assessment year 1984-85.
2. The assessee-company is engaged in the business of export of ready-made garments. During the assessment year under consideration the company set up a plant for production of bed sheets and other linen products under the trade name of ‘Bichhouna’. The return of income for assessment year under reference was filed declaring a total income of Rs. 13,39,240 on 18-4-1985 on which admitted tax works out to Rs. 8,71,441. However, the assessment under Section 143(3) was completed at a total income of Rs. 92,47,070 of the Income-tax Act on which tax payable works out to Rs. 88,40,408. The assessee filed an appeal before the CIT(A)-IX, New Delhi on 27-4-1987. However, the tax due on income returned by the assessee-company was not paid as per the provisions of Sub-section (4) of Section 249 of the Income-tax Act, 1961. In reply to the show-cause notice the explanation of the assessee was that the Assessing Officer had not adjusted refund due in earlier years. The learned CIT(A) held that this contention was not established and there was no provision for adjustment of refund of past years against tax payable under Section 140A. He, therefore, did not admit the appeal and dismissed it as such. The assessee filed an appeal before the Income-tax Appellate Tribunal and it was contended that there was no tax liability due at the time of filing of the appeal before the CIT(A) as the assessee was entitled to refunds equivalent to or more the tax alleged to be due under Section 140A. The assessee had paid taxes amounting to Rs. 12,39,781 between 12-10-1987 and 2-7-1988 as against tax due of Rs. 8,37,440 under Section 140A on the declared income of Rs. 13,39,240. The assessee filed the copies of the various letters to the ITO requesting for adjustment of the refund due and other correspondences with the income-tax authorities and TRO regarding the demand and its stay and the paper showing declining financial position and lack of liquidity of resources with the assessee. In reply to the query from the Bench, the assessee’s counsel stated that though no written application was made before the CIT(A) for exemption from the provisions of Section 249(4), such a request had been made orally explaining the financial difficulty as also the above mentioned facts. He also submitted that proper opportunity of being heard and of establishing these conditions was not afforded by the learned CIT(A) since the show-cause notice was issued on 4-12-1987 and the hearing was concluded and the order passed by the CIT(A) on 14-12-1987. An undertaking was also given before the Tribunal that the company should cooperate for expeditious, disposal of the matter.
3. After considering the facts and the circumstances and the submission of the learned counsel, the Tribunal was of the view that in the interest of justice the assessee-company should have a fair opportunity to submit an application before the CIT(A) for seeking exemption from the provisions of Section 249(4) for good and sufficient reasons. Therefore, the order of the CIT(A) was set aside and the matter was remanded back to his file with the direction to give opportunity of hearing as contemplated in the order of the Tribunal.
4. When the matter again came before the CIT(A) an application was filed on 30th December, 1988 seeking exemption as per the provisions of Section 249(4) of the I.T. Act. In this application, the assessee mentioned the following particulars :-
Date Particulars Amount
12-10-1987 Paid vide Rs.
cheque No.
491398
dated 28-9-1987 1,50,000.00
9-11-1987 Paid vide DD
No. 777667
dated 2-11-1987 93,000.00
18-11-1987 Refund of the
Company for
AY 83-84
adjusted against
demand for
AR 84-85 2,19,150.00
18-11-1987 Refund of Mr.
Mohan Anand
Director of
the company
for assessment
year 1983-84
adjusted 1,91,020.00
Refund of Mrs.
Usha M. Anand,
Managing
Director of the
company for AR
1983-84 adjusted 2,17,594.00
11-12-1987 Paid vide DD No.
19822/87
dated 11-12-1987
Date of Credit as
per challan 28-12
-1987 2,19,000.00
In this application it was also mentioned that the admitted tax on the returned income had been paid after filing the appeal for the circumstances beyond the control of the assessee-company. Besides, the fact that the company has mentioned about the financial exigencies experienced by the company during the period under consideration due to operations of a new plant ‘Bichhouna’ on the fact and figures of sales earlier and subsequent years and it was prayed that due to the severe financial crisis faced by the company, it was not in a position to pay any self-assessment tax for the impugned assessment year and, therefore, the assessee be exempted from the operation of provisions of Section 249(4) of the I.T. Act. Alter receiving this application, the CIT(A) himself examined the financial position of the assessee for assessment year 1984-85 from the balance-sheet of the company and he observed as under :-
After analysing the financial position of the Appellant it is seen that up to the AY 86-87 there is substantial increase in purchase, sales as well as profits. It is also seen that throughout this period the appellant has been also making additions by purchase of assets. It is also seen from the chart that the appellant was having bank balances of substantial amount with him. It is also seen that throughout this period the appellant has also earned profits. It is also seen that the appellant has made a provision for taxation. It is also seen that the appellant has made provision for dividend. So far as the asstt. year 1987-88 is concerned the appellant has made a sales of Rs. 477.41 lacs. The appellant has made an addition to assets of Rs. 4.41 lacs. The appellant was having cash and bank balances available and the appellant made provisions for taxation at Rs. 22.14 lacs. The above picture clearly shows that the appellant was not in financial difficulty to make the payment of tax of Rs. 8,43,721. Apart from this the appellant has also been making payment of income-tax for earlier assessment years. Mind of the appellant was to postpone the payment of sales-tax assessment whereas all other commitments were fulfilled by the appellant. Therefore, the records as well as the financial position of the appellant company do not show there were acute financial crises such as liquidation of the company, winding up of company and some crises like lock-up in the factory.
Thus he concluded that there was no good and sufficient reason for not making payment of self-assessment tax. Therefore, this application was rejected. The CIT(A) has observed about the non-co-operation of the assessee for expeditious disposal of the case also in the subsequent paragraph.
5. Aggrieved by that order the assessee filed an appeal before the Tribunal. The main contention of the assessee before the Tribunal was that the appeal should be admitted and be disposed of on merits, by the CIT(A) or if it is possible by the Tribunal though he has also raised number of grounds on merit of the claim and various disallowances made by the ITO.
However, at the time of hearing, the only argument of the learned counsel for the assessee was that the appeal should have been admitted after giving exemption’under Section 249(4) of the Income-tax Act. No submissions on merit were advanced. The learned counsel for the assessee, Shri Agarwal very vehemently argued that the tax due at the time of filing the return was Rs. 8,33,440 whereas the assessee had paid as well as got adjusted the payment of tax against the refund due to the extent Of Rs. 12,39,781 which is clear from the details of payment given by the assessee on page 1 of the paper book. Therefore, the assessee cannot be treated as an assessee in default. Once the tax paid is more than the tax payable by the assessee though it was paid after filing the appeal. In this connection, reliance was placed on the decision of the Supreme Court in the case of CIT v. Filmistan Ltd. [1961] 42 ITR 163 which was delivered in context of provisions of the first proviso to Section 30(1) of the Indian Income-tax Act, 1922 where the words “no appeal shall lie” were appearing. Taking the analogy of that decision it was submitted that even if the tax was paid after the period of limitation had expired. If the assessee had a reasonable and good cause for not paying the tax at the time of filing the return, then the delay can be condoned. Our attention was invited to the fact that this decision was given in reference to Section 9 of UP Sales-tax Act, 1948 which is clear from the Commentary of Chaiurvedi and Pithisaria, IV Ed, Vol. V at page 5215. Reliance was also placed on the decision of the Supreme Court in the case of Collector, Land Acquisition, v. Mst. Katiji [1987] 167 ITR 471 where the Hon’ble Supreme Court had made observation, “When substantialjustice and technical considerations are pitted against each other, the case of substantial justice deserved to be preferred, for, the side cannot claim to have vested right in injustice being done because of non-deliberate delay”. In order to show the financial difficulties of the company for not paying the tax in time, the learned counsel for the assessee invited our attention to the Profit & Loss Account and the balance-sheet of the company specifically the Schedule VI where the following position of cash and bank balance was given:-
Export Division Cash Rs. Balances with 74,659.11 Scheduled Banks in garment Accounts 53,533.22 State Bank of Patiala, Bombay State Bank of Patiala, 161.45 A/c 385 State Bank of Patiala, - A/c 466 Canara Bank, Bombay 85,335.58 State Bank of India - Margin on Bank Guar- 61500.00 antees (Cash) Margin on Bank 9,799.00 Guarantee (KDR) On fixed deposits 5,00,000.00 (pledged with Canara Bank) Margin on L.C. 2,22,499.96 Bank Guarantees, - Suspense 33,556.55 Margin Money 78,685.00
Besides the sales position of the assessee-company given in the various applications given to the CIT (Appeals) and the ITO which is also incorporated in the impugned order of the CIT (Appeals). Reliance was also placed on the decision of Delhi High Court in the case of Addl. CIT v. Free Wheels India Ltd. [1982] 137 ITR 378. It was also pointed out that keeping in view the financial difficulties of the company, the CIT (Appeals) himself stayed the tax demand,’ firstly, up to 25th October and later up to 30-6-1988 which is clear from the order given at pages 61-79. Reliance was also placed on the decision of the Tribunal in the case of J.K.K. Natarqjah v. ITO [1980] 10 TTJ (Mad.) 204, Smt. NanhibaiJaiswal v. ITO [1983]’ 16 TTJ (Jab.) 397 and the decision of Syed Mohsin v. ITO [1980] 9TTJ (Mad.) 179. Our attention was also invited to thevarious applications of the assessee requesting refund and adjustment by individual directors against the tax demand (pages 48 to 67).
6. As against this the learned DR submitted that under the provisions of Section 249(4)(a) the CIT (Appeals) has no discretion to grant exemption, in view of the scheme of the provisions”. Under the old Act there was a provision for condonation of delay but under the new Act this right has been taken away. It is pointed out that the ‘words’ appearing under Section 249(4) are “appeal shall not be admitted”. Therefore, there is no reason to consider any sufficient cause under this provision. However, it is submitted that the case relied upon by the learned counsel for the assessee in the case of Filmistan Ltd. (supra) is distinguishable on the facts itself because the Hon’ble Supreme Court in the case of Mst. Katiji ((supra) stating that under Section 5 of the Limitation Act the expression sufficient cause was appearing. Therefore, while interpreting that expression the decision was given. For this provision, there is no such word, therefore, the ratio laid down in that case cannot be applicable. It is pointed out that even at the time of filing the return, the admitted tax is not paid, an appeal cannot be admitted. There is no question of adjusting refund against the tax due under Section 249(4). It is also pointed out that the refund belongs to the director. Therefore, it cannot be adjusted against the tax payable by the company under provisions of Section 249(4) of the IT Act. However, it was submitted that this reques for adjustment of tax by director of the company in view of the specific mention of adjustment against tax payable under Section 140A of the IT Act due aganst the company could be adjusted against the tax demand of company resulted after completion of assessment order in which total tax payable was computed at Rs. 88,40,408. It is further submitted that no specific request for adjustment was made against the notice contemplated under Section 249(4). Therefore, there is no question of presuming adjustment of refund against the demand for 140A. It is further pointed out that the reason for financial difficulties could not only be good but sufficient also. In this connection, our attention was invited to the Schedule 6 of Balance sheet showing that there was a sale of Rs. 477.00 lakhs and the assessee made addition to assets of Rs. 441 lakhs. The stock position of the assessee also shows that there was an increase. Besides, the fact that the assessee made provision for payment of dividend and payment of tax during the assessment year under consideration. If we take into consideration the cash and balance position including the margin money it shows and availability of cash and bank balance to the tune of Rs. 11,19,679. From the evidence filed by the assessee it is clear that there is no good and sufficient reason which may show that the assessee was in a financial difficulty. Therefore, no exemption can be granted. Reliance was also placed on the decision of the Supreme Court in the case of Vijay Prakash D. Mehta v. Collector of Customs [1989] 175 ITR 540 where while considering an at peal under the Customs Act, 1962 one of the conditions was that the assessee pending the appeal shall deposit duty demanded or the penalty levied. The Hon’ble Supreme Court observed as under:-
The right to appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant. If the statute gives a right to appeal upon certain conditions, it is upon fulfilling of those conditions that the right becomes vested in and exercisable by the appellant.
7. We have considered the rival submissions and have gone through the relevant provisions of Section 249(4). Our attention was invited by the learned counsel for the assessee to an observation in Chaturvedi and Pithisaria in Income-tax Law, IV Ed, Vol. I wherein the learned authors have also observed that in order to get his appeal admitted by the first appellate authority, the assessee must either comply with the mandatory requirement of provisions of Sub-section (4) of Section 249 or wherever these have application, as to the payment of the tax on the returned income etc. before the period of limitation for filing the appeal or make an application under the provisions of Section 249(4) for exemption from the operation of the provision of the main Sub-section. On failure of the assessee to comply with either requirement the first appellate authority is competent not to admit the appeal. Therefore, it is clear that provisions of Section 249(4) is mandatory and in order to get the exemption the assessee had to make an application for exemption from operation of provisions of Section 249(4). In the instant case at the time of filing the return the assessee did not make any application for seeking an exemption from operation of Section 249(4). It is only when the case was being considered by the Tribunal that the assessee made submission that oral requests for exemption from the provisions of Section 249(4) was made explaining the financial difficulties and also pointed out that proper opportunity was not given then the Tribunal taking into consideration the factual position, which was similar to that of a case of M/s. Capri International Pvt Ltd. opportunity was given to the assessee to move an application before the CIT (Appeals) seeking exemption from the provisions of Section 249(4). After that, the assessee moved an application on 30-12-1988. In that application the reason of financial crisis was cited for the first time. Therefore, it is clear that no application in writing was moved for seeking an exemption from the provisions of Section 249(4) within the period of limitation for filing the return. However, when this opportunity is given by the Tribunal to the assessee, we have to analyse the position after that. In the present case, the first plea of the assessee is that there was no tax liability due at the time of filing of the appeal before the CIT (Appeals) as the assessee was entitled to receive equivalent to or more than the tax is due under Section 140A because he had paid taxes amounting to Rs. 12,39,781 between 12-10-1987 to 2-10-1988 as against Rs. 8,37,440 payable under Section 140A on the declared income in the return. In so far as this plea is concerned, we are of the opinion that tax should have been paid according to the mandatory provision of Sub-section (4) of Section 249 within the limitation given for filing the return. In the instant case we find that the assessee paid two amounts on 12-10-1987 and 9-11-1987 totalling to Rs. 2,43,000 much after the period of limitation and he claimed that the refund due to Ms. Usha M. Anand, director were also adjusted by the CIT(A) against the demand. But we find from the application of Ms. Usha M. Anand dated 7th Sept., 1987 there is no specific request for adjusting the refund of Rs. 2,19,858 against the tax payable under Section 140A. Similarly, in the request of Mohan Anand and subsequent request of Ms. Usha M. Anand given on 25th September, 1987 pages 49-50 of the paper book there is a request to refund and adjustment against the income-tax demand of the company for assessment year 1984-85 but there is no specific request of these two directors to adjust the amount of refund due to the directors against the specific demand tax payable under Section 140A specifically when at the time of making this request the assessment of assessee company had completed at a figure of Rs. 92,47,070 on which total tax demand was standing at Rs. 88,40,702. Therefore, unless there is a specific request for these directors to adjust the amount of refund payable to them against the demand under Section 140A it cannot be categorised that the assessee had made request to adjust the refund against self-assessment tax payable under Section 140A of the IT Act. In the absence of specific request, it cannot be said that the assessee was not in default of paying the self-assessment tax. Besides, the fact that the payment of Rs. 2,43,000 and Rs. 2,19,000 was made much after the self-assessment tax was payable at the time of filing the appeal. The assessee also cannot take any benefit of the fact that the revenue Deptt. itself stayed the payment of admitted tax up to 25-10-1987 and later on up to 30-6-1988 upon by an application dated 5-10-1987 because this application was also moved after the period of limitation. So far as the case law relied upon by the learned counsel for the assessee in the case of Filmistan Ltd. (supra) is concerned, the Hon’ble Supreme Court was considering the meaning of the words “no appeal shall lie” under the proviso by Section 30 of the IT Act, 1922 which is different from the provision of Section 249(4) of the IT Act, 1961 where the word appearing are “appeal shall not be admitted”. Therefore, the ratio laid down by the Hon’ble Supreme Court in that case cannot be applied to the fact of the present case. Similarly, the reliance on the observation of Authors Chaturvedi & Pithisaria given at page 5215 will be of no help to the assessee because the Hon’ble Supreme Court in the case of Lakshmiratan Engg. Works Ltd. v. Assistant Commissioner [1968] 21 STC 154 was considering the interpretation of words no appeal shall be entertained in the proviso to Section 9 of UP Sales Tax Act, 1948 and held to denote not the filing of Memo of appeal but refer to occasion when appeal is taken for consideration and further observed that if upon consideration of matter by appellate authority of proof of Payment within limitation is filed the requirement of Section 9 is fulfilled. Similarly, in the case of Babu Lai Mohan Lal Kandal v. CIT the Hon’ble Madhya Pradesh High Court was considering the Madhya Pradesh General Sales Tax Act, 1959, where the requirement was that the tax be deposited before the appeal is admitted or entertained. In the case of Mst. Katiji (supra) the Hon’ble Supreme Court was considering the word sufficient cause appearing in Section 5 of Limitation Act and while giving that decision the observation mentioned in the preceding paragraph was made. So the observation in this case does not help the assessee in the given set of facts and circumstances of the present case. The Hon’ble Supreme Court in the case of Vijay PrakashD. Mehta (supra) was considering provision of Section 129(A) and (E) of the Customs Act which provides “where, in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer, the duty demanded or the penalty levied. Here also the word appearing was ‘shall’ like in the present provision. In this context the Hon’ble Supreme Court has held that the right to appeal is a statutory right and it can be circumscribed by the condition in the grant. If the statute gives a right upon certain conditions, it is upon fulfilling of those conditions that the right becomes vested and exercisable. In view of this latest decision, we are of the opinion that right to appeal is conditioned by the provisions of Section 249(4) and, therefore, unless a mandatory provision is complied there is no vested right of appeal.
8. As regards the sufficient reason for exemption from the provision of Section 249(4) and the facts relating to the same are concerned, we find that the CIT(A) has analysed the financial position of the assessee from the balance-sheet produced for the impugned asst. order, which is also mentioned in the preceding paragraph. Therefore, keeping in view the factual position given in the balance-sheet, we find that during the asst. year under consideration not only the sale of the assessee increased but the stock value also increased. Assessee also made provision for tax and payment provision for dividend besides the cash and bank balance mentioned above. Therefore, if the assessee had an intention to make payment at the time of filing the appeal, there was no difficulty to make the payment of Rs. 8,43,721.
9. As regards the decision cited by the learned counsel for the assessee in the case of J.K.K. Natctraja (supra) is concerned it was a case where the admitted tax was paid before the appeal was taken up for hearing and the assessee had also paid equally large amount in respect of other taxes. Therefore, this case is distinguishable on facts.
10. Similarly, the case of Smt. Nanhi Bai Jaiswal is also distinguishable on facts. In that case, the assessee had made payment of Rs. 25,000 as against due of Rs. 39,014. An application in writing was given for seeking exemption. In those circumstances, the lenient view was taken by the Tribunal. Similarly, in the case of Syed Mohsin (supra), the demanded tax was required to be paid up to particular time. The assessee moved an application before the ITO under Section 220(3) to extend the time and that application was not rejected. Taking into consideration that fact and other circumstances of the case, the Tribunal has taken a view in favour of the assessee. These decisions are distinguishable on facts itself.
11. In view of our above discussion, we are of the opinion that the assessee had no good and sufficient reasons for not making the payment of taxes at the time of filing the return for seeking exemption under Section 249(4). Therefore, we agree with the finding given by the CIT(A) on this point and we do not find any substance in the appeal. It will be pertinent to mention here that the assessee was, asked to cooperate with the CIT(A) for expeditious disposal of the matter. However, the CIT(A) has noted about non -cooperation of the assessee in his order. The assessee was not in a position to controvert this fact. Therefore, the assessee does not deserve any leniency on this account also.
12. Appeal is dismissed.