CIT(A) Wrongly Dismissed Appeal Due to Alleged Non-Payment of Advance Tax: ITAT Remands Matter for Fresh Consideration [Read Order]

Recently in a decision, the Income Tax Appellate Tribunal (ITAT) of Bangalore remanded a case back to the Commissioner of Income Tax (Appeals) [CIT(A)] for fresh consideration after finding that the CIT(A) had wrongly dismissed the appeal on technical grounds, specifically over allegations of non-payment of advance tax.

The case involves a property sale transaction, and the assessment of short-term capital gains for the assessment year 2018-19. The CIT(A) had dismissed the appeal on the basis of non-payment of advance tax, but the ITAT found that this decision was flawed.

The issue arose when the Assessing Officer (AO) issued a notice under Section 148 of the Income Tax Act, 1961 (ITA) to the assessee/appellant Asian Earth Movers, after discovering that the assessee had not filed their return of income for the assessment year in question. The AO noted that the assessee had received contract receipts of Rs. 3,85,020, commission of Rs. 2,31,818, and was involved in the sale of immovable property for Rs. 67,67,000. This led the AO to assess a total income of Rs. 68,16,348, including short-term capital gains of Rs. 67,67,000, based on the property sale. The assessee challenged the assessment, arguing that the cost of acquisition of the property had not been deducted from the sale proceeds and that the AO had failed to consider set-offs from previous business losses and unabsorbed depreciation.

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The assessee subsequently appealed the AO's decision before the CIT(A). However, the CIT(A) dismissed the appeal, citing non-compliance with Section 249(4) of ITA, which requires the payment of advance tax on the returned income before an appeal can be admitted. The CIT(A) concluded that the assessee had not paid the necessary advance tax and, therefore, ruled the appeal as unadmitted. This dismissal was made without addressing the substantive issues raised in the appeal, including the computation of short-term capital gains and the treatment of prior business losses.

Represented by their counsel, the assessee argued before the ITAT that the return of income had been filed in response to the Section 148 notice, showing nil income, and that advance tax was not required because there was no taxable income after setting off prior losses. Furthermore, the assessee submitted that Rs. 86,962 had already been deducted at source (TDS) from the property sale, which should have been accounted for as a tax payment.

The bench of Mr Laxmi Prasad Sahu and Mr Keshav Dubey considered these arguments and observed that the CIT(A) had indeed erred in dismissing the appeal based solely on the alleged non-payment of advance tax. The Tribunal observed that the taxpayer had filed the return of income in response to the notice and that there was no dispute regarding the TDS. It also noted that the taxpayer's claim of set-offs for prior business losses had not been considered by the CIT(A), nor had the cost of acquisition been accounted for when calculating the short-term capital gain from the property sale.

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In its ruling, the ITAT remanded the case back to the CIT(A) for fresh consideration, instructing the lower authority to examine the substantive issues and to give the taxpayer a reasonable opportunity to present additional evidence. The Tribunal stressed that the appeal should be heard on its merits and that technical grounds such as the alleged non-payment of advance tax should not obstruct the proper adjudication of the case.

To Read the full text of the Order CLICK HERE

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