Compliance with S. 249(4)(b) of Income Tax is Mandatory: ITAT Rules Non-Payment of Advance Tax Bars Taxpayer’s Right to Appeal [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) ruled that compliance with Section 249(4)(b) of the Income Tax Act is mandatory and failure to pay advance tax/self-assessment tax bars a taxpayer’s right to appeal.

Nagin A. Vaghela, the assessee did not file a return for Assessment Year 2014-15 despite deriving income from various sources. A search under Section 132 led to scrutiny under Section 153A of the Income Tax Act, with repeated notices and summonses issued under various sections. However, the assessee failed to respond to any of the notices.

The assessee admitted to undisclosed income during the search proceedings, leading to additions to income, including unaccounted sales, cash credits, business income, cash deposits, and jewelry found.

Due to non-compliance, penalties were initiated, and the total income assessed was Rs. 6,29,96,907, with a tax demand of Rs. 1,77,42,736. No return or tax payment was made by the assessee.

The assessee appealed the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)]. The appeal faced a barrier under Section 249(4)(b) of the Income Tax Act, which requires taxpayers to pay advance/self-assessment tax if they have not filed a return.

The assessee’s counsel argued that the non-payment of advance tax was a “curable defect” and that the appeal should proceed if tax payments were later fulfilled. They claimed financial hardship prevented the assessee from filing his Income tax return or paying the taxes.

However, the  CIT(A) rejected the argument, noting the assessee’s repeated non-compliance and lack of intent to pay taxes. Based on Section 249(4)(b), the CIT(A) ruled that without payment of taxes, the appeal could not be admitted.

Aggrieved, the assessee appealed before the ITAT but did not appear for the proceedings despite many intimations.

The two-member bench comprising Annapurna Gupta (Accountant Member) and Siddhartha Nautiyal (Judicial Member) noted the assessee’s absence of self-assessment tax payments and non-compliance to the notices.

The tribunal referenced tribunal rulings in Khushmanlal Hiralal (Ahmedabad Bench) and Bharatkumar Sekhsaria (Mumbai Bench) which underscored that the provision of Section 249(4) of the Income Tax Act is mandatory and not merely procedural, indicating that tax due must be paid to maintain the right to appeal.

Therefore, the tribunal dismissed the appeal of the assessee due to repeated failure to file returns or pay taxes.

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