Section 249(4)(b) of Income Tax Act Inapplicable when Advance Tax not Payable: ITAT [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) observed that Section 249(4)(b) of the Income Tax Act, 1961 is inapplicable when advance tax is not payable.

The assessee, an individual, had not filed a return of income for Assessment Year 2020-21. During the assessment proceedings, the assessee failed to respond to notices issued by the Assessing Officer (AO). As a result, the AO completed the assessment under Sections 147 read with 144 and 144B of the Income Tax Act, 1961, on 24 December 2024 and determined the assessee’s total income at ₹89,12,572.

Aggrieved by the reassessment order, the assessee preferred an appeal before the CIT(A). However, the appellate authority dismissed the appeal, holding that the assessee had failed to comply with Section 249(4)(b) of the Income Tax Act, 1961, by not paying the advance tax allegedly payable by him. Challenging this dismissal, the assessee approached the Tribunal.

Before the Tribunal, the Authorised Representative (AR) submitted that the assessee had not accepted any taxable income in his hands and maintained that the amounts received constituted exempt retirement benefits falling under Section 10 of the Income Tax Act, 1961. It was therefore argued that no liability to pay advance tax arose and, consequently, the provisions of Section 249(4)(b) of the Income Tax Act, 1961 were inapplicable.

The Departmental Representative fairly stated that he had no objection if the matter was restored for fresh adjudication in accordance with law.

GST Audit & Assessment notices are increasing... The question is: Are you prepared to handle them confidently? Practical Guide to Assessment & Audit under GST Grab your copy Now:

After examining the provisions of Section 249(4)(b) of the Income Tax Act, 1961, the Tribunal observed that the provision applies in cases where an assessee has not filed a return of income and has failed to pay the advance tax payable by him. However, where the assessee disputes the existence of any taxable income and claims exemption in respect of the receipts, the question of advance tax liability does not arise.

The Bench comprising Vice-President Vijay Pal Rao and Accountant Member Madhusudan Sawdia ruled “On perusal of the above, it is evident that the provision of section 249(4)(b) of the Income Tax Act, 1961 applies in a case where no return of income has been filed by the assessee and the assessee has failed to pay advance tax payable by him. In the present case, the assessee has not accepted any taxable income in his hands and the stand of the assessee is that the amounts received are exempt retirement benefits under section 10 of the Income Tax Act, 1961. Therefore, under the facts of the present case, liability to pay advance tax does not arise and accordingly, in our considered opinion, provisions of section 249(4)(b) of the Income Tax Act, 1961 are not attracted in the case of the assessee.”

Accordingly, the Tribunal set aside the order of the CIT(A) dismissing the appeal under Section 249(4)(b) of the Income Tax Act, 1961, and restored the matter for adjudication on merits in accordance with law.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates