1. The firm of Mote Shah & Co., which was an unregistered firm, was assessed to tax for the assessment year 1949-50. The assessee appealed against the order of the Income-tax Officer to the Appellate Assistant Commissioner. While the appeal was pending before him, the assessee applied for permission to make an application to the Income-tax Officer under Section 26A for registration of the partnership. No order was made by the Appellate Assistant Commissioner on this application and the Appellate Assistant Commissioner passed his final order reducing the assessment made by the Income-tax Officer. From that decision an appeal was preferred to the Appellate Tribunal. Before the Appellate Tribunal the assessee made a grievance of the fact that no order on his application had been made by the Appellate Assistant Commissioner. The Tribunal took the view that it was not competent for it to consider the grievance of the assessee and disposed of the appeal by confirming the order of assessment made by the Appellate Assistant Commissioner, and the real question that arise on this reference is whether the Appellate Tribunal had the jurisdiction to consider the grievance made by the assessee.
2. Now, when an assessment is made by the Income-tax Officer under Section 23, what he does is to determine the total income of the assessee and also the sum payable by the assessee and in deciding the sum payable by the assessee he has to determine the status of the assessee. In the case of a firm he has to decide whether the assessee has to pay the assessment as a registered firm or an unregister firm. The consequences of this decision are very important because if the assessee is an unregistered firm the assessment is made on the firm itself and the tax is payable by the firm, whereas if the assessee is a registered firm the assessment is not made on the firm but on the partners constituting the firm and the share of profit or loss of the partner in the firm is included in the individual assessment of the partner. Therefore, when in this case in Income-tax Officer passed his assessment order, he rightly assessed the assessee as an unregistered firm as the had not been registered under Section 26A of the Income-tax Act. When the assessee went to the Appellate Assistant Commissioner, he made an application under Rule 2(c) of the Indian Income-tax Rules and that rule provides that an application under Section 26A shall be made with the permission of the Appellate Assistant Commissioner hearing an appeal under Section 30 of the Act before the assessment is confirmed, reduced, enhanced or annulled. The object of framing this rules is obvious. If a firm has not been registered by the Income-tax Officer and the assessment order goes under appeal to the Appellate Assistant Commissioner, a locus penitentiae is given to the unregistered firm before the final order is made by the Appellate Assistant Commissioner. He may obtain leave from the Appellate Asitant Commiss ioner to make an application to the Income-tax Officer. If on that application an order made by the Income-tax Officer registering the firm, then the appeal before the Appellate Assistant Commissioner would proceed on the basis of the assessee being a registered firm and not an unregistered firm and as pointed out consequences would follow upon this order being made by the Income-tax Officer.
3. In this case it is indeed curious that the Appellate Assistant Commissioner should have made no order whatever on this application made by the assessee. The solicitor-General has been at pains to point out to us that the application was bad, that it was not maintainable, and the merits of that it suffered from several defects. We are not concerned with the merits of that application. It is surprising that a judicial Officer exercising statutory powers should not have taken the trouble to make up his mind one way or the other as to what was to be the fate of this application made by the assessee. To the assessee the importance of this application was very considerable and he had right to expect a decision from the Appellate Assistance Commissioner. Therefore there can be no doubt that the Appellate Assistance Commissioner was entirely in error in not disposing of this application. But the question is, what is the remedy of the assessee when the Appellate Assistant Commissioner refuses to discharge the statutory functions as laid down in Rules 2(c). The Solicitor-General has suggested that he can be called to order by the Central Board Revenue to which the Appellate Assistant Commissioner is subordinate, or even an application may be made for mandamus against the Appellate Assistant Commissioner. Whether those remedies are open to the assessee or not, the question that we have to consider is whether when the Appellate Assistant Commissioner refuses to make an order on an application made under Rule 2(c) he could be judicially corrected by the Appellate Tribunal. The Solicitor-General has drawn our attention to the fact that no appeal is provided from the order of the Appellate Commissioner granting or refusing permission to the assessee under Rule 2(c). We are concerned in this reference with what would be the position if permission had been refused by the Appellate Assistant Commissioner. We are concerned with the narrow question as to whether the Appellate Tribunal has any power given to it under the statute judicially to correct the Appellate Assistant Commissioner when he refuses to make an order on an application made to him under Rule 2(c).
4. Now, the powers of the Appellate Tribunal are very wide. Under Section 33(4) it is provided that the Appellate Tribunal may, after giving both parties to the appeal an opportunity to be heard, pass such orders thereon as it thinks fit and shall communicate any such orders to the assessee and to the Commissioner. It is contended by the Solicitor-General that the powers that the Appellate Tribunal can exercise under this provision are powers which are necessary for the purpose of disposing of the appeal, and all that the Tribunal was concerned with in the appeal was whether the assessment order made by the Appellate Assistant Commissioner was a proper order or not. The Solicitor-General says that the refusal to make an order under Rule 2(c) had no bearing whatever on the merits of the assessment order. That contention in our opinion is unsound. As we pointed out before, an assessment consists of the ascertainment of the total income and the determination of liability to pay. In refusing to make an order on the application under Rule 2(c) the Appellate Assistant Commissioner deprived the assessee of an opportunity of obtaining the status of registered partnership. If the permission had been granted and the order had been made by the Income-tax Officer registering the partnership, the status of the assessee would have been different. Therefore the grievance that the assessee can make before the Tribunal is that assessment order passed by the Appellate Assistant Commissioner was bad inasmuch as it passed before his application under Rule 2(c) had been disposed of. Therefore the grievance that the assessee is making with regard to the non-disposal of the application by the Appellate Assistant Commissioner affects the merits of the assessment order and it would be quite competent to the Appellate Tribunal to direct that the assessment order should be set aside and the matter should go back to the Appellate Assistant Commissioner to dispose of the application of the assessee before he passes the final assessment order.
5. We should be very reluctant to take the view that an Appellate Assistant Commissioner Exercising judicial functions cannot be judicially corrected by a higher judicial Tribunal when obviously and unjustifiably he acts contrary to the rules framed under the Indian Income-tax Act. The question framed by the Tribunal does not really bring out the real point of law which we have to decide in this reference. The question suggested by the Tribunal is whether if an Appellate Assistant Commissioner does not pass any order on an application made for permission under Rule 2(c) of the Indian Income-tax Rules, 1922, an appeal lies to the Appellate Tribunal. That is not the question. It is not the contention of the assessee that an appeal lies from a refusal on the part of the Appellate Assistant Commissioner to pass an order on an application under Rule 2(c). What the assessee contends is a proper appeal under Section 33 against the assessment order passed by the Appellate Tribunal. We will therefore reformulate the question and the question when reformulated will be whether in an appeal against an assessment order by the Appellate Assistant Commissioner it is competent to the appellant to make a grievance of the fact that the Appellate Assistance Commissioner has passed no orders on an application made for permission under rule 2(c) of the Income-tax Rules, and having reformulated the question we will answer the question in the affirmative.
6. Another question was also framed by the Tribunal which is question (1). That has been withdrawn by the assessee.
7. No order as to costs.
8. Reference answered accordingly.