1. The question that arises in this reference is whether a certain order passed by the Appellate Assistant Commissioner was an order under Section 30(2) or an order under Section 31. If the order was under Section 31 it was appealable, if it was one under Section 30(2) no appeal could lie under that order. The Tribunal has taken the view that the order was under Section 30(2) and therefore refused to entertain the appeal preferred by the assessee from that order, and the question submitted to us by the Tribunal in substance raises this question.
2. Now, a few facts might be stated. The assessment order was passed on the 30th of April, 1949, and the notice of demand was served upon the assessee on the 13th of February, 1950. The last day for preferring the appeal to the Appellate Assistant Commissioner was the 16th of March, 1950. For certain reasons which it is not necessary to go into at the present stage, the assessee did not post the memo. of appeal from Ahmednagar where he was living up to the 16th of March, 1950, and the petition for appeal reached the Appellate Assistant Commissioner in Poona to whom it was posted on the 18th of March, 1950. Therefore, when the petition for appeal reached him it was clearly out of time by two days. On the 5th of May, 1950, a notice was issued by the Appellate Assistant Commissioner calling upon the assessee to show cause why his appeal should be condoned. Then on the 1st of September, 1950, a notice was issued by the Appellate Assistant Commissioner under Section 31 to the effect that the appeal preferred by the assessee had been received and registered by the office of the Appellate Assistant Commissioner and 19th of September, 1950, was fixed for hearing and final disposal of the appeal at Ahmednagar and the assessee was informed that he should appear in that office in person or by an authorised agent or by a pleader duly instructed who would be able to answer all material questions arising in the appeal. He was further informed that in default of his appearance on the day mentioned the appeal will be heard and determined in his absence. Pursuant to this notice the appeal was heard on the 19th of September, 1950, and it is not disputed that the appeal was heard on merits by the Appellate Assistant Commissioner. Ultimately on that day he passed an order to the effect that he saw no reason why the assessee could not submit the appeal petition within the period of limitation. The Appellate Assistant Commissioner, therefore, expressed the opinion that he was unable to condone the delay and the order he passed was that the appeal was rejected as time-barred, and the question arises whether on these facts the order of the Appellate Assistant Commissioner falls under Section 31 or under Section 30(2).
3. Now, in our decision in K. K. Porbunderwalla v. Commissioner of Income-tax, Bombay City, we considered the scheme of Section 30 and 31 and we pointed out that there was an intermediate stage between the presentation of the appeal and the hearing of the appeal as provided by the last clause of Section 30(2) and that intermediate stage relates to those appeals which were out of time, but for which the appellant asked for condonation of the delay from the Appellate Assistant Commissioner and it was left to the decision of the Appellate Assistant Commissioner whether to condone or not to condone the delay. It is clear that it is only after that intermediate stage is passed that it is competent to the Appellate Assistant Commissioner to issue a notice fixing a day and place for the hearing of the appeal under Section 31. Now, in this case as already pointed out, in order to decide whether the delay should be condoned or not, the Appellate Assistant Commissioner actually issued a notice to show cause upon the assessee on the 5th of May, 1950. The assessee showed cause on the 11th of May, 1950. It was open to the Appellate Assistant Commissioner to decide that no sufficient cause had been shown by the assessee for condonation of the delay. But instead of coming to that conclusion the Appellate Assistant Commissioner on the 1st of September, 1950, issued a notice under Section 31 and fixed the hearing of the appeal for the 19th of September, 1950. Now, it is clear that the notice was issued under Section 31 and the hearing of the appeal was also fixed under Section 31. Therefore the ultimate order that the Appellate Assistant Commissioner passed was also under Section 31.
4. Reliance is placed on the fact that the only order that the Appellant Assistant Commissioner passed was refusing condonation and dismissing the appeal on the ground that it was time-barred. But it is open to the Appellate Assistant Commissioner, having taken the view at the intermediate stage under Section 30(2) that delay should be condoned, and having admitted the appeal, to revise his decision and, when the appeal comes on for hearing under Section 31 to take a, different view and dismiss the appeal on the ground that no sufficient cause was shown for condoning the delay. If he does so, even though his order is merely refusing to condone the delay the order would be under Section 31 and not under Section 30(2). It is clear that no notice for the hearing and final disposal of the appeal can be issued and no hearing of the hearing of the appeal can be fixed except under Section 31.
5. Sir Nusserwanji says that it may be that the Appellate Assistant Commissioner was in error in issuing a notice under Section 31 and he should not have issued the notice under that section. We do not think it is open to the Appellate Assistant Commissioner to contend that the notice which he issued in pursuance of which he heard the appeal and passed the final order was not a valid notice. In our opinion the proper practice for the Appellate Assistant Commissioner to follow, which in this case he did follow, was first to issue a notice limited to the question of condonation of delay. That is exactly what he did on the 8th of May. After the assessee had shown cause by his letter of the 11th of May the Appellate Assistant Commissioner should have decided at that stage whether he should condone the delay or he should dismiss the appeal. Not having dismissed the appeal, in law he must be deemed to have admitted the appeal and to have condoned the delay. Having done so, he then proceeded to issued notice under Section 31, and once he issued notice under Section 31 and passed an order, even though the order was in effect a reconsideration of his earlier decision, it was still an order under Section 31 and not an order under Section 30(2).
6. Support for this view can be found in a recent decision of the Allahabad High Court in Mohd Naim Mohd. Alam v. Commissioner of Income-tax. There the facts were practically identical. The Allahabad High Court held that the Appellate Assistant Commissioner of Income-tax was not debarred from reconsidering the question whether an appeal was time-barred merely because he has passed an order under sub-section (2) of Section 30 of the Income-tax Act, 1922, admitting it, and that High Court further held that where the Appellate Assistant Commissioner of Income-tax had admitted the appeal under Section 30(2) of the Act a subsequent order of dismissal on the ground that the appeal was time-barred after the issue of the notice to the assessee fixing a date and place for the final hearing and final disposal was an order under Section 31 of the Act.
7. Sir Nusserwanji says that there is no order here admitting the appeal. As we have already pointed out in law the Appellate Assistant Commissioner must be deemed to have admitted the appeal and Section 30(2) does not contemplate the necessity of passing a formal order. As a matter of fact in the notice which he issued under Section 31 he states that the appeal was received and registered by the office and this was done after the notice to show cause with regard to the condonation of the delay had been issued against the assessee. Therefore it is clear that when this notice was issued on the 1st of September 1950, the appeal had not only been received but that the appeal was admitted; and when this notice was issued it was issued for the purpose of enabling the assessee to be heard on merits and in fact, as already pointed out, the assessee was heard on merits in this case. Sir Nusserwanji has relied on a recent judgment of the East Punjab High Court reported in Dewan Chand v. Commissioner of Income-tax. In the judgment, Mr. Justice Kholsa at page 623 points out that 'There is in reality only one question requiring our decision, viz., whether the order of the Appellate Assistant Commissioner of Income-tax declining to extend the time of limitation and dismissing the appeals as barred by time is appealable or not.' As far as that question is concerned the East Punjab High Court takes the same view as we took in K. K. Porbunderwalla v. Commissioner of Income-tax, Bombay City, but then they go on to consider the other question, and the discussion of that question will be found at page 625 and the view taken by the East Punjab High Court is that issuing of a notice under Section 31 does not imply that the appeal had been admitted in the sense contemplated by sub-section (2) of Section 30. With respect, we are unable to agree with the view of the East Punjab High Court. In our view the view taken by the Allahabad High Court is the better view and with respect we prefer to accept the view taken by the Allahabad High Court to the view taken by the East Punjab High Court. It must be borne in mind that a dismissal of the appeal by the Appellate Assistant Commissioner deprives the assessee of a right to challenge the assessment made by the Income-tax Officer, and if anything, Section 30 and 31 should be liberally construed in favour of the assessee rather than against him so far as to deprive him of the right to appeal to the Appellate Tribunal. Therefore, we are rather inclined in favour of the more liberal interpretation put by the Allahabad High Court than the construction put by the East Punjab High Court on these two sections. The question submitted to us does not really bring out the controversy between the department and the assessee. We would, therefore, re-frame the question and the re-framed question will be :
'Whether the order of the Appellate Assistant Commissioner dated the 20th of September, 1950, is an order under Section 31 and appealable ?'
and we answer that question in the affirmative. The Commissioner to pay the costs.
8. No order on the notice of motion except that the Commissioner should pay the costs of the motion.
9. Reference answered accordingly.