UPADHYA, J. - The question referred for the opinion of this court is : 'Whether in the circumstances of the case the Tribunal was justified in dismissing the appeal as being infructuous ?'
The assessee is a registered firm which was assessed to tax for the year 1947-48. It appears that the Income-tax Officer issued a notice under section 34 as in his opinion there were cash credits in the assessees account books amounting to Rs. 1,30,000, which deserved to be considered for inclusion in the assessees total income. He accordingly issued a notice under section 34 calling upon the assessee to file a return of income. The assessee filed the return and in response to the notice issued under sections 23 (2) and 22 (4) offered an explanation in respect of the cash credits noted by the Income-tax Officer. The assessee challenged the validity of the notice under section 34 of the Income-tax Act. The Income-tax Officer overruled the legal objection and held that the sum of Rs. 1,30,000 was the assessees income from undisclosed sources and assessment was, therefore, made under section 34 read with section 23 (3) of the Income-tax Act. The assessee preferred an appeal to the Appellate Assistant Commissioner, and besides challenging the correctness of the decision of the Income-tax Officer on merits urged the legal contention that the notice under section 34 was invalid and that the matters sought to be reopened under section 34 had been considered by the Income-tax Officer at the time of the original assessment and that there was no justification for the issue of the notice issued under section 34. The legal contention raised by the assessee was not considered by the Appellate Assistant Commissioner, but he considered the appeal on merits and set aside the assessment and remanded the case to the Income-tax Officer directing him to make a fresh assessment after issuing another notice under section 22 (4) calling upon the assessee to produce genuine account books. The assessee then went up in appeal to the Appellate Tribunal.
Before the Tribunal the assessee contended inter alia that the notice issued under section 34 was invalid and that there was no justification for the proceedings under section 34 of the Income-tax Act. The Income-tax Appellate Tribunal took the view that in view of the appellate order passed by the Appellate Assistant Commissioner of Income-tax there was no subsisting demand against the assessee and the appeal therefore had become infructuous. The learned Members of the Tribunal expressed the opinion that the assessee could raise the legal contention about the validity of the notice under section 34 after it had been assessed by the Income-tax Officer in pursuance of the appellate order passed by the Appellate Assistant Commissioner remanding the case to him.
After having heard learned counsel for the parties we are of the opinion that the Income-tax Appellate Tribunal misdirected itself in law in taking the view that a subsisting demand and essential for the maintainability of an appeal before them. Section 33 of the Income-tax Act which provides for an appeal by an assessee reads as follows :
'(1) Any assessee objecting to an order passed by an Appellate Assistant Commissioner under section 28 or section 31 may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him.'
The order against which the appeal had been preferred by the assessee in the instant case was on passed by the Appellate Assistant Commissioner under section 31 of the Act. There is nothing in section 33 to indicate that in case the order passed under section 31 by the Appellate Assistant Commissioner was on which canceled the demand no appeal to the Tribunal was maintainable. We are unable to see how the Tribunal took the view that the appeal which had been preferred by the assessee was infructuous. So far as the findings relating to the cash credits were concerned the finding of the Income-tax Officers have been overruled by the Appellate Assistant Commissioner and he had remanded the case. The Appellate Assistant Commissioner could direct the proceedings to continue only if he assumed that the proceedings under section 34 were valid. Unfortunately the Appellate Assistant Commissioner did not consider it necessary to decide the legal objection taken by the assessee relating to the initiation of the proceeding under section 34. When the assessee went up to the Appellate Tribunal and pressed this legal question it was necessary for the Tribunal to decide as to whether the contention of the assessee was or was not sound. Instead of deciding the question raised in appeal the Appellate Tribunal refused to record any finding the dismissed the appeal on the erroneous view that it had become infructuous. Learned counsel for the Department has not been able to show how in the circumstances of the case the appeal to the Tribunal could be said to be infructuous. He says the use of the word infructuous was rather unhappy but he does not suggest what other word could be substituted in the Tribunals order to express the decision more correctly. The Tribunal has referred to the fact that there was no subsisting demand against the assessee and has said later that the appeal therefore appeared to have become infructuous. This, therefore, was evidently the dominant reason which persuaded the Tribunal to decide the case in the manner it did. Mr. Das contended that the Tribunal was competent to pass any order that it toughs fit, and, in the instant case, where the propriety of the proceedings under section 34 could be properly determined only after the facts have been investigated thoroughly, the Tribunal took the view that the directions given by the Appellate Assistant Commissioner might be complied with by the Income-tax Officer and it is then only that all the relevant material would be on the record to enable the authorities to decide the case properly. We are unable to appreciate this contention. The principal ground in the appeal to the Tribunal related to the validity of the proceedings under section 34 and, in declining to give its decision on the question raised, the Tribunal, as observed above, acted on an erroneous view of the law that in the absence of a subsisting demand the appeal had become infructuous. The propriety of the proceedings under section 34 should have been determined upon the material already on record.
We are, therefore, of the opinion that the question referred to us should be answered in the negative. The assessee will have its costs which we assess at Rs. 200. Fee of learned counsel for the Department is fixed at the same amount.
Question answered in the negative.