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Santosh Kumar Vs. Commissioner of Income-tax, U.P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberMiscellaneous Income-tax No. 411 of 1957
Reported in[1962]46ITR1236(All)
AppellantSantosh Kumar
RespondentCommissioner of Income-tax, U.P.
Excerpt:
- - but the appellate assistant commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period. it is also contended that it is under section 31 that the appellate assistant commissioner would pass his order admitting an appeal which was filed after the expiry of the period of limitation if he was satisfied that the appellant had sufficient cause for not presenting it within the period and also it is under section 31 that he would reject the appeal on the ground that it was not in the prescribed form. their lordships of the supreme court in that case observed that there was abundant authority for the proposition that section 31 should be liberally construed so as to include not only.....gurtu j. - the income-tax tribunal on the application of the assessee has referred for the opinion of this court under section 66(1) of the indian income-tax act, 1922, the following question of law :'whether, on a true interpretation of the proviso to sub-section (1) of section 30 and sections 31 and 33 of the indian income-tax act, the appeal preferred by the assessee before the appellate tribunal was not competent ?'the facts stated by the tribunal, so far as they are relevant, are that the income-tax and super-tax payable by the assessee for the assessment year 1954-54 was rs. 73,167-13-0. by a demand notice issued under section 29 of the indian income-tax act, the income-tax officer called upon the assessee to pay the tax on or before the 8th of july, 1955. as the tax was not paid on.....
Judgment:

GURTU J. - The Income-tax Tribunal on the application of the assessee has referred for the opinion of this court under section 66(1) of the Indian Income-tax Act, 1922, the following question of law :

'Whether, on a true interpretation of the proviso to sub-section (1) of section 30 and sections 31 and 33 of the Indian Income-tax Act, the appeal preferred by the assessee before the Appellate Tribunal was not competent ?'

The facts stated by the Tribunal, so far as they are relevant, are that the income-tax and super-tax payable by the assessee for the assessment year 1954-54 was Rs. 73,167-13-0. By a demand notice issued under section 29 of the Indian Income-tax Act, the Income-tax Officer called upon the assessee to pay the tax on or before the 8th of July, 1955. As the tax was not paid on or before the due date, the Income-tax Officer passed an order on the 27th of January 1956, under sub-section (1) of section 46 of the Act and imposed a penalty of Rs. 5,000. Against this last mentioned order the assessee preferred an appeal before the Appellate Assistant Commissioner on the 15th of February, 1965. On the date on which the appeal was filed the assessee had not paid the tax that was due from him. The Appellate Assistant Commissioner by his order dated the 15th of May, 1956, held that, as the tax had not been paid on the date on which the appeal was filed, the appeal was incompetent. None the less he considered the matters which had been raised before him also on merits. The appeal was dismissed.

The assessee then preferred a second appeal before the Appellate Tribunal challenging the order of the imposition of penalty and the order of the Appellate Assistant Commissioner. The departmental representative raised a preliminary objection about the maintainability of the appeal. It was contended before the Tribunal that the order passed by the Appellate Assistant Commissioner was not one under section 31 of the Act and the appeal preferred before the Tribunal was therefore incompetent. The Tribunal, for reasons recorded by it in its order dated the 13th March, 1957, upheld the preliminary objection and held that the appeal before the Tribunal was not maintainable. The Tribunal held that as the Appellate Assistant Commissioner had refused to exercise jurisdiction to entertain the appeal, the order passed by him was under sub-section (1) of section 30 of the Act and was not an order under section 31 of the Act, and that the appeal before the Tribunal was therefore incompitent. The Tribunal obsereved that it was only against orders passed by the Appellate Assistant Commissioner under section 28 or section 31 of the Indian Income-tax Act that an appeal could be preferred before the Appellate Tribunal. In arriving at this conclusion the Tribunal relied on the ruling of the Supreme Court in Commissioner of Income-tax v. Arunachalam Chettiar. The Tribunal also referred to another ruling of the Supreme Court in Mela Ram and Sons v. Commissioner of Income-tax, but held that this latter ruling was not applicable to the facts of this case.

In this reference it has been contended, on the one hand, that the order passed by the Appellate Assistant Commissioner was under section 31, and on the other that it was under section 30. If the order of the Appellate Assistant Commissioner was passed under section 30, no appeal would lie to the Appellate Tribunal. On the other hand, if it was passed under section 31, an appeal would lie.

Section 30(1), inter alia, provides for an appeal against an order under sub-section (1) of section 46 of the Act. There is a proviso to section 30(1) which runs as follows :

'Provided that no appeal shall lie against an order under sub-section (1) of section 46 unless the tax has been paid.'

Sub-section (2) of section 30 runs as follows :

'30.(2) The appeal shall ordinarily be presented within thirty days of the payment of the tax deducted under sub-section (3A), (3B) or (3C) of section 18 or of receipt of the notice of demand relating to the assessment or penalty objected to or of the order in writing notifying the amount of total income on which the determination under sub-section (5) of section 23 was based and the apportionment thereof between the several partners or of the loss computed under section 24 or of the intimation of the refusal to pass an order under sub-section (1) of section 25A, or to register a firm under section 26A, or of the date of the refusal to make a fresh assessment under section 27, or of the intimation of an order under sub-section (1) of section 23A or under section 48, 49 or 49F, as the case may be; but the Appellate Assistant Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.'

Sub-section (3) of section 30 is to the following effect :

'30.(3) The appeal shall be in the prescribed form and shall be verified in the prescribed manner.'

Section 31 provides for the hearing of appeals by Appellate Assistant Commissioners. Sub-section (3) of section 31 provided that :

'31.(3) In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, -

(a) confirm, reduce, enhance or annual the assessment, or

(b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct....'

And in the case of an appeal from an order under sub-section (1) of section 46, confirm or cancel such order or vary it so as either to enhance or reduce the penalty.

It is contended on behalf of the assessee that when the Appellate Assistant Commissioner passed his order dated the 15th May, 1956, on his appeal, the order was passed under section 31 and not under section 30 of the Act. It is contended that even though no tax had been paid as required by the proviso to section 30(1), there was an appeal against an assessment under this Act before the Appellate Assistant Commissioner who heard it under section 31 and in the course of hearing he passed his order rejecting the appeal because the tax had not been paid. It is contended that any orders passed on an appeal which has been filed must be passed under section 31, as also an order rejecting an appeal on the ground that the tax has not been paid. It is contended that the proviso to section 30(1) does not state that if the tax has not been paid, the Appellate Assistant Commissioner may pass an order under section 30 rejecting the appeal. It is contended that whether the tax has been paid or not as provided in the proviso, there would still be a preferred appeal which appeal had to be heard by the Appellate Assistant Commissioner under section 31 and it is under that section that the Appellate Assistant Commissioner would be acting when he passed an order rejecting the appeal on the ground that no tax had been paid. It is also contended that it is under section 31 that the Appellate Assistant Commissioner would pass his order admitting an appeal which was filed after the expiry of the period of limitation if he was satisfied that the appellant had sufficient cause for not presenting it within the period and also it is under section 31 that he would reject the appeal on the ground that it was not in the prescribed form. In other words, it is contended that an order by the Appellate Assistant Commissioner holding that there was no reason for excusing delay under under section 30(2) of the Income-tax Act and rejecting the appeal as time-barred, was an order passed under section 31 and in consequence an appeal will lie from that order to the Appellate Tribunal, and that it would make no difference whether the order of dismissal of the appeal is made before or after the appeal is admitted. It is contended that an appeal presented out of time is an appeal and an order dismissing it as time-barred, is one passed in appeal. It is also contended that the disposal of objections based on section 30, sub-section (3), would be under section 31 and not under section 30. It is also contended that an order rejecting an appeal on the ground that the tax had not been paid amounts to an objection of a preliminary character raised at the hearing of the appeal and that the order of the Appellate Assistant Commissioner on that objection would also be an order under section 31.

So far as the first two of the last three mentioned contentions are concerned, they are fully supported by the observations of their Lordships of the Supreme Court in Mela Ram and Sons v. Commissioner of Income-tax. Their Lordships of the Supreme Court in that case observed that there was abundant authority for the proposition that section 31 should be liberally construed so as to include not only orders passed on a consideration of the merits of the assessment, but also orders which dispose of the appeal on preliminary issues such as limitation and the like. It was observed :

'... a right of appeal is a substantive right, and is a creature of the statute. Section 30(1) confers on the assessee a right of appeal against certain orders, and an order of assessment under section 23 is one of them. The appellant therefore had a substantive right under section 30(1) to prefer appeals against orders of assessment made by the Income-tax Officer. Then, we come to section 30(2), which enacts a period of limitation within which his right is to be exercised. If an appeal is not presented within that time, does that cease to be an appeal as provided under section 30(1). It is well established that rules of limitation pertain to the domain of adjectival law, and that they operate only to bar the remedy but not to extinguish the right. An appeal preferred in accordance with section 30(1) must, therefore, be an appeal in the eye of law, though having been presented beyond the period mentioned in section 30(2) it is liable to be dismissed in limine. There might be a provision in the statute that at the end of the period of limitation prescribed, the right would be extinguished, as for example, under section 28 of the Limitation Act; but there is none such here. On the other hand, in conferring a right of appeal under section 30(1) and prescribing a period of limitation for the exercise thereof separately under section 30(2), the legislature has evinced an intention to maintain the distinction well-recognised under the general law between what is a substantive right and what is a matter of procedural law.'

It was conceded on behalf of the income-tax department that Mela Rams case should be confined to orders based on section 30(2) and section 30(3) of the Act and that the considerations which apply in case of those two kinds of orders do not apply in a case where the proviso to section 30(1) of the Act is attracted. It was conceded that section 30(1), so far as an appeal from an order under section 46(1) was concerned, only gave a right of appeal, provided the tax had been paid and that there was no right of appeal if no tax was paid, and it was contended that section 30(1) did not give an untrammelled substantive right of appeal, but gave a right which was trammelled by the condition of pre-payment of the tax and it was, therefore, contended that a so-called appeal preferred without the tax having been paid was no appeal in the eye of law and that, therefore, there could never be a hearing of such an appeal under section 31. It was contended that, therefore, there could be no disposal of the appeal in such a case.

Reliance was placed on the case of Jot Ram Sher Singh v. Commissioner of Income-tax. There, a best of judgment assessment had been made under section 23(4). At that date no appeal was provided for from a best of judgment assessment. An application under section 27 to cancel the assessment was made, which was dismissed by the Income-tax Officer. An appeal to the Assistant Commissioner from the order of the Income-tax Officer under section 27 was unsuccessful. The assessee applied to the Commissioner under section 33 for revision of the orders passed by the Income-tax Officer. The Commissioner set aside the assessment and directed further inquiry and a fresh assessment. The Income-tax Officer again assessed the tax on an income of Rs. 75,000. The assessee again applied under section 27 and finally moved the Commissioner in revision. The revision was dismissed and an application by the assessee for a reference to the High Court was also dismissed. The assessee then came up under section 66(3) of the Income-tax Act, as it then was, for an order requiring the Commissioner of Income-tax to state a case and to refer certain questions of law for the decision of this court. In that case it was held by Niamattullah J. as follows :

'Section 30, proviso, expressly declares that there shall be no appeal from an assessment to the best of the Income-tax Officers judgment under section 23(4) or under that sub-section read with section 27. Accordingly no question of law or fact arising from such assessment can be the subject of consideration by the Assistant Commissioner for the simple reason that no appeal lies to him, with the result that the Assistant Commissioner can never have an occasion to pass in appeal an order under section 31 in relation to a best judgment assessment. As already shown, the High Court can require the Commissioner to make a reference for decision by the High Court of a question of law, only if it arises from an order under section 31. It is argued, on the authority of Ananda v. Commissioner of Income-tax, that the order of the Assistant Commissioner rejecting an appeal on the ground that it did not lie is an order under section 31 disposing of an appeal. This is the view taken by the majority of the judges composing the Full Bench. It is said that there is no other section under which such an order in limine can be passed. I would point out that a Tribunal can not dispose of an appeal if what purports to be an appeal is no appeal and is held by the Tribunal to be incompetent. Where the Assistant Commissioner rejects what purports to be an appeal on the ground that none lies, he gives effect to the proviso to section 30, and his order should be deemed to be one under it and not under section 31. In passing such an order, the Assistant Commissioner refuses to entertain the appeal, and cannot be considered to be disposing of an appeal, which implies the assumption that the appeal lay, was entertained and disposed of, after discussion of some question falling within the purview of the appeal.'

From the judgment of Bennet J. in the case it is clear that the Assistant Commissioner had declined to admit the appeal holding that the assessment order was under section 23(4) and so not appealable.

Learned counsel for the assessee, however, contended that as there was no express power under section 30 to pass any orders in respect of an appeal on which the tax had not been paid, therefore, perforce recourse must be had to section 31 for the purpose of passing such an order.

Learned counsel for the assessee has invited our attention to the observations of their Lordships of the Supreme Court in Raja Kulkarni v. State of Bombay. In that case the question was whether there was an appeal pending so as to attract section 24(b) of the Industrial Disputes (Appellate Tribunal) Act, 1950. The passage relied upon runs as follows :

'It is contended that section 24 contemplates the pendency of a valid and competent appeal, but as no valid or competent appeal under the law was pending, the appellants committed no offence under section 27. We are unable to accept this contention. Section 24 on a plain and natural construction requires for its application no more than that an appeal should be pending and there is nothing in the language to justify the introduction of the qualification that it should be valid or competent. Whether the appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to determine, and this determination is possible only after the appeal is heard, but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g., when it is held to be barred by limitation or that it does not lie before that court or is concluded by a finding of fact under section 100 of the Civil Procedure Code. From the mere fact that such an appeal is held to be unmaintainable on any ground whatsoever, it does not follow that there was no appeal pending before the court.'

Learned counsel for the assessee relied upon certain cases to show that it was not necessary in order to enable an appeal to be heard that the tax should have been paid along with the memorandum of appeal on the date that it was filed but could be paid up to but before the hearing of the appeal and has contended that this clearly showed that the right to file an appeal was not dependent upon a pre-payment of tax and he argued that even where an appeal was not accompanied by the tax the Appellant Commissioner would be bound to fix a date for hearing under section 31 and that it would only be when, even at the time of the hearing, the tax was not paid that the Appellate Assistant Commissioner would pass an order rejecting the appeal and that this order would therefore be an order passed under section 31.

We may now refer to the cases relied upon. In Commissioner of income-tax v. Filmistan Limited it was held where the assessee is in default in making a payment of income-tax and the Income-tax Officer acting under section 46(1) of the Income-tax Act imposes a penalty on the assessee and the assessee prefers an appeal to the Appellate Assistant Commissioner before paying the tax, the first proviso to section 30(1) does not take away the right of appeal, but only bars the remedy until tax was paid. The payment of tax is a condition precedent not to the presentation of the appeal but to the hearing and disposal of the appeal. The appeal is liable to be dismissed if by the time the date of hearing of the appeal arrives, the tax has not been paid. An appeal from an order imposing penalty for default in making a payment of income-tax, presented before the payment of the tax, becomes a proper and complete appeal if the tax is paid before the hearing of the appeal.

In Kamdar Brothers of Jharia v. Commissioner of Income-tax, an appeal preferred by an assesses against the order imposing penalty was held to be competent because on the date of hearing the amount of tax had been fully paid.

In Ramanarayana Das Madanlal v. Commissioner of Income-tax an order by an Appellate Assistant Commissioner dismissing an assessees appeal on the ground of its incompetence according to the proviso to sub-section (1) of section 30 of the Income-tax Act has been held to be under section 31 and as such appealable to the Appellate Tribunal under section 33(1). It was observed in that case at page 667 as follows :

'When an appeal is filed.... it is a matter for consideration of the appellate authority whether such an appeal does lie, or, in other words, whether the appeal is competent, that is to say, whether the assessee appellant has fulfilled the conditions which ar prerequisite for an appeal. Within the provisions of section 31, there is nothing to empower an appellate authority to pass any order by way of admitting an appeal. Admission of an appeal has not been sufficiently provided for within the purview of the Income-tax Act, but it is not strange to the scheme of the Act. By contrast, I refer to the admission of an appeal as provided for in the concluding portion of sub-section (2) of section 30. That sub-section provides, in the main, a time-limit for appeals of various classes, the starting points of such time-limits varying according to the circumstances of each of the cases mentioned therein. The sub-section concludes with the following words; but the Appellate Assistant Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period. This makes it clear that the stage of admission is interposed between the presentation of an appeal and its hearing and disposal under section 31 in cases in which an appeal is not presented within the prescribed time-limit. The necessary inference, therefore, is that in all other cases the appeals, as soon as presented, must come up for decision under section 31.'

It may here be pointed out that even an order passed in virtue of the powers under section 30(2) has now been held to fall under section 31 by their Lordships of the Supreme Court.

On behalf of the department the case of Dutt v. Commissioner of Income-tax was cited to showed that when an arrear of tax payable by an assessee was not paid, the appeal was incompetent under the proviso to section 30(1).

No one denies that the appeal would be incompetent, but the only question is as to under what section an order has to be passed declaring it to be incompetent and rejecting it.

It will be observed that in the above case there was actually an appeal to the Appellate Assistant Commissioner and then an appeal was preferred by the department to the Appellate Tribunal. The Tribunal held that as the assessee did not pay the amount of Rs. 6,690 on the day on which the appeal was filed no appeal lay to the Appellate Assistant Commissioner and the Appellate Assistant Commissioner was wrong in entertaining the appeal. Thereafter, the High Court directed a case to be stated and the question referred to the High Court was whether in the circumstances of the case the Income-tax Appellate Tribunal was right in holding that no appeal lay before the Appellate Assistant Commissioner.

Unless the order of the Appellate Assistant Commissioner was treated as an order under section 31 of the Act, there could be no appeal to the Appellate Tribunal and no question of reference could have arisen.

Learned counsel for the department then referred to the decision in Shivnath Prasad v. Commissioner of Income-tax, which seems to be based on the ruling in Jot Ram Sher Singh v. Commissioner of Income-tax already referred to.

The case of Shivnath Prasad had been disapproved by their Lordships of the Supreme Court.

Sheoduttrai Pannalal v. Commissioner of Income-tax was also cited on behalf of the department. There it was held that where an assessment had been made, not in form but in fact, not ostensibly but actually in good faith under section 23(4) of the Indian Income-tax Act, 1922, before its amendment by the Act of 1939, and where the Assistant Commissioner upon considerations of fact has found that the assessment was properly so made, the proviso to section 30 barred an appeal and the order of the Appellate Assistant Commissioner rejecting an appeal was not an order under section 31, inasmuch as he had not 'disposed of the appeal' and, therefore, there could be no question of law referable to the High Court under section 66(2) or section 66(3) of the Act.

A similar view was taken in Bhikhi Ram Ramdeo v. Commissioner of Income-tax and these cases were followed in L. Hira Lal v. Commissioner of Income-tax. It will be observed, however, that even in these cases the Appellate Assistant Commissioner had made an investigation into the question whether the assessment under section 23(4) was or was not in good faith or was merely ostensible and that it was after it was found that the assessment was in good faith that it was considered that the appeal did not lie. These cases therefore are no authority for the proposition that an appeal preferred is a scrap of paper which has no value as an appeal even in limine. The proviso to the then section 30 which barred an appeal against a best of judgment assessment did not give in express terms powers under section 30 to reject such an appeal. Presumably, therefore, when the Appellate Assistant Commissioner passed an order, it must have been under the provisions of section 31 and this seems to be conceded in these cases because ultimately all these cases came up to the High Court on a reference after an appeal to the Appellate Tribunal.

On behalf of the assessee the case of Maharani Gyan Manjari Kuari v. Commissioner of Income-tax was cited. In that case the assessee was assessed to income-tax and an appeal to the Appellate Assistant Commissioner was rejected in limine on the ground that the appeal was not in the prescribed form as an alteration had been made in the prescribed words in the form of appeal. It was held that the appeal to the Appellate Tribunal was incompetent on the ground that the order of the Appellate Assistant Commissioner was an order under section 30 and not an order under section 31. Upon a reference it was held by the High Court that an order by the Appellate Assistant Commissioner was an order under section 31 of the Income-tax Act.

Lastly, reference may be made to the case of Commissioner of Income-tax v. Arunachalam Chettiar, which has been relied upon by the Appellate Tribunal. That case merely decided that the jurisdiction of the High Court in respect of reference under the Income-tax Act is conditional on there being an order which could be said to be under section 33(4) and a question of law arose out of such an order. In that case it appears that an assessee who was assessed to tax on certain foreign income on accrual and remittance basis, appealed to the Appellate Tribunal against the disallowance of certain expenses by the income-tax authorities. The Tribunal allowed two items of expenses and partly allowed the appeal on the 20th August, 1943. When the matter came before the Income-tax Officer, he made a re-computation and included a certain sum as unassessed foreign income of earlier years remitted to India during the year of account. The assessee appealed to the Appellate Assistant Commissioner against this inclusion, but the Appellate Assistant Commissioner declined to admit the appeal on the ground that the assessee had no right of appeal under section 30 because there had been no assessment under section 23 and no notice of demand had been served on him under section 29. The assessee then brought a miscellaneous application to the Appellate Tribunal who held that the finding of the Income-tax Officer that the sum was to be assessed as untaxed profits of earlier years remitted to India in the accounting year did not arise in the course of giving effect to the Tribunals order and by its order dated 20th February, 1946, cancelled that finding and directed the officer to revise the computation. This order was served on the Commissioner who within sixty days thereof made an application to the Appellate Tribunal under section 66(1) for referring certain questions of law. The Appellate Tribunal referred only one question but on the application of the Commissioner under section 66(2) the High Court directed the Tribunal to refer another question. When these two references came up for hearing the High Court relying on its earlier decision in Commissioner of Income-tax v. Sevugan held that the references were incompetent and refused to answer the questions referred. The Commissioner thereafter obtained leave to appeal to the Supreme Court under section 66A. At the request of counsel the Supreme Court treated the appeal as one filed pursuant to special leave granted by the Supreme Court under article 136. On the question whether the High Court could decline to answer the references, it was held that the order of the Appellate Tribunal dated 20th February, 1946, could not be regarded as an order passed by the Appellate Tribunal under section 33(4) so as to attract the operation of section 66 and, therefore, the High Court could decline to entertain the references. It will be observed that the Appellate Tribunal had been moved after it had sent the matter back to the Income-tax Officer by means of a miscellaneous application. The Appellate Assistant Commissioner had declined to admit the appeal which had been made to him from the order passed by the Income-tax Officer as a result of the Tribunal sending the case back to the Income-tax Officer. It is, therefore, clear that the Tribunal never exercised a second appellate jurisdiction from the Income-tax Officers order, but it acted upon some sort of a miscellaneous application made to it. No second appeal was filled at all. If it had been filed the question might have arisen whether the Appellate Assistant Commissioner in passing his order rejecting the appeal had acted under section 31 or not. Inasmuch as there never was an appeal under section 33 before the Income-tax Appellate Tribunal from the Appellate Assistant Commissioners order, no question arose as to under what section the Appellate Assistant Commissioner himself had passed his own order rejected the appeal. It would, therefore, appear as their Lordships of the Supreme Court have themselves pointed out in Mela Rams case, that this decision does affect the question which they were considering in that case and it was whether the orders passed under section 30(2) and section 30(3) of the Income-tax Act must be considered to have been passed under section 31 of the Act or not.

It seems to me, therefore, upon a review of the entire position that when an appeal is filed under section 30(1) against an order passed under section 46(1) without tax being paid, any orders passed with reference to such an appeal have to be passed under section 31. The proviso to section 30 itself does not provide for the passing of any orders. It appears to me also that the right of appeal given from an order under section 46(1) is not trammelled by the pre-requirement of payment of tax but that there is only a limitation placed on the hearing of the appeal on the merits that if no tax had been paid before the hearing of the appeal then this appeal will not be heard on the merits. Accordingly, I would answer the question propounded as follows :

On a true interpretation of the proviso to sub-section (1) of section 30 and sections 31 and 33 of the Income-tax Act the appeal preferred by the assessee before the Appellate Tribunal was competent.

UPADHAY J. - The Income-tax Appellate Tribunal refused to decide the appeal on merits as the Appellate Assistant Commissioner declined to do so on the ground that the assessee had not paid the tax due from him before filing the appeal. Section 30(1) of the Act enumerates the circumstances in which an assessee may appeal to the Appellate Assistant Commissioner and one of the provisos added says that 'no appeal shall lie against an order under sub-section (1) of section 46 unless the tax has been paid.' The Appellate Assistant Commissioner took the view that in the circumstances of the instant case no appeal lay and, therefore, he was not called upon to decide it on merits. He referred to some of the facts of the case and observed in his appellate order that there was 'no justification for the non-payment of the tax on the due date'. This observation evidently related to the merits of the appeal. The learned Assistant Commissioner then held that the Income-tax Officer was therefore justified in imposing the penalty. After this he observed that as tax has not been paid the appeal is incompetent and is dismissed as such. The Tribunal held that the order of dismissal by the Appellate Assistant Commissioner was in this case passed under section 30 of the Act and, therefore, no appeal lay under section 33 to the Income-tax Appellate Tribunal. The assessees contention is that the only provision under which an appeal may be disposed of by the Appellate Assistant Commissioner is section 31 of the Act and therefore all dismissals of appeals on whatsoever ground the order was passed are orders under section 31 of the Act and an appeal from every such order would therefore lie to the Tribunal.

As discussed elaborately by my learned brother there has been considerable controversy relating to the matter, but the controversy should be taken as set at rest by the pronouncements of the Supreme Court in Mela Ram & Sons v. Commissioner of Income-tax. Venkatarama Ayyar J. observes in that case at page 618 :

'There is thus abundant authority for the position that section 31 should be liberally construed so as to include not only orders passed on a consideration of the merits of the assessment but also orders which dispose of the appeal on preliminary issues, such as limitation and the like.'

This court in Commissioner of Income-tax v. Mukandilal Harbanslal has followed the rule laid down by the Supreme Court in Mela Rams case. It appears that in J.N. Dutt v. Commissioner of Income-tax the Patna High Court took the view that where the assessee made a default in making the payment of income-tax within the meaning of section 46(1) he was hit by the proviso to section 30(1) of the Act and an appeal to the Appellate Assistant Commissioner was incompetent. The view taken by the Appellate Tribunal in that case that no appeal lay to the Income-tax Appellate Tribunal was approved of, but it appears that the attention of the learned judges of the Patna High Court was not invited to the enunciation of the law by the Supreme Court in Mela Rams case.

Learned counsel for the respondent attempted to draw a distinction between an appeal filed beyond time and an appeal filed against an order under section 46(1) without payment of the tax. He contended that an appeal beyond time was a good appeal and it was within the competence of the Appellate Assistant Commissioner to condone the delay and to decide the appeal on merits. He could condone the delay under section 30(2) of the Act. Limitation was therefore only in the nature of a hurdle in the way, but an appeal from an order under section 46(1) without prior payment of the tax was initially incompetent. Section 30(1) enumerates the orders against which an assessee may appeal to the Appellate Assistant Commissioner. Among these is an order passed under section 46(1) of the Act. When the proviso states that no appeal shall lie against an order under sub-section (1) of section 46 unless the tax has been paid it should be taken to mean that the right to prefer an appeal againest an order under section 46(1) is non-existent in the case of an assessee who has not paid the tax due. It is argued that the right itself is taken away and the proviso cannot be construed as laying down a bar or a hurdle.

It appears that section 30 does not deal with the disposal of an appeal by an Appellate Assistant Commissioner at all. It only says when an appeal may be filed and how it is to be filed. Sub-section (2) says that it shall ordinarily be presented within 30 days and empowers the Appellate Commissioner to admit an appeal after the expiration of this period. Section 30(2) therefore empowers the Appellate Assistant Commissioner to condone the delay and to admit the appeal. It does not go on further to say that the Appellate Assistant Commissioner may reject it or dismiss it or refuse to entertain it. In fact an appeal having been filed its disposal is entirely covered by section 31 of the Act. The very first sub-section says that 'an Appellate Assistant Commissioner shall fix a day and place for the hearing of an appeal and may from time to time adjourn the hearing'. The law contemplates a hearing of the appeal in all cases where an appeal is preferred. At this hearing the Appellate Assistant Commissioner may find that the appeal is filed beyond time or that it is not filed in the prescribed form and manner or that it is an appeal filed from an order under section 46(1) without payment of the tax due. When dealing with the last mentioned class of cases the Appellate Assistant Commissioner must know the amount of tax due and should reasonably hear the assessee as to whether such a tax was or was not due from him and as to whether he had or had not paid it. It may be that after the assessment the assessee obtained permission to pay by instalments and the very first instalment was not due on the date when the appeal was preferred or it may be that the assessee had paid the tax. These are all facts which an Appellate Assistant Commissioner must go into and decide before be can find that the appeal was incompetent. It is difficult to see how the Appellate Commissioner may be expected to record these findings and to dispose of the appeal without even fixing a date for the hearing as required under section 31(1). The appeal may be disposed of on merits or on a preliminary point, but the disposal can only by made under section 31 of the Act. The Supreme Court in Mela Rams case has referred to the disposal of the appeal on the preliminary issues and has observed that these preliminary issues may be 'limitation and the like'. I, therefore, respectfully agree with the answer proposed by my learned brother.

BY THE COURT. - Our answer to the question referred is that on a true interpretation of the proviso to sub-section (1) of section 30 and sections 31 and 33 of the Income-tax Act the appeal preferred by the assessee before the Income-tax Appellate Tribunal was competent. The assessee will have his costs which we assessee at Rs. 250. The fee of learned counsel for the department is fixed at the same amount.

Question answered accordingly.


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