S. K. KAPUR J. - By order dated 25th January, 1963, the Income-tax Appellate Tribunal referred the following two questions to this court under section 66(1) of the Indian Income-tax Act, 1922 :
'(1) Whether, in the particular facts of the case, an appeal lay of the Appellate assistant Commissioner and
(2) If the answer to the first question is in the affirmative, whether a further appeal lay to the Appellate Tribunal in the circumstances of the case ?'
The relevant assessment year is 1948-49. Gopi Lal (hereafter referred to as the assessee) was a partner of a firm known as Messrs. Behari Lal Ghasi Ram, Delhi. The said firm went to the Income-tax Appellate Tribunal in appeal, being Appeal No. 321 of 1956-57, and the question therein was whether a sum of Rs. 24,500 should be taxed in the hands of the firms of Gopi Lal, who was present at the time of the hearing of the appeal before the income-tax Appellate Tribunal, expressly stated that the said sum of Rs. 24,500 be included in his income and treated his exclusive share. Inter alia, in pursuance of the said statement by Gopi Lal the Tribunal directed that 'Gopi Lal share of the profits in the firm be modified so as to include this sum of Rs. 24,500 in his hands alone. The share income of the other partners will so be accordingly modified and, as a result of this, necessary modification will be made in the personable assessments of the partners.' Consequent upon the order of the Tribunal, the Income-tax Officer reallocated the profit of the firm in the hands if its partners including the assessee. The assessee objected to the said reallocation and appealed to the Appellate assistant Commissioner. The Appellate assistant Commissioner rejected the appeal on the ground that the case was not competent. Aggrieved by the order of the Appellate assistant Commissioner the assessee filed an appeal before the Income-tax Appellate Tribunal, which decided that no appeal was competent against the order of reallocation before the Appellate assistant commissioner and, consequently, the appeal did not lie to the Tribunals well. In these circumstances, the aforesaid two questions have been referred to us.
It appears that the direction to excluded Rs. 24,500 from the income of the firm was made under section 33(4) while the direction to reallocate the profits in the hands of the partners was made under section 33(5) of the Indian Income-tax Act, 1922. Mr. Whig, the learned counsel for the assessee, has frankly pointed out that he has so grievance against the exclusion of Rs. 24,500 from the income of the firm and its inclusion in the assessees hands as his exclusive income. His grievances, however, is against the reallocation made in the hands of the partners, including the assessee, in pursuance of the directions of the Income-tax Appellate Tribunal. The order of the Income-tax Officer making the reallocation has not been included in the record and Mr. Hardy could not find out any express order to that effect even in the original record. Whether or not an appeal under section 30 would be complement depends on the terms of the said provisions as an appeal is always a creation of the statute. It is not disputed that it is case where the partner of the firm we individually assessable on their shares in the total income of the firm. Mr. Whig says that :
'(1) the order of reallocation an order made under section 23 of the said Act and the assessees objection is, consequently, an objection to the amount of income assessed under section 23 within the meaning of section 30;
(2) in any case, it is case of an assessee denying his liabilities to be assessed under this Act, which term is wide enough to included denying the liability totally or partially; and
(3) every partner is, under the second proviso to section 30, entitled to appeal against the order of apportionment between the partners.'
The power of the Income-tax Officer to make assessment area derived from section 23. Whenever the Income-tax Officer has make assessment he has to look to section 23 unless there is any other express provisions entitling him to do so. The question, therefore, is : does section 33(5) provide a source for making an order of assessment more or less similar question rose before the Calcutta High Court in Kooka Sidhwa and Co. v. Commissioner of Income-tax. There the tribunal had given the following directions :
'The result is that there three income-tax appeals are allowed in part. We direct the Income-tax Officer to revise the assessments and authorize him to amend the assessments made on the partners, if necessary. The excess profits tax appeals are dismissed.'
In compliance with the above direction the Income-tax Officer revised the assessments of income-tax and made certain major amendments in his original order. The assessee, a partnership firm, at the instance of which the Tribunal had given the above the above direction, being dissatisfied with the amendments made by the Income-tax Officer, preferred appeals to the Appellate Assistant Commissioner who entertained the same and decided them on merits. The assessee then preferred second appeals to the Tribunal were not maintainable on the ground that the order passed by the Income-tax Officer in pursuance of the direction of the Tribunal were not order under section 23(3) of the Income-tax Act. The Calcutta High Court held that :
'The order passed by the Income-tax Officer revising the assessment, made originally under the direction of the appellate Tribunal, would partake the character of a fresh assessment order and would be no less an order as made under section 23(3) of the Act within the ordinary acceptation of the terms from which an appeal would lie to the Appellate Assistant Commissioner.
Mr. Hardy though to distinguish this case on the ground that there the Income-tax Officer had given effect to that part of the direction which was made under section 33(4) and the appeal was taken for the second time before the Tribunal by the firm itself. Accordingly to Mr. Hardy, the direction in this case is one made under section 33(5) and the order reallocating the income is relatable to the exercise of power under that provisions and not under section 23(3). Looking at the language of section 30 there appear to be three answers to the contention of the revenue. Section 33(5) does not, in my opinion, provide a source to the Income-tax Officer for making an order of the assessment. The Tribunal, while giving directions under section 33(5), merely authorizes the Income-tax Officer to amend any assessment the assessment of a firm. In carrying out that direction and amending the order of assessment in accordance therewith, the Income-tax Officer merely make an order under section 23 and, consequently, when a partner files and appeals, he, in effect, object to the amount of income assessed under section 23. Again if a partner is satisfied with the reallocation and says that the same is not in accordance with the direction of the Tribunal he, in effect denies his liability to be assessed under the sat to the extent to which he claims to have been wrongly assessed. Partial denial of liability to be assessed is, I think, comprised in the expression 'denying his liability to be assessed under this Act.' In Commissioner of Income-tax v. Kanpur Coal Syndicate, their Lordship of the Supreme Court observed :
'Under section 30, an assessee objecting to the amount of income assessed under section 23 or the amount of tax determined under the said section or denying his liability to be assessed under the Act can prefer an appeal against the order of the Income-tax Officer to the appellate Assistant Commissioner. It is said that an order made by the Income-tax Officer rejecting the plea of an association of person that the members thereof shall be assessed individually does not fall under one or other of the three heads mentioned above. What is the substance of the objection of the assessee The assessee denies his liability to be assessed under the Act in the circumstances of the case pleads that the members of the association shall be assessed only individually. The expression denial of liability is comprehensive enough to take in not only the total denial of liability but also the liabilities to tax under particular circumstance. In either case the denial is a denial of liability to be assessed under the provisions of the Act. In one case the assessee says that he is not liable to be assessed to tax under the provisions of the Act if the option given to the appropriate officer under the provisions of the act is judicially exercised.'
If an over-assessment its made in the hands of partner as a result of reallocation, the challenge to such an over assessment by a partner would, in my opinion, be a denial of liability. Lastly under the second proviso to section 30 the partners of a firm, who are individually assessable on their shares in the total income for the firm, may appeal against any order of an Income-tax Officer apportioning the income of the firm between the servile partners. As I have pointed out already, the grievance of the assessee is against the apportionment, and therefore, his appeal would fall in terms under the said second proviso. It should be remembers that statutes pertaining to right of appeal have to be given a liberal construction since they are remedial. A right of appeal will not be rusticated or denied unless such a construction is unavoidable. Our courts recognise the rule that an appeal of a cause is a valuable right to a litigant and, in the absence of unmistakable indications to the contrary, statutes regulating appeals are given liberal construction. It is also recognised that an appeal is a remedy that is favoured in law and an important right, which should never be denied, unless its forfeiture or abandonment is conclusively shown and, case of doubt, an appeal should always be allowed rather than denied. Mr. Hardly also placed reliance on Commissioner of Income-tax v. Arunachalam Chettiar. That case is of no assistance to Mr. Hardy. There no appeal was taken to the Tribunal against the order of the Appellate Assistant Commission but the assessee had only made a miscellaneous application to the Tribunal. The supreme court took the view that the order of the Tribunal was not one passed under section 33(4) and, consequently, no reference under section 66(1) or section 66(2) could be entertained. In these circumstances, the answer to the first question must be in the affirmative and in favour of the assessee.
So far as the second question is concerned, the order made by the Appellate Assistant Commissioner rejecting the appeal as incompetent was an order made under section 31. In Mela Ram Sons v. Commissioner of Income tax, the Appellate Assistant Commissioner declined to condone the delay for filing the appeal and dismissed the same as time-barred. The appellant preferred an appeal against the order of dismissal to the Tribunal under section 33 of the said Act. Their Lordships of the Supreme Court held that section 31 was the only provision relating to hearing and disposal of the appeal and if an order dismissing the appeal a barred by limitation be one passed in appeal, it must fall within section 31. On the same process of reasoning it appears to me that the order of the Appellate assistant Commissioner dismissing the appeal as incompetent would be an order passed under section 31. As a matter of fact, the order is itself described as one under section 31. That being so, the appeal before the Appellate Tribunal must be held to be competent. The answer to the second question must, therefore, be also in the affirmative and in favour of the assessee.
In the result, both these questions are answered in favour of the assessee. The assessee will have the costs of this reference.
R. S. NARULA J. - I agree.
Questions answered in favour of the assessee.