Commissioner of Income Tax vs Ramlal Mansukh Rai

The Income Tax Tribunal, Delhi Bench "C", has referred the following question of law u/s 66(1) of the Income Tax Act, 1922 :

"Whether, on the facts and in the circumstances of the case, the assessee''s appeal to the Appellate Assistant Commissioner was maintainable undef Section 30 of the Income Tax Act, 1922 ?"

The Hindu undivided family was assessed as such till the assessment year 1942-43. The question above-said relates to the assessment year 1943-44, for which the relevant accounting year ended on the 9th of November, 1942 (equivalent to Kartik Sud 1,1999 Bk.). The Hindu undivided family disrupted on the 9th of November, 1942, and an application u/s 25A of the Act was duly filed. On the 21st of January, 1945, by an order u/s 25A, the partition and the disruption of the family was duly accepted as from the 9th of November, 1942. It deserves notice that from the 10th of November, 1942, a new partnership firm was formed for carrying on the business and an assessment for the year 1943-44 was made on the new unit on the 28th of August 1943. An appeal was preferred against this assessment which was decided by the Appellate Assistant Commissioner on the 4th of October, 1943.

The admitted case is that thereafter neither the department nor the assessee adverted to the admissibility or otherwise of the relief u/s 25(4) of the Act to the assessee on the succession to the business of the Hindu undivided family. Well nigh 20 years after the order of the Appellate Assistant Commissioner, the assessee filed an application u/s 25(4) or in the alternative, u/s 23(3) of the Act claiming relief under the above-said provision. This application was rejected on merits by the Income Tax Officer on the 5th of July, 1963. The assessee then preferred an appeal to the Appellate Assistant Commissioner who rejected the same primarily on the ground that u/s 30 of the Act, no appeal was provided for against an order u/s 25(4). On further appeal to the Tribunal it was held that an appeal against an order objecting to the amount of income finally assessed u/s 23 was maintainable u/s 30 of the Income Tax Act, and it was consequently directed that the Appellate Assistant Commissioner should entertain the assessee''s appeal and decide the same on merits. On these facts, the reference on the above-mentioned question of law has arisen. Mr. B. S. Gupta on behalf of the Commissioner of Income Tax has reiterated and commended the reasoning of the order passed by the Appellate Assistant Commissioner. He further placed reliance on Commissioner of Income Tax, Madras Vs. Mtt. Ar. S. Ar. Arunachalam Chettiar, and M.M.P.L.S. Ramaswami Chettiar Vs. The Commissioner of Income Tax, Madras, .

We are inclined to agree with the contention raised on behalf of the revenue. As the argument turns primarily upon the language of Section 30 of the Income Tax Act, 1922, for facility of reference we are setting down below the relevant part thereof ;

"Appeal against assessment under this Act.--Any assessee objecting to the amount of income assessed u/s 23 or Section 27, or the amount of loss computed u/s 24 or the amount of tax determined u/s 23 or Section 27, or denying his liability to be assessed under this Act, or objecting to the cancellation by an Income Tax Officer of the registration of a firm under Sub-section (4) of Section 23 or. .... or objecting to any order under Sub-section (2) of Section 25 or Section 25A or Sub-section (2) of Section 26 ....."

Now it is well settled that there exists no inherent right of appeal and this right is entirely a creature of the statute granting the same. Its scope in the present case is necessarily limited by the provisions of Section 30 of the Act. What is of particular significance is that this provision expressly gives a right of appeal against an order u/s 25(2) but no appeal whatsoever has been specifically provided in respect of orders passed u/s 25(3) of Section 25(4) of the Act. By implication, therefore, it may well be presumed that the legislative intent was to exclude the orders passed under Sub-sections (3) and (4) of Section 25 from the ambit of the right of appeal. As is evident from an analysis of Section 30 it enumerates specifically and in great detail the orders which are appealable to the Appellate Assistant Commissioner. The said authority, therefore, cannot have jurisdiction to entertain appeals which fall outside the specific grounds and orders mentioned in Section 30. As already noticed, Section 30 does not expressly provide for any appeal against the Income Tax Officer''s orders u/s 25(3) or Section 25(4} arid, in our opinion, no such right can be created by way of implication.

The matter may then be viewed from another angle as well. Admittedly, the assessment on the new firm for the year in 1943-44, which is the assessment year in question, was made vide an order dated 28th of August, 1943. A notice of demand in pursuance of the assessment so made was served on the assessee and this patently did not indicate any relief granted u/s 25(4) of the Act. An appeal lay against this order in which this matter could be agitated within 30 days of the service of such a demand notice. Such an appeal was in fact preferred against the assessment to the Appellate Assistant Commissioner which was decided on the 4th of October, 1943. The issue of the non-grant of the relief u/s 25(4) could thus clearly have been agitated before the Appellate Assistant Commissioner, but was patently not done. Thereafter, for nearly 20 years, no grievance was made regarding the non-compliance with the provisions of Section 25(4). In this context we are, therefore, unable to agree that the order of the Income Tax Officer passed subsequently u/s 2X4) on the 5th of July, 1963, is in fact an order finally assessing the income in respect of the assessment year 1943-44. That assessment u/s 23 in fact stood concluded by the earlier order of the Income Tax Officer dated the 28th of August, 1943, and which had become final subsequently after the order of the Assistant Commissioner of 4th of October, 1943. That being so we are of the view that no appeal is competent against the order of the Income Tax Officer dated the 5th of July, 1963.

The matter is also not res integra. In Ramaswami Chettiar''s case, the facts were closely similar. In that case there was a partition in a Hindu undivided family and the assessment of income of the Hindu undivided family from the 13th of April, 1940, to 30th March, 1941, was completed on the 24th March, 1942. More than six years later in August, 1948, the father (a member) of the disrupted Hindu undivided family presented an application to the Commissioner of Income Tax for relief u/s 25(4) of the Act alleging that the foreign income of the joint family had been assessed to Income Tax tinder the Income Tax Act, 19,18. This being rejected, he filed a regular application before the Income Tax Officer for the same relief which was declined and an appeal therefrom also failed. On a reference being made, a Division Bench of the Madras High Court relying on Arunachalam Chettiar''s case, observed as follows:

"The benefit under the first part of Section 25(4) is certainly one to which an assessee who satisfied the terms of that provision is entitled, and that benefit can be afforded to him in the assessment. If in an appeal against an assessment order, the proper interpretation or effect of Section 25(4) comes up for consideration, the assessee can certainly in his appeal have the decision of the Income Tax Officer on that point adjudicated in the appellate court and so on up to this court. But the petition filed by Ramaswami Chettiar in the present case is certainly not one of those enumerated in the Act, and no appeal, therefore, lies from the order passed adversely to the applicant in such an application as the same is not covered by Section 30 of the Act The Appellate Assistant Commissioner was, therefore, right in the view that no appeal lay to him."

We would accordingly answer the question of law referred in the negative, in favour of the revenue, and against the assessee.