LEELA SEPARATOR MANUFACTURING CO. PRIVATE LTD. vs COMMISSIONER OF Income Tax, DELHI.

FALSHAW C.J. - This is a reference made to this court by the Income Tax Appellate Tribunal u/s 66(1) of the Income Tax Act at the instance of the assessee, Messrs. Leela Separator Manufacturing Company Private Ltd.

The case arises out of the assessment of Income Tax of the company for the assessment year 1957-58 in respect of which a notice was issued to the company by the Income Tax Officer on the 24th of November, 1956, for the payment of Rs. 14,528-2-0 as advance payment of tax u/s 18A(1) of the Act. The sum demanded was payable in two installments of which the second was due on the 15th March, 1957. As no payment all had been made by the date the Income Tax Officer imposed a penalty of Rs. 1,452 u/s 46(1) of the Act by his order dated the 20th of March, 1957.

The assessee appealed to the Appellate Assistant Commissioner against this order and although the Appellate Assistant Commissioner had been informed that no payment had been made towards the tax, even up to the date when he decided the appeal on the 30th of May, 1957, he proceeded to go into the merits of the appeal and, finding that the demand for Rs. 14,528-2-0 as advanced payment of tax made by the Income Tax Officer was illegal, accepted the appeal and set aside the penalty.

An appeal was preferred to the Appellate Tribunal by the Income Tax Officer on the ground that the Appellate Assistant Commissioner could not lawfully decide the assessees appeal at all without the prior payment of the tax demanded. This was on the basis of the proviso to sub-section (1) of section 30 of the Act which reads :

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

The contention of the Income Tax Officer was accepted by the Appellate Tribunal which set aside the order of the Appellate Assistant Commissioner as being without jurisdiction.

On the application of the assessee the following question has been referred to us by the Tribunal :

"Whether the appeal preferred by the assessee against the imposition of penalty u/s 46(1) of the Indian Income Tax Act for failure to pay the tax demanded of the assessee was competent and maintainable ?"

On the face of it the answer to this question must be "no", since the relevant provision of law is quite free from any ambiguity whatever. The argument advanced on behalf of the assessee was that the word "tax" in the proviso to sub-section (1) of section 30 means tax actually due or legitimately demanded, and in support of this he wanted use to go into the merits to derive support from the decision of the Andhra High Court in which the Tribunal had relied on its appellate order, namely, Raja of Venkatagiri v. Commissioner of Income Tax. In particular he relied on the finding in the head-note where the decision of the learned judges is summed up to the effect that the expression "tax has been paid" in the proviso to section 30(1) does not mean the entire tax assessed, but the tax which had become due. Before that it had been held that under the proviso payment of the tax was a condition precedent for the maintainability of the appeal to the Appellate Assistant Commissioner, and the finding which is now relied upon on behalf of the assessee related to the peculiar facts of that case. These were that in connection with an appeal filed by him against two successive penalties imposed on him by the Income Tax Officer the assessee had obtained an order from the Commissioner for payment of the balance of tax in installments, and when his appeal was decided he had paid such installments as were due up to the time when his appeal was heard. The department apparently had sought to contend that his appeal was only maintainable provided that he had paid the whole of the demand irrespective of the order of the Commissioner permitting the payment by installments. It is thus clear that all that the learned judges decided in that case was that where payment by installments had been permitted the word "tax" in the proviso meant such tax as was due on installments payable up to the date of the appeal. This is something quite different from the arguments in the present case and the decision does not held the assessee at all.

I am, therefore, of the opinion that in order that his appeal against the order of the Income Tax Officer imposing a penalty on him could be heard at all be the Appellate Assistant Commissioner it was necessary for the assessee to pay the tax demanded from him beforehand, and the question referred to us must accordingly be answered in the negative. I would, however, leave the parties to bear their own costs in this case.

DULAT J. - I agree.

Question answered in the negative.