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Judgment
Subba Rao, C.J. 1. The Income Tax Appellate Tribunal, Madras Branch, referred to the High Court of Madras, u/s 66 (I) of the Indian Income Tax Act, the following two questions of law:
Whether the appeal did not lie to the Appellate Assistant Commissioner against the Order of the Income tax Officer u/s 46 (1) because of the first proviso to Section 30 (1) of the Act.
Whether the failure of the Income Tax Officer to object to the competency of the appeal gave the Appellate Assistant Commissioner jurisdiction to hear and decide the appeal?
The case has been transferred to this Court alter its constitution.
The undisputed facts that gave rise to the Reference may be briefly stated: For the assessment year 1948-49, the Assessee was assessed to Income Tax in a sum of Rs. 2,19,541-2-0 and was directed to pay the same on or before 5-3-1949. On 8-3-1949 he sent a cherub for Rs. 25,000 and prayed for the payment of the balance in installments of Rs. 25,000 per mensem. On 11-3-1949, the Income Tax Officer refused to grant time as the Assessee made default in the payment of the tax.-On 19-3-1949, the Income Tax Officer levied a penalty of Rs. 2,000 and called upon the Assessee to pay up the tax and penalty by 25-3-1949. After giving some extension of time for the payment of the balance, the Income-lax Officer on 28-3-1949 levied a further penalty of Us. 25,000. On 25-4-1949 the Assessee sent to the Income Tax Officer a cherub for Rs. 25,000 towards penalty and a further cherub for Rs. 30,000 in part payment of the tax due. The Commissioner of Income Tax, Madras, by his Order dated 2-5-1949 permitted the Assessee to pay the balance of tax in monthly instalments of Rs. 40,000. On 21-4-1949, the Assessee filed two appeals to the Appellate Assistant Commissioner, "A" Range, Madras, against! the said penalties of Rs. 2,000 and Rs. 25,000 imposed on him u/s 46 (1) of the Income Tax Act.
The Appellate Assistant Commissioner by his Order dated 19-10-1949 disposed of the appeals. He confirmed the imposition of penalty of Rs. 2,000 but cancelled the penalty of Rs. 25,000. It may be mentioned that by that date the Assessee had paid all the amounts due from him in accordance with the terms of the Order of installment made by the Commissioner of Income Tax. The Assessee preferred an appeal to the Tribunal against the Order of the Appellate Assistant Commissioner, confirming the penalty of Rs. 2,000. The Department preferred an appeal against the Order can calling the penalty of Rs. 25,000. The Tribunal dismissed the appeal preferred by the Assessee, but allowed the appeal preferred by the Department on the ground that, on the date when the Assessee filed the appeal, the tax was due and as the tax was not paid before the filing of the ap peal, the appeal was incompetent The assessee applied to the Income Tax Appellate Tribunal u/s 66 (1) of the Act for referring (ho aforesaid two questions and they have accordingly done so.
Learned Counsel for the assessee contended that the condition of prepayment of tax laid down in the proviso to Section 30 (;1) applied only to the lineal disposal of the appeal, & not to its presentation To put it differently, he would contend that if the condition is complied with on the dale when the appeal is disposed of, the appeal is i (impotent notwithstanding the fact that oil the date of the presentation of the appeal, the condition was not satisfied. To appreciate this argument, the relevant provisions of the Indian Income-lax Act may be read:
Section 46 (1): When an assessee is in default in making a payment of income -tax, the Income Tax Officer may in his discretion direct that, in addition to the amount of the arrears, a .sum not exceeding that amount shall be recovered from the asses-see by way of penalty.
Section 30 (1): Any asscssee...........objecting to any order under Sub-section (1) of Section 46...........may appeal to the Appellate Assistant Commissioner against...........such order.
Provided that no appeal shall lie against an order under Sub-section (1) of Section 40 unless the lax has been paid.
Section 30 (2): The apneal shall ordinarily be presented within 30 days.............of the receipt of the notice of demand relating to the assessment or penalty objected lo..............hut I he. Appellate Assistant Commissioner may admit an appeal alter the expiration of the period if he is satisfied that the Appellant had sufficient cause for mil presenting it within that period.
A combined reading of the provisions of Section 30 (1) and (2) leaves no doubt in our mind that the payment of the tax is a condition precedent for the maintainability of the appeal. The proviso to Section 30 by indicating that no appeal shall lie unless the tax has been paid, clearly makes such payment of tax a condition. Sub-section (2) only limits the period of time within which such appeal shall be filed. To read the two Sub-sections as dealing with a right of appeal at two different points of time is not only illogical, but will lead to anomalies. An aggrieved party may file an incompetent appeal to satisfy the period of limitation with an off-chance of paying the arrears at any time before the appeal is disposed of. The maintainability of the appeal would then depend upon the fortuitous circumstance of the posting of the appeal for hearing before or alter the payment of the tax. We would, therefore, hold that an appeal presented within the meaning of Sub-section (2) of Section 30 should comply with the condition laid down in the proviso to Sub-section (1),
Reliance is placed upon the judgment of the Orissa High Court in Ramanarayan Das Madanlal Vs. Commissioner of Income Tax, (A). There the Petitioner was assessed to Income Tax on 30-5-1944. As he failed to pay the same, he was ordered to pay certain penalty u/s 46 of the Act. He filed an appeal on 5-7-1944. According to the order of the Income Tax Officer the Petitioner should pay the balance of tax by 13-7-1944: The appeal came up for disposal before the Appellate Assistant Commissioner on 10th September 1944. Meanwhile the Inspecting Assistant Commissioner extended the time for payment of tax till the 25th of September 1944, i.e., on the date when the appeal was disposed of, the assessee had some more time to pay the tax. The Assistant Appellate Commissioner rejected the appeal on the ground that an appeal did not lie inasmuch as the lax had not been paid. When an appeal was filed against that order, the Income Tax Appellate Tribunal dismissed it on the ground that the order was not one u/s 30 (1) of the Act and therefore no appeal lay to them.
The learned judges on these facts directed the Tribunal to refer the following two questions to the High Court:
Whether an order passed by an Appellate Assistant Commissioner dismissing an assessor''s appeal on the ground of its incompetence according to the proviso "to Sub-section (1) of S. 30 of the Act is one u/s 31 and as such appeasable u/s 33 (1) of the Act, and
Whether such an order passed before the expiry of the time either as originally fixed or later extended by competent authority for the payment of the tax is good in law?
Alter the two points were referred, the learned Judges held on tin first point that the, dismissal of the appeal by the Appellate Assistant Commissioner was one u/s 30 (1) of the Act, and, therefore, an appeal lay to the Tribunal. In regard to the second point expressing the view that it would strictly fall within the scope of an appeal before the Appellate Tribunal, they did not give any finding on the same. Tins case cannot, therefore, be relied upon in support of the proposition advanced by the learned Counsel for the assessee. We shall later on consider some of the relevant observations found in the judgment in their proper context. This view will not dispose of the reference. The more substantial question is whether the Assistant Appellate Commissioner had jurisdiction to dispose of the appeal in the circumstances of this case. If the Assistant Appellate Commissioner had jurisdiction, the mere fact that there was some irregularity in the exercise of jurisdiction would not affect the validity of that order. At the time the appeal came to be disposed of, i.e., on 19-10-1949, there was the Order of the Commissioner dated 2-5-1949 where under the Assessee was directed to pay the tax in installments.
The Commissioner had ample jurisdiction to make such an order u/s 33, where under the Commissioner may of his own motion call for the record of any proceeding under the Act, in which an order has been passed by any authority subordinate to him, and make such enquiry or cause such enquiry to be made and subject to the provisions of the Act may pass such order thereon not being an order prejudicial to the Assessee as he thinks fit. It follows that, on 2-5-1949, the unconditional demand for the payment of the entire tax by the Income Tax Officer was modified by the competent revulsion authority,1 the Commissioner. The result was as if the original demand itself contained a direction for the payment of the amount in the prescribed installments.'' The question under these circumstances is whether the tax has been paid within the meaning of the proviso to Section30 (1) at the time the appeal was filed. The answer turns upon the meaning of the word ''tax''.
Does that word mean the entire tax assessed or does it mean the tax due for payment? If it was the former, undoubtedly the Assessee did not pay it. If it was the latter, the entire tax was not due on the date, the appeal was filed for, in accordance with the modified order, the further installments did not fall due by that date.
The observations made by the learned Judges in 1950 18 ITU 660: AIR 1050 Ori 205 (A), may usefully be referred to at this stage. At p. 662, the learned Judges observed:
This argument, however, has to be judged in the light of the facts, out of which the question emerges, whether a competent authority having extended the time for payment of the Income Tax, it can be held before that time expires that the Assessee had committed a default in payment of the lax. In whatever language the proviso under consideration might have been couched, it is nothing but a provision providing for forfeiture of right of appeal accruing from a default. It follows necessarily, that if there is no default, there ought to be no forfeiture. Therefore, the contention of the Petitioner that till after the expiry of the time for payment under orders of an authority competent in that behalf, it could not be held that an Assessee lost his right of appeal, seems to bear a great force and requires consideration..........................
These observations indicate that till the time given by the competent authority for payment expires, the tax would not be clue. In Elbridge Watson v. R. K. Das, 1951 19 ITU 538: AIU 1951 Cal 430 (B), has Gupta, J., made certain observations which are apposite to the question raised now. The section construed in that case reads as follows:-
Section 46(5A). The Income Tax Officer may, at any time or from time to ''lime, by notice in writing (a copy of which shall be forwarded to the Assessee at his last address known to the Income Tax Officer) require any person from whom money is due or may become due to the Assessee or any person who holds or may subsequently hold money for or on account of the Assessee to pay to the Income Tax Officer either forthwith upon, the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or as held) so much of the-, money as is sufficient to pay the amount due by the tax-payer in respect of arrears of Income Tax and penalty or the whole of the money when it is equal to or less than that amount. The Income Tax Officer may at any time or from time to time amend or revolve any such notice or extend the time for making any payment of pursuance of the notice.
The question propounded for decision in that case was stated by the learned Judge thus:
The point which specifically arises for my consideration is what would be the amount due as mentioned in Section 46 (5A) of the Income Tax Act? Is it in the present case, the whole of the amount which is payable to the Income Tax authorities by the Petitioner, viz., Rs. 3,37,345-5-0 or is it Rs. 5,000 per month as and when the installment became due.
Answering that question at p. 543 (of ITR): (at p. 432 of AIR), the learned Judge says:
It seems to me that after the certifying Officer has allowed installments at Rs. 5,000/- per month and the Assessee has a right to pay only Rs. 5,000/- per month and the Income Tax authorities would be under an obligation to take, so long that order stands, only at such installments. If that is so, then the Income Tax Officer caw direct the debtors of the Assessee to pay anything more than at the rate of Rs. 5,000/- per month, and it was incumbent on the In come-tax Officer at least to amend his notice acv accordingly. The position, it seems to me, would be entirely anomalous if on the one hand, the Collector who is authorised to do so allows the Assessee to pay in installments but the Income Tax officer issues notices for payment of the entire sum all at once........... The expression ''amount due'' in this case to my mind must mean the amount of installments as and when they become due.
Though in the proviso to Section 30 the word due is absent the words "tax has been paid" mean only that the lax due has been paid. The Legislature could not have intended to compel a party to pay a lax not due as a condition precedent for conferring a right of appeal on him. "Tax therefore in the section means tax duo for payment he, a tax in respect of which the Income Tax Officer has a right to demand, and the Assessee has an obligation to pay. In this view, even at the time the appeal was presented no tax was due from the Assessee, as by reason of the installment order, he had further time to pay the balance and that by the time it fell due, it is conceded that it was paid.
Even if the tax was due at the time the appeal was presented, we would go further and hold that the subsequent event and- the conditions obtaining at the time the appeal was disposed of by the Assistant Commissioner could certainly be relied upon by the Assessee in the circumstances of the case. If an appeal has been filed though after the prescribed period of time, the Assistant Commissioner would have jurisdiction to hear the appeal after the tax due was paid. The only possible objection that could have been raised was that the appeal was barred under the provisions of Sub-section (2) of Section 30, but under that Sub-section the appellate authority could have jurisdiction to excuse the delay. The Income Tax authorities could have waived their objection. If the present objection had been raised before the appellate authority, he could have treated the appeal as filed after the condition was complied with-for, as aforesaid, by the time the appeal came to be disposed of, the installments due up to that date were completely paid-and, if necessary, would have excused the delay in filing the appeal. In the view we expressed, viz., that the word ''tax'' in the proviso means the tax due, no question of jurisdiction arises, for the entire tax due was paid. If at all, there was irregularity in the exercise of jurisdiction, which if pointed out in time, could have been rectified. The Income Tax authorities not having raised that objection and allowed the appeal to be disposed of on merits, it is not open to them to contend for the first time before the Tribunal that the appeal should have been dismissed on the ground that it was filed after the prescribed time. In this view also, the appeal before the Assistant Commissioner was maintainable.
In the result, we answer the first question in the negative, and the second question in the affirmative. The Respondent will pay the costs of the Assessee, which is fixed at Rs. 250/-.