1955 (1) TMI 37 - HC - Income Tax

Summary

Issues Involved:
1. Whether the appeal did not lie to the AAC against the order of the ITO under S. 46(1) because of the first proviso to S. 30(1) of the Act.
2. Whether the failure of the ITO to object to the competency of the appeal gave the AAC jurisdiction to hear and decide the appeal.

Issue-Wise Detailed Analysis:

1. Whether the appeal did not lie to the AAC against the order of the ITO under S. 46(1) because of the first proviso to S. 30(1) of the Act:

The Tribunal, Madras Bench, referred two questions of law to the High Court. The first question was whether the appeal did not lie to the AAC against the order of the ITO under S. 46(1) due to the first proviso to S. 30(1) of the Indian IT Act. The relevant provisions were read to appreciate the argument. Section 46(1) allows the ITO to levy a penalty if an assessee defaults in paying income tax. Section 30(1) provides that an assessee can appeal to the AAC against such an order, but the proviso specifies that no appeal shall lie unless the tax has been paid. Section 30(2) sets the time limit for presenting the appeal. A combined reading of these provisions indicates that the payment of tax is a condition precedent for the maintainability of the appeal. The court held that an appeal presented within the meaning of sub-s. (2) of S. 30 should comply with the condition laid down in the proviso to sub-s. (1).

2. Whether the failure of the ITO to object to the competency of the appeal gave the AAC jurisdiction to hear and decide the appeal:

The second question was whether the failure of the ITO to object to the competency of the appeal gave the AAC jurisdiction to hear and decide the appeal. The court examined the jurisdiction of the AAC in the circumstances of the case. On 2nd May 1949, the CIT had permitted the assessee to pay the balance of tax in monthly installments. The court observed that the Commissioner had ample jurisdiction to modify the unconditional demand for payment of the entire tax by the ITO. Therefore, on the date the appeal was filed, the tax due was not the entire assessed amount but the amount due as per the installment order. The court referred to observations in Ramanarayana Das Madanlal vs. CIT and Elbridge Watson vs. B.K. Das, which supported the view that "tax" means the tax due for payment. Consequently, the court held that even if the tax was due at the time the appeal was presented, subsequent events and conditions at the time the appeal was disposed of by the AAC could be considered. The AAC had jurisdiction to hear the appeal after the tax due was paid, and any irregularity in the exercise of jurisdiction could have been rectified if pointed out in time. Since the IT authorities did not raise the objection and allowed the appeal to be disposed of on merits, they could not contend before the Tribunal that the appeal should have been dismissed for being filed after the prescribed time.

Conclusion:

The court answered the first question in the negative, indicating that the appeal did lie to the AAC. The second question was answered in the affirmative, indicating that the failure of the ITO to object to the competency of the appeal gave the AAC jurisdiction to hear and decide the appeal. The respondent was ordered to pay the costs of the assessee, fixed at Rs. 250.