1966 (11) TMI 16 - HC - Income Tax

Order of the AAC rejecting the appeal on the ground that no appeal lay - such order of AAC is not appellable

Summary

Issues Involved:
1. Whether the order passed by the Appellate Assistant Commissioner was under section 31 of the Income-tax Act, 1922, and if an appeal lay against that order.

Issue-wise Detailed Analysis:

1. Legality of the Appellate Assistant Commissioner's Order:
The primary issue was whether the Tribunal was legally right in its view that the order passed by the Appellate Assistant Commissioner was not an order under section 31 of the Income-tax Act, 1922, and thus whether an appeal lay against that order. The court analyzed whether the provisions of section 30 allowed for an appeal against an order purportedly made under section 35.

Material Facts:
The assessee-company, initially a private limited company, was converted into a public company in 1941. For the assessment year 1946-47, the original assessment was completed on March 20, 1947, and the income was assessed at Rs. 1,71,694, later reduced to Rs. 1,41,487 in appeal. A successor Income-tax Officer found that no additional super-tax under the Finance Act of 1946 had been levied and issued a notice under section 35 on August 6, 1947. The assessee's objections were rejected, and the additional super-tax was levied. The Appellate Assistant Commissioner initially refused to entertain the appeal, relying on a decision of the Patna High Court. The Commissioner of Income-tax later directed the Appellate Assistant Commissioner to decide the appeal on merits, but the latter again dismissed it as incompetent.

Legal Precedents and Analysis:
The court referred to several precedents to determine the nature of the order and the right of appeal:
- Duni Chand v. Commissioner of Income-tax: The Lahore High Court held that an appeal would not be shut out merely because an order was labeled under a specific section.
- Kunwarji Ananda v. Commissioner of Income-tax: The Patna High Court held that an order dismissing an appeal as incompetent is an order under section 31.
- Commissioner of Income-tax v. Khemchand Ramdas: The Judicial Committee held that an appeal lay against an assessment purporting to be under section 23(4), even if the Commissioner decided otherwise.
- Commissioner of Income-tax v. Jagdish Prasad Ramnath: The court held that an order imposing penal interest was appealable as part of the assessment order.
- S. M. Modi v. Commissioner of Income-tax: The Bombay High Court held that an assessee denying liability to be charged with tax had a right of appeal under section 30(1).

Supreme Court Clarification:
The court noted that the Tribunal had misconstrued the Supreme Court's observations in Commissioner of Income-tax v. Arunachalam Chettiar. The Supreme Court in Mela Ram & Sons v. Commissioner of Income-tax clarified that an order dismissing an appeal on preliminary issues, such as limitation, falls under section 31 and is appealable.

Conclusion:
The court concluded that the order passed by the Appellate Assistant Commissioner was indeed an order under section 31, as the assessee was denying liability to super-tax. The matter was to be remanded to the Tribunal to entertain the appeal and decide whether the order was genuinely under section 35 and its implications.

Final Judgment:
The court answered the question in the negative, against the department, and directed the department to pay the costs of the reference assessed at Rs. 300, with counsel's fee also assessed at Rs. 300.