PETITIONER: MESSRS MELA RAM & SONS Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX,PUNJAB. DATE OF JUDGMENT: 21/02/1956 BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA DAS, SUDHI RANJAN BHAGWATI, NATWARLAL H. CITATION: 1956 AIR 367 1956 SCR 166 ACT: Indian Income Tax Act,1922 (XI of 1922),ss.23,30(1)(2),31, 33-Assessment of Income-tax-Notice of demand-Appeal against assessment-Received in Appellate Assistant Commissioner's Office out of time-Prayer for condonation of delay rejected- Order of Assistant Commissioner dismissing an appeal as out of time-Whether one under s. 30(2)or under s. 31 of the Act- Whether appeal competent therefrom. HEADNOTE: The appellant firm filed appeals against orders assessing it to income-tax and super-tax for the years 1945-1946 and 1946-1947 beyond the time prescribed by s. 30(2) of the Income-tax Act. The appeals were numbered, and notices were issued for their hearing under s. 31. At the hearing of the appeals before the Appellate Assistant Commissioner, the Department took the objection that the appeals were barred by time. The appellant prayed for condonation of delay, but that was refused, and the appeals were dismissed as time- barred. The appellant then preferred appeals against the orders of dismissal to the Tribunal under s. 33 of the Act, and the Tribunal dismissed them on the ground that the orders of the Assistant Commissioner were in substance passed under s. 30(2) and not under s. 31 of the Act and that no appeal lay against them under s. 33 of the Act. On a reference under s. 66(1) of the Act the High Court held that the orders of the Appellate Assistant Commissioner were made under s. 30(2) and were not appealable under s. 33 of the Act. On appeal by special leave to the Supreme Court the question for determination was whether an order dismissing an appeal presented under s. 30 as out of time was one under s. 30(2) or under s. 31 of the Act because if it was the former there was no appeal provided against it; if it was the latter it was open to appeal under s. 33. Held that the orders of the Appellate Assistant Commissioner fell within s. 31. A right of appeal is a substantive right and is a creature of the statute. S. 30(1) confers on the assessee a right of appeal against certain orders and an order of assessment under s. 23 is one of them. The appellant had therefore a substantive right under s. 30(1) to prefer appeals against orders of assessment made by the Income Tax Officer. 167 An appeal presented out of time is an appeal and an order dismissing it as time-barred is one passed in appeal. Section 31 is the only provision relating to the hearing and disposal of appeals and if an order dismissing an appeal as barred by limitation as in the present case is one passed in appeal it must fall within s. 31 and as s. 33 confers a right of appeal against all orders passed under s. 31, it must also be appealable. To fall within s. 31 it is not necessary that the order should expressly address itself to and decide on the merits of the assessment and it is sufficient that the effect of the order is to confirm the assessment as when the appeal is dismissed on a preliminary point. An order rejecting an appeal on the, ground of limitation after it had been admitted is one under s. 31, though there is no consideration of the merits of the assessment. Held therefore that the orders of the Appellate Assistant Commissioner holding that there were no sufficient reasons for excusing the delay and rejecting the appeals as time- barred would be orders passed under s. 31 and would be open to appeal, and it would make no difference in the position whether the orders of dismissal were made before or after the appeals were admitted. Commissioner of Income-tax, Madras v. Mtt. `r. S. Ar. Arunachalam Chettiar, ([1953] S.C.R. 463), explained. Case-law discussed. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 17 of 1954.
Appeal by Special Leave from the Judgment and Order-dated
the 11th day of June 1951 of the Punjab High Court in Civil
Reference No. 2 of 1951.
Hardyal Hardy and Sardar Singh, for the appellant.
C. K. Daphtary, Solicitor-General of India (G. N.
Joshi and R. H. Dhebar, with him) for the ‘respondent.
1956. February 21. The Judgment of the Court was delivered
by
VENKATARIAMA AYYAR J.–The appellant is a firm carrying on
business at Ludhiana in the Punjab. The Income-tax Officer
assessed its income for 1945-1946 at Rs. 71,186, and on
17-9-1947 a notice of demand -was served on it for Rs.
29,857-6-0 on account of income-tax and super-tax. The
appellant preferred an
168
appeal against the assessment, and it was actually received
in the office of the Appellate Assistant Commissioner on 5-
11-1947. It was then out of time by 19 days; but the appeal
was registered as No. 86, and notice for hearing under
section 31 was issued for 13-12-1947, and after undergoing
several adjournments, it was actually heard on 1-10-1948.
For the year 1946-1947, the Income-tax Officer assessed the
income of the firm at Rs. 1,09,883, and on 29-9-1947 a
notice of demand was served on it for Rs. 51,313-14-0 on
account of income-tax and super-tax. The appellant
preferred an appeal against this assessment, and it was
actually received in the office of the Appellate Assistant
Commissioner on 5-11-1947, and it was then 7 days out of
time. It was registered as No. 89, and notice for hearing
under section 31 was issued for 24-6-1948. Eventually, it
was heard along with Appeal No. 86 on 1-10-1948.
At the hearing, the Department took the objection that the
appeals were presented out of time, and were therefore
liable to be dismissed. The appellant prayed for
condonation of the delay on the ground that following on the
partition of the country the conditions were very unsettled,
that curfew order had been promulgated and was in force, and
that the post office did not accept registered letters, and
that the traffic on the Grand Trunk Road was closed., and
that in view of these exceptional circumstances, it bad
sufficient cause for not presenting the appeals in time. On
31-12-1948 the Appellate Assistant Commissioner passed
orders in both the appeals, holding that there was not
sufficient ground for condoning the delay, and rejecting
them in limine. These orders were purported to be passed
under section 31 read along with section 30(2).
Against these orders, the appellant preferred appeals
under section 33 of the Act to the Appellate Tribunal which
by its order dated 4-4-1950 dismissed them on the ground
that the orders of the Assistant Commissioner were in
substance passed under section 30 (2) and not under section
31 and that no appeal lay against them under section 33, On
the applica-
169
tions of the appellant, the Tribunal referred under section
66(1) of the Income Tax Act the following question for the
decision of the High Court of Punjab:
“Whether in the circumstances of the case appeals lay to
the Tribunal against orders of the Appellate Assistant
Commissioner dismissing the appeals against the assessments
for the years 19451946 and 1946-1947 in limine”.
The reference was beard by Khosla and Harnam Singh JJ.,
who held following an earlier decision of that court in
Dewan Chand v. Commissioner of Incometax(1) that the orders
of the Appellate Assistant Commissioner were under section
30(2) and not appealable under section 33. Certificate to
appeal to this Court against this order having been refused
by the High Court, the appellant applied for and obtained
leave to appeal to this Court under article 136 of the Con-
stitution, and that is how the appeal comes before US.
The provisions of the Act bearing on the question may now
be referred to. Section 30(1) confers on the assessee a
right of appeal against orders passed under the sections
specified therein. Section 30(2) provides that the appeal
shall ordinarily be presented within thirty days of the
order of assessment, but the Appellate Assistant
Commissioner may admit an appeal after the expiration of the
period if he is satisfied that the appellant bad sufficient
cause for not presenting it within that period. Section
30(3) provides that “the appeal shall be in the prescribed
form and shall be verified in the prescribed manner”.
Section 31(1) enacts that “the Appellate Assistant Commis-
sioner shall fix a day and place for the hearing of the
appeal, and may from time to time adjourn the hearing”.
Section 31(3) specifies the orders that may be passed in
appeals according as they are directed against orders passed
under the one or the other of the sections of the Act which
are specified in section 30(1). When the appeal is against
an order of assessment under section 23-and this is what we
are con-
(1) (1951] 20 1 T.R. 621,
170
cerned with in this appeal-it is provided in section 31(3),
clauses (a) and (b) that in disposing of the appeal the
Appellate Assistant Commissioner may (a) confirm, reduce,
enhance or annul the assessment, or (b) set aside the
assessment and direct the. Incometax Officer to make a
fresh assessment after making such further enquiry as the
Income-tax Officer thinks fit. Section 33(1) enacts that,
“Any assessee objecting to an order passed by an Appellate
Assistant Commissioner under section 28 or section 31 may
appeal to the Appellate Tribunal within sixty days of the
date on which such order is communicated to him”.
Stated succinctly, section 30 confers a right of appeal on
the assessee, section 31 provides for the hearing and
disposal of the appeal, and section 33 confers a right of
further appeal against orders passed under section 31,
Now, on these provisions the question is whether an order
dismissing an appeal presented under section 30 as out of
time is one under section 30(2) or under section 31 of the
Act. If it is the former, there is no appeal provided
against it; if it is the latter, it is open to appeal under
section 33. On this question, there has been a sharp
conflict of opinion among different High Courts and even
among different Benches of the same High Court. The Bombay
High Court has held that when an appeal is presented out of
time, and there is no order of condonation of delay under
section 30(2), there is, in law, no appeal before the
Appellate Assistant Commissioner, and that an order by him
rejecting the appeal does not fall within section 31 and is
not appealable: Commissioner of Income-tax v. Mysore Iron
and Steel Works(1) and K. K. Porbunderwalla v. Commissioner
of Income-tax(2); but that if the appeal is admitted after
an order of condonation is made under section 30(2), an
order subsequently passed dismissing it on the ground of
limitation would be one under section 31 and would be
appealable under section 33 and the result will be the same
even when the appeal is admitted without
(1) .[1949] 17 I.T.R. 478,
(2) [1952] 21 I.T.R. 63.
171
any order of condonation under section 30(2): Champalal A
sharam v. Commissioner of Income-tax(1).
The High Court of Allahabad has also taken the same view,
and held that an order refusing to condone delay and
rejecting an appeal before it was admitted was not one under
section 31 and was not appealable: Vide Shivnath Prasad v.
Commissioner of Income-tax, Central and U. P.(3) and
Municipal Board, Agra v. Commissioner of Income-tax, U. P.(
3 ); but that ail order dismissing the appeal as time-barred
after it had been admitted was one under section 31 and was
appeable: Mohd. Nain Mohd. Alam v. Commissioner of Income-
tax(1). The High Court of Punjab has held following
Shivnath Prasad v. Commissioner of Incometax, Central and
U. P.(2) and Commissioner of Incometax v. Mysore Iron and
Steel Works(5) that when the Appellate Assistant
Commissioner declines to condone delay and rejects the
appeal, it is one under section 30(2) and not appealable.
It has further held that even if the appeal bad been
admitted without an order of condonation and dismissed at
the hearing on the ground of limitation, it would not be
under section 31, because the scheme of the Act contemplated
that an order to be passed under that section must relate to
the merits of the assessment. It is on this decision that
the judgment under appeal is based It may be mentioned that
the decision in Dewan Chand v. Commissioner of Income-tax(6)
was dissented from in a recent decision of the Punjab High
Court in General Agencies v. Income-tax Commissioner(7) .
In Commissioner of Income-tax v. Shahzadi Begum the Madras
High Court has held that an order-declining to excuse delay
and rejecting the appeal is one under section 31, whether it
is made before the appeal is admitted or after, and that an
appeal which is filed out of time is, nonetheless, an appeal
for purposes of section 31, and that an order dismissing it
would be appealable under section 33. In Gour Mohan
(1) [1953] 23 I.T.R. 464,
(3) [1951] 19 I.T.R. 63.
(5) [1949] 17 I.T.R. 478.
(7) A.I R. 1956 Punjab 26.
(2) [1936] 3 I.T.R. 200.
(4) [1951] 19 I.T.R. 58.
(6) [1951] 20 I.T.R. 621.
(8) [1952] 21 I.T.R. 1.
172
Mullick v. Commissioner of Agricultural Income-tax(1), the
Calcutta High Court has, after a full discussion, come to
the conclusion that an order of dismissal on the ground of
limitation at whatever stage was one which fell under
section 31. It is unnecessary to refer to the views
expressed in decisions of other High Courts, as the point
now under discussion did not directly arise for decision
therein.
The question is which of these views is the correct one to
adopt. We start with this that under section 33 it is only
orders under section 31 that are appealable. The question
therefore narrows itself to this whether an order declining
to condone delay and dismissing the appeal as barred by time
is an order under section 31. It will be, if it is passed
in appeal against an order of assessment, and is one which
affirms it. Now, the conflicting views expressed by the
several High Courts centre round two points: (1) when an
appeal is presented out of time and there has been a refusal
to condone delay under section 30(2), is an order rejecting
it as time-barred one passed in appeal; and (2) if it is, is
such an order one confirming the assessment within section
31(3)(a)?
On the first point, as already stated, it has been held by
the Bombay High Court that while an order dismissing an
appeal as time-barred after it is admitted is one under
section 31, a similar order passed before it is admitted is
one under section 30(2). The ratio of this distinction is
stated to be that in law there is no appeal unless it is
presented in time, and if presented beyond time, unless the
delay is excused. In Commissioner of Income-tax v. Mysore
Iron and Steel Works(2), Chagla, C.J. stated the position
thus:
“An asseesee has a statutory right to present an appeal
within thirty days without any order being required from the
Appellate Assistant Commissioner for admission of that
appeal. But if the time prescribed expires, then that
statutory right to present an appeal goes; and an appeal can
only be entertained provided it is admitted by the Appellate
Assistant Commissioner after condoning the delay.
(1) [1952] 22 I.T.R. 131.
(2) [1949] 17 I.T.R. 478.
173
Therefore before an appeal could be admitted in this case,
an order from the Appellate Assistant Commissioner was
requisite that the delay had been condoned and it was only
on such an order being made that the appeal could be
entertained by the Appellate Assistant Commissioner. Now
section 31 deals only with such appeals which are presented
within the prescribed period or admitted after the delay has
been condoned, and the procedure laid down in section 31
with regard to the hearing of appeals only applies to such
appeals. Therefore, in my opinion, when the Appellate
Assistant Commissioner refused to condone the delay, there
was no appeal before him which he could hear and dispose of
as provided under section 31 of the Act. Section 33 then
gives the right of appeal to the assessee from an order made
by the Appellate Assistant Commissioner either under section
28 or under section 31. Therefore the Legislature did not
give the right of appeal to the assessee against an order
made by the Appellate Assistant Commissioner under section
30 of the Act”.
Learned counsel for the appellant disputes the correctness
of the last observation that an order of the Appellate
Assistant comissioner refusing to condone the delay is one
under section 30(2), and contends that the only order that
could be passed under that section was one excusing delay,
and an order refusing to condone it will fall outside it,
and that such an order could only be made under section 31.
We find it difficult to accede to this contention. When
power is granted to an authority to be exercised at his
discretion, it is necessarily implicit in the grant that he
may exercise it in such manner as the circumstances might
warrant. And if the Appellate Assistant Commissioner has a
discretion to excuse the delay, he has also a discretion in
appropriate cases to decline to do so. We are therefore of
opinion that the refusal to excuse delay is an order under
section 30(2.).
But the question still remains whether the view taken in
Commissioner of Income-tax v. Mysore Iron
23
174
and Steel Works(1) and K. K. Porbunderwalla v Commissioner
of Income-tax (2) that an appeal which is filed beyond the
period of limitation is, in the eye of law, no appeal,
unless and until there is a condonation of delay, and that,
in consequence, an order passed thereon cannot be held to be
passed in appeal so as to fall within section 31 is right.
Now, a right of appeal is a substantive right, and is a
creature of the statute. Section 30(1) confers on the
assessee a right of appeal against certain orders, and an
order of assessment under section 23 is one of them. The
appellant therefore had a substantive right under section
30(1) to prefer appeals against orders of assessment made by
the Income-tax Officer. Then, we come to section 30(2),
which enacts a period of limitation within which this right
is to be exercised. If an appeal, is not presented within
that time, does that cease to be an appeal as provided under
section 30(1)? It is well established that rules of
limitation, pertain to the domain of adjectival law, and
that they operate only to bar the remedy but not to
extinguish the right. An appeal preferred in accordance
with section 30(1) must, therefore, be an appeal in the eye
of law, though having been presented beyond the period
mentioned in section 30(2) it is liable to be dismissed in
limine. There might be a provision in the statute that at
the end of the period of limitation prescribed, the right
would be extinguished, as for example, section 28 of the
Limitation Act; but there is none such here. On the other
hand, in conferring a right of appeal under section 30(1)
and prescribing a period of limitation for the exercise
thereof separately under section 30 (2), the legislature has
evinced an intention to maintain the distinction well-
recognised under the general law between what is a
substantive right and what is a matter of procedural law.
In Nagendranath Dey v. Suresh Chandra Dey(3) Sir Dinshaw
Mulla construing the word ‘ appeal’ in the third column of
article 182 of the Limitation Act observed:
“There is no definition of appeal in the Civil Pro-
(1) [1949] 17 I.T.R. 478. (2) [1952] 21 I.T.R. 63.
(3) 59 I.A. 283, 287.
175
cedure Code, but their Lordships have no doubt that any
application by a party to an appellate, Court, asking it to
set aside or revise a decision of a subordinate Court, is an
appeal within the ordinary acceptation of the term, and that
it is no less an appeal because it is irregular or
incompetent”.
These observations were referred to with approval and
adopted by this Court in Raja Kulkarni and others v. The
State of Bombay(1). In Promotho Nath Roy v. W. A. Lee(2),
an order dismissing an application as barred by limitation
after rejecting an application under section 5 of the
Limitation Act to excuse the delay in presentation was held
to be one “passed on appeal” within the meaning of section
109 of the Civil Procedure Code. On the principles laid
down in these decisions, it must be held that an appeal pre-
sented out of time is an appeal, and an order dismissing it
as time-barred is one passed in appeal.
Then, the next question is whether it is an order passed
under section 31 of the Act. That section is the only
provision relating to the hearing and disposal of appeals,
and if an order dismissing an appeal as barred by limitation
is one passed in appeal, it must fall within section 31.
And as section 33 confers a right of appeal against all
orders passed under section 31, it must also be appealable.
But then, it is contended that in an appeal against
assessment the only order that could be passed under section
31 (3)(a) is one which confirms, reduces, enhances or annuls
the assessment, that such an order could be made only on a
consideration of the merits of the appeal, and that an order
dismissing it on the ground of limitation is not within the
section. That was the view taken in Dewan Chand v.
Commissioner of Income-tax(3). But there is practically a
unanimity of opinion among all the other High Courts that to
fall within the section it is not necessary that the- order
should expressly address itself to and decide on the merits
of the assessment, and that it is sufficient that the effect
of the order is to confirm the assessment
(1) [1954] S.C.R. 384, 388. (2) A.I.R. 1921 Cal. 415.
(3) [1951] 20 I.T.R. 621.
176
as when the appeal is dismissed on a preliminary point. In
Commissioner of Income-tax v. Shahzadi Begum(1),
Satyanarayana Rao, J. said:
“If the appeal is dismissed as incompetent or is rejected
as it was filed out of time and no sufficient cause was
established, it results in an affirmation of the order
appealed against”.
In Gour Mohan Mullick v. Commissioner of Agricultural
Income-tax(2), construing sections 34, 35 and 36 of the
Bengal Agricultural Income-Tax Act which are in terms
identical with those of sections 30, 31 and 33 of the Indian
Income-Tax Act, Chakravarti, J. observed:
“I would base that view on the ground that the order, in
effect, confirmed the assessment or, at any rate, disposed
of the appeal and was thus an order under section 35,
because what that section really contemplates is a disposal
or conclusion of the appeal and the forms of orders
specified in it are not exhaustive. An appellate order may
not, directly and by itself, confirm, or reduce or enhance
or annul an assessment and may yet dispose of the appeal.
If it does so, it is immaterial whether the ground is a
finding that the appeal is barred by limitation or a finding
that the case is not a fit one for extension of time or
both”.
This reasoning is also the basis of the decisions of the
Bombay and Allahabad High Courts which bold that an order
rejecting an appeal on the ground of limitation after it had
been admitted is one under section 31, though there is no
consideration of the merits of the assessment. Thus, in K.
K. Porbunderwalla v. Commissioner of Income-tax(3), Chagla,
C. J. observed:
“…. although the Appellate Assistant Commis sioner did
not hear the appeal on merits and held that the appeal was
barred by limitation his order was under section 31 and the
effect of that order was to confirm the assessment which bad
been made by the Income-tax Officer”.
In Special Manager of Court of Wards v. Commissioner
(1) [1952] 21 I.T.R. 1. (2) [1952] 22 I.T.R. 131.
(3) [1952] 21 I.T.R. 63.
177
of Income-tax(1), the Allahabad High Court stated that the
view was “possible that even though the period of limitation
is prescribed under section 30 and the power to grant
extension is also given in that section the power is really
exercised under section 31 as the Appellate Assistant
Commissioner when he decides not to extend the period of
limitation may be said in a sense to have confirmed the
assessment”.
The respondent relied on a later decision of the)
‘Allahabad High Court in Mahabir Prasad Niranjanlal v.
Commissioner of Income-tax(2), wherein it was held by the
learned Judges, departing from the previous course of
authorities of that court, that an order of the Appellate
Assistant Commissioner dismissing an appeal as time-barred
was one under section 30(2) and not under section 31, and
was therefore not appealable. This conclusion they felt
themselves bound to adopt by reason of certain observations
of this Court in Commissioner of Income-tax, Madras v. Mtt.
Ar. S. Ar. Arunachalam Chettiar(3). But when read in the
context of the point that actually arose for decision in
that case, those observations lend no support to the
conclusion reached by the learned Judges. There, the facts
were that an appeal was preferred by the assessee under
section 30(1) against an order of the Income-tax Officer,
and that was dismissed by the Appellate Assistant
Commissioner on 19-11-1945 as incompetent. No appeal was
filed against this order, and it became final. But acting
on a suggestion made in the order dated 19-11-1945, the
assessee filed an original miscellaneous application before
the Appellate Tribunal for relief, and by its order dated
20-2-1946 the Tribunal set aside the findings of the Income-
tax Officer, and directed him to make a fresh computation.
Then, on the application of the Commissioner of Income-tax,
the Tribunal referred to the High Court under section 66(1)
of the Income-tax Act the following question:
“Whether in the facts and circumstances of the
case, the order of the Bench dated 20th February,
(1) [1950] 18 I.T.R. 204, 212. (2 ) [1955] 27 I.T.R. 268.
(3) [1953] S.C.R. 463: 474-475,
178
1946 in the miscellaneous application is an approoriate
order and is legally valid and passed within the
jurisdiction and binding on the Income-tax Officer”.
The High Court declined to answer this reference on the
ground that the order of the Tribunal was not one passed in
an appeal under section 33(1), and that In consequence, the
reference under section 66(1) was itself incompetent. The
correctness of this decision was challenged on appeal to
this Court, and in affirm ing it, this Court observed:
…….. when on 19th November 1945, the Appellate
Assistant Commissioner declined to admit the appeal, the
assessee did not prefer any appeal but only made a
miscellaneous application before the Appellate Tribunal.
There is no provision in the Act permitting such an
application. Indeed, in the statement of the case the
Appellate Tribunal states that in entertaining that
application and correcting the error of the Income-tax
Officer it acted in exercise of what it regarded as its
inherent powers. There being no appeal under section 33(1)
and the order having been made in exercise of its supposed
inherent jurisdiction, the order cannot possibly be regarded
as one under section 33(4) and there being no order under
section 33(4) there could be no reference under section
66(1) or (2), and the appellate Court properly refused to
entertain it”.
There is, of course, nothing in the decision itself which
bears on the point now under discussion. But certain
observations occurring at pages 474 and 475 were referred to
by the learned Judges as leading to the conclusion that an
order dismissing an appeal as barred by time would fall
undersection 3O(2). Now, those observations came to be made
by way of answer to a new contention put forward by the
learned, Attorney-General in support of the appeal. That
contention was that the miscellaneous application presented
to the Tribunal might be treated as an appeal against the
order dated 19-11-1945, in which case the order passed
thereon on 20-2-1946 would fall under section 33(4) and the
reference would be com-
179
petent. ‘In disagreeing with this contention, this Court
observed that the appeal to the Appellate Assistant
Commissioner was incompetent under section 30(1), that even
if it was competent, the order dated 19-11-1945 was not one
contemplated by section 31, and there could be no appeal
against such an order under section 33(1). Now, it should
be noticed that the question actually referred under section
66(1) was the correctness and legality of the order passed
in a miscellaneous application and not of any order made in
an appeal preferred under section 33(1). In this context,
the point sought to be raised by the learned, Attorney-
General did not arise at all for decision, and the
observations in answer thereto cannot be read as a
pronouncement on the question of the maintainability of the
appeal, much less as a decision that an order dismissing an
appeal as barred by limitation is one under section 30(2).
Accordingly, the question whether an order dismissing an
appeal as barred by limitation falls under section 30(2) or
section 31 remains unaffected by the observations in Commis-
sioner of Income-tax, Madras v. Mtt. Ar. S. Ar. Aruna-
chalam Chettiar(1).
Then again, under the provisions of the Act, limitation is
not the only preliminary ground on which an appeal could be
disposed of without a consideration of the merits. Section
30(3) provides that an “appeal shall be in the prescribed
form and shall be verified in the prescribed manner”. If
the Appellate Assistant Commissioner holds that the appeal
does not comply with the requirements of this enactment and
rejects it on that ground, the order must be one made under
section 31, since section 30(3) makes no provision for such
an order, as does section 30(2) in the case of limitation.
All the orders under section 31 being appealable under
section 33, the order of dismissal for noncompliance with
section 30(3) must also be appealable, and it was so decided
in Maharani Gyan Manjari Kuari v. Commissioner of Income-
tax(2) . How is this view to be reconciled with the
contention that section 31 contemplates only orders on the
(1) [1953] S.C.R. 463.
(2) (1944) 12 I.T.R. 59.
180
merits of the assessment and not on preliminary issues?
Vide also the decision in Kunwarji Ananda v. Commissioner of
Income-tax(1), which was followed in Maharani Gyan Manjari
Kuari v. Commissioner of Income-tax(2), and in Ramnarayana
Das Mandal v. Commissioner of Income-tax(3). There is thus
abundant authority for the position that section 31 should
be liberally construed so as to include not only orders
passed on a consideration of the merits of the assessment
but also orders which dispose of the appeal on preliminary
issues, such as limitation and the like.
The learned Solicitor-General sought to get over these
decisions by taking up the position that section 31(3) (a)
construed in its literal and ordinary sense, conferred
jurisdiction on the Appellate Assistant Commissioner only to
pass orders on the merits of the assessment, that it was not
therefore open to him to entertain any question which did
not directly relate to such merits, and that accordingly he
could not hear or decide any issue of a preliminary nature
such as limitation, and dispose of the appeal on the ,basis
of the finding on that issue. He conceded that this
contention would run counter to numerous authorities, but
argued that they were all wrong. Having given due
consideration to this contention, we are of opinion that it
is not well-founded.
Taking the plea of limitation-which is what we are
concerned with in this appeal when there is a judgment or
order against which the statute provides a right of appeal
but none is preferred within the time prescribed therefor,
the respondent acquires a valuable right, of which he cannot
be deprived by an order condoning delay and admitting the
appeal behind his back. And when such an order is passed ex
partehe has a right to challenge its correctness at the
bearing of the appeal. That is the position under the
general law (vide Krishnasami . Panikondar v. Ramasami
Chettiar(4), and there is nothing in the provisions of the
Income Tax Act, which enacts a different principle.
(1) I L.R. 11 Patna 187; A.I.R. 1931 Patna 306; 5 I.T.C.
417.
(2) [1944]12 I.T.R. 59. (3) (1950) 18 I.T.R. 660.
(4) [1918] I.L.R. 41 Mad. 412; 45 I.A. 25.
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Therefore, if an appeal is admitted without the fact of
delay in presentation having been noticed, clearly it must
be open to the Department to raise the objection at the time
of the hearing of the appeal. That would also appear to be
the practice obtaining before. the Income-tax Tribunal, as
appears from the decisions cited before us, and that, in our
opinion, is right. Similar considerations would apply to
other objections of a preliminary character, such as one
based on section 30, sub-section (3). We should be slow to
adopt a construction which deprives parties of valuable
rights. We are therefore of opinion that contentions
relating to preliminary issues are open to consideration at
the time of the hearing of the appeal, and that the
jurisdiction of the Appellate Assistant Commissioner is not
limited to the bearing of the appeal on the merits of the
assessment only. In this view, the orders of the Appellate
Assistant Commissioner holding that there were no sufficient
reasons for excusing the delay and rejecting the appeals as
time-barred would be orders passed under section 31 and
would be open to appeal, and it would make no difference in
the position whether the order of dismissal is made before
or after the appeal is admitted.
The question referred must accordingly be answered in the
affirmative. This appeal will therefore be allowed, and the
order of the court below set aside. The appellant will have
his costs here and in the court below.
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