COMMISSIONER OF INCOME TAX Vs. SHAHZADI BEGUM

JUDGEMENT

(1.) THE question referred to us under Section 66(1) of the Indian Income-tax Act by the Income-tax Appellate Tribunal is:

(2.) THE following facts relevant for the consideration of the question are taken from the statement of the case by the Appellate Tribunal. THE assessees are the joint receivers appointed by the High Court for the management of the estate of the late Md. Umar Sahib of Madras. THE receivers were, however, discharged after the application for reference under Section 66(1) was filed before the Tribunal and in their place, the heirs of the deceased were brought on record as respondents. For the accounting year 1943 a return of the income was made treating the estate as one single unit. THE heirs, however, raised the contention that the assessment should be made upon them individually in proportion to the shares of the Income which they obtained from the estate to which they succeeded. While that assessment was pending enquiry before the Income-tax Officer, for the subsequent year 1944, a return was again submitted by the assessees for separate assessment. THE claim of the assessees for separate assessment was rejected by the Income-tax Officer for the two years. Against the order of the Income-tax Officer, appeals were preferred to the Appellate Assistant Commissioner and they were pending. For the accounting year 1945 again a similar claim was made by the heirs in their return submitted to the Income-tax Officer, and following the previous decision, the Income-tax Officer again negatived the claim. Against this order also there was an appeal to the Appellate Assistant Commissioner, which was filed on the 28th September 1946. THE appeal was however out of time by 64 days. In a covering letter which they submitted to the Appellate Assistant Commissioner along with the memorandum of appeal, the assessees prayed for the condo nation of the delay on the ground that the staff which received the order of the Income-tax Officer mislaid it and omitted to bring it to the notice of the assessees for the purpose of filing the appeal. THE Appellate Assistant Commissioner was not satisfied with that explanation and therefore rejected the appeal on llth October 1948. An appeal was thereafter preferred to the Appellate Tribunal against the order of the Ap- pellate Assistant Commissioner rejecting the appeal. This appeal also was filed out of time but the Appellate Tribunal condoned the delay accepting the explanation offered by the assessees. When the appeal was taken up for hearing by the Tribunal, the departmental representative raised the preliminary objection that no appeal lay as the order of the Appellate Assistant Commissioner rejecting the appeal was an order under Section 30 of the Income-tax Act which was not appeasable and that therefore the Tribunal had no Jurisdiction to hear and dispose of the appeal. THE Tribunal did not accept the contention, as in their opinion, the order of the Appellate Assistant Commissioner rejecting the appeal as time barred was a disposal of the appeal, and as the only section which empowered the Appellate Assistant Commissioner to dispose of an appeal was Section 31, the order of the Appellate Assistant Commissioner should be treated as one made under Section 31 of the Act. THErefore, the order, it was held by the Appellate Tribunal, was appealable. In the result the Tribunal allowed the appeal of the assessees and set aside the order of the Appellate Assistant Commissioner and remitted the case back for hearing. THE question set out above was referred to this Court at the instance of the Income-tax Commissioner.

(3.) THE argument however most strongly pressed was that in enumerating the powers in Sub-section 3 to Section 31 power to reject an appeal was not expressly mentioned, which, it was claimed, was an indication that the preliminary stages of an appeal and the disposal and hearing of it were not within the purview of Section 31. We are unable to agree with this view. 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. When pressed, learned counsel however was forced to concede that if an appeal, though out of time, was admitted by mistake and at the hearing an objection was taken by the respondent which was upheld, the order rejecting the appeal at that stage would fall under Section 31. One of the decisions of the Allahabad High Court even held that once the delay was condoned and the appeal was admitted, but later, on the objection of the respondent, it was found that the condonation of the delay at the earlier stage proceeded on a mistake, an order rejecting the appeal at that stage would be one under Section 31. It is also stated that if a date for the hearing of the appeal was axed and the appeal was heard, the order might possibly fall under Section 31. If the argument in support of the Allahabad view were correct, where is the power under Section 31 to reject an appeal even under those circumstances? It must be conceded that the order of rejection under such circumstances would amount to confirmation of the order of the Income-tax Officer. THE difficulty arises according to the argument advanced on behalf of the Income-tax Commissioner only in cases where the delay was not condoned by the Appellate Assistant Commissioner and when he deals with the matter ex parte. In such a case, it is said that the order would be outside the purview of Section 31. It is difficult to make a distinction in the manner suggested. It only shows and reinforces the argument that all the powers exercised and exercisable by the appellate authority are derived under Section 31 and that the language of Section 31 is wide enough to cover the two stages of the hearing of the appeal whether It related to questions of a preliminary nature or whether it related to the merits of the appeal. THE decision of the Allahabad High Court in 'Jot Ram v. Commissioner of Income-tax, U. P. 1934 2 ITR 129 (All), already referred to was followed by the same Court in 'Shivnath Prasad v. Commissioner of Income-tax', Central and United Provinces, (1935) 3 I T R 200 (All) in which the question was whether an order rejecting an appeal by the Assistant Commissioner as time barred was within the purview of Ss. 31, 32 or 33 of the Income-tax Act as ifc stood before 1939 and the High Court could direct the Commissioner to state a case under Section 66 of the Act. It was held that the order was not within Section 31 or any other section. It was an appeal filed out of time and the delay in presenting was not condoned and the appeal was non-existent; the question of the power to reject an appeal under any particular section of the Act was not considered by the learned Judges. An order rejecting an appeal on the ground of limitation was not considered to be an order confirming an assessment within the meaning of Section 31. According to the learned Judges an order confirming an assessment is an order which has reference to the assessment and which affirms it; in other words an express affirmation of the order of assessment should be made. All that the section says is that in disposing of an appeal, the Appellate Assistant Commissioner may in the case of an order of assessment confirm the order; if the appeal is rejected or if the appeal is dismissed it tantamounts "to a confirmation of the order. It is not the form in which the judgment is pronounced that matters, but the substance and the consequence of the dismissal or rejection of the appeal. In a recent decision of the same Court in 'Special Manager, Court of Wards v. Commissioner of Income-tax, U. P. 1950 18 ITR 204 (All), there are observations doubting the correctness of the decision in 'Shivnath Prasad v. Commissioner of income-tax, C. P. and U. P.' 1935 3 ITR 200 (All) though obiter, for it was found even by the Appellate Tribunal that the case was not one in which the delay should be excused on the merits, as they were not satisfied with the sufficiency of the grounds for condoning the delay. After referring to a decision of the Patna High Court to the contrary, this is what the learned Judges state at page 212: "THE other view at the same time may be 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. This question may assume some importance to a case where the appeal was within time but the Appellate Assistant Commissioner made a mistake and refused to admit it on the ground that the appeal was barred by limitation or the question might well have to be seriously considered in a case where there was sufficient cause for condonation of the delay and the exercise of the discretion by the Appellate Assistant Com- missioner was considered to be perverse. In the case before us, however, both the Appellate Assistant Commissioner as well as the Appellate Tribunal considered the case on the merits and both were of the opinion that there were no sufficient grounds for the condonation of the delay..... in the circmstances of the case, there is no point in having the question further considered by a larger Bench."