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Dewan Chand v. Commissioner Of Income-Tax
Structured Summary of the Opinion (Khosla, J.)
Factual and Procedural Background
Two matters were before the Court: (1) Civil Reference No. 10 of 1949, a reference under Section 66(1) of the Income-tax Act made by the Income-tax Appellate Tribunal, Bombay; and (2) an application by Messrs. Diwan Chand-Atma Ram (Civil Misc. 59 of 1950) asking the Tribunal to state all seven questions originally formulated in their application to the Tribunal.
Messrs. Diwan Chand-Atma Ram, a firm from Simla, presented three separate appeals to the Appellate Assistant Commissioner of Income-tax (AAC), Delhi, against three different orders of the Income-tax Officer (orders said to arise under Section 23(3), Section 25-A and Section 26-A of the Income-tax Act). The appeals were mailed and reached Delhi on 20 February 1946, but due to the AAC having shifted his office and subsequent delivery difficulties by the post office, the packet was delivered only on 22 February 1946.
Because the appeals should have been presented on 20 February, they were, on the face of it, barred by time. The AAC declined to extend the time for filing (i.e., did not condone the delay) and dismissed the appeals as time-barred. An appeal against that dismissal was brought to the Income-tax Appellate Tribunal, which concluded that the dismissal was under Section 30 (and therefore not appealable). The petitioners then applied to the Tribunal for a statement of questions of law under Section 66(1); the Tribunal referred a single question to the High Court, and the present reference and petition to this Court followed.
Legal Issues Presented
- Whether the order of the Appellate Assistant Commissioner, Delhi, refusing to condone the delay and rejecting the appeals as time-barred was an order passed under Section 31 or under Section 30(2) of the Income-tax Act.
- Whether such an order (i.e., refusal to admit an appeal for failure to condone delay and dismissal as time-barred) is appealable.
Arguments of the Parties
Petitioners' (Appellants') Arguments
- The petitioners (Messrs. Diwan Chand-Atma Ram) contended that the AAC's actions amounted to admission of the appeals because a notice informing them of the date of hearing had been issued; on that basis they argued the order was appealable.
- Learned counsel for the petitioners relied upon two authorities said to support appealability in analogous circumstances: Maharani Gyan Manjari Kuari v. Commissioner of Income-tax, Bihar and Orissa [1944] 12 I.T.R. 59, and Ramanarayana Das Madanlal v. Commissioner of Income-tax, Bihar and Orissa [1950] 18 I.T.R. 660. These cases were presented as examples where appeals dismissed on preliminary points were held to be appealable.
The opinion does not contain a detailed account of the respondent's separate or opposing arguments beyond the Tribunal's position that the dismissal was under Section 30 and not appealable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Maharani Gyan Manjari Kuari v. Commissioner of Income-tax, Bihar and Orissa [1944] 12 I.T.R. 59 | Authority where an appeal dismissed on a preliminary point (allegation that demand notice was never received) was held to be appealable. | The Court observed that this case involved dismissal on a preliminary point but the facts differed from the present case; it was not a dismissal as barred by time. The Court treated it as distinguishable and did not apply it to hold the present order appealable. |
| Ramanarayana Das Madanlal v. Commissioner of Income-tax, Bihar and Orissa [1950] 18 I.T.R. 660 | Authority where an appeal dismissed on a preliminary matter was held appealable by a Division Bench of the Orissa High Court (though facts included payment/penalty issues and prior proceedings permitting extension in part). | The Court noted that while the reasoning of that Division Bench to some extent supported the petitioners, the facts were different and distinguishable; the learned Judge in that case had himself noted the special role of admission under subsection (2) of Section 30. |
| Shivnath Prasad v. Commissioner of Income-tax, Central and United Provinces, Lucknow | Authority holding that an appeal filed beyond time and dismissed by the AAC is not appealable. | The Court relied on this case as directly in point and supportive of the conclusion that dismissal of an appeal for being filed after the statutory period is not appealable. |
| Commissioner of Income-tax, Bombay City v. Mysore Iron and Steel Works | Authority holding that where the AAC does not extend limitation for an appeal presented after the statutory period, the order dismissing the appeal is an order under Section 30 and not appealable; includes Chagla, C.J.'s explanation of the need for an admission order before an out-of-time appeal can be entertained. | The Court cited and followed the reasoning in this case (including Chagla, C.J.'s observations) to support its conclusion that the AAC's refusal to condone delay results in an order under Section 30, which is not appealable. |
Court's Reasoning and Analysis
The Court focused on the statutory scheme created by Sections 30 and 31 of the Income-tax Act and on the consequence established by Section 33 that orders under Section 31 are appealable but orders under Section 30 are not.
The decisive part of the analysis was an examination of the concluding portion of subsection (2) of Section 30, which provides that "the appellate Assistant Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period." The Court drew the following inferences from that wording (all of which are grounded in the opinion's own text):
- An appeal that is on its face barred by time can be formally admitted only if the AAC is satisfied that there was sufficient cause for the delay (i.e., condonation must be granted).
- If the AAC is not so satisfied (or does not extend limitation) there is no formal admission of the appeal even if an entry in the register of appeals has been made.
- The statutory scheme contemplates that an appeal will be heard on the merits under Section 31 only if the preliminary defect of limitation is not present or has been removed via admission; otherwise the hearing date may be only to determine whether time should be extended.
- In the present facts, because the packet with the appeals reached the AAC after the statutory period and the AAC declined to extend time, the dismissal was an order under Section 30 (i.e., a refusal to admit an out-of-time appeal), not an order under Section 31 disposing of an appeal on the merits.
The Court reviewed the authorities relied upon by the petitioners and drew distinctions where appropriate: the Maharani and Ramanarayana cases involved dismissals on preliminary points but not dismissals for being time-barred; hence they were distinguishable on facts. By contrast, Shivnath Prasad and Commissioner of Income-tax, Bombay City v. Mysore Iron and Steel Works were treated as more directly in point and as supporting the statutory interpretation that an AAC must expressly admit (by condoning delay) an out-of-time appeal before it becomes an appealable decision under Section 31.
The Court also addressed the petitioners' contention that issuance of a hearing notice demonstrated admission. It rejected that contention, explaining (with reference to Chagla, C.J.'s observations in the Mysore Iron and Steel Works case) that issuance of a notice does not constitute the statutory "admission" contemplated by subsection (2) of Section 30; admission must follow extension of time. Because there had been no extension or condonation in the present case, the mere issue of a hearing notice did not demonstrate that the appeals had been admitted.
Holding and Implications
Holding: The Court answered the reference by holding that the order of the Appellate Assistant Commissioner in this case was an order under Section 30(2) of the Income-tax Act (a refusal to admit an out-of-time appeal) and not an order under Section 31; consequently, the order was not appealable.
Direct consequences for the parties:
- The petition (seeking further questions to be referred and challenging the Tribunal's reference) was dismissed.
- The Court made no order as to costs.
- The reference was answered accordingly in line with the reasoning above.
The opinion does not discuss broader legal implications beyond the direct effect on these proceedings; the decision resolves the reference by applying the statutory scheme to the facts and distinguishing the authorities relied upon by the petitioners.
Khosla, J:— There are two matters before us. The first (Civil Reference No. 10 of 1949) is a reference under Section 66(1) of; the Indian Income-tax Act by the Income-tax Appellate Tribunal, Bombay. In the order of reference the following question of law has been referred for our decision:—
Whether the order of the Appellate Assistant Commissioner, Delhi, refusing to condone the delay and rejecting the appeals as time barred on the date of their hearing was an order passed under Section 31 or under Section 30, clause (2), of the Income-tax Act?
2. This reference was made upon an application by Diwan Chand-Atma Ram, a firm of Simla, in which it was prayed that three questions be referred to the High Court under Section 66(1) of the Income-tax Act. In the application seven questions in all were formulated but the prayer clause referred only to three. The Income-tax Appellate Tribunal took the view that there was in reality only one question of law arising in the matter and that the other two questions were merely corollaries to the first question. It, therefore, referred only one question namely, the one cited above for our decision. Messrs. Diwan Chand-Atma Ram were dissatisfied with this reference and have made an application to this Court (Civil Misc. 59 of 1950) in which they ask for a direction to the Income-tax Appellate Tribunal to state all the seven questions which were set out in the original application of the petitioners and also in the present application. The manner in which this application arose was briefly as follows. The petitioners (Messrs. Diwan Chand-Atma Ram) presented three appeals to the Appellate Assistant Commissioner of Income-tax against three different orders of the Income-tax Officer. These orders were (1) an order of regular assessment under Section 23(3) of the Income-tax Act, (2) an order under Section 25-A of the Act and (3) an order under Section 26-A of the Act. These appeals were all sent by post and reached Delhi on 20th February, 1946. They were addressed to the Appellate Assistant Commissioner’ of. Income-tax at the address known to the petitioners. The appellate Assistant Commissioner had in the meantime shifted his office and the new address was apparently not known to the petitioners. The packet containing the appeals could not be delivered on the 20th of February and was brought back to the post office by the postman. It was entrusted to another postman on the following day but this postman also could not deliver the packet. Finally on 22nd February, 1946, the packet was delivered at the new address and the Appellate Assistant Commissioner of Income-tax sent a notice to the petitioner informing them of the date of hearing. The appeals should have been presented on the 20th of February, 1946, and as the packet containing the appeals was not delivered until the 22nd, the appeals were barred by time. When the matter came up before the Appellate Assistant Commissioner on the date fixed he declined to extend the time and dismissed the appeals as barred by time. An appeal against the order of dismissal was preferred to the Income-tax Appellate Tribunal. The Tribunal took the view that the appeals had been dismissed under Section 30 and no order under Section 30 of the Act was appealable. Upon this the petitioners applied to the Tribunal for stating a question of law under Section 66(1) of the Act and the reference and the petition before us then followed.
3. There is in reality only one question requiring our decision namely, whether the order of the Appellate Assistant Commissioner of Income-tax declining to extend to time of limitation and dismissing the appeals as barred by time is appealable or not. The other questions are really of no importance once this primary question is decided. Therefore the point for consideration is whether the order in the present case was passed under Section 30 or under Section 31. There is no doubt that an order under Section 31 is appealable but an order under Section 30 is not appealable. This is clear from the wording of Sec tion 33 of the Act.
4. Section 30 deals with the filing of appeals and their admission. The concluding portion of sub-section (2) of this section in the following terms:—
“But the appellate Assistant Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.”
5. From this it appears that the formal admission of an appeal which is on the face of it barred by time can be made only if the Appellate Assistant Commissioner is satisfied that there was sufficient cause for delay in presenting the appeal. If he is not so satisfied or if he does not extend limitation and leaves the matter undecided it is clear that there has been no formal admission of the appeal even if an entry in the register of appeals has been made. The scheme of the Act contemplates that an appeal can only be heard under Section 31 on merits if the preliminary defect of limitation is not present or has been removed. In the circumstances from the wording of the section it appears to follow that in the present case the appeal was not heard on merits it could not be said to have been formally admitted and the date of hearing fixed was merely for the purpose of determining whether time should be extended or not. The Appellate Assistant commissioner declined to extent limitation and so the order dismissing the appeal was really an order passed under Section 30 and not under Section 31. In this view of the matter it must be held that the order was not appealable.
6. Learned counsel for the petitioners relied upon two cases: Maha-rani Gyan Manjari Kuari v. Commissioner of Income-tax, Bihar and Orissa [1944] 12 I.T.R 59., and Ramanarayana Das Madanlal v. Commissioner of Income-tax, Bihar and Orissa [1950] 18 I.T.R 660.,. In both these cases the appeals were dismissed on what is usually called a preliminary point and held that the order was appealable. Neither of these appeals was dismissed as barred by time. In the first case Maharani Gyan Manjari Kuari v. Commissioner of Income-tax, Bihar and Orissa, the allegation of the assessee was that she had never got the demand notice. The Appellate Assistant Commissioner declined to enquire into the truth of this statement and dismissed the appeal. In the second case Ramanarayana Das Madanlal v. Commissioner of Income-tax, Bihar and Orissa, the petitioner was assessed with income-tax and was asked to pay the amount by a certain date. On his failure to pay this amount he was ordered to pay a penalty amounting to Rs. 1,000. His prayer for extension of time in the original instance was rejected but the Inspecting Assistant Commissioner allowed him extension. He filed an appeal against the order of the Income-tax Officer after paying the penalty but it was held that he had not paid the tax in time and so his appeal was not competent. A further appeal was taken to the Appellate Tribunal but they took the view that the order dismissing the appeal as incompetent was not passed under Section 31. A Division Bench of the Orissa High Court, however, took the contrary view and held that the appeal was competent. The reasoning upon which the judgment proceeds does to some extent support the case of the petitioners before us but the facts of that case were different and the case is distinguishable. Indeed the distinction was pointed out by the learned Judge himself who observed:—
“By contract, I refer to the admission of an appeal as provided for in the concluding portion of sub-section (2) of Section 30. That sub-section provides, in the main, a time-limit for appeals of various classes, the starting points of such time-limits varying according to the circumstances of each of the cases mentioned therein.”
7. The learned Judge then quoted the concluding portion of subsection (2) and observed:—
“This makes it clear that the stage of admission is interposed between the presentation of an appeal and its hearing and disposal under Section 31 in cases in which an appeal is not presented within the prescribed time-limit. The necessary inference, therefore, is that in all other cases that appeals, as soon as presented, must come up for decision under Section 31.”
8. There are two cases on the other hand which are more in point, The first of these, Shivnath Prasad v. Commissioner of Income-tax, Central and United Provinces, Lucknow, was a case in which the appeal to the Appellate Assistant Commissioner was filed beyond time and it was held that an order dismissing such an appeal is not appealable, Similarly, in Commissioner of Income-tax, Bombay City v. Mysore Iron and Steel Works, it was held that where the Appellate Assistant Com-missioner does not extend limitation in respect of an appeal presented after the statutory period of thirty days the order dismissing the appeal is an order under Section 30 and is, therefore, not appealable. Chagla, C.J, in the course of his judgment observed:—
“An assessee 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, 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.”
9. With these observations with very great respect I find myself in entire agreement.
10. Learned counsel for the petitioners contended that in the persent case the appeal had in fact been admitted as a notice informing the petitioners of the date of hearing was issued. The issuing of such a notice, however, does not imply that the appeal had been admitted in the sense contemplated by sub-section (2) of Section 30. In fact, as pointed out by Chagla, C.J, in the above mentioned case, the admission of an appeal must follow extension of time. In the present case, it is clear that there has been no extension of the time or condonation of the delay and, therefore, the mere issue of a notice informing the petitioners of the date on which their appeal would be considered does not mean that their appeal had been admitted. For the reasons given above, I would say in answer to the question referred to us by the Income-tax Tribunal that the order of the Appellate Assistant Commissioner in this case was an order under Section 30(2) of the Act and not under Section 31.
11. It is unnecessary to deal with the other question set out in the petitioner's application as the answer to these question must follow as corollaries to the answer proposed by me. The petition will be dismissed but I make no order as to costs.
Weston, C.J— I agree.
12. Reference answered accordingly.
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