Subsisting demand is not required to maintain an appeal; tribunals must decide the legal validity rather than dismiss as infructuous.

Whether an appeal becomes infructuous absent a subsisting demand was the central issue; the applicable principle is that the right of appeal under section 33 does not require a subsisting demand. The appellate authority had remanded factual findings on cash credits but left undecided the legal objection to initiation of proceedings under section 34, a question capable of determination on record. The Tribunal therefore erred in treating the appeal as infructuous instead of deciding the legal validity; the appeal should not have been dismissed and the question is resolved for the assessee.

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Issues: Whether in the circumstances of the case the Tribunal was justified in dismissing the appeal as being infructuous?

Analysis: The Appellate Tribunal dismissed the assessee's appeal on the ground that there was no subsisting demand following the order of the Appellate Assistant Commissioner and therefore the appeal had become infructuous. Section 33 (appeal to the Appellate Tribunal) contains no requirement that a subsisting demand must exist for an assessee to maintain an appeal. The Appellate Assistant Commissioner had remanded the matter after overruling the Income-tax Officer's findings on cash credits, but had not decided the legal objection to the initiation of proceedings under section 34. The principal question before the Tribunal was the legal validity of the proceedings under section 34, which could be determined on the material on record; the Tribunal erred in refusing to decide that legal question and treating the appeal as infructuous simply because there was no subsisting demand.

Conclusion: The Tribunal misdirected itself in law in holding that a subsisting demand was essential to the maintainability of the appeal; the Tribunal was not justified in dismissing the appeal as infructuous. The question is answered in the negative, in favour of the assessee.

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