Tax appeal maintainable after payment under modified demand; unraised competency objection could not later invalidate merits decision.

A tax appeal subject to a proviso requiring payment of tax was treated as maintainable where the tax due under the operative or modified demand had been paid before disposal, even if it was unpaid on the date of presentation. The proviso was read as a condition precedent linked to the tax then due for payment, while the limitation provision governed presentation time. The Court also treated the Commissioner's instalment order as modifying the original demand and held that any objection not raised before the appellate authority did not later defeat an appeal decided on merits. The appellate order was therefore valid.

---

---

Issues: (i) Whether an appeal against a penalty order under section 46(1) of the Income-tax Act, 1922 was maintainable when the tax had not been paid on the date of presentation but was paid before disposal of the appeal; (ii) Whether the failure of the Income-tax Officer to object to the competency of the appeal conferred jurisdiction on the Appellate Assistant Commissioner to hear and decide it.

Issue (i): Whether an appeal against a penalty order under section 46(1) of the Income-tax Act, 1922 was maintainable when the tax had not been paid on the date of presentation but was paid before disposal of the appeal.

Analysis: The proviso to section 30(1) makes payment of tax a condition precedent to the right of appeal, while section 30(2) deals only with limitation for presentation. Read together, the provisions require that the appeal must be presented only when the tax due for payment has been paid. The Court also treated the instalment order passed by the Commissioner as modifying the original demand, so that the relevant question was whether tax due under the modified order had been paid. On that footing, and alternatively because the tax payable under the instalment arrangement had been cleared before disposal, the appeal could not be rejected as incompetent.

Conclusion: The appeal was maintainable and the answer to this issue was in favour of the assessee.

Issue (ii): Whether the failure of the Income-tax Officer to object to the competency of the appeal conferred jurisdiction on the Appellate Assistant Commissioner to hear and decide it.

Analysis: If any defect existed, it was at most an irregularity in the exercise of jurisdiction, not an absence of jurisdiction. By the time the appeal was disposed of, the tax due under the instalment order had been paid. Since the objection was not raised before the appellate authority and the appeal was in fact decided on merits, the revenue could not later contend that the appeal ought to have been dismissed as incompetent. The Court therefore treated the appellate order as valid.

Conclusion: The Appellate Assistant Commissioner had jurisdiction to dispose of the appeal, and the answer to this issue was in favour of the assessee.

Final Conclusion: The reference was answered by holding that payment of the tax due under the modified demand satisfied the statutory condition for appeal, and that no jurisdictional objection survived against the appellate order.

Ratio Decidendi: Where a tax appeal is subject to a proviso requiring payment of tax, the expression refers to tax due for payment under the operative demand, and an objection not taken before the appellate authority cannot later invalidate an appeal decided on merits when the statutory condition has been satisfied.

---