Appeal maintainability under tax proviso: non-payment on filing did not bar hearing once tax was paid before argument.

An appeal against a penalty order under section 46(1) of the Indian Income-tax Act, 1922 was held to remain competent even though the tax had not been paid when the appeal was filed. Section 30(1) gave a right of appeal, and the proviso stating that no appeal shall lie unless tax has been paid was construed strictly as affecting maintainability, not as barring filing or entertainment of the appeal itself. Reading sections 29 and 30 together, the right of appeal arose on service of the demand notice, and payment by the date of hearing was sufficient to keep the appeal effective. The proviso did not prevent hearing on merits once tax was paid.

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Issues: Whether an appeal against an order imposing penalty under section 46(1) of the Indian Income-tax Act, 1922 was incompetent merely because the tax had not been paid on the date the appeal was filed.

Analysis: Section 30(1) expressly conferred a right of appeal against an order imposing penalty, while the proviso stated that no appeal shall lie unless the tax has been paid. The expression used in the proviso was contrasted with language that would have barred presentation or entertainment of the appeal altogether. The proviso was read strictly, and the word "lie" was understood as meaning sustainable or maintainable rather than as barring filing itself. The scheme of sections 29 and 30 showed that the right of appeal accrued on service of the notice of demand and that limitation ran from that date. A liberal construction of appeal provisions, and the rule that doubt in a fiscal statute should be resolved in favour of the assessee, supported the view that payment of tax up to the date of hearing was sufficient to make the appeal effective.

Conclusion: The appeals were competent despite non-payment of tax on the date of filing, and the bar in the proviso did not prevent their hearing on the merits if the tax stood paid by the date of hearing.

Ratio Decidendi: A proviso barring an appeal unless tax has been paid does not, in the absence of express language, prohibit the filing or entertainment of the appeal; it only suspends its effectiveness until the tax is paid.

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