1961 (4) TMI 109 - HC - Income Tax

Tax Appeal Allowed When Tax Paid Before Hearing

The court interpreted the proviso to section 30(1) of the Indian Income-tax Act, holding that the right to file an appeal against a penalty order exists, ... - Issues:Interpretation of proviso to section 30(1) of the Indian Income-tax Act regarding the payment of tax for filing an appeal against the imposition of penalty under section 46(1).Detailed Analysis:The judgment involves a reference under section 66(1) of the Indian Income-tax Act concerning the assessment years 1945-46, 1946-47, and 1947-48 for an assessee engaged in the business of cloth and utensil manufacturing. The assessee was assessed on income for these years, and penalty orders were imposed under section 46(1) of the Act due to non-payment of taxes and penalties (para 1-2).The core issue revolved around the interpretation of the proviso to section 30(1) of the Act, which states that 'no appeal shall lie against an order under sub-section (1) of section 46 unless the tax has been paid.' The Tribunal and the Appellate Assistant Commissioner had held that the appeals against the penalty orders were incompetent as the tax had not been paid when the appeals were filed (para 3-4).The court analyzed the language of the proviso and the main clause of section 30(1) to determine the legislative intent. It emphasized that the right of appeal against a penalty order is conferred by the main clause, and the proviso only qualifies that right by stating that it shall not be effective unless the tax is paid (para 5-6).The court interpreted the phrase 'no appeal shall lie' in the proviso, concluding that it does not bar the entertainment of an appeal altogether but makes it ineffective until the tax is paid. The court held that the right to file an appeal exists, and the appeal becomes effective only after the tax is paid (para 7-8).The judgment highlighted that the proviso does not specify the timeline for tax payment to make the appeal competent, and it should be strictly construed without adding additional conditions. The court emphasized that statutes related to the right of appeal should be liberally construed in favor of the right, especially in fiscal matters like income tax (para 9-10).The court referred to similar decisions by the Patna and Bombay High Courts supporting their interpretation and disagreed with a contrary view by the Andhra High Court. Ultimately, the court held that if the tax is paid by the date of the appeal hearing, the appeal is competent and should be heard on its merits (para 11-12).In the specific case, as the assessee was no longer in arrears of tax when the appeals were heard, the court concluded that the appeals against the penalty orders were competent. The court answered the reference in the negative, directing the department to pay the costs of the reference (para 13).