Right of appeal against tax penalties may be filed before payment but becomes maintainable if tax is paid by the hearing.

The note addresses appeals against penalty orders under income-tax law, holding that the proviso barring appeals until tax is paid renders the right ineffective but not extinguished; the right of appeal accrues on receipt of the notice of demand and limitation runs from that date. The proviso affects admissibility at hearing rather than filing; if the tax is paid or no arrears exist by the date of hearing, the appeal becomes sustainable and may be decided on merits. The construction favours harmonising the proviso with the main right and a remedial approach to appeals.

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Issues: Whether appeals against imposition of penalty under section 46(1) of the Income-tax Act are incompetent if the tax for which penalty was imposed has not been paid on or before the date on which the appeals are filed.

Analysis: Section 30(1) confers a right of appeal against orders imposing penalties while the proviso states that "no appeal shall lie" unless the tax has been paid. The proviso must be read in the context of the main clause conferring the right; the expression "lie" denotes sustainability or admissibility rather than the mere act of presentation. The right of appeal accrues on receipt of the notice of demand and limitation begins to run from that date under section 30(2). The proviso renders the right ineffective until payment but does not extinguish the right to file; if the tax is paid by the date of hearing (or there are no arrears on that date), the appeal becomes sustainable and may be heard on merits. A strict construction of the proviso, harmonised with the main clause and principles favouring remedial rights, supports this construction.

Conclusion: The appeals against the orders imposing penalty were competent and should be heard on the merits; the reference is answered in the negative.

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