Appellate order on incompetency remains appealable when, in substance, it rejects an income-tax appeal under the Act.

An order of the Appellate Assistant Commissioner dismissing an assessee's appeal as incompetent was treated, in substance, as an appellate order under section 31 of the Income-tax Act, 1922 and was therefore appealable. The form or label of the order was not decisive; the substance had to be examined. Relying on the broad construction of section 31 and earlier authority, the court noted that dismissal of an appeal on a preliminary ground such as incompetency does not prevent the order from being one passed in appeal. The reference was answered in favour of the assessee.

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Issues: Whether an order of the Appellate Assistant Commissioner dismissing an appeal as incompetent against an order purporting to be made under section 35 of the Income-tax Act, 1922, was an order under section 31 of the Act and therefore appealable.

Analysis: Section 30 of the Income-tax Act, 1922 conferred a right of appeal where an assessee denied his liability to be assessed under the Act. The form or label attached to the order was not conclusive; the substance of the order had to be examined. Earlier authorities had held that an order dismissing an appeal on a preliminary ground, including limitation or incompetency, did not cease to be an appellate order merely because it did not decide the assessment on merits. The Supreme Court's exposition of the scope of section 31 in Mela Ram and Sons made it clear that section 31 was to be construed broadly enough to include orders rejecting an appeal on preliminary grounds. Applying that principle, an order refusing to entertain the assessee's appeal on the footing that no appeal lay was itself an order passed in appeal under section 31.

Conclusion: The order was appealable and the reference was answered in the negative, in favour of the assessee and against the department.

Ratio Decidendi: An order of the Appellate Assistant Commissioner which dismisses an appeal on a preliminary ground such as incompetency is an order under section 31 of the Income-tax Act, 1922 if, in substance, the assessee is denying liability to be assessed under the Act.

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