Appeal No 17 of 1954
Appeal by Special Leave from the Judgment and Order dated the 11th day of June 1951 of the Punjab High Court in Civil Reference No 2 of 1951
Hardyal Hardy and Sardar Singh for the appellant
C K Daphtary Solicitor General of India G N Joshi and R H Dhebar with him for the respondent
February 21
The Judgment of the Court was delivered by VENKATARIAMA AYYAR J
The appellant is a firm carrying on business at Ludhiana in the Punjab
The Income tax Officer assessed its income for 1945 1946 at Rs 71186 and on 17 9 1947 a notice of demand was served on it for Rs 29857 6 0 on account of income tax and super tax
The appellant preferred an 168 appeal against the assessment and it was actually received in the office of the Appellate Assistant Commissioner on 5 11 1947
It was then out of time by 19 days but the appeal was registered as No 86 and notice for hearing under section 31 was issued for 13 12 1947 and after undergoing several adjournments it was actually heard on 1 10 1948
For the year 1946 1947 the Income tax Officer assessed the income of the firm at Rs 109883 and on 29 9 1947 a notice of demand was served on it for Rs 51313 14 0 on account of income tax and super tax
The appellant preferred an appeal against this assessment and it was actually received in the office of the Appellate Assistant Commissioner on 5 11 1947 and it was then 7 days out of time
It was registered as No 89 and notice for hearing under section 31 was issued for 24 6 1948
Eventually it was heard along with Appeal No 86 on 1 10 1948
At the hearing the Department took the objection that the appeals were presented out of time and were therefore liable to be dismissed
The appellant prayed for condonation of the delay on the ground that following on the partition of the country the conditions were very unsettled that curfew order had been promulgated and was in force and that the post office did not accept registered letters and that the traffic on the Grand Trunk Road was closed and that in view of these exceptional circumstances it bad sufficient cause for not presenting the appeals in time
On 31 12 1948 the Appellate Assistant Commissioner passed orders in both the appeals holding that there was not sufficient ground for condoning the delay and rejecting them in limine
These orders were purported to be passed under section 31 read along with section 302
Against these orders the appellant preferred appeals under section 33 of the Act to the Appellate Tribunal which by its order dated 4 4 1950 dismissed them on the ground that the orders of the Assistant Commissioner were in substance passed under section 30 2 and not under section 31 and that no appeal lay against them under section 33 On the applica 169 tions of the appellant the Tribunal referred under section 661 of the Income Tax Act the following question for the decision of the High Court of Punjab Whether in the circumstances of the case appeals lay to the Tribunal against orders of the Appellate Assistant Commissioner dismissing the appeals against the assessments for the years 19451946 and 1946 1947 in limine
The reference was beard by Khosla and Harnam Singh JJ who held following an earlier decision of that court in Dewan Chand vs Commissioner of Incometax1 that the orders of the Appellate Assistant Commissioner were under section 302 and not appealable under section 33
Certificate to appeal to this Court against this order having been refused by the High Court the appellant applied for and obtained leave to appeal to this Court under article 136 of the Con stitution and that is how the appeal comes before US
The provisions of the Act bearing on the question may now be referred to
Section 301 confers on the assessee a right of appeal against orders passed under the sections specified therein
Section 302 provides that the appeal shall ordinarily be presented within thirty days of the order of assessment but the Appellate Assistant Commissioner may admit an appeal after the expiration of the period if he is satisfied that the appellant bad sufficient cause for not presenting it within that period
Section 303 provides that the appeal shall be in the prescribed form and shall be verified in the prescribed manner
Section 311 enacts that the Appellate Assistant Commis sioner shall fix a day and place for the hearing of the appeal and may from time to time adjourn the hearing
Section 313 specifies the orders that may be passed in appeals according as they are directed against orders passed under the one or the other of the sections of the Act which are specified in section 301
When the appeal is against an order of assessment under section 23 and this is what we are con 1 1951 20  170 cerned with in this appeal it is provided in section 313 clauses a and b that in disposing of the appeal the Appellate Assistant Commissioner may a confirm reduce enhance or annul the assessment or b set aside the assessment and direct the
Incometax Officer to make a fresh assessment after making such further enquiry as the Income tax Officer thinks fit
Section 331 enacts that Any assessee objecting to an order passed by an Appellate Assistant Commissioner under section 28 or section 31 may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him
Stated succinctly section 30 confers a right of appeal on the assessee section 31 provides for the hearing and disposal of the appeal and section 33 confers a right of further appeal against orders passed under section 31 Now on these provisions the question is whether an order dismissing an appeal presented under section 30 as out of time is one under section 302 or under section 31 of the Act
If it is the former there is no appeal provided against it if it is the latter it is open to appeal under section 33
On this question there has been a sharp conflict of opinion among different High Courts and even among different Benches of the same High Court
The Bombay High Court has held that when an appeal is presented out of time and there is no order of condonation of delay under section 302 there is in law no appeal before the Appellate Assistant Commissioner and that an order by him rejecting the appeal does not fall within section 31 and is not appealable Commissioner of Income tax vs Mysore Iron and Steel Works1 and K K Porbunderwalla vs Commissioner of Income tax2 but that if the appeal is admitted after an order of condonation is made under section 302 an order subsequently passed dismissing it on the ground of limitation would be one under section 31 and would be appealable under section 33 and the result will be the same even when the appeal is admitted without 1 1949  2 171 any order of condonation under section 302 Champalal A sharam vs Commissioner of Income tax1
The High Court of Allahabad has also taken the same view and held that an order refusing to condone delay and rejecting an appeal before it was admitted was not one under section 31 and was not appealable Vide Shivnath Prasad vs Commissioner of Income tax Central and U P3 and Municipal Board Agra vs Commissioner of Income tax U P 3  but that ail order dismissing the appeal as time barred after it had been admitted was one under section 31 and was appeable Mohd Nain Mohd Alam vs Commissioner of Income tax1
The High Court of Punjab has held following Shivnath Prasad vs Commissioner of Incometax Central and U P2 and Commissioner of Incometax vs Mysore Iron and Steel Works5 that when the Appellate Assistant Commissioner declines to condone delay and rejects the appeal it is one under section 302 and not appealable
It has further held that even if the appeal bad been admitted without an order of condonation and dismissed at the hearing on the ground of limitation it would not be under section 31 because the scheme of the Act contemplated that an order to be passed under that section must relate to the merits of the assessment
It is on this decision that the judgment under appeal is based It may be mentioned that the decision in Dewan Chand vs Commissioner of Income tax6 was dissented from in a recent decision of the Punjab High Court in General Agencies vs Income tax Commissioner7 
In Commissioner of Income tax vs Shahzadi Begum the Madras High Court has held that an order declining to excuse delay and rejecting the appeal is one under section 31 whether it is made before the appeal is admitted or after and that an appeal which is filed out of time is nonetheless an appeal for purposes of section 31 and that an order dismissing it would be appealable under section 33
In Gour Mohan 1  3 5 7 AI R 1956 Punjab 26
2 4 6 8 172 Mullick vs Commissioner of Agricultural Income tax1 the Calcutta High Court has after a full discussion come to the conclusion that an order of dismissal on the ground of limitation at whatever stage was one which fell under section 31
It is unnecessary to refer to the views expressed in decisions of other High Courts as the point now under discussion did not directly arise for decision therein
The question is which of these views is the correct one to adopt
We start with this that under section 33 it is only orders under section 31 that are appealable
The question therefore narrows itself to this whether an order declining to condone delay and dismissing the appeal as barred by time is an order under section 31
It will be if it is passed in appeal against an order of assessment and is one which affirms it
Now the conflicting views expressed by the several High Courts centre round two points 1 when an appeal is presented out of time and there has been a refusal to condone delay under section 302 is an order rejecting it as time barred one passed in appeal and 2 if it is is such an order one confirming the assessment within section 313a On the first point as already stated it has been held by the Bombay High Court that while an order dismissing an appeal as time barred after it is admitted is one under section 31 a similar order passed before it is admitted is one under section 302
The ratio of this distinction is stated to be that in law there is no appeal unless it is presented in time and if presented beyond time unless the delay is excused
In Commissioner of Income tax vs Mysore Iron and Steel Works2 Chagla CJ stated the position thus An asseesee has a statutory right to present an appeal within thirty days without any order being required from the Appellate Assistant Commissioner for admission of that appeal
But if the time prescribed expires then that statutory right to present an appeal goes and an appeal can only be entertained provided it is admitted by the Appellate Assistant Commissioner after condoning the delay
1 2 173 Therefore before an appeal could be admitted in this case an order from the Appellate Assistant Commissioner was requisite that the delay had been condoned and it was only on such an order being made that the appeal could be entertained by the Appellate Assistant Commissioner
Now section 31 deals only with such appeals which are presented within the prescribed period or admitted after the delay has been condoned and the procedure laid down in section 31 with regard to the hearing of appeals only applies to such appeals
Therefore in my opinion when the Appellate Assistant Commissioner refused to condone the delay there was no appeal before him which he could hear and dispose of as provided under section 31 of the Act
Section 33 then gives the right of appeal to the assessee from an order made by the Appellate Assistant Commissioner either under section 28 or under section 31
Therefore the Legislature did not give the right of appeal to the assessee against an order made by the Appellate Assistant Commissioner under section 30 of the Act
Learned counsel for the appellant disputes the correctness of the last observation that an order of the Appellate Assistant comissioner refusing to condone the delay is one under section 302 and contends that the only order that could be passed under that section was one excusing delay and an order refusing to condone it will fall outside it and that such an order could only be made under section 31
We find it difficult to accede to this contention
When power is granted to an authority to be exercised at his discretion it is necessarily implicit in the grant that he may exercise it in such manner as the circumstances might warrant
And if the Appellate Assistant Commissioner has a discretion to excuse the delay he has also a discretion in appropriate cases to decline to do so
We are therefore of opinion that the refusal to excuse delay is an order under section 302
But the question still remains whether the view taken in Commissioner of Income tax vs Mysore Iron 23 174 and Steel Works1 and K K Porbunderwalla v Commissioner of Income tax 2 that an appeal which is filed beyond the period of limitation is in the eye of law no appeal unless and until there is a condonation of delay and that in consequence an order passed thereon cannot be held to be passed in appeal so as to fall within section 31 is right
Now a right of appeal is a substantive right and is a creature of the statute
Section 301 confers on the assessee a right of appeal against certain orders and an order of assessment under section 23 is one of them
The appellant therefore had a substantive right under section 301 to prefer appeals against orders of assessment made by the Income tax Officer
Then we come to section 302 which enacts a period of limitation within which this right is to be exercised
If an appeal is not presented within that time does that cease to be an appeal as provided under section 301 It is well established that rules of limitation pertain to the domain of adjectival law and that they operate only to bar the remedy but not to extinguish the right
An appeal preferred in accordance with section 301 must therefore be an appeal in the eye of law though having been presented beyond the period mentioned in section 302 it is liable to be dismissed in limine
There might be a provision in the statute that at the end of the period of limitation prescribed the right would be extinguished as for example section 28 of the Limitation Act but there is none such here
On the other hand in conferring a right of appeal under section 301 and prescribing a period of limitation for the exercise thereof separately under section 30 2 the legislature has evinced an intention to maintain the distinction well recognised under the general law between what is a substantive right and what is a matter of procedural law
In Nagendranath Dey vs Suresh Chandra Dey3 Sir Dinshaw Mulla construing the word  appeal  in the third column of article 182 of the Limitation Act observed There is no definition of appeal in the Civil Pro 1 2 3 59 IA 283 287
175 cedure Code but their Lordships have no doubt that any application by a party to an appellate Court asking it to set aside or revise a decision of a subordinate Court is an appeal within the ordinary acceptation of the term and that it is no less an appeal because it is irregular or incompetent
These observations were referred to with approval and adopted by this Court in Raja Kulkarni and others vs The State of Bombay1
In Promotho Nath Roy vs W A Lee2 an order dismissing an application as barred by limitation after rejecting an application under section 5 of the Limitation Act to excuse the delay in presentation was held to be one passed on appeal within the meaning of section 109 of the Civil Procedure Code
On the principles laid down in these decisions it must be held that an appeal pre sented out of time is an appeal and an order dismissing it as time barred is one passed in appeal
Then the next question is whether it is an order passed under section 31 of the Act
That section is the only provision relating to the hearing and disposal of appeals and if an order dismissing an appeal as barred by limitation is one passed in appeal it must fall within section 31
And as section 33 confers a right of appeal against all orders passed under section 31 it must also be appealable
But then it is contended that in an appeal against assessment the only order that could be passed under section 31 3a is one which confirms reduces enhances or annuls the assessment that such an order could be made only on a consideration of the merits of the appeal and that an order dismissing it on the ground of limitation is not within the section
That was the view taken in Dewan Chand vs Commissioner of Income tax3
But there is practically a unanimity of opinion among all the other High Courts that to fall within the section it is not necessary that the order should expressly address itself to and decide on the merits of the assessment and that it is sufficient that the effect of the order is to confirm the assessment 1 1954 SCR 384 388
2 AIR 1921 Cal
3 176 as when the appeal is dismissed on a preliminary point
In Commissioner of Income tax vs Shahzadi Begum1 Satyanarayana Rao J said If the appeal is dismissed as incompetent or is rejected as it was filed out of time and no sufficient cause was established it results in an affirmation of the order appealed against
In Gour Mohan Mullick vs Commissioner of Agricultural Income tax2 construing sections 34 35 and 36 of the Bengal Agricultural Income Tax Act which are in terms identical with those of sections 30 31 and 33 of the Indian Income Tax Act Chakravarti J observed I would base that view on the ground that the order in effect confirmed the assessment or at any rate disposed of the appeal and was thus an order under section 35 because what that section really contemplates is a disposal or conclusion of the appeal and the forms of orders specified in it are not exhaustive
An appellate order may not directly and by itself confirm or reduce or enhance or annul an assessment and may yet dispose of the appeal
If it does so it is immaterial whether the ground is a finding that the appeal is barred by limitation or a finding that the case is not a fit one for extension of time or both
This reasoning is also the basis of the decisions of the Bombay and Allahabad High Courts which bold that an order rejecting an appeal on the ground of limitation after it had been admitted is one under section 31 though there is no consideration of the merits of the assessment
Thus in K K Porbunderwalla vs Commissioner of Income tax3 Chagla C J observed  although the Appellate Assistant Commis sioner did not hear the appeal on merits and held that the appeal was barred by limitation his order was under section 31 and the effect of that order was to confirm the assessment which bad been made by the Income tax Officer
In Special Manager of Court of Wards vs Commissioner 1 2 3 177 of Income tax1 the Allahabad High Court stated that the view was possible that even though the period of limitation is prescribed under section 30 and the power to grant extension is also given in that section the power is really exercised under section 31 as the Appellate Assistant Commissioner when he decides not to extend the period of limitation may be said in a sense to have confirmed the assessment
The respondent relied on a later decision of the Allahabad High Court in Mahabir Prasad Niranjanlal vs Commissioner of Income tax2 wherein it was held by the learned Judges departing from the previous course of authorities of that court that an order of the Appellate Assistant Commissioner dismissing an appeal as time barred was one under section 302 and not under section 31 and was therefore not appealable
This conclusion they felt themselves bound to adopt by reason of certain observations of this Court in Commissioner of Income tax Madras vs Mtt
section Ar
Arunachalam Chettiar3
But when read in the context of the point that actually arose for decision in that case those observations lend no support to the conclusion reached by the learned Judges
There the facts were that an appeal was preferred by the assessee under section 301 against an order of the Income tax Officer and that was dismissed by the Appellate Assistant Commissioner on 19 11 1945 as incompetent
No appeal was filed against this order and it became final
But acting on a suggestion made in the order dated 19 11 1945 the assessee filed an original miscellaneous application before the Appellate Tribunal for relief and by its order dated 20 2 1946 the Tribunal set aside the findings of the Income tax Officer and directed him to make a fresh computation
Then on the application of the Commissioner of Income tax the Tribunal referred to the High Court under section 661 of the Income tax Act the following question Whether in the facts and circumstances of the case the order of the Bench dated 20th February 1  212
2  3  474 475 178 1946 in the miscellaneous application is an approoriate order and is legally valid and passed within the jurisdiction and binding on the Income tax Officer
The High Court declined to answer this reference on the ground that the order of the Tribunal was not one passed in an appeal under section 331 and that In consequence the reference under section 661 was itself incompetent
The correctness of this decision was challenged on appeal to this Court and in affirm ing it this Court observed   when on 19th November 1945 the Appellate Assistant Commissioner declined to admit the appeal the assessee did not prefer any appeal but only made a miscellaneous application before the Appellate Tribunal
There is no provision in the Act permitting such an application
Indeed in the statement of the case the Appellate Tribunal states that in entertaining that application and correcting the error of the Income tax Officer it acted in exercise of what it regarded as its inherent powers
There being no appeal under section 331 and the order having been made in exercise of its supposed inherent jurisdiction the order cannot possibly be regarded as one under section 334 and there being no order under section 334 there could be no reference under section 661 or 2 and the appellate Court properly refused to entertain it
There is of course nothing in the decision itself which bears on the point now under discussion
But certain observations occurring at pages 474 and 475 were referred to by the learned Judges as leading to the conclusion that an order dismissing an appeal as barred by time would fall undersection 3O2
Now those observations came to be made by way of answer to a new contention put forward by the learned Attorney General in support of the appeal
That contention was that the miscellaneous application presented to the Tribunal might be treated as an appeal against the order dated 19 11 1945 in which case the order passed thereon on 20 2 1946 would fall under section 334 and the reference would be com 179 petent In disagreeing with this contention this Court observed that the appeal to the Appellate Assistant Commissioner was incompetent under section 301 that even if it was competent the order dated 19 11 1945 was not one contemplated by section 31 and there could be no appeal against such an order under section 331
Now it should be noticed that the question actually referred under section 661 was the correctness and legality of the order passed in a miscellaneous application and not of any order made in an appeal preferred under section 331
In this context the point sought to be raised by the learned Attorney General did not arise at all for decision and the observations in answer thereto cannot be read as a pronouncement on the question of the maintainability of the appeal much less as a decision that an order dismissing an appeal as barred by limitation is one under section 302
Accordingly the question whether an order dismissing an appeal as barred by limitation falls under section 302 or section 31 remains unaffected by the observations in Commis sioner of Income tax Madras vs Mtt
section Ar
Aruna chalam Chettiar1
Then again under the provisions of the Act limitation is not the only preliminary ground on which an appeal could be disposed of without a consideration of the merits
Section 303 provides that an appeal shall be in the prescribed form and shall be verified in the prescribed manner
If the Appellate Assistant Commissioner holds that the appeal does not comply with the requirements of this enactment and rejects it on that ground the order must be one made under section 31 since section 303 makes no provision for such an order as does section 302 in the case of limitation
All the orders under section 31 being appealable under section 33 the order of dismissal for noncompliance with section 303 must also be appealable and it was so decided in Maharani Gyan Manjari Kuari vs Commissioner of Income tax2 
How is this view to be reconciled with the contention that section 31 contemplates only orders on the 1  2 180 merits of the assessment and not on preliminary issues Vide also the decision in Kunwarji Ananda vs Commissioner of Income tax1 which was followed in Maharani Gyan Manjari Kuari vs Commissioner of Income tax2 and in Ramnarayana Das Mandal vs Commissioner of Income tax3
There is thus abundant authority for the position that section 31 should be liberally construed so as to include not only orders passed on a consideration of the merits of the assessment but also orders which dispose of the appeal on preliminary issues such as limitation and the like
The learned Solicitor General sought to get over these decisions by taking up the position that section 313 a construed in its literal and ordinary sense conferred jurisdiction on the Appellate Assistant Commissioner only to pass orders on the merits of the assessment that it was not therefore open to him to entertain any question which did not directly relate to such merits and that accordingly he could not hear or decide any issue of a preliminary nature such as limitation and dispose of the appeal on the basis of the finding on that issue
He conceded that this contention would run counter to numerous authorities but argued that they were all wrong
Having given due consideration to this contention we are of opinion that it is not well founded
Taking the plea of limitation which is what we are concerned with in this appeal when there is a judgment or order against which the statute provides a right of appeal but none is preferred within the time prescribed therefor the respondent acquires a valuable right of which he cannot be deprived by an order condoning delay and admitting the appeal behind his back
And when such an order is passed ex partehe has a right to challenge its correctness at the bearing of the appeal
That is the position under the general law vide Krishnasami 
Panikondar vs Ramasami Chettiar4 and there is nothing in the provisions of the Income Tax Act which enacts a different principle
1 I LR 11 Patna 187 AIR 1931 Patna 306 5 ITC 417
2 194412 ITR 59
3 4 Mad 412 45 IA 25
181 Therefore if an appeal is admitted without the fact of delay in presentation having been noticed clearly it must be open to the Department to raise the objection at the time of the hearing of the appeal
That would also appear to be the practice obtaining before
the Income tax Tribunal as appears from the decisions cited before us and that in our opinion is right
Similar considerations would apply to other objections of a preliminary character such as one based on section 30 sub section 3
We should be slow to adopt a construction which deprives parties of valuable rights
We are therefore of opinion that contentions relating to preliminary issues are open to consideration at the time of the hearing of the appeal and that the jurisdiction of the Appellate Assistant Commissioner is not limited to the bearing of the appeal on the merits of the assessment only
In this view the orders of the Appellate Assistant Commissioner holding that there were no sufficient reasons for excusing the delay and rejecting the appeals as time barred would be orders passed under section 31 and would be open to appeal and it would make no difference in the position whether the order of dismissal is made before or after the appeal is admitted
The question referred must accordingly be answered in the affirmative
This appeal will therefore be allowed and the order of the court below set aside
The appellant will have his costs here and in the court below


Summary:
The appellant firm filed appeals against orders assessing it to income tax and super tax for the years 1945 1946 and 1946 1947 beyond the time prescribed by section 302 of the Income tax Act
The appeals were numbered and notices were issued for their hearing under section 31
At the hearing of the appeals before the Appellate Assistant Commissioner the Department took the objection that the appeals were barred by time
The appellant prayed for condonation of delay but that was refused and the appeals were dismissed as time barred
The appellant then preferred appeals against the orders of dismissal to the Tribunal under section 33 of the Act and the Tribunal dismissed them on the ground that the orders of the Assistant Commissioner were in substance passed under section 302 and not under section 31 of the Act and that no appeal lay against them under section 33 of the Act
On a reference under section 661 of the Act the High Court held that the orders of the Appellate Assistant Commissioner were made under section 302 and were not appealable under section 33 of the Act
On appeal by special leave to the Supreme Court the question for determination was whether an order dismissing an appeal presented under section 30 as out of time was one under section 302 or under section 31 of the Act because if it was the former there was no appeal provided against it if it was the latter it was open to appeal under section 33
Held that the orders of the Appellate Assistant Commissioner fell within section 31
A right of appeal is a substantive right and is a creature of the statute
section 301 confers on the assessee a right of appeal against certain orders and an order of assessment under section 23 is one of them
The appellant had therefore a substantive right under section 301 to prefer appeals against orders of assessment made by the Income Tax Officer
167 An appeal presented out of time is an appeal and an order dismissing it as time barred is one passed in appeal
Section 31 is the only provision relating to the hearing and disposal of appeals and if an order dismissing an appeal as barred by limitation as in the present case is one passed in appeal it must fall within section 31 and as section 33 confers a right of appeal against all orders passed under section 31 it must also be appealable
To fall within section 31 it is not necessary that the order should expressly address itself to and decide on the merits of the assessment and it is sufficient that the effect of the order is to confirm the assessment as when the appeal is dismissed on a preliminary point
An order rejecting an appeal on the ground of limitation after it had been admitted is one under section 31 though there is no consideration of the merits of the assessment
Held therefore that the orders of the Appellate Assistant Commissioner holding that there were no sufficient reasons for excusing the delay and rejecting the appeals as time barred would be orders passed under section 31 and would be open to appeal and it would make no difference in the position whether the orders of dismissal were made before or after the appeals were admitted
Commissioner of Income tax Madras vs Mtt
r section Ar
Arunachalam Chettiar 1953 SCR 463 explained
Case law discussed