W.TA. NO. 224/HQ OF 1990-91, DECIDED ON 16TH MAY, 1991. VS W.TA. NO. 224/HQ OF 1990-91, DECIDED ON 16TH MAY, 1991.
1991 P T D (Trib.) 875
[Income-tax Appellate Tribunal Pakistan]
Before Farhat Ali Khan, Chairman and Iqbal M. Qureshi, Accountant Member
W.TA. No. 224/HQ of 1990-91, decided on 16/05/1991.
Wealth Tax Act (XV of 1963)---
----S. 23(1), proviso---Appeal---Tax liability was not discharged on the date when the appeal was filed before the Commissioner of Wealth Tax (Appeals) but on the date of hearing of appeal, no tax liability existed---Commissioner of Wealth Tax (Appeals) dismissed the appeal on the ground that no appeal would lie unless the Wealth Tax admitted to be due by the appellant had been paid---Appellant had disputed the tax liability as determined by the Assessing Officer together with levy of additional tax and there could have been admitted tax liability as assessee had not claimed exception but disputed the assessment order because of illegal addition of betterment and conservancy taxes realised by it from tenants while working out the market value on the basis of GALV arrived at after brushing aside his objection---Nothing was thus available on record to show that appellant had any admitted Wealth Tax liability---Held, it was the duty of the Commissioner of Wealth Tax (Appeals) to find out the exact amount of liability and determine the issue regarding maintainability of the appeal---While allowing the appeal of assessee Tribunal directed that Commissioner should find out as to whether there was any admitted tax liability and if so what was its extent and, secondly as to whether it was paid before or after institution of the appeal and thirdly he should also find out as to whether under the facts and circumstances of the appeal, delay in filing appeal could be condoned under S. 23(2) --- [Kashiram. Bhajan Lal v. Commissioner of Income Tax, U.P. (1962) 45 ITR 1; Kamdar Brothers of Jharia v. Commissioner of Income Tax, Bihar and Orissa (1955) 27 ITR 176 and (1960) 2 Tax (V-292) (Trib.)].
Kashiram Bhajan Lal v. Commissioner of Income Tax, U.P. (1962) 45 ITR 1; Kamdar Brothers of Jharia v. Commissioner of Income Tax, Bihar and Orissa (1955) 27 ITR 176 and (1960) 2 Tax (V-292) (Trib.) dissented from.
C.I.T. v. Filmistan Limited (1958) 33 ITR 334; Venkatagire v. C.I.T. (1955) 28 ITR 189; Mst. Durga Chaudharani v. Jawaharsingh Chaudhary (1890) 17 IA 122 and (1961) 42 ITR 163 ref.
Ebrahim Dohodwala, F.C.A. for Appellant.
Ilyas Shaikh, D.R. for Respondent.
Date of hearing: 13th May, 1991.
ORDER
FARHAT ALI KHAN (CHAIRMAN).---Mr. Ebrahim Dohodwala, FCA submits that since on the date of hearing the tax demand was not existing the learned C.W.T. (A) should not have rejected the appeal for the reason that the appeal was not sustainable because the due tax was not paid before the appeal was filed. In support of his submission the learned A.R. has relied upon the following decisions:--
(1) (1962) 45 I T R 1 (All. H.C.) Kashiram Bhajan Lal v. Commissioner of Income-tax, U.P.,
(2) (1955) 27 I T R 176 (Pat. H.C.) Kamdar Brothers of Jharia v. Commissioner of Income-tax, Bihar and Orissa.
(3) (1960) 2 Tax (V-292) (Trib.)
Mr. Ilyas Shaikh, the learned D.R. however, supports the learned C.W.T. (A).
2. We have heard both the learned A.R. and D.R. but before adverting to the arguments of learned A.R. let us firstly recapitulate the facts involved in this appeal relating to the assessment year 1988-89. From perusal of the grounds of appeal taken before the learned C.W.T. (A) it appears that the demand note for Wealth Tax payable at Rs.26,488 was served on the appellant on 9th August, 1989. From perusal of the impugned order it appears that the appeal was filed before C W.T.(A) on 28th August, 1989 but it was heard on 14th June, 1990 and the impugned order was recorded on 8th July, 1990. However, from perusal of the grounds of appeal taken before us it appears that the tax was paid on 28th February, 1990.
3. Thus, from these facts it is clear that on the date when the appeal was filed before the learned C.W.T.(A) the tax liability was not discharged but, on the other hand, on the date of hearing before the learned C.W.T.(A) no tax liability existed.
4. Now, before proceeding further, let us also examine the provision of law which the learned C.W.T.(A) had invoked for dismissing the appeal in limine, and it is- contained in subsection (1) of section 23 of the Wealth Tax Act. However, we reproduce hereinbelow the entire provisions of section 23 of the Wealth Tax Act, as we would find them relevant in our forthcoming discussion. It reads as under:--
"23. Appeals to the Appellate Assistant Commissioner C.I.T.(A) from orders of Wealth Tax Officer.---(1) Any assessee objecting to an assessment made, or penalty imposed upon him, or denying his liability to be assessed under this Act or objecting to an order under subsection (2) of section 20 may, within thirty days of the date on which he is served with the notice of demand or copy of order under subsection (2) of section 20, appeal to the Appellate Assistant Commissioner/C.I.T. (Appeals) against such assessment, penalty or order as the case may be in the prescribed form and verified in the prescribed manner:
Provided that no appeal shall lie unless the wealth tax admitted to be due by the appellant has been paid.
(2) The Appellate Assistant Commissioner/C.I.T. (Appeals) may admit an appeal after the expiration of the period referred to in subsection (1) if he is satisfied that the appellant had sufficient cause for not presenting the appeal within that period.
(3) The Appellate Assistant Commissioner/C.I.T. (Appeals) may after giving the appellant a reasonable opportunity of being heard, pass such order on the appeal as he may think fit and communicate the order passed by him to the assessee and the Commissioner;
(4). When hearing an appeal, the Appellate Assistant Commissioner/C.I.T. (Appeals) shall not admit airy evidence which was not produced, before 'the Wealth Tax Officer unless he is satisfied that the assessee was prevented by sufficient cause from producing such evidence."
From perusal of proviso added to subsection (1) of section 23 of the Wealth Tax Act; hereinafter referred to as "the Act", it appears that it has been laid down that no appeal shall lie unless the Wealth Tax admitted to be due by the appellant has been paid and since admittedly the Wealth, Tax was not paid by the appellant on the date of the filing of the appeal before learned C.W.T. (A) the appeal was dismissed.
5. Let us now revert to the cases relied upon by the learned Authorised Representative. When we went through (sic) we discovered that the issue involved was not as much simple as Mr. Ebrahim Dohodwala took it to be. The case of Kashiram Bhajanlal (supra) has itself proved to be a tip of an iceberg. We, therefore, had to go deep to find out that the issue involved had not only been examined in its various aspects by different High Courts in India but it also gave rise to conflicting decisions. Our research has shown that though Bombay, Allahabad & Patna High Courts took contrary view to that of Andhra Pradesh High Court, yet the Indian Supreme has not specifically affirmed one view overruling the other. It is true that Allahabad view, was not before their Lordships of Indian Supreme Court but conflicting decisions of Patna and Andhra Pradesh High Courts were very much relied upon by the Department and assessee and their Lordships would have easily overruled one of them but they have not done so. We would, therefore, examine all the cases in some details.
6. Now starting with the case of Kashiram Bhajanlal coming from Allahabad High Court, we note that it was decided on 21-4-1961. From its perusal the facts which emerge out are that the tax payable by the assessee for assessment years 1945-46, 1946-47 and 1947-48 was determined on 28th February, 1959. But on default of payment the penalty was further imposed on 1st October, 1951, in all three assessment years. The assessee, however, instead of paying the tax and penalty, filed separate appeals against all the three assessments as well as penalty orders on 2nd November, 1951. The learned AA.C. while allowing the appeals against the quantum of the amount of tax in all the three assessment years, dismissed the appeals against penalty orders for the reason that the tax was not paid on or before 2nd November, 1951, when the appeals were filed. If was held that such appeals were hit by the proviso added to section 30(1) of the Income-tax Act, and on appeal the orders of the learned A.A.C. were confirmed. The assessee, however, still felt aggrieved and at his instance the case was stated to the High Court and their Lordships of Allahabad High Court finding that the appeals against the quantum of assessment having been allowed by the learned A.A.C. no tax was payable on the date of hearing. Consequently, after vacating the order of learned A.A.C. their Lordships were pleased to send the matter back to him for disposal of the appeals on merits. In other words, their Lordships held in this case that at was not necessary for an assessee to pay the amount of tax before filing of appeal and that if it was paid before the hearing of the up peal it should have been disposed of on merits. From a careful perusal of aforesaid decision it appears that their Lordships came to aforesaid conclusion for the following reasons:
(1) That the right of appeal is determined by and is dependent upon the nature of the cause and not by or upon the conduct of party.
(2) Since right of appeal is given by main section,' the proviso attached to it cannot be interpreted in such a way that it takes it away. It would be appropriate at this juncture if subsection (1) of section 30 of the Income tax Act is reproduced hereinbelow, and it reads:
"Any assessee objecting to .any penalty imposed by an Income-tax Officer under section (6) of section 44(c) or subsection (5) of section 44-F or subsection (1) of section 46 ....,............may appeal to the Appellate Assistant Commissioner against the assessment or against such refusal or order:
Provided that no appeal shall lie against an order under subsection (1) of section 46 unless the tax has been paid."
(3) Whenever a provision of any taxing law is open to more than one interpretation that one should be adopted which is in favour of an assessee and since the word "lie" means, according to Shorter Oxford English Dictionary, to be admissible or sustainable it may be interpreted to mean and imply "sustainable".
(4) Since the proviso did not lay down any point of time by which the tax was to be deposited in order to make an appeal lie, it could not be said that the tax must have been necessarily paid before filing of the appeal.
(5) Since the legislature used the word "presented" in subsection (2) of section 30, it could have also been used in proviso appended to subsection (1) of section 30 and the legislature by using the expression "lie" has provided elasticity to the proviso.
(6) Since the provision regarding the payment of tax was consisting of a Rule of Public Policy of making the realisation of tax easy, the payment of tax before date of hearing met this Rule.
(7) And since the Rules of Interpretation require that the right of appeal given by some statute is to be liberally construed, the proviso should not be interpreted in such a way that it takes away the right of appeal.
7. Their Lordships of Allahabad High Court relied upon the case of Kamdar Brothers of Jharia (supra) and another case coming from Bombay High Court, reported as (1958) 331 T R 334, C:I.T. v. Filmistan Limited and dissented from a case coming from Andhra Pradesh and reported as (1955) 281 T R 189, Venkatagire v. C.I.T. We would discuss these cases also in some details but since Mr. Ebrahim Dohodwala has specifically relied upon the case of Kamdar Brothers (supra), we should advert to it before analysing other cases.
8. From perusal of the case of Kamdar Brothers (supra) it appears that in that case the tax liability was created at Rs.15,000 but the penalty was imposed as assessee had paid Rs.13,000 only. Having been aggrieved by the penalty order the assessee filed an appeal before the learned AAC on 5th February, 1951, which was heard on 24th April, 1952, but meanwhile the Income-tax Appellate Tribunal in the appeal against the tax liability reduced it to Rs.9,057 as against Rs.15,000. Thus, on the date of hearing of the appeal filed against penalty order before learned A.A.C the tax demand stood reduced. However, the learned AAC relying upon the proviso added to subsection (1) of section 30, dismissed the appeal for the reason that the amount of tax demand was not paid prior to the institution of appeal before him hence the appeal was incompetent and on appeal his order was confirmed by the Income-tax Appellate Tribunal. However, their Lordships of Patna High Court came to the conclusion that since no tax liability existed on the date of hearing before the learned C.I.T. (A) he wrongly rejected the appeal. Their Lordships also accepted the argument that since the legislature did not use the word "presented" in the proviso though it was used in subsection (2) of section 30, the word "lie" as used in proviso should not be read to mean and imply that no appeal shall be "presented" unless the tax had been paid. Moreover, their Lordships also adopted the Dictionary meaning of the word "lie" as "sustainable" because it was favourable to the assessee. Their Lordships also relied upon the interpretation of the provision of section 100 of the Code of Civil Procedure, given in a decision reported as (1890) 17 I A 122, Mst. Durga Chaudharani v. Jawaharsingh Chaudhary. Thus, this decision also is an authority for- the proposition that if the tax is paid before the date of hearing the appeal is sustainable.
9. Now turning to the case of Filmistan Limited (supra) which has been relied upon by the Allahabad High Court, it appears that in that case the assesses was granted payment of tax in instalments and on its failure to pay the last installment the ITO imposed penalty which aggrieved the assessee and it went up in appeal. However, before the appeal came up for hearing before the learned AAC on 19th August 1955 the assessee had already paid the amount of penalty on 16th May, 1955. The learned AAC however, dismissed the appeal for the reason that since the tax was not paid before filing of the appeal it did not lie. On appeal, however, the Income-tax Appellate Tribunal found distinction between a right and a remedy. According to it, the first proviso added to subsection (1) of section 30 barred the remedy until the tax was paid but the right for filing such appeal remained untouched. This time, the Department felt aggrieved and took the issue to their Lordships of Bombay High Court. The learned counsel for the Department relying on the analogy of clause 15 of the Letters Patent and sections 96, 100, 101, 104 and 109 of the Civil Procedure Code where the expression "appeal shall lie" has been used, argued that the finding of the learned AAC was correct as no tax having been paid, no appeal existed before him. The learned counsel for the. Department vehemently argued that the question as to whether an appeal did or did not lie was question that was to be determined before an appeal was presented and it was a stage anterior to the presentation of the appeal. Their Lordships of Bombay High Court, however, rejected this contention with the following observation:
"In one sense, Mr. Amin is right because, unless there is a right of appeal the presentation of an appeal is a factual formality, but looked at from another point of view, the question as to whether there is a right of appeal and, therefore, an appeal lies can only be determined after an appeal is presented and on an objection taken by the respondent that no appeal lies. From that point of view, therefore, the question whether the appeal lies goes up only for determination at the hearing of an appeal and not at anterior stage:"
Their Lordships of Bombay High Court preferred the view of Patna High Court in Kamdar Brothers case (supra) over the case of Andhra Pradesh High Court recorded in case of Raja of Venkatagirie (supra). Let us, therefore, now, examine the case from the Andhra Pradesh High Court.
10. In case of Raja Vekatagire (supra) the demand was created in assessment year 1948-49 but the assessee went on discharging it by making smaller payments from time to time and seeking stay orders from higher authorities. However, the ITO finally imposed penalties of Rs.2,000 and Rs.25,000 but, on appeal, the penalty of Rs.2,000 was confirmed whereas that of Rs.25,000 was cancelled. Having been aggrieved the assessee went up in appeal without depositing Rs.2,000 before the date of filing of the appeal. On the other hand, the department also went up in appeal against the cancellation of the penalty of Rs.25,000. The Income-tax Appellate Tribunal, however, accepted the appeal filed by the department and rejected the appeal filed by the assessee, and finally the matter came up before their Lordships of the Madras High Court, Agreeing with the Income-tax Appellate Tribunal, their Lordships of Andhra Pradesh High Court made the following observation:--
"A combined reading of the provision of sections 30(1) & (2) leaves no doubt in our mind that payment of the tax is a condition precedent for the maintainability of the appeal. The proviso to section 30 by stating that no appeal shall lie unless the tax has been paid clearly makes such payment of tax a condition. Subsection (2) only limits the period of time within which such appeal shall be filed. To read the two subsections as is dealing with a right of appeal at two different points of time is not only Y8illogical but will lead to anomalies. An aggrieved party may file an incompetent appeal to satisfy the period of limitation with an off-chance of paying the arrears at any time before the appeal is disposed of. The maintainability of the appeal would then depend upon the fortuitous circumstances of the posting of the appeal for hearing before or after the payment of the tax. We would therefore, hold that an appeal presented within the meaning of subsection (2) of section 30 should comply with the condition laid down in the proviso to subsection (1)."
However, their Lordships of Andhra Pradesh High Court had to proceed further as they were called upon to interpret the words "tax has been paid" also as used in proviso added to subsection (1) of section 30. Their Lordships, under the facts and circumstances of the appeal, therefore, further held that since the instalments ere granted to the assessee, no tax was due from the assessee on the date of presentation of the appeal. Moreover, their Lordship went even a step further and held that the subsequent events and conditions obtaining at the time the appeal was disposed of by the AAC could certainly be relied upon by the assessee in the circumstances of the case. But it is important to note that their Lordships also propounded the view that even though the appeal was filed after the prescribed period of time, the A.A.C had jurisdiction to hear the appeal after the tax due was paid. According to their Lordships the only possible objection that could have been raised was that the appeal was barred under the provisions of subsection (2) of section 30, but under that subsection an appellate authority could have condoned the delay. Thus, from perusal of this authority, it is clear that though their Lordships have made a conflicting observation than the conclusions arrived at by Allahabad, Patna and Bombay High Courts, yet their Lordships have held under the facts and circumstances of that case that the appeal did the before learned AAC. Thus in the ultimate analysis the apparent conflict appears to have been removed and it is perhaps for this reason that the India Supreme Court has refrained itself from overruling specifically the case of Raja Venkatagirie (supra). However, we have still to analysis the decision of the India Supreme Court. Let us therefore, finally turn to this decision coming from highest authority of Indian jurisdiction.
11. In a decision recorded in the case of Filmistan Ltd. (supra) and reported as (1961) 42 1 T R 163 Their Lordships of Indian Supreme Court, as pointed out earlier, had an occasion to consider both the decisions of Patna High Court and Andhra Pradesh High Court recorded in the case of Kamdar Brothers (supra) and Raja Venkatagirie (supra) in the appeal filed by the Department against the decision of Bombay High Court. Their Lordships of Indian Supreme Court resolved the controversy existing between Patna and Bombay High Courts on one hand and Andhra Pradesh High Court on the other with the following observation:--
"In our opinion, the meaning of the words "no appeal shall lie" in the proviso is not that no memo of appeal can be presented. All that it means is that the appeal will not be held to be properly filed until the tax has been paid."
Illustrating their conclusion their Lordships further observed:
"If for instance the memo of appeal is filed on the 20th day, i.e. ten days before the period of limitation expired and the tax is paid within the rest of the ten days, the appeal will be proper appeal: it will be within time and no question of limitation will arise but if the tax is paid after the period of limitation has expired, it will be taken to have been filed on the day when the tax is paid even though the memo of appeal was presented earlier and within the period of limitation."
Advising the appellate authorities as to what course of action they should adopt under such circumstances, their Lordships further observed:
"The question will then have to be decided whether there was sufficient cause for condonation of delay and that is exactly what the Tribunal had ordered and that in our opinion is the effect of the proviso to section 30(1) read with subsection (2) of section 30 of the Act."
11. Their Lordships, however, did not make any comment on the decisions of Raja Venkatagirie (supra) or Kamdar Brothers (supra). But as pointed out earlier since this decision was recorded on 21st February, 1961 by the Supreme Court, the decision of Allahabad was not before their Lordships and was, therefore, not considered. Moreover, it is also obvious that this decision of Indian Supreme Court could not be brought to the notice of their Lordships of the Allahabad High Court as they decided the case of Kashiram Bhajanlal (supra) exactly after two months, viz., on 21st April, 1961.
12. Thus, from the discussion made above, it is clear that the Allahabad High Court decision relied upon by Mr. Ebrahim Dohodwala does not lay down the correct law though it is fortified by as many as seven good reasons and is most exhaustive of all the decisions. Similarly the case of Kamdar Brothers (supra) can also be not relied upon in view of Supreme Court decision. For the same reason we also find the decision of this Tribunal cited by learned A.R. as a bad precedent.
(13). Now, in the light of discussion made above, when we turn to the proviso added to subsection (1) of section 23 of the Act it appears that the legislature has restricted the payment of Wealth Tax before institution of the appeal to that which is admitted to be due by the appellant. However, there is nothing on record to, show that the appellant had any admitted Wealth Tax liability. From perusal of the grounds of appeal taken before the learned C.W.T. (A) it appears that the appellant had disputed tax liability as determined by the WTO together with levy of additional tax. However, from perusal of the assessment order and the grounds of appeal it appears that there could have been some admitted liability because the appellant had not claimed exemption but disputed the assessment order because of illegal addition of betterment and conservancy taxes realised by it from tenants while working out the market value on the basis of A GALV arrived at after brushing aside his objection. It further appears that the appellant disputed before the learned WTO working out of the GALV after ignoring his plea that certain rooms remained vacant. As such, it was the duty of the C.W.T.(A) to find out (lie exact amount of the liability and then determine the issue regarding maintainability of the appeal which he, did not. His order, therefore, is not sustainable for this reason also.
(14). We therefore, allow this appeal but we feel constrained to set aside the impugned order with the direction to the learned C.W.T. (A) that lie should find out as to whether there was any admitted tax liability and, if so what was its extent and, secondly as to whether it was paid before or after institution of the appeal. Thirdly; he should also find out as to whether under the facts and circumstances of the appeal, the delay in filing the appeal may be condoned under subsection (2) of section 23 of the Act in the light of the discussion made above.
15. The appeal stands disposed. of accordingly.
M.B.A./1196/T Order accordingly.