The condition of prepayment of tax laid down in the proviso to S. 30 (1) of the Income-tax Act, 1922, applies to the presentation of the appeal, and not only to its final disposal.

SUBBA RAO, C.J. :- The Income-tax Appellate Tribunal, Madras Branch, referred to the High Court of Madras, under S. 66 (1) of the Indian Income-tax Act, the following two questions of law :-

1. Whether the appeal did not lie to the Appellate Assistant Commissioner against the Order of the Income-tax Officer under S. 46 (1) because of the first proviso to S. 30 (1) of the Act?

2. Whether the failure of the Income-tax Officer to object to the competency of the appeal gave the Appellate Assistant Commissioner jurisdiction to hear and decide the appeal?

2. The case has been transferred to this Court after its constitution.

3. The undisputed facts that gave rise to the Reference may be briefly stated :- For the assessment year 1948-49, the assessee was assessed to income-tax in a sum of Rs.2, 19, 541-2-0 and was directed to pay the same on or before 5-3-1949. On 8-3-1949 he sent a cheque for Rs. 25,000 and prayed for the payment of the balance in instalments of Rs. 25,000 per mensem. On 11-3-1949, the Income-tax Officer refused to grant time as the assessee made default in the payment of the tax. On 19-3-1949, the Income-tax Officer levied a penalty of Rs. 2,000 and called upon the assessee to pay up the tax and penalty by 25-3-1949. After giving some extension of time for the payment of the balance, the Income-tax Officer on 28-3-1949 levied a further penalty of Rs. 25,000. On 25-4-1949 the assessee sent to the Income-tax Officer a cheque for Rs. 25,000 towards penalty and a further cheque for Rs. 30,000 in part payment of the tax due. The Commissioner of Income-tax, Madras, by his Order dated 2-5-1949 permitted the assessee to pay the balance of tax in monthly instalments of Rs. 40,000. On 21-4-1949, the assessee filed two appeals to the Appellate Assistant Commissioner, "A" Range, Madras, against the said penalties of Rs. 2,000 and Rs. 25,000 imposed on him under S. 46 (1) of the Income-tax Act.

The Appellate Assistant Commissioner by his Order dated 19-10-1949 disposed of the appeals. He confirmed the imposition of penalty of Rs. 2,000 but cancelled the penalty of Rs. 25,000. It may be mentioned that by that date the assessee had paid all the amounts due from him in accordance with the terms of the Order of instalment made by the Commissioner of Income-tax. The assessee preferred an appeal to the Tribunal against the Order of the Appellate Assistant Commissioner confirming the penalty of Rs. 2,000. The Department preferred an appeal against the Order cancelling the penalty of Rs. 25,000. The Tribunal dismissed the appeal preferred by the assessee, but allowed the appeal preferred by the Department on the ground that, on the date when the assessee filed the appeal, the tax was due and as the tax was not paid before the filing of the appeal, the appeal was incompetent. The assessee applied to the Income-tax Appellate Tribunal under S. 66 (1) of the Act for referring the aforesaid two questions and they have accordingly done so.

4. Learned counsel for the assessee contended that the condition of prepayment of tax laid down in the proviso to S. 30 (1) applied only to the final disposal of the appeal, and not to its presentation. To put it differently, he would contend that if the condition is complied with on the date when the appeal is disposed of, the appeal is competent notwithstanding the fact that on the date of the presentation of the appeal, the condition was not satisfied. To appreciate this argument, the relevant provisions of the Indian Income-tax Act may be read :-

"Section 46 (1) :- When an assessee is in default in making a payment of income-tax, the Income-tax Officer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty.

Section 30 (1) :- Any assessee...........objecting to any order under sub-s. (1) of S. 46...........may appeal to the Appellate Assistant Commissioner against...........such order.

Provided t