TMI Blog1964 (4) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to sell and by a document dated December 21, 1954, sold his entire holding in the two companies to Mr. Asher and certain relations of his nominated by him. These sales resulted in. a profit of ₹ 72,515 and ₹ 3,14,100 respectively. The Income-tax Officer brought them to tax for the assessment year 1956-57 under section 10(5A) of the Income-tax Act, 1922, as compensation earned for parting with the effective power of management, which the assessee till then had over the two companies. This assessment was upheld by the Appellate Assistant Commissioner on appeal. The assessee then filed a further appeal to the Appellate Tribunal. After some adjournments, the appeal was finally posted for hearing on August 26, 1958. Neither the counsel engaged by the assessee nor any authorised representative of his appeared before the Tribunal on that day; there was not even an application on behalf of the assessee for an adjournment. Two days later, on August 28, 1958, the Tribunal dismissed the appeal for default of appearance, purporting to do so under rule 24 of the Appellate Tribunal Rules, 1946, as amended by the notification dated January 26, 1948. That states: Where on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be adopted, should be regarded as invalid, being contrary to the provisions of the Income-tax Act, 1922. To reflect that contention and with the concurrence of the parties, the first of the two questions referred to us under section 66(2) was reframed in the manner set out at the beginning of this judgment. That question has been answered in the affirmative by a Bench of this court in Ravula Subba Rao v. Commissioner of Income-tax [1955] 27 ITR 164. But it has been contended that that decision is inconsistent with the provisions contained in section 33(4) as well as the scheme underlying section 66 of the Act. The reference was, therefore, placed before a Special Bench. To reiterate, the substantial ground on which the validity of rule 24, in so far as it empowers the Appellate Tribunal to dismiss an appeal for default on the non-appearance of an appellant, is challenged is that it is contrary to the provisions of section 33(4), the contention on behalf of the assessee being that under the latter provision the Tribunal will have to dispose of the appeal on the merits regardless of the fact whether the party appeared before it or not. The Income-tax Tribunal is a creature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the parties. There is, however, a proviso to that rule which enables the Tribunal to set aside the dismissal if the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance. There can be little doubt that these rules are but part of the law of procedure and as such they will be covered by the authority conferred on the rule-making authority under section 5A(8) of the old Act, which corresponds to section 255(5) of the Income-tax Act, 1961. Section 5A(8) speaks of rules to regulate the procedure of the Tribunal. Procedure under the law denotes the mode of proceeding by which a legal right is to be enforced. There is a distinction between a law which gives and defines a right, and the practice that has to be followed to enforce that right. In Poyser v. Minors [1881] 50 LJ (QB) 55 Lush L. J. observed that the word practice like the word procedure denotes the mode of proceeding by which a legal right is enforced, as distinguished from the law which gives or defines the right, and which by means of the proceeding the court is to administer the machinery as distinguished from its product. In that case a question aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stent with the construction now sought to be placed on section 33(4) as it is a disposal on merits of the appeal. We have now to consider the question whether a rule enabling the Tribunal to dismiss an appeal for non-appearance of the appellant is consistent with section 33(4). That provision states: The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner. The argument on behalf of the assessee is that under the terms of the section referred to above, the Appellate Tribunal should pass an order on the appeal, implying thereby that it should be on the merits of the appeal. In Ravula Subba Rao v. Commissioner of Income-tax [1955] 27 ITR 164 , Satyanarayana Rao J. was not prepared to accept this construction. The learned judge has held that the section confers very wide powers on the Tribunal and the language employed in it- it may pass such orders thereon as it thinks fit -would include such orders, according to the circumstances of the case, whether the opportunity was availed of by the party concerned or was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for default of appearance has nothing to do with the matter in controversy. It merely puts an end to the appeal. Such a method of disposal cannot therefore be said to be in accordance with section 33(4). Again the terms of the section 33(4) itself appear to suggest that the Tribunal is intended to dispose of the appeal on its merits. That it had the special competence to do so is plain from the very constitution of the Tribunal, comprising as it does of an experienced member of the Bar and also one from the profession of accountancy. Sub-section (4), to which we have made reference, directs the Appellate Tribunal to dispose of the appeal after giving the parties to the appeal an opportunity of being heard. The fact that the opportunity had not been availed of by the appellant cannot obviously discharge the obligation cast on the Tribunal of passing orders on the appeal, that is, on the merits of the appeal. This view, namely, that the legislature intended that all appeals should be disposed of by the Income-tax Appellate Tribunal on their merits, is supported by the other provisions contained in the Act. It is an accepted rule of interpretation of statutes that, in ascertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application under section 66(1). The assessee then has a right to move the High Court under sub-clause (2) to that section and if the High Court is satisfied that a question of law arises in the case, it can direct the Tribunal to state a case on the lines indicated earlier. Sub-clause (4) empowers the High Court to call for an additional statement of the case from the Tribunal. The power of the High Court to decide questions of law raised on the reference is conferred by sub-clause (5). In Commissioner of Income-tax v. Arunachalam Chettiar [1953] 23 ITR 180 , the Supreme Court held that the jurisdiction conferred under the Act on the Tribunal and the High Court would be conditional on there being an order by the Appellate Tribunal, which could be said to be one under section 33(4) of the Act and on a question of law arising out of such order. In New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax [1959] 37 ITR 11 (SC), Bhagwati J., while discussing the limits of a reference to the High Court under section 66(1), has observed: ... the only question of law which the assessee or the Commissioner can require the Tribunal to refer to the High Court is 'any question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng by it in regard to that matter, the High Court, exercising its jurisdiction under section 66, will really have not the benefit of a final finding of fact on which its opinion can be rested. Section 66, no doubt, contemplates a statement of the case being prepared by the Tribunal and sent to the High Court for the purpose of obtaining its opinion; but a statement of the case is in the nature of a pleading setting out the facts admitted and facts found. At the stage of the preparation of the statement of the case, there is no occasion for the Appellate Tribunal to decide any disputed question of fact. This aspect of the matter can well be illustrated by the present case itself. The appeal before the Tribunal was dismissed for default. There was no occasion for it to consider the merits of the assessee's case. When this court directed the Tribunal to submit a statement of the case on the second of the questions referred to above, the Tribunal could not really state a case on that point, although under section 66 it was bound to do so. This was because the manner in which the appeal was disposed of precluded it from investigating the matter. It cannot, of course, be said that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case in order to answer the question of law which is raised, then it can direct such statement to be submitted with such additions and alterations as it may direct but the statement must necessarily be based on the facts which are already on the record and the High Court cannot ask for additional facts to be brought in because these would not be in regard to a question which arises from the order of the Tribunal but would be a statement based on something which was not before the Appellate Tribunal when it passed its appellate order. It would follow that for the exercise of the special jurisdiction conferred on the High Court, the Appellate Tribunal should dispose of the appeal before it on its merits, although it cannot be laid down that, in so doing, the consideration of the merits should be of a particular pattern or length. The observations of Venkatarama Ayyar J. in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd s case (supra), though put in the form of an interrogation, will clearly bring out the need of the Appellate Tribunal disposing of the appeal before it on its merits. The learned judge asks: How can it be said that the Tribunal should seek fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of dismissal for default as well. We have earlier referred to the decision in Ravula Subba Rao v. Commissioner of Income-tax [1955] 27 ITR 164 , where Satyanarayana Rao J. rested his conclusion mainly on the fact that the word thereon used in section 33(4) of the Act should receive a wide interpretation. In so holding, the learned judge did not advert to the several considerations to which we have made reference just now. We are unable to share the view taken in that case. To sum up the position, the Appellate Tribunal is the appointed machinery under the Act for finally deciding questions of fact in relation to assessment of income-tax. Its composition, consisting as it does of qualified persons in law and accountancy, makes it peculiarly qualified to deal with all questions raised in a case, whether there be assistance from the party or his counsel or not. Section 33(4) obliges it to decide an appeal, after giving an opportunity to the parties to put forward their case. The giving of the opportunity only emphasises the character of the quasi-judicial function performed by the Appellate Tribunal. The fact that that opportunity is not availed of in a particular case, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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