1964 (4) TMI 138 - HC - Income Tax

Summary

Issues Involved:
1. Validity of Rule 24 of the Appellate Tribunal Rules, 1946, regarding the dismissal of appeals for default of appearance.
2. Justification of the Appellate Tribunal's dismissal of the appeal for default and refusal to restore it.
3. Taxability of the sums of Rs. 72,515 and Rs. 3,14,100 under Section 10(5A) of the Income-tax Act, 1922.

Issue-Wise Detailed Analysis:

1. Validity of Rule 24 of the Appellate Tribunal Rules, 1946:
The primary issue was whether Rule 24, which allows the Tribunal to dismiss an appeal for default of appearance, is ultra vires. The rule states: "Where on the day fixed for hearing or any other day to which the hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Tribunal may dismiss the appeal for default."

The court observed that the rule, as it stands, does not conform to the provisions of the Income-tax Act, 1922, specifically Section 33(4). Section 33(4) mandates that the Tribunal must dispose of the appeal on its merits after giving both parties an opportunity to be heard. The court emphasized that the dismissal of an appeal for default does not constitute an adjudication on the merits and thus cannot be considered a valid disposal under Section 33(4).

The court also noted that the rule-making power under Section 5A(8) of the Act, which allows the Tribunal to regulate its procedure, does not extend to creating rules that conflict with the main provisions of the Act. The court concluded that Rule 24, in its current form, is ultra vires as it conflicts with Section 33(4).

2. Justification of the Appellate Tribunal's Dismissal of the Appeal for Default and Refusal to Restore It:
The Tribunal dismissed the appeal for default on August 28, 1958, due to the non-appearance of the assessee's counsel. The assessee later filed a petition for restoration, citing a miscommunication due to the counsel's convalescence after surgery. The Tribunal did not accept this excuse and refused to restore the appeal.

The court held that the Tribunal's dismissal for default was not justified as it did not align with the statutory requirement to dispose of appeals on their merits. The court reiterated that the Tribunal has an obligation to decide the appeal on its merits, regardless of the appellant's appearance. Consequently, the Tribunal's refusal to restore the appeal was also deemed unjustified.

3. Taxability of the Sums of Rs. 72,515 and Rs. 3,14,100 under Section 10(5A) of the Income-tax Act, 1922:
The court noted that the second question regarding the taxability of the sums under Section 10(5A) depends on the merits of the case, which were not investigated due to the dismissal of the appeal for default. Since the first question was answered in favor of the assessee, the second question was left for adjudication by the Tribunal upon restoration of the appeal.

Conclusion:
The court concluded that Rule 24 of the Appellate Tribunal Rules, 1946, in so far as it enables the Tribunal to dismiss an appeal for default of appearance, is ultra vires as it conflicts with Section 33(4) of the Income-tax Act, 1922. The Tribunal's dismissal of the appeal for default and refusal to restore it were not justified. Consequently, the appeal before the Appellate Tribunal has not been legally disposed of, and the second question regarding the taxability of the sums will be adjudicated by the Tribunal upon restoration of the appeal. There was no order as to costs.