Law: Income Tax Act, 1922

Section: 33,10(5A),66(1),66(2),5A(8),33(4),66A,31

Law: Income Tax Act, 1922

Section: 33,10(5A),66(1),66(2),5A(8),33(4),66A,31

Law: Appellate Tribunal Rules, 1946

Section: 24

Section 254 of the Income-tax Act, 1961 [Corresponding to section 33(4) of the Indian Income-tax Act, 1922], read with rule 24 of the Appellate Tribunal Rules, 1946 - Appellate Tribunal - powers of - Assessment year 1956-57 - Whether Tribunal is bound to give proper decision on question of fact as well as law on merits and it cannot dismiss an appeal owing to default of appearance - Held, yes - Whether, therefore, rule 24 of 1946 Rules which provides to dismissals of appeal for failure of appellant to appear is ultra vires as it being in conflict with provisions of section 33(4) of 1922 Act - Held, yes FACTS The assessee owned certain share in two companies. The assessee was a joint managing director of one of the companies along with one 'A'. During accounting year relevant to assessment year in question, the assessee sold entire holdings in two companies to 'A' and earned certain profits. The ITO assessed these amounts to tax for the assessment year 1956-57 under section 10(5A) of the 1922 Act as compensation earned for parting with the effective power of management. The assessment was upheld by the AAC. On second appeal, the Tribunal dismissed the appeal for default of non-appearance of assessee. Five weeks after the disposal of the appeal the assessee filed a petition before the Tribunal praying for its restoration. The Tribunal did not consider that there was sufficient cause for restoration and rejected the petition. On reference, the High Court held that section 33(4)of the 1922 Act obliges the Tribunal to decide an appeal after giving an opportunity to the parties to put forward their case ; that the giving of the opportunity only emphasises the character of the quasi-judicial function performed by the Tribunal ; that the fact that opportunity is not availed of in a particular case, will not entitle the Tribunal not to decide the case and that there can be no decision of the case on its merits if the matter is to be disposed of for default of appearance of the parties. It further held that rule 24, therefore, to be consistent with section 33(4) of the 1922 Act, could only empower the Tribunal to dispose of the appeal on its merits whether there be an…

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