K.S.Hegde, J.

(1) THIS is an appeal by. certificate. It arises from the decision of the Calcutta High court in a reference under S. 66(1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the "Act"). Three questions of law were referred to the High court for ascertaining its opinion. Those questions are:

"(1) Whether, in view of the fact that the tribunals order dated 22/07/1964, was an interlocutory order, the tribunal was competent to entertain an application purported to be under S. 66(1) of tho Indian Income-tax Act, 1922, in respect of such order?

(2) If the answer to question no. 1 above be in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal exercised its discretion judicially in not allowing the applicants petition for raising the additional grounds?

(3) Whether, on the facts and in the circumstances of the case the tribunal erred in dismissing the appeal summarily on the grounds stated in its appellate order dated 3/09/1964?"

(2) THE: High court answered the first question in favour of the assessee and came to the conclusion that it was unnecessary to answer the remaining two questions. Mr. Manchanda, learned counsel for the revenue, did not seek to get any answer from us on questions Nos. 1 and 2. His arguments were confined to question No. 3.

(3) THE material facts of the case as could be gathered from the case stated by the tribunal are as follows :

(4) HEREIN we are concerned with the assessment of the assessee for the assessment year 1947-48, relevant accounting year being the financial year 1946-47. The assessee-company floated a subsidiary company named Messrs. Clive Row Investment (Holding) Co. Ltd. during the relevant previous year and transferred to that subsidiary company various shares held by it. In return the subsidiary company transferred to the assessee-company its shares of the value of Rs. 1,38,81,173.00. The book value of the shares transferred by the assessee-company to its subsidiary was Rs. 1,66,69,391.00. Thus the assessee-company sustained a loss of Rs. 27,02,398.00 but it did not claim that loss in the return made on the ground that the transfer in question was made to its own subsidiary. The Income-tax Officer valued the shares transferred by the assessee-company to its subsidiary at the market rate and on that basis came to the conclusion that the assessee-company must be deemed to have made a profit ofRs. 1,02,40,546. The Income-tax Officer did not hold that the transaction between the assessee-company and its subsidiary was not a bona. fide transaction or the assessee-company had made any secret profits out of that transaction. In other words, according to the Income-tax Officer even though the assessee-company had not made any profits in fact, it must be deemed to have made a profit ofRs. 1,02,40,546 solely on the ground that the market value of the shares transferred by the assessee-company to its subsidiary is much more than their book value.

(5) AGGRIEVED by the dicision of the Income-tax Officer the assessee went up in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner opined that the basis adopted by the Income-tax Officer was unsustainable and hence set aside the order of the Income-tax Officer and remitted the case back to that officer for finding out whether the assessee had really made any profits in the transaction in question. As against that order the Income-tax Officer went up in appeal to the Incometax Appellate tribunal. In the appeal memo. the Income-tax Officer took only three grounds, namely:

"(1) For that on the facts and in the circumstances of the case the learned Appellate Assistant Commissioner of Income-tax should have held that the shares transferred by the assessee-company to its subsidiary during the year of account should be valued for the purposes of assessment under the Indian Income-tax Act, 1922, at thei