The main legal point established in the judgment is that the Income-tax Appellate Tribunal has the inherent power to set aside an ex parte order and afford an opportunity of being heard to the aggrieved party, in the interest of justice, as part of its jurisdiction under S.254(1) of the Income-tax Act, 1961.

1. In this writ petition filed by the Commissioner of Income-tax, Tamil Nadu IV, Madras, an important question touching the jurisdiction of the Income-tax -Appellate Tribunal to set aside an ex parte order for rehearing the appeal disposed of on merits, arises for decision.

2. For the assessment year 1969-70 the Income-tax Officer, Calicut, brought to tax certain amount representing the capital gain arising out of acquisition of an item of property belonging to the second respondent-assessee by the Government. The contention of the second respondent that the property sold being agricultural land, the resultant gain was not liable to be taxed as capital gain, rejected by the Income-tax Officer, however, found favour with the Appellate Assistant Commissioner who allowed the appeal and deleted the additions made. Aggrieved by the order of the Appellate Assistant Commissioner, the Income-tax Officer preferred an appeal to the first respondent herein, the Income-tax Appellate Tribunal, Cochin Bench, Ernakulam. The second respondent filed a cross-objection also supporting the order of the Appellate Assistant Commissioner. The appeal and the cross-objection filed by the Department and the assessee respectively, after due notice to the parties, were listed for hearing on 2810 1974 by the Tribunal. On the date appointed for the hearing neither the assessee (second respondent) nor his representative was present. The Tribunal as per Ext. P3 order allowed the appeal and dismissed the cross-objection. The decision was rendered on merits (presumably to conform to sub-section (1) of S.254 of the Income-tax Act, 1961, hereinafter referred to as the Act, which enjoins that the Tribunal may "pass such orders thereon as it thinks fit" as pointed out by the Supreme Court in Commissioner of Income-tax Madras v. S. Chenniappa Mudaliar ((1969) 74 ITR. 41), holding that the property was not agricultural in character and, as such, the resultant gain was liable to be taxed as capital gain. Against Ext. P3 order the second respondent filed before the first respondent a reference application under S 256(1) of the Act, for obtaining an order stating the case for reference to this Court. He also filed a miscellaneous petition before the first respondent Tribunal praying for the restoration of the appeal and the cross-objection for fresh hearing and disposal alleging that there was confusion in the mind of the assessee and the advocate that the appeal which was fixed for hearing on 28101974 had been refixed to 11111974, and because of this con fusion they had not put in appearance. By Ext. P4 order dated 811975 the Tribunal allowed the miscellaneous petition and reposted the appeal for hearing. It is for quashing Ext. P4 order that this writ petition has been filed.

3. It is urged on behalf of the petitioner that Ext. P4 order passed by the first respondent Tribunal is illegal and without jurisdiction, in as much as Ext. P3 appellate order having been passed on merits, it was not open to the Tribunal to set aside that order and restore the appeal to the file for fresh hearing. The contention is that there is no provision in the Act or in the Rules framed thereunder which empowers the Tribunal to condone the absence of the respondent assessee and to rehear the appeal on that ground. It is also contended that what was purported to be a cross-objection was not a cross-objection in the real sense in as much as, instead of objecting to the order of the Appellate Assistant Commissioner who allowed the second respondent's appeal wholly, it was a cross-objection filed to support that order. In any event, it is urged, the first respondent Tribunal ought to have dismissed the cross-objection for default instead of disposing of that also on merits along with the appeal filed by the petitioner. It is pointed out that R.25 of the Income-tax (Appellate Tribunal) Rules, 1963, hereinafter referred to as the Rules, specifically empowers the Tribunal to hear the ma