Provision creates conflict with Section 33(4) of the Act.

RAMACHANDRA IYER C.J.

This reference to a Special Bench has been necessitated by reason of certain doubts felt as to the correctness of the decision in Ravula Subba Rao v. Commissioner of Income-tax. The question that falls for determination on this reference can be formulated thus

"Whether 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 ?" *

The facts giving rise to this reference are these

The assessee owned 1, 674 shares in Asher Textiles Limited and nine out of twenty shares in Textile Corporation (Private) Limited, both at Tiruppur. The Textile Corporation (Private) Limited was the managing agent of the other company, its managing directors being the assessee and one Mr. Asher. Differences appear to have arisen between these two some time during the year 1954, and the assessee 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 Rs. 72, 515 and Rs. 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 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 order passed by the Tribunal cannot be said to be in strict accordance with the rule cited, for there was no dismissal of appeal on the day to which it stood posted for hearing; the day on which the final order was passed was not one to which the hearing of the appeal was adjourned. But we prefer not to pursue this line of approach as the question referred to us is of much wider import

About five weeks after the disposal of the appeal the assessee filed a petition before the Tribunal praying for its restoration on the ground that, owing to a misapprehension on the part of the auditors at Coimbatore, the date of hearing of the appeal, of which they had been apprised, was not reported to their counsel at Madras, who had then been convalescing after a major surgical operation. The Tribunal did not accept the excuse as sufficient and declined to restore the appeal to file. On a direction given by this court under section 66(2) of the Act, the following questions were referred to us for opinion

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in dismissing the appellant's appeal for default and in refusing to restore the appeal for a fresh hearing ?

2. Whether, on the facts and in the circumstances of the case, the two sums of Rs. 72, 515 and Rs. 3, 14, 100 were assessable to tax under section 10(5A) of the Income-tax Act ?" *

The latter of the two questions depends on the merits of the case, which, as a result of the procedure adopted by the Tribunal, was not investigated. If, therefore, the first question were to be answered in favour of the assessee, it will be but appropriate to leave the second question for adjudication by