1973 PLP 530 (PTD)

(c) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal ought to be reduced or annulled, it shall reduce or annul the assessment accordingly. (d) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal is insufficient, it shall increase the assessment accordingly. (e) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal ought to be set aside, it shall set aside the assessment and direct the Income‑tax Officer to make a fresh assessment. (f) As respects any other matter, if the Appellate Tribunal is satisfied that an order which is the subject of appeal ought to be interfered with, it shall cancel or vary the order accordingly and shall issue such consequential directions as the case may require. In the case of an order imposing a penalty the power to vary the order shall include the power to enhance the penalty. (g) The Appellate Tribunal shall communicate its order on the appeal to the assessee and to the Commissioner." It was contended that the above provision which was obviously more elaborate than the Indian provision did not provide for the dismissal of an appeal in default nor was any reference to such dismissal made in section 31 of the Income tax Act which contained a very elaborate and collateral provision on the procedure of hearing of an appeal by the Appellate Assistant Commissioner. It was argued that sec tions 31 and 33(4) of the Income‑tax Act were pari materia and that the Tribunal had arrogated to itself a jurisdiction which did not lawfully vest in it. It was further contended on the basis of Manufacturers' Life Insurance Co. of Canada v. The Commissioner of Income‑tax, Bombay ((1938) 6 I T R 321) that an appeal once filed ought to be disposed of on merits and could not even se withdrawn. Reference was also made in this regard to Kanga, page

678. The relevant portion reads as under :‑ "Appeal cannot be withdrawn. It is not open to an assessee who has preferred an appeal to withdraw it so as to prevent the Appellate Assistant Commissioner from enhancing the assessment. Once a tax‑payer has served a notice of appeal and so set in motion the machinery designed for the purpose of completing the assessment, he cannot stop the further working of that machinery either by withdrawing the appeal or by refusing to be" present at the hearing of the appeal . . . . . ."

9. It was next contended that the question sought to be raised did arise out of the order of the Appellate Tribunal on the facts found and determined by it and as such could be legitimately raised for determination. Reliance was placed in this regard on Commissioner of Income‑tax, Bombay v. Scindia Steam Navigation Co. Ltd. ((1961) 42 I T R 589), Messrs Muhammad 1drees Barry & Company v. The Commissioner of Income‑tax, Punjab (P L D 1959 S C (Pak.) 202), In re: Ram Ditta Sita Ram of Basil ((1947) I T R 61), Messrs Sutlej Cotton Mills Ltd., Okara v. The Commissioner of Income‑tax, North Zone (West Pakistan), Lahore (PLD 1965 S C 443). Lastly, it was contended that the question of jurisdiction could be raised at any time. Reliance was placed in this regard on The Scindia Steam Navigation Co. Ltd. v. The Commissioner of Income‑tax (P L D 1959 Kar. 527).

10. On the other hand, apart from the question of limitation referred to earlier Mr. Lone contended that the question as sought to be agitated did not arise out of the Tribunal's order. Relying on (1961) 42 I T R 589, he contended that the question was neither raised before nor discussed by the Tribunal, and as such could not be deemed to have arisen out of its order. He also pressed into service the following authorities :‑

R. S. Munshi Gulab Singh & Sons v. Commissioner of Income‑tax, Punjab P L D 1950 Lah. 476, Bachu Bai F. E. Dinshaw v. Commissioner of Income‑tax P L D 1967 Kar. 372, Messrs Odeon Cinema, Lahore v. The Commissioner of Income tax, Lahore P L D 1971 Lah. 632, Abdul Ghani & Co. v. Commissioner of Income‑tax P L D 1962 Kar. 635 and Pakistan Medical Stores v. Commissioner of Income‑tax 1967 PTD 339.

11. On the point whether the question of jurisdiction could be raised at any stage Mr. Lone tried to distinguish Messrs Sutlej Cotton Mills Ltd., Okara v. The Commissioner of Income tax, North Zone (West Pakistan), Lahore. It was, however, contended that the impugned order did not relate to question of jurisdiction. In support of his contention that in order to qualify for being agitated in any reference application before the High Court, the question should have been raised before the learned Tribunal, Mr. Lone relied on Commissioner of Income‑tax (Central), Karachi v. Messrs Habib Insurance Company, Ltd.. Karachi (P L D 1969 Kar. 278) and Lakhmir Singh v. Commissioner of Income‑tax, B. & O. (A I R 1957 Pat. 538). Lastly, it was contended that in any case, the question of sufficiency or insufficiency of cause justifying the restoration or otherwise of an appeal dismissed in default was one of fact and as such could not be agitated.

12. Having considered the contentions raised by the learned counsel for the parties, we are inclined to think that the first and the most important question determinative of the fate of these applications is whether rule 24 of the Appellate Tribunal Rules, 1948, is ultra vires of section 33(4) of the Income‑tax Act. However, before coming to this question, two preliminary objections raised on behalf of the Department have to be disposed of in the first instance.

13. As regards the question of limitation, it may bf observed firstly, that section 66(7‑A) has been made applicable to an application under Income‑tax Act and, secondly once the time taken by the applicant in seeking restoration of the appeals dismissed in default, is excluded, the application would be well within limitation. This view could be fully justified on the basis of the unreported judgment of M. Yaqoob Ali and S. Anwarul Haq, JJ., now Judges of the Supreme Court, delivered in C. M. No. 1416/1959 on 31‑10‑1962. In the case before their Lordships instead of approaching the Tribunal under the unamended section 66(1) of the Income‑tax Act, for making reference to this Court in the first Instance, the assessee filed a writ petition which was ultimately dismissed. Subsequently, the Tribunal declined to make a reference to the High Court on the ground of limitation. Feeling aggrieved, the assessee approached the High Court which directed the Tribunal to treat the application under section 66(1) as one within time. We are not, therefore, inclined to hold that these applications are barred by limitation.

14. Coming to the next preliminary objection that the question sought to be raised, did not arise out of the order of the Tribunal for the reason that the same was neither raised before nor discussed by it we are clearly of the view that the contentions have to be overruled on two grounds firstly, that in our humble opinion the criteria laid down in Commissioner of Income‑tax, Bombay v. Scindia Steam Navigation Co. Ltd., in the form of four. tests for determining the point as to whether the question arises out of the Tribunal's order are by no means exhaustive and, secondly that the question of jurisdiction could be raised at any time notwithstanding the fact that it has not been raised earlier. We are conscious of the fact that the jurisdiction of the High Court under sec tion 66 of the Income‑tax Act is merely advisory in nature and confined to considering and answering the actual question referred to it, as held in Raja Bahadur Sir Rajendra Narayan Bhanj Deo v. Commissioner of Income‑tax, Bihar & Orissa (AIR 1940 P C 158). Likewise, a decision based on arguments raised for the first time before the High Court, was considered by the Supreme Court of India in National Mutual Life Association of Australasia Ltd. v. Commissioner of Income‑tax, Bombay Presidency & Aden ((1935) 13 I A 99), to be irrelevant and outside the scope of the question as referred, more or less the same view was expressed by the Supreme Court of India in the majority judgment in Commis sioner of Income‑tax, Bombay v. Sandia Steam Navigation Co. Ltd., wherein questions arising out of the Tribunal's Order were summed up as follows :‑ (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it." It may also be observed with utmost respect that this exposition of law is not binding on us and furthermore we see a lot of force in the minority view expressed by Justice J. C. Shah who observed as follows :‑ "There is no warrant for the view that the question which the Tribunal may refer or which the High Court on the refusal of the Tribunal may call upon the Tribunal to refer, must be a question which was raised and argued before the Tribunal at the hearing under section 33(4). The Statute does not specifically impose such a restriction nor is it implied. To import in the meaning of the expression "any question of law arising out of such order" the concept that the question must have been argued before and dealt with by the Tribunal in its judgment deciding the appeal, is to impose a fetter upon the jurisdiction of the High Court not warranted by the plain intendment of the statute. A concrete question of law having a direct beating on the rights and obligations of the parties which may be founded on the decision of the Tribunal is one which arises out of the order of the Tribunal even if it is not raised or argued before the Tribunal at the bearing of the appeal. It Is the duty of the Tribunal to draw up a statement of case and to frame questions that duty can only be performed adequately if specific questions relating directly to the dispute between the parties are raised. If the import of the question is unduly large, the High Court has, and is indeed bound in dealing with it to restrict it to its true content in the light of the findings recorded by the Tribunal. But in dealing with the question, the High Court may not only entertain those aspects of the case which were argued before the Tribunal, but all such aspects as have fairly a direct bearing on the dispute. The jurisdiction of the High Court is by statute not expressly circumscribed in recording its opinion on arguments advanced before the Tribunal, and the nature of the jurisdiction exercised by the High Court does not demand that such a limitation should be implied. The Court has jurisdiction to decide questions which arise out of the order of the Tribunal, and not merely those which were raised and argued before the Tribunal."

15. Be that as it may, however, the question involved In the instant case is preliminary one of jurisdiction in our humble opinion was legitimately raised before the High Court regardless of the advisory nature of its function. Reliance may be placed in this regard on an authority of our own Supreme Court In Messrs Sutlej Cotton Mills Ltd., Okara v. The Commissioner of Income‑tax North Zone (West Pakistan), Lahore it was observed by their Lordships as follows:

"It is open to a Court before which a point of jurisdiction is raised, to deal with it at a very last stage, even if the point was not raised at any earlier stage, provided that all the evidence necessary for the determination of the point is available on the record so that no further evidence is required for reaching a satisfactory conclusion." In this view of the matter, we overrule the preliminary objections.

16. This brings us to the real point involved in the case which is the crux of the matter namely; as to whether a reference application could be dismissed on the technical ground of default without determination on merits. The answer to this question will depend, in turn, on the determination of the question as to whether rule 24 of the Appellate Tribunal Rules, 1948 which enables the Tribunal to dismiss an appeal in default for non‑appearance of the appellant, is ultra vires. We now proceed to examine this aspect of the matter.

17. Subsection (8) of section 5‑A of the Income‑tax Act. empowers the Appellate Tribunal to regulate its own procedure in the matters arising out of the discharge of its function. A rider, has, however, been placed ort these powers of the Tribunal making them subject to the provisions of the Act as would be clear from the provision reproduced below :‑ "5‑A(8). Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own procedure, and the procedure of Benches of the Tribunal in all matters arising out of the discharge of its functions. including the (Places) at which the Benches shall bold their sittings."

18. It is abundantly char that the rules framed under this section must be in conformity with the provisions of the Act. In purporting exercise of its rowers under this section, the Appellate Tribunal first framed rules in 1941 of which rule 36 provided that the Tribunal shall determine an appeal on merits notwithstanding the fact that the appellant did not chose to appear. Power was also vested in the Tribunal to restore an appeal dismissed in default. These rules were, however, substituted by Appellate Tribunal to dismiss an appeal In default. It reads as follows : ‑‑ "Rule 24.‑Where on the day fixed for nearing 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, in its discretion, either dismiss the appeal for default or may hear it ex parte."

19. Section 33 (4) as amended by Act IV of 1948 reads as follows :‑ "33(4).‑‑(a) The Appellate Tribunal shall give both parties to the appeal an opportunity of being heard. (b) If the Appellate Tribunal is not satisfied that the assessment or order which is the subject of appeal ought to be Interfered with, it shall reject the appeal and the assessment or order shall stand good. (c) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal ought to be reduced or annulled, it shall reduce or annul the assessment accordingly. (d) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal ought to be set aside, it shall set aside the assessment and direct the income‑tax Officer to make a fresh assessment. (f) As respects any other matter If the Appellate Tribunal is satisfied that an order which is the subject of appeal ought to be interfered with, ft shall cancel or vary the order accordingly and shall issue such consequential directions as the case may require. In the case of an order imposing a penalty the power to vary the order shall include the power to enhance the penalty. (g) The Appellate Tribunal shall communicate its order on the appeal to the assesssee and to the Commissioner."

20. The question whether rule 24 was ultra vires of section 33(4) cane up for consideration before the Special Bench of the Madras High Court consisting of the Chief Justice and two other learned Judges in S. Chenniappa Mudaliar v. Commissioner of Income‑tax. The provision contained in section 33(4) as it then stood was slightly different and read as follows:

"The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner."

21. In the provision to be interpreted by us reproduced earlier, the orders to be passed by the Appellate Tribunal have been specified and elaborated. Having examined considerable case‑law and authorities for and against the proposition, their Lordships of the Madras High Court canoe to the conclusion that rule 24 of the Appellate Tribunal Rules in so far as it enabled the dismissal of an appeal in default for non‑appearance of the appellant, was ultra vines. The relevant observation is as follows : "To sum up the position, the Appellate Tribunal. is the appointed machinery under the Act for finally deciding question is of fact in relation to assessment of Income‑tax. Its composi tion, consisting as it does of qualified persons in law and accountancy, makes it peculiarly qualified to deal with all questions raised in a case, whether there be assistance from the party or his counsel or not. Section 33(4) obliges it to decide an appeal, after giving an opportunity to the parties to put forward their case. The giving of the opportunity only emphasises the character of the quasi‑judicial function, performed by the Appellate Tribunal. The fact that that opportunity is not availed of in a particular case, will not entitle the Tribunal not to decide the case. There can be no decision of the case on its merits if the matter is to be disposed ass of for default of appearance of the parties. Further an adjudication on the merits of the case is essential to enable the High Court to perform its statutory duty and for Supreme Court to hear an appeal filed under section 33(4) itself indicates by the use of the word "thereon" that the decision should relate to the subject‑matter of the appeal. Rule 24, therefore, to be consistent with section 33(4), could only empower the Tribunal to dispose of the appeal on its merits whether there be an appearance of the party before it or not. This was Indeed the rule when it was first promulgated in the year 1941. The rule in its present form, as amended in the year, 1948, in so far as it enables the dismissal of an appeal before the Income‑tax Appellate Tribunal for default of appearance of the appellant, will, therefore, be ultra vines, as being in conflict with the pro visions of section 33(4) of the Act. We may also point out that if the Appellate Tribunal should have a power of dismissing an appeal for default of appearance of a party, such power can be given by the Legislature itself, it cannot be done by a mere rule promulgated under section 5‑A (8) as any rule made in that behalf wall be contrary to the existing provision in section 33(4) of the Act. We therefore, answer the question set out at the beginning in the affirmative."

22. It may also be observed in this context that in an earlier authority of the Madras High Court reported as Ravela Subba Rao and others v. Commissioner of Income‑tax, Madras and others ((1955) 27 I T R 164). although a contrary view was taken by the Division Bench which held that the Appellate Tribunal dismissing an appeal for default was not without jurisdiction, yet it was clearly held that this question did arise out of the order of the Tribunal and the assessee could have legitimately approached the Tribunal for reference to the High Court. It is hardly necessary to add that this Division Bench authority as also Shri Bhagwan Radha Kishan v. Commissioner of Income‑tax ((1952) 22 I T R 104), were overruled by the Full Bench.

23. Notwithstanding the minor differences in the phraseology employed in the Indian and the Pakistani provisions of section 33(4) we are clearly of the view that the ratio decidendi of the Madras authority is fully attracted to the case before us.

24. Admittedly the appeals of the petitioner were dismissed on the technical ground of default in appearance and were not disposed of on the merits. Therefore, the impugned orders cannot be sustained. In our opinion, in the circumstances and on the facts in these cases, the Appellate Tribunal of Income‑tax was not justified is law in dismissing the appeal of the petitioner in default of non‑appearance. We must therefore return our answer to question (a) reproduced above, in the negative. In view of this answer question (b) does not arise.

25. These references are answered accordingly, leaving the parties to bear their own costs. Reference answered