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Cites 3 docs
The Income- Tax Act, 1995
Suraj Mall Mohta And Co vs A. V. Visvanatha Sastri And ... on 28 May, 1954
Bijli Cotton Mills Ltd. vs Commissioner Of Income-Tax on 18 November, 1969
Citedby 1 docs
Income-Tax Officer And Anr. vs Gargidin Jwala Prasad And Ors. on 1 March, 1979

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Allahabad High Court
Gargi Din Jwala Prasad vs Commissioner Of Income-Tax on 8 August, 1973
Equivalent citations: 1974 96 ITR 97 All
Author: S Chandra
Bench: S Chandra, A Banerji

JUDGMENT

Satish Chandra, J.

1. The Income-tax Appellate Tribunal has submitted the following questions of law for the opinion of this court :

"(1) Whether the assessee got reasonable opportunity to meet the case that the department had set up against it ?

(2) Whether there was any material before the Tribunal for arriving at its conclusion that the concealed income of the assessee from black market transactions amounted to Rs. 85,937 ? "

2. These questions relate to the assessment year 1948-49. The assessee had returned a loss of Rs. 17,131. The Income-tax Officer completed the assessment on a net loss of Rs. 8,382. As a result of the voluntary disclosure scheme launched by the Government of India the assessee disclosed suppressed income of Rs. 45,000. After some negotiations with, the Income-tax Officer, the assessee increased the disclosure to Rs. 50,000. The Income-tax Officer, however, was not satisfied with the disclosure made by the assessee. He made inquiries and then informed the assessee that the concealed income was much more. The assessee did not agree. The Income-tax Officer after investigating into the matter ultimately made the assessment by holding that the concealed income for that year was Rs. 85,937. The assessee went up in appeal. The Appellate Assistant Commissioner held that the information possessed by the Income-tax Officer against the assessee was not disclosed to him and no opportunity was given to him to rebut the same. In this view, the matter was remanded to the Income-tax Officer for a further report. The Income-tax Officer entered into a series of correspondence with the assessee and ultimately submitted a remand report. The Appellate Assistant Commissioner heard the matter again and ultimately dismissed the appeal filed by the assessee. Aggrieved, the assessee went up to the Tribunal but failed. At the instance of the assessee a Bench of this court directed the Tribunal to draw up a statement of the case and refer the questions of law for the opinion of this court.

3. After remand of the case the Income-tax Officer in his letter dated 5th August, 1954, asked the assessee to produce such evidence as he may rely on that the following items were not his income :

1. Rs. 75,947 extra profit received from M/s. Purshottam Das Kishore Bhai on sales of 4,555 maunds 30 seers of gur.

2. Rs. 9,990 extra profit received from M/s. Jetha Lal Kishore Das on sales of 1010 maunds of gur.

4. The date for hearing was fixed for 17th August, 1954. On 16th August, 1954, the assessee sent a reply. He denied the allegation that he got Rs. 75,947 as extra profit from M/s. Purshottam Das Kishore Bhai and Rs. 9,990 from Jetha Lal Kishore Das. If the officer had been supplied any such information the information given to him was absolutely wrong and he would request him to examine such person in his presence with account books so that he might get the chance to cross-examine him and he may be able to establish that the information given to the Income-tax Officer was wrong and without any basis. On 3rd May, 1956, the Income-tax Officer sent a long letter to the assessee in the shape of a charge-sheet indicating the details of the transactions and accounts in which the assessee had received extra profits. In this letter no mention had been made of any witness having been examined or of the fact that the facts and figures in this letter are based upon the statements of any witnesses in the possession of the Income-tax Officer. On 26th June, 1956, the Income-tax Officer informed the assessee that if he desired to cross-examine the various parties, he could do so only before the respective Income-tax Officers before whom the variors parties were assessed. In that case, he requisite commission would be issued to the Income-tax Officers concerned. On 30th June, 1956, the assessee replied that if the Income-tax Officer wished to prove anything against him on any definite evidence, the evidence must be placed before him and he should be allowed the opportunity to cross-examine the person who might or who might not have made any statements against him. If he was furnished the copy of the statement made by any witness, he might let the Income-tax Officer know when he wished to cross-examine and if those witnesses could not be summoned he would go with his counsel to cross-examine them and in that case, as the witnesses were being examined on behalf of the department, the department would have to bear his expenses and that of his counsel who would go to various places to cross-examine the witnesses. The Income-tax Officer, however, did not either furnish to the assessee the copies of the statements of the witnesses in his possession nor did he agree to bear the cost of the cross-examination being conducted outside Sitapur. It appears from the correspondence annexed to the statement of the case that the assessee made a request for being granted inspection of the record, but the Income-tax Officer did not allow this request.

5. On these facts the question arises whether the assessee was given an adequate opportunity to meet the material relied upon against him. At this stage it may be stated that the assessing authorities have largely based their conclusion upon reliance on the statements of Chinaman Lal Phool Chandra and Nagar Das Dayal Bhai. These witnesses proved the account books of their firms. The account books of the firms gave material upon the basis of which the authorities have come to the conclusion that the suppressed profits of the assessee were Rs. 85,000 and odd. It is thus evident that the statements of the witnesses and the account proved by them formed the foundation of the findings.

6. In Suraj Mall Mohta and Co. v. A. V. Viswanatha Sastry, (1954] 26 I.T.R. 1 (S.C.) the Supreme Court has ruled that assessment proceedings before the Income-tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. The assessee has a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income-tax Act.

7. In Dhakeshwari Cotton Mills v. Commissioner of Income-tax, [1954] 26 I.T.R. 775, 783 (S.C.) the Supreme Court re-emphasised that the principles of natural justice are applicable to the proceedings under the Income-tax Act. It observed :

" It is... ...surprising that the Tribunal took from the representative of the department statement of gross profit rates of other cotton mills without showing the statement to the assessee and without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the mill in question."

8. From these cases it is apparent that the principles of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material that is going to be used against him so that he may be able to meet it. Here, the Income-tax Officer was placing reliance on the statements of certain witnesses. He had permitted the assessee to cross-examine the witnesses, but he did not supply copies of the statements of .those witnesses although the assessee had requested for it. He did not even supply the substance of the contents of the statements as recorded. The learned standing counsel took us through the correspondence between the Income-tax Officer and the assessee but in none of the letters of the Income-tax Officer there was any indication as to what was the name of the witnesses, much less any semblance of indication as to what he had stated. Under these circumstances the mere grant of the permission to cross-examine those witnesses was an eye-wash. The assessee could not have effectively cross-examined any particular person. The direction that he will issue a commission was illusory. The assessee was not told the names of witnesses or apprised of the contents of their statements. It is clear that an adequate opportunity to cross-examine was denied. Even if we accept, for the sake of argument, that in law the requirements of natural justice are satisfied by supplying the substance of the statement sought to be relied upon, even that was not done in this case. The Income-tax Officer had refused to give copies of the statements of the witnesses on the view that they formed part of the record. Even so, he refused permission to the assessee to inspect the record. It is evident that the proceedings were vitiated by violation of the principles of natural justice.

9. We answer the first question in the negative, in favour of the assessee and against the department. In view of this answer, question No. 2 has become of academic importance only and is left unanswered.

10. The assessee would be entitled to costs which we assess at Rs. 200. The- fee of the learned counsel for the department is also assessed at the same amount.