Two Brothers Securities (P) Ltd., New Delhi V. ITO, New Delhi

ITA 3386/DEL/2011

• Counselvise Citation: 338620114 RSA 2011
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2000-2001
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: JASPAL SINGH SAHNI
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Non compliance

Judgement Text

ITA NO.3386/DEL/2011 A.Y. 2000-01 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H: NEW DELHI DELHI BENCH H: NEW DELHI DELHI BENCH H: NEW DELHI DELHI BENCH H: NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER SHRI B.K. HALDAR, ACCOUNTANT MEMBER SHRI B.K. HALDAR, ACCOUNTANT MEMBER SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A.NO. 3386/DEL/2011 ASSESSMENT YEAR : 2000-01 M/S. TWO BROTHERS SECURITIES VS. ITO PVT. LTD., FLAT NO. 3, WARD-16 (4), SECTOR-10, PLOT NO. 7 NEW DELHI. PRAGIYOTISHPUR APPARTMENTS, DWARKA, NEW DELHI 110 045. PAN AABCT3526G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JASPAL SINGH SAHNI, CA RESPONDENT BY : DR. B.R.R.KUMAR , SR. DR O R D E R O R D E R O R D E R O R D E R PER DIVA SINGH, JUDICIAL MEMBER PER DIVA SINGH, JUDICIAL MEMBER PER DIVA SINGH, JUDICIAL MEMBER PER DIVA SINGH, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 5.10.2009 OF CIT(A) XIX NEW DELHI PERTAINING TO 200 0-01 ASSTT. YEAR WHEREIN EX PARTE ORDER WAS PASSED AS THE ASSESSEE DID NOT P ARTICIPATE IN THE PROCEEDING BEFORE THE CIT(A). BEFORE THE TRI BUNAL VIDE GROUND NO. 1, THE ASSESSEE CHALLENGES THE REOPENING OF THE ASSTT. U/S 147/144 ON THE GROUND THAT NO NOTICE WAS SERVED UPON THE ASSESSEE . APART FROM THAT THE ASSESSEE ALSO CHALLENGES THE ADDITIONS SUSTAI NED IN THE IMPUGNED ORDER WHICH HAD BEEN MADE BY THE AO. OVER AND ABOVE THIS THE ASSESSEE HAS RAISED A GENERAL GROUND IN GROUND NO. 4. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES BE FORE THE BENCH IN REGARD TO THE FACT THAT THE IMPUGNED ORDER HAS BEEN PASSED EX PARTE ON ACCOUNT OF THE FACT THAT THE OPPORTUNIT IES GIVEN BY THE CIT(A) WERE NOT RESPONDED TO BY THE ASSESSEE. LD. AR SHR I JASPAL SINGH ITA NO.3386 /DEL/2011 A.Y. 2000-01 2 SAHANI REQUESTED THAT THE ISSUE MAY BE RESTORED TO THE CIT(A) IN ORDER TO AFFORD THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. H E GAVE AN ORAL UNDERTAKING BEFORE THE BENCH ON BEHALF OF THE ASSESSEE STATING THAT IF THE APPEAL IS RESTORED THE ASSESSEE SHALL PARTICIPATE IN T HE PROCEEDINGS BEFORE THE CIT(A). 3. IN THE LIGHT OF THE SUBMISSIONS ADVANCED ON THE MATE RIAL AVAILABLE ON RECORD IT IS CONSIDERED APPROPRIATE TO A CCEPT THE ORAL UNDERTAKING OF THE LD. AR IN THE INTERESTS OF SUBSTANTI AL JUSTICE AND RESTORE THE ISSUE BACK TO THE FILE CIT(A) WITH THE DI RECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW BY WAY OF A SPEAKING ORDE R AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 3.1 BEFORE PARTING WE WOULD LIKE TO ADDRESS THE PRINC IPLES WHICH HAVE GUIDED US INCOMING TO THE ABOVE CONCLUSION. 3.2 IN THE CELEBRATED JUDGMENT OF THE APEX COURT IN THE CASE OF A.K. KRAIPAK VS UNION OF INDIA (1969) 2 SCC 262, IT I S OBSERVED THAT THE AIM OF RULES OF NATURAL JUSTICE IS TO SECURE JUSTICE OR TO PUT IT NEGATIVELY TO PREVENT MISCARRIAGE OF JUSTICE. THE SAID RULES ARE M EANS TO AN END AND NOT AN END IN THEMSELVES AND THOUGH IT IS NOT POSSIB LE TO MAKE AN EXHAUSTIVE CATAQLOGUE OF SUCH RULES HOWEVER IT CAN BE READILY SAID THAT THERE WAS TWO BASIC MAXIMS OF NATURAL JUSTICE NAMELY A UDI ALTERAM PARTEM AND NEMO JUDEX IN RE SUA. IN THE PRESENT F ACTS OF THE CASE WE ARE CONCERNED WITH THE MAXIM AUDI ALTERAM PARTEM WHICH AGAIN MAY HAVE MANY FACETS TWO OF THEM BEING (A) NOTICE OF THE CASE TO BE MET; AND (B) OPPORTUNITY TO EXPLAIN. THEIR LORDSHIPS HAVE CAUTIONED THAT THESE RULES CANNOT BE SACRIFICED AT THE ALTAR OF THE ADMINISTRATIVE CONVENIENCE OR CELEBRITY. 3.3 IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE GENERAL VIEW EARLIER WAS THAT THE RULES OF NATURAL JUSTICE WOULD AP PLY ONLY TO THE ITA NO.3386 /DEL/2011 A.Y. 2000-01 3 JUDICIAL AND QUASI-JUDICIAL PRONOUNCEMENTS AND NOT TO BE ADMINISTRATIVE ACTION. HOWEVER, IN THE CASE OF STATE OF ORISSA VS DR. MISS BINAPANI (1967) 2 SCR 625 THE DISTINCTION BETWEEN QUASI JUDICIAL AND ADMINISTRATIVE DECISIONS WAS PERCEPTIVELY MITIGATED AND IT WAS HELD THAT EVEN ADMINISTRATIVE ORDER OR DECISIONS IN MA TTERS INVOLVING CIVIL CONSEQUENCES HAVE TO BE MADE CONSISTENTLY WITH TH E RULES OF NATURAL JUSTICE. SINCE THEN THE CONCEPT OF NATURAL J USTICE HAS MADE GREAT STRIDES AND IS INVARIABLY READ INTO ADMINISTRATIV E ACTIONS INVOLVING CIVIL CONSEQUENCES, UNLESS OF COURSE THE STATUE CONFERRING THE POWER EXCLUDES ITS APPLICATION BY EXPRESS LANGUAGE. 3.4 REFERENCE MAY BE MADE TO THE JUDGMENT OF THE AP EX COURT IN THE CASE OF CANARA BANK VS V.K. AVASTHI (2005) 6 S CC 321 WHEREIN THE CONCEPT, SCOPE, HISTORY OF DEVELOPMENT AND SIGNIFI CANCE OF THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN DISCUSSED EXTENSI VELY WITH REFERENCE TO EARLIER CASES THEIR LORDSHIPS OBSERVED THAT THE PRINCIPLES OF NATURAL JUSTICE ARE THOSE WHICH HAVE BEEN LAID OUT BY THE COURTS AS BEING THE MINIMUM PROTECTION OF THE RIGHTS OF AN IND IVIDUAL AGAINST THE ARBITRARY PROCEDURE THAT MAY BE ADOPTED BY A JUDICI AL, QUASI-JUDICIAL AND ADMINISTRATIVE AUTHORITY WHILE MAKING AN ORDER A FFECTING THOSE RIGHTS. 3.5. THEIR LORDSHIPS OF THE APEX COURT IN THE CASE OF SWADESHI COTTON MILLS VS UNION OF INDIA (1981) 1 SCC 664 HAVE BEE N CONSCIOUS OF EXAMINING THE GENERAL PRINCIPLE AS DISTINGUISHED FROM THE ABSOLUTE RULE OF UNIFORM APPLICATION TO HOLD THAT WHERE THE STATUE DOES NOT IN SPECIFIC TERMS EXCLUDE THIS RULE OF PRIOR HEARING BUT CONTEMPL ATES A POST DECISIONAL HEARING AMOUNTING TO A FULL REVIEW OF THE ORIGINAL ORDER ON MERITS, THEN SUCH A STATUTE SHOULD BE CONSTRUED AS EXCLUD ING AUDI ALTERAM PARTEM AT THE PRE-DECISIONAL STAGE. CONVERSELY IF THE STATUTE CONFERRING THE POWER IS SILENT WITH REGARD TO THE GIV ING OF A PRE- ITA NO.3386 /DEL/2011 A.Y. 2000-01 4 DECISIONAL HEARING TO THE PERSON AFFECTED AND THE ADM INISTRATIVE DECISION TAKEN BY THE AUTHORITY INVOLVES CIVIL CONSEQU ENCES OF A GRAVE NATURE, AND NO FULL REVIEW ON MERITS AGAINST THE DECI SION IS PROVIDED THE COURTS WILL BE EXTREMELY RELUCTANT TO CONSTRUE SUC H A STATUTE AS EXCLUDING THE DUTY OF AFFORDING EVEN A MINIMAL HEAR ING SHORN OF ALL ITS FORMAL TRAPPINGS AS IT WOULD PARALYSE THE ADMINISTRATIV E PROCESS OR FRUSTRATE THE NEED FOR PROMPTITUDE. THEIR LORDSHIPS HA VE CAUTIONED THAT THIS RULE OF FAIR PLAY MUST NOT BE JETTISONED SAVE IN EXCEPTIONAL CIRCUMSTANCES WHERE COMPULSIVE NECESSITY SO DEMANDS AND TH E COURTS MUST MAKE EVERY EFFORT TO SALVAGE THIS CARDINAL RULE T O THE MAXIMUM EXTENT POSSIBLE. THEY HAVE HELD THAT THE CORE OF THE SITUATIONAL MODIFICATIONS MUST REMAIN NAMELY THAT THE PERSON MUST H AVE REASONABLE OPPORTUNITY OF BEING HEARD AND THE HEARIN G MUST BE A GENUINE HEARING AND NOT AN EMPTY PUBLIC RELATIONS EX ERCISE. 3.6 WE MAY ALSO MENTION ANOTHER JUDGMENT OF THE APEX COURT NAMELY THE CASE GB GAUTAM VS UNION OF INDIA (1993) 1 SCC 78 WHERE THE QUESTION AROSE WHETHER IN THE ABSENCE OF THE PROVI SIONS FOR GIVING THE CONCERNED PARTIES AN OPPORTUNITY OF BEING HEARD BEFORE AN ORDER IS PASSED UNDER THE PROVISIONS OF SECTION 269UD OF THE ACT, FOR PURCHASE BY THE CENTRAL GOVT. OF AN IMMOVABLE PROPERTY AGREE D TO BE SOLD ON AN AGREEMENT TO SELL AN OPPORTUNITY OF BEING HEARD BEFO RE SUCH AN ORDER WOULD BE PASSED SHOULD BE GIVEN OR NOT. RELYING ON ITS EARLIER DECISIONS IN THE CASE OF UNION OF INDIA VS.- KAMAL J N SINHA (1970) 2 SCC 458, AND OLGA TELS VS MUMBAI MUNCIPAL CORPORATION (198 5) 3 SCC 545 THEIR LORDSHIPS HELD THAT ALTHOUGH CHAPTER XX-C DOE S NOT CONTAIN ANY EXPRESS PROVISION FOR AFFORDING THE PARTIES BEING GIVEN AN OPPORTUNITY TO BE HEARD BEFORE AN ORDER IS MADE U/S 269 UD NOT TO READ THE REQUIREMENT OF SUCH AN OPPORTUNITY WOULD BE TO GIVE TOO LITERAL AND STRICT INTERPRETATION TO THE PROVISION OF CHAPTER XX- C. THEIR LORDSHIPS WHILE HOLDING SO HAVE OBSERVED THAT THE OBSERVANCE OF THE PRINCIPLES OF ITA NO.3386 /DEL/2011 A.Y. 2000-01 5 NATURAL JUSTICE IS THE PRAGMATIC REQUIREMENT OF FAIR PLAY IN ACTION. AS SUCH THE REQUIREMENT OF AN OPPORTUNITY TO SHOW CAUSE B EING GIVEN BEFORE AN ORDER FOR PURCHASE BY THE CENTRAL GOVERNME NT IS MADE BY AN APPROPRIATE AUTHORITIES U/S 269UD MUST BE READ INTO TH E PROVISIONS OF CHAPTER XX-C. THEY HAVE HELD THAT THERE IS NOTHING I N THE NATURE U/S 269D OR ANY OTHER PROVISION IN THE SAID CHAPTER WHICH WOULD NEGATE SUCH AN OPPORTUNITY BEING GIVEN. BEING CONSCIOUS OF TH E FACT THAT IF SUCH A REQUIREMENT WERE NOT READ INTO THE PROVISIONS O F THE SAID CHAPTER. THEIR LORDSHIPS OBSERVED THAT SUCH AN ORDER WO ULD BE SERIOUSLY OPEN TO CHALLENGE ON THE GROUND OF VIOLATIO N OF THE PROVISIONS OF ARTICLE 14 OF THE CONSTITUTION OF INDIA ON THE GR OUND OF NON COMPLIANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. 3.7. IT IS ALSO SEEN THAT SIMILARLY, WHILE DEALING WITH THE QUESTION WHETHER THE REQUIREMENT OF AFFORDING AN OPPORTUNITY OF HEARING IS TO BE READ INTO SECTION 142(2A)OF THE ACT IN REGARD TO TH E SPECIAL AUDIT THEIR LORDSHIPS OF THE APEX COURT HAVE HELD IN RAJESH KUMAR S CASE VS- DCIT (2006) 287 ITR 91 (SC) THAT PREJUDICE TO THE A SSESSEE IS APPARENT ON THE FACE OF THE SAID STATUTORY PROVISIONS. REFERRIN G TO JUDGMENT OF DR. MISS BINAPANI DEI CITED SUPRA IT WAS OBSERVED THAT A N ORDER U/S 142 (2A) THE ASSESSEE SUFFERS CIVIL CONSEQUENCES AND EVEN THOUG H NO EXPRESS REQUIREMENT IS MENTIONED IN THE PROVISIONS, COMP LIANCE WITH THE PRINCIPLES OF NATURAL JUSTICE WOULD BE IMPLICIT. THEIR LORDSHIPS HAVE OBSERVED THAT THE ASSESSMENT PROCEEDINGS IS A PART OF JUDI CIAL PROCESS. WHEN A STATUTORY PROCESS IS EXERCISED BY THE ASSESSING AUTHO RITY IN TERMS OF ITS JUDICIAL FUNCTIONS WHICH IS DETRIMENTAL TO THE ASSESSEE IT DOES NOT AND CANNOT BE ADMINISTRATIVE IN NATURE. THE PRINCIPLES OF NATURAL JUSTICE ARE BASED ON TWO PRINCIPLES (I) NOBODY SHOULD BE CONDEMNED UNHEARD; AND (II) NOBODY SHOULD BE JUDGE I N HIS OWN CAUSE. THE DUTY TO ASSIGN REASONS IS THE JUDGE MADE LAW. ITA NO.3386 /DEL/2011 A.Y. 2000-01 6 3.8 IN THIS CONTEXT WE MAY ALSO REFER TO THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TIN BOX COMPANY-VS-CIT 249 ITR 216 (SC) WHEREIN ADMITTEDLY AN OPPORTUNITY OF BEING HEARD HA D NOT BEEN GRANTED BY THE AO. IN THE FACTS OF THAT CASE THE ASSESSME NT ORDER IN APPEAL WAS CONFIRMED BY THE CIT(A) AND FURTHER TRAVE LED TO THE TRIBUNAL. THE TRIBUNAL HELD THAT THE ASSESSEE HAD BEEN AFFORDED AN OPPORTUNITY OF BEING HEARD BY THE COMMISSIONER (APPEA LS) AND HAVING DONE THAT HELD THAT THE CLAIM OF THE ASSESSEE DID NOT H AVE ANY MERIT AND SINCE THE ADDRESS CHOOSE NOT TO ADDUCE ANY ADDITION AL EVIDENCE IN TERMS OF THE PROVISIONS OF RULE 46A OF THE IT RULES, TH E GRIEVANCE OF THE ASSESSEE ALLEGING DENIAL OF OPPORTUNITY WAS HELD TO BE W ITHOUT MERIT. THE TRIBUNAL TOOK NOTE OF THE FACT THAT EVEN BEFORE IT THE ASSESSEE COULD NOT INDICATE AS TO WHAT THE ASSESSEE HAD TO SAY BY WAY OF EXPLANATION TO THE DISCREPANCIES POINTED OUT BY THE A O. ACCORDINGLY THEY FOUND THAT NO POSITIVE EVIDENCE IN SUPPORT OF TH E AVERMENTS MADE BY THE ASSESSEE WERE AVAILABLE NOR ANY APPLICATION UND ER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES WAS FILED BEF ORE THE TRIBUNAL TO PERMIT THE ASSESSEE TO LEAD THE ADDITIONAL EVIDENCE EXCEPT THE BALD PLEA NO OTHER EVIDENCE WAS AVAILABLE. IN THESE CIRCUM STANCE THE ASSESSEES APPEAL WAS DISMISSED AS HAVING BEEN FOUND TO BE WI THOUT ANY MERIT, WHICH ACTION WAS CONFIRMED BY THE HONBLE HIGH COURT. THE HONBLE APEX COURT HELD THAT THE ASSESSMENT ORDER MUST B E MADE AFTER THE ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNIT Y OF SETTING OUT HIS CASE AND THEIR LORDSHIPS DID NOT AGREE WITH THE TRIBUNAL AND THE HONBLE HIGH COURT THAT IT WAS NOT NECESSARY TO SET ASID E THE ORDER OF THE ASSESSMENT AND REMANDED THE MATTER TO THE AO FOR FR ESH ASSESSMENT AFTER GIVING TO THE ASSESSEE A PROPER OPPORTUNIT Y OF BEING HEARD. 3.9 A CAREFUL PERUSAL OF THE CONSISTENT JUDGMENTS OF TH E APEX COURT WOULD SHOW THAT IT HAS CONSISTENTLY BEEN HELD THAT THE RULES OF NATURAL JUSTICE ARE NOT EMBODIED RULES AND THE SAID PHRASE IS NO T AND CANNOT ITA NO.3386 /DEL/2011 A.Y. 2000-01 7 BE CAPABLE OF A PRECISE DEFINITION. THE UNDERLYING P RINCIPLE OF NATURAL JUSTICE EVOLVED UNDER THE COMMON LAW IS TO CHECK ARBI TRARY EXERCISE OF POWER BY THE STATE OR ITS FUNCTIONARIES. ACCORDINGLY, THE PRINCIPLE BY ITS VERY NATURE IMPLIES THE DUTY TO ACT FAIRLY I.E. FAIR PLAY IN ACTION MUST BE EVIDENT AT EVERY STAGE. 3.10 IT IS A SETTLED LEGAL PROPOSITION THAT IF ANY ORD ER BY A JUDICIAL OR A QUASI-JUDICIAL AUTHORITY OR FOR THAT MATTER AN ADMIN ISTRATIVE AUTHORITY IS PASSED WHICH IS ADVERSE TO THE PARTY, IMPLICITLY BY REA DING THE RULES OF NATURAL JUSTICE INTO IT A RESPONSIBILITY IS CAST ON THE AUTHORITY PASSING THE ORDER TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE PERSON. THE IMPORTANCE OF THE SAID RULE CANNOT BE OVE R-EMPHASIZED. 4. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 30.8.2011. SD/- SD/- (B.K. HALDAR) (B.K. HALDAR) (B.K. HALDAR) (B.K. HALDAR) (DIVA SIN (DIVA SIN (DIVA SIN (DIVA SINGH) GH) GH) GH) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: 30.8.2011 VEENA COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER DEPUTY REGISTRAR, ITAT.