TMI Blog1997 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ected appeals, they are being disposed off through this single order for the sake of convenience. FACTS 3. In terms of section 132 of the Act, separate warrants of authorisation under the said provision in statutory Form No. 45 were issued by the Director of Income-tax, Investigation, Madras, on 26-8-1995 for search of the below given premises: (a) No. 91, Venkatasamy Road (West), R.S. Puram, Coimbatore; (b) No. 86, Periasamy Road (West), R.S. Puram, Coimbatore; and (c) 601, Raja Street, Coimbatore in which the business is carried on by the firm of M/s. Kirtilal Kalidas Co. Warrant of authorisation was also issued by the Dy. Director of Income-tax (Inv.), Coimbatore, dated 30-8-1995 to search Vispark Jewellery Manufacturers Pvt. Ltd., Mettupalayam Road, Coimbatore. 4. In the warrants of authorisation (search warrants) issued by the Director of Income-tax, Madras, it is mentioned that information has been laid before him and on the consideration thereof he had reason to believe that: "If a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult of such search and take possession thereof; (f) to make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing; (g) to convey such books of account, documents, money, bullion, jewellery or other valuable article or thing to the office of the Deputy Commissioner of Income-tax or any other authority not below the rank of the Income-tax Officer employed in the execution of the Income-tax Act, 1961; and (h) to exercise all other powers and perform all other functions under section 132 of the Income-tax Act, 1961 and the rules relating thereto." 5. Similarly the Dy. Director of Inspection (Investigation), Coimbatore, Sri V.S. Kothari, in the search warrant dated 30-8-1995 issued by him in statutory Form No. 45 has stated that information was laid before him and on the consideration thereof he had reason to believe that: "if a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer employed in the execution of the Income-tax Act, 1961; and (viii) to exercise all other powers and perform all other functions under section 132 of the Income-tax Act, 1961 and the rules relating thereto." 6. Pursuant to these search warrants/authorisations, search operations were earned out on 30-8-1995 and certain materials were seized duly recorded in the Panchnama drawn at the search place, copies of which were also given to the respective searched persons or their agents. Copies of four search warrants have been given by the Assessing Officer on 12-8-1997 along with the written submissions filed by him in these appeals. 7. On the basis of searches conducted on 30-8-1995 an appraisal report was prepared on 14-11-1995 by the Dy. Director of Income-tax (Inv), Coimbatore, which was forwarded to the Assessing Officer, who was possessed of the jurisdiction over these appellants by virtue of notification under section 120 of the Income-tax Act, 1961, from the Commissioner of Income-tax, Coimbatore, bearing No. 7/1988-89/CBE dated 15-6-1988, which was modified subsequently by the Commissioner of Income-tax, Coimbatore, through notification No. 3/1991-92/CB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectively under section 158BC of the Act because according to them there was no undisclosed income for the block period of 10 years and moreover the notices issued on them were wholly illegal and without jurisdiction. However, subsequently, the returns for the block period were filed by the above mentioned appellants, the details of which are as follows: ----------------------------------------------------------------- (a) M/s. Kirtilal Kalidas Company (Appellant No. 1) Nil income (b) M/s. M.R. Agros Rs. 1,47,162 (Appellant No. 2) (as income from other sources as undisclosed income). (c) M/s. Vispark Jewellery Manufacturers P. Ltd. Nil income (Appellant No. 3) (d) Dr. Ms. Usha M. Mehta Rs. 3,58,560 (Appellant No. 4) (as undisclosed income) ----------------------------------------------------------------- 10. The Assessing Officer after scrutinising the seized materials and after obtaining the details/clarifications from the respective appellants/assessees, completed the block assessment on these appellants on 31-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- Total Income Rs. 31,54,960 ----------------------------------------------------------------- 11. The Assessing Officer also levied and demanded tax at 60% of the undisclosed income computed by him in (he respective block period assessment orders in terms of section 113 read with section 158BA(2) of the Act. We also record the facts and the reasons for making the different additions by the Assessing Officer in their respective block period assessment orders. M/s. Kirtilal Kalidas Co. (ITA No. 93/MDS/97) 12. The addition of Rs. 4,78,350 has been made on account of unexplained gold jewellery which has been dealt with by the Assessing Officer in the impugned order in this appellant's case in para. 4 of the impugned order from pages 2 to 5. According to the Assessing Officer the gold jewellery as per the assessee's books on 30-8-1995 was 160433.250 grams whereas as per the physical inventory made on that day, the quantity of gold and gold jewellery was to the extent of 137.986 kgs. The Assessing Officer, through his letter dated 8-5-1996 demanded explanation for the shortfall of 22.447 kgs and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- 12,308.52 " ----------------------------------------------------------------- This shortfall of the gold jewellery under repairs to the extent of 12,308.52 gms was taken (5) Rs. 459 per gram but since the jewellery for repairs was old, the value was taken @ Rs. 400 per gram and by doing so, the addition worked out to Rs. 49,23,408. This was treated as undisclosed income of the block period by the Assessing Officer. 12.3 The addition of Rs. 5,05,227 towards unexplained cash treated as undisclosed income has been discussed in para. 6 of the impugned assessment order. According to the Assessing Officer, the cash available at the counter on the search day was Rs. 20,96,500 whereas per books, it was only Rs. 15,91,273. Thus, there was an excess cash of Rs. 5,05,227. It was explained by Shri T. Shanthakumar, one of the partners of the appellant firm that the excess cash belonged to JVI/s. M.R. Agros, of which he was a trustee and the cash of the said trust was on account of sale of agricultural produce. It was also contended on the search day, by Shri T. Shantakumar, partner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng investments. From the detailed discussions made by the Assessing Officer from pages 4 to 8, he was of the opinion that the appellant-trust did not carry out any agricultural operations and did not even have the cash balance of Rs. 10,92,710 and the amount stated to be given to Sri T. Shantakumar, Dr. Usha K. Mehta and Sri Shyam Shir Sagar and M/s. Kirtilal Kalidas Co. recorded by us above was in fact their own money and not belonging to this appellant-assessee trust. At page 7 of the assessment order of this appellant, the Assessing Officer has also recorded the answer given by Dr. Usha K. Mehta to question No. 5 on 31-8-1995 under section 132(4) of the Act. In para. 5.2 at page 8 of the order of this appellant, the Assessing Officer has come to the conclusion that the investment made by the Trust in land and building to the extent of Rs. 12,19,665 has been made from out of undisclosed income and therefore assessable under1 section 158BC of the Act, namely the impugned order passed in the case of this appellant-trust. It is also mentioned in the said paragraph that the moneys found in the possession of the different parties belonged to those parties only and was not the cash b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une,'94 - 20443.350" (c) July, '94 - 29916.700" (d) August,'94 - 18850.150" (e) Sept.'94 - 24442.000" (f) Oct.'94 - 22017.000" (g) Nov.'94 - 17731.830" (h) Dec.'94 - 37606.630" -------------- 183466.062 " -------------------------------------------------- 16.2 The Assessing Officer demanded explanation from the assessee in respect of this alleged unaccounted turnover from seized document No. KR/S/19 and the assessee through letters dated 7-3-1997 and 19-3-1997 furnished explanations which have been discussed by the Assessing Officer in para. 4.2 at page 3 of the assessment order. The assessee submitted that it had issued issues and receipts to third parties during the period May, 1994 to December, 1994 in respect of the following third parties, the details of which are as under: ----------------------------------------------------------------- Name of the party Issues Receipts Making charge --------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer at Rs. 45,77,605. This was considered by the Assessing Officer as undisclosed income of the assessee from unaccounted turnover of gold jewellery. 16.3 The Assessing Officer did not stop here. According to him, the entire quantum of gold jewellery transaction denied by third parties was to the tune of 12,950.52 grams and the quantum of 22.923 Kgs. being the monthly-average of the unaccount turnover of 183466.062 grams made by the assessee allegedly through its employees was also treated as unexplained investment by the assessee in the gold for the balance period up to the date of search, viz, 30-8-1995. Thus the total unexplained investment in gold in terms of quantity was worked out by the Assessing Officer at 35.873 Kgs., the value of which was taken by him was @ Rs. 459 per gram and by doing so, the unexplained investment in gold was estimated at Rs. 1,64,65,707. Thus the total unexplained investment in gold and undisclosed profit on unaccounted turnover was worked out at Rs. 2,10,43,312 and this was brought to tax at 60%. 16.4 In para. 6, the Assessing Officer has stated that the assessee by letter dated 19-3-1997 submitted that the net excess of gold of 2053.826 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Diamonds 101.22 Cts. 20.50 Cts. 86.23 Cts. 3.52 Cts. 110.25 Cts. Cash Rs. 90,907 ----------------------------------------------------------------- 17.2 The appellant through letter dated 13-3-97, in order to explain the discrepancy raised by the Assessing Officer in letter dated 6-3-1997, it was submitted that 14 ct. gold jewellery was converted into 22 ct. gold jewellery and on conversion the gold jewellery found and the gold jewellery available with her and her mother Smt. Maniben K. Mehta were as under: ----------------------------------------------------------------- Items Quantity found Explained by the assessee Mother in W. T. Return ----------------------------------------------------------------- 22 Cts. gold jewellery 3168 gms. 5,771.500 gms. 14 Cts.- 22 Cts.Net 497 gms. 228.500 " ----------- 3665 gms. 6,000.000 " ----------------------------------------------------------------- It was further submitted that the differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the gold jewellery has been considered on equivalent wt. of 22 Ct. for easier tallying. It is submitted that the assessee has considered the entire jewellery including 14 Ct. jewellery." 17.3 The assessee had admitted in her Wealth-tax return (latest Wealth-tax return filed for assessment year 1993-94) Gold jewellery of 22 Cts. of 2,165.700 gms. and Diamonds of 20.50 cts. After taking into account these items admitted, the balance of gold jewellery and diamonds explainable are as under: ----------------------------------------------------------------- 22 ct. gold jewellery 1,002.30 gms. 14 ct. gold jewellery 781.00 gms. Jattar 754.00 gms. Diamonds 80.72 Cts. ----------------------------------------------------------------- 17.4 The assessee submitted that the above gold jewellery belonged to her mother and her mother had declared the same in her Wealth-tax return also. But the Assessing Officer did not accept this in view of the sworn statement given on 30-8-1995 under section 132(4), in answer to question No. 6 she had stated that none of her jew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------- No. Name Nos. Gold Diamond content content 1 2 3 4 5 ----------------------------------------------------------------- 62 4 green stoned Diamond bangles 4 53 gms. 2.50 cts. 64. Red-stone diamond bangles 4 43.8 gms. 1.75 cts. 65. Blue and diamond bangle 4 55.0 gms. 1.5 cts. 66. Diamond Bangles- single lined 2 38.0 gms. 7.0 cts. 67. Diamond bangles- single lined small 2 38.0 gms. 5.0 cts. 68. Gold chain with 1 set 91.0 gms. 4.0 cts. diamond pendant and studs 69. While gold necklace and pendants and 1 set 40.0 gms. 13.0 cts. studs 71. Diamond necklace- double lined 1 No. 47.0 gms. 5.0 cts. Purchased in April-May 1995 ------------ ------------ 405.8 gms 39.75 cts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 is out my in accumulated savings. Sum of Rs. 18,800 found in several envelopes represent gifts received by me on various occasions. Sum of Rs. 20,000 has been drawn from my Bank account at Indian Overseas Bank, R.S. Puram Branch. The balance amounts to the payments to be made for the purchase of sarees, received from my friends." But during the course of assessment proceedings, it was submitted that Rs. 80,000 belonged to her and Rs. 10,000 was given by M/s. M.R. Agios in which she was a trustee and it was received by her for the purpose of agricultural and other developmental activities in the land owned by the Trust. The assessee was also unable to give the exact details of expenses spent for agricultural operations of the land belonging to the trust. 17.7 The Assessing Officer did not believe the explanation tendered by the assessee and was of the opinion that the sum of Rs. 10,000 was not belonging to M.R. Agros Trust and the same was not handed over to her for agricultural purposes. This sum was, therefore, treated by the Assessing Officer as undisclosed income of this appellant-assessee of the block period and subjected to tax. Thus, the total undisclosed income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in M/s. Vispark Jewellery Manufacturers (P.) Ltd. (Appellant No. 3). Arguing further, Shri Santhana Krishnan submitted that the Assessing Officer in order to cover the lapse in failing to complete the assessments on or before 30-8-1996 and with a view to bring all the block assessments impugned in all these appeals within the limitation period prescribed under section 158BE(2) deliberately mentioned in the respective assessment orders that they were framed and completed under section 158BD read with section 143(3) of the Act. In fact, according to Shri Santhana Krishnan all the assessments were framed under section 158BC only and took us to the contents and observations made by the Assessing Officer in the impugned assessment orders of the respective appellants/assessees. On this ground of limitation, the assessees counsel pleaded for annulment of these assessments made by the Assessing Officer on 31-3-1997. 18.2 It was next contended by the assessees counsel that all the assessments impugned in these appeals were also required to be annulled by this Tribunal as the assessments were made not by the Assessing Officer acting independently on the basis of the seized material or ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of such an illegal approval cannot be sustained in law and therefore all the impugned orders should be vacated, submitted the assessees counsel, Shri Santhakrishnan. He also relied on the below given decisions: (a) Union of India v. Tulsiram Patel AIR 1985 SC 1416; (b) Smt. Maneka Gandhi v. Union of India AIR 1978 SC 597; (c) Mohinder Singh Gill v. Chief Election Commissioner AIR 1978 SC 851; and (d) K.V. Panduranga Rao v. Karnataka Dairy Development Corporation Indian Factories Journal. 18.4 The approval order of the Commissioner was also assailed by the assessees counsel on the ground that it contained no reasons whatsoever. Sri Santhanakrishnan submitted that as per settled law every order passed by any quasi judicial and judicial authority has to be supported by reasons and a speaking order is essential. Since the approval order of the Commissioner dated 31-3-1997 is silent, the assessment orders passed by the Assessing Officer on 31-3-1997 impugned in these appeals were required to be annulled, according to him. 18.5 It was also contended by the assessee counsel that the Commissioner in order to give his previous approval, has to study the draft orders prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnan submitted that the provisions of Chapter XIV-B are enacted as a special procedure for assessment of search cases brought on the statute book by Finance Act, 1995 and the purpose is to subject to tax, as quick as possible, the undisclosed income as defined in sub-section (b) of section 15813 of the Act. According to Shri Santhanakrishnan, no undisclosed income as defined in section 158B(6) has been found during the course of search operations in the premises of any of the appellant assessees and, therefore, the assessments framed under section 158BC are wholly illegal and should be declared as void and assessments cancelled. In order to buttress this argument, Shri Santhanakrishnan took us through the contents of the various additions made in the hands of the appellant-assessees in these cases. According to him, the Assessing Officer has not understood the various accounting entries and stock position reflected in the accounts and registers in the cases of M/s. Kirtilal Kalidas Co. (Appellant No. 1) and M/s. Vispark Jewellery Manufacturers (P.) Ltd. (Appellant No. 3) and that he has unnecessarily assumed about investments in good and manufacture of gold jewellery and other as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on the present appellant-assessees in accordance with the provisions of section 158BE(2) they were within the limitation period and this Tribunal should not annul or quash the impugned assessments. 19.1 Regarding the directions in the appraisal report of the DDI, Shri Goraknathan, submitted that this is the general practice in the department that after search and seizure operations an appraisal report is prepared by the investigation wing of the department and after the approval by the Commissioner the same is given to the Assessing Officer to help him to make the assessment after proper enquiry. According to Sri Goraknathan, this was an internal document between the investigation wing and the Assessing Officer and it was a private and confidential document and neither the assessee nor any other person can look into or take copies from the appraisal report of the DDI. According to him the impugned assessments have been framed by the Assessing Officer independently without being influenced or carried away by the directions contained in the appraisal report of the DDI and therefore, the plea of annulment by the assessees counsel is wholly unjustified and the Tribunal should reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re operations conducted on 30-8-1995 and, therefore, this Tribunal should not be carried away by the arguments of the assessees counsel and should not give any relief or delete any addition made in the case of all the appellant-assessees. In the end it was pleaded by the departmental officers appearing for the revenue that the impugned assessments being valid and proper as per law are required to be upheld dismissing the appeals filed by all the appellant-assessees before this Tribunal. 20. To a specific query by us the Assessing Officer Sri Krishna Rao submitted that the draft assessment orders in these cases as well as in the case of Shri T. Santhakumar (ITA No. 1883/MDS/96) were taken by him personally to the Commissioner of Income-tax, Coimbatore, on 31-3-1997 and were not forwarded to the Commissioner through any covering letter or any other communication. The Assessing Officer fairly conceded before us that the Commissioner did not call for or examine the seized materials from him for the purpose of according approval. The Assessing Officer upon questioning by us was also unable to give approximate timings of taking the draft assessment orders is all these cases to the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Director of Inspection (Investigation), Madras and the Dy. Director of Inspection (Investigation), Coimbatore respectively filed before us in these appeals by the Assessing Officer and the Departmental Representative clearly, without any shadow of doubt, say that the searches were conduced and carried out at the concerned premises of each of these appellant-assessees on the building/premises mentioned on page 2 of the respective search warrants. The recovery and seizure of cash, jewellery, account books, registers and other material during the course of search operations and the various lengthy inventories prepared by the search party on the search day forming gart of the different panchnamas in respect of each of the premises and persons establishes firmly that such searches were conducted in terms of section 132 of the Act and that being the case, the provisions of section 158BE(1) clearly applied and governed the instant cases. By no amount of vehemence or force of any argument it cannot be accepted by us that the search operations were only on Shri T. Santhakumar and not on these appellant-assessees. The contents of various search warrants at page 2 clearly reveal that cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants calling upon them for filing of block period returns in respect of undisclosed income and the Assessing Officer did issue such notices to all these appellant-assessees and the same were also compiled by these appellant-assessees by filing block period returns. The issuance of a notice by the Assessing Officer on 11-3-1996 to all these appellant-assessees after the search operations on the basis of the appraisal report of the DDI clearly establishes that these were search warrant cases and, therefore, the provisions of section 158BE(1) governed it. It is too late in the day for the Departmental Officers to contend that the impugned assessments were not search warrant assessments but assessments made in terms of section 158BD of the Act. From the conduct of the Assessing Officer in issuing the notices to all of them under section 158BC of the Act and, framing of the assessments clearly demonstrates that the assessments are to be governed by the provisions of section 158BE(1) of the Act and not in terms of section 158BE(2) of the Act. The Assessing Officer has not issued notices under section 158BD of the Act after being satisfied on the basis of search material found in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Act cannot be claimed to be done in pursuance or execution or intended execution of the Act". It is similarly held by the Supreme Court also in the case of Municipal Corporation v. Sri NiyamatuIlah [1969] 2 SCC 551. The Hon'ble Supreme Court again in the case of J.N. Ganatra v. Morvi Municipality [1996] 9 SCC 495 at page 498 in para 4 have laid down that an act or a power under a statute has to be done or exercised in accordance with the provisions of the Statute otherwise it is illegal and void and cannot be treated as being done or performed in pursuance or execution or intended execution of the Statute. On the basis of these authorities the impugned assessments cannot stand and are liable to be quashed. 25. Not only the impugned assessments are barred by limitation but are also lawfully not sustainable for other reasons also, as contended by Sri Santhana Krishnan. It was the contention of Sri Santhana Krishnan that the Assessing Officer did not act independently in making the enquiries and in framing the impugned assessments but was greatly influenced and carried away by the directions/instructions issued by the Dy. Director of Inspection (Inv.) as contained in his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent orders he is only bound by what has been decided by the appellate authorities mentioned in the Income-tax Act and the opinion expressed by the High Court or the Supreme Court. It is also now well settled that, as far as the income-tax is concerned, the principle of res judicata is not applicable and the Income-tax Officer is not bound by the decisions rendered by him in an earlier order in regard to the same assessee. When these principles are kept in view, it becomes clear that the orders, instructions or directions that can be issued under section 119(1) are administrative directions which cannot in any manner fetter the discretion of the Income-tax Officer in making the assessment. This becomes more clear from the proviso to sub-section (1) of section 119 which says that no orders, instructions or directions shall be given by the Board so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate function. The Appellate Assistant Commissioner's functions are not executive. They are only judicial and this proviso has been enacted to make it clear that the orders, instructions or directions of the Board will not interfere with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession and custody of such document, then, the Court will be perfectly justified in presuming and drawing an inference that the contents of such a with-held document are favourable to the opposite side and adverse to the party possessing such document and refusing to part with it or file before the Court for the purpose of determination of the lis. In the instant case such a situation prevails. The departmental authorities are in custody and possession of the appraisal report of the D.D.I, which according to the appellants are adverse to their interest inasmuch as the Assessing Officer has been influenced, dictated and directed to act not on his own independently but as directed and dictated by the superior officer in a particular document, namely, in the instant case the appraisal report of the D.D.I. It is on account of this conduct and attitude of the departmental authorities in withholding the appraisal report which compels us to draw an inference that what the assessees counsel Sri Santhana Krishnan submitted is true and correct and therefore we believe the same to be true, correct and acceptable. It is on the account of these reasons that the impugned assessments, as conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uant to enquiry conducted by him as provided in the relevant provisions of the Income-tax Act, 1961. One thing we bear in mind that after the passing of the order of assessment by the Assessing Officer after the granting of approval by the Commissioner under section 158BG of the Act only one appeal has been provided to the aggrieved person and that is the appeal to this Tribunal. No further appeal has been provided after the disposal of the appeal by this Tribunal except the matter resting with the High Court by way of reference of questions of law under section 256 of the Act Since only one appeal has been provided, we think the Legislature thought that no order of assessment of the block period framed in terms of Chapter XIV-B of the Act to be passed until the Commissioner being a very Senior Officer of the Department goes through the draft assessment order and grants his approval either for or against such an order of assessment. From the scheme of the special provisions in relation to search cases enacted in Chapter XIV-B and the phraseology employed by the Legislature in section 158BG empowering the Commissioner to give previous approval before final order of assessment is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformed by the Commissioner in granting previous approval requires an enquiry and a judicial approach on the entire facts, materials and evidence. In law where any act or function requires application of mind and judicial discretion or approach by any authority it partakes of and assumes the character and status of a judicial or at least quasi-judicial act particularly where such act or function is likely to affect any person or his rights prejudicially, and where, more so, such right is civil right, namely, the property and assets which the assessee will be required to part with after the passing of the final order of assessment of the block period. 32. Under the provisions of section 110(1) of the Customs Act, 1962, the officer has power of seizure if he has a reasonable belief that any goods are liable for confiscation under the Act. Further sub-section (2) of section 110 lays down that a notice under section 124 has to be given within six months of the seizure of the goods to the person from whom the seizure was effected and if no such notice is given within that period then the seized goods shall be returned by such officer to the person from whose possession the goods were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the other in the case of Charan Das Malhotra it can certainly be said that the power exercised by the Commissioner in granting approval to the order of the Assessing Officer is a quasi-judicial function and not an administrative function as contended by the departmental authorities. 34. The term 'quasi-judicial' means 'like judicial though not exactly judicial' and its proceedings must be like judicial. And once it is judicial, then as per the requirement and rule of modern administrative law and that of Anglo Saxon system of administration of law and justice followed by the Courts in India, it must essentially conform with, adhere to and follow the cardinal principles, commonly known as rules of 'natural justice'. 35. The 'principles of natural justice' demand that no man should be condemned without any hearing and that nothing should be done behind the back of any person who is likely to be adversely affected. This is based on the very well accepted maxim Audi Alteram Partem, i.e., hear the other side. The fundamental idea of observance of the principles of natural justice is the recognised basic right of a human being to a fair trial or fair play in action or fairness in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 1269 as also the observations in administrative law by H.W.R. Wade, 5th edn., pages 310-11 that the act in violation of the principles of natural justice or a quasi-judicial act in violation of the principles of natural justice is void or of no value. In Ridge v. Baldwin [1964] AC 40 and Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147 the House of Lords in England has made it clear that breach of natural justice nullifies the order made in breach. If that is so then the order made in violation of the principles of natural justice was of no value........" On the question whether a person should be heard before any adverse order is passed against him, the Rajasthan High Court in the case of CIT v. Suresh Chandra Gupta [1988] 173 ITR 407/36 Taxman 225, held as under: ". . . It is a basic requirement of law that a person, who is likely to be adversely affected by an order, should have an opportunity to show cause why such adverse order should not be made. ..." Once it is established that there is non-observance of the principles of natural justice, it consequently follows that a 'prejudice' is caused to a person, that is to say, there has been 'miscarriage o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors of a given case is not desirable, but the fact remains that it is "untenable heresy to lock-jaw the victim or act behind his back" by tempting invocation of administrative necessity. Even where there is a clearest case of public interest or public injury, there is no justification for non-observance of even an abridged form of fair hearing, preferably before a clear decision is taken or where a hearing before the decision is not practical or reasonable. A hearing to the affected party is thus an essential attribute of quasi-judicial action and it would be ceased to be unfair if the affected or aggrieved party is denied this fairness in action. 39. One principle which is now well-settled by a catena of decisions, few of which we have discussed above is that even if the statute is silent with regard to grant of hearing to the person affected but the decision taken by the authority involves civil consequences or adverse consequences, at least a minimal hearing is essential, and not only desirable. An order suffering from non-observance of the principles of natural justice would, under the circumstances, be void and a nullity. 40. The departmental authorities appearing before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive authority invested with the judicial power." 43. Again, in Liberty Oil Mills 'case while dealing with clause 8B of the Imports and Exports (Control) Act, which does not provide for a pre-decisional opportunity to the affected party and also lays down that an order may be made "Without assigning any reason", their Lordships opined thus: "Ours is a constitutional Government, an open democracy founded upon the rule of law not a cloak and dagger regimen. It is inconceivable that under our constitutional scheme a decision of the kind contemplated by clause 8B which may have the effect of bringing to a standstill the entire business activity of the person affected and which may even spell ruin to him, should be made and implemented without being communicated to that person. Intertwined is the question of observance of natural justice and how can natural justice be satisfied if the decision is not even communicated? It would be most arbitrary and quite clearly violative of articles 14 and 19(1)(g) of the Constitution if clause 8B is to be interpreted as excluding communication of the decision taken. There is nothing in clause 8B to suggest that the decision is not to be communic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable." It is, therefore, no longer res Integra that a reasoned order is the essential condition of judicial disposal because the obligation to give reasons introduces clarity and excludes, or at any rate, minimises chances of arbitrariness. It gives satisfaction to the party against whom the order is made and enables an appellate or a supervisory court to keep the Tribunals within bounds by testing the correctness of those reasons. Communicating an order but withholding the reasons for the order is thus an idle and a meaningless formality of conveying the order. 46. It, therefore, follows from the above authoritative decisions that an approval order of a quasi-judicial nature without reasons is a wholly defective order in the eye of law. 47. It is, therefore, too late now for the income-tax authorities to contented that there is no necessity to follow the principles of natural justice nor any need for giving any hearing to a person likely to be adversely affected by granting approval. The lw of 'fair hearing to the other side' has become fully ingrained an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions by the Assessing Officer, it is clear that no undisclosed income was detected or found pursuant to the search operations conducted on the premises of the various appellants. The Assessing Officer assessed M/s. Kirtilal Kalidas Co. (Appellant No. 1) in respect of undisclosed income worked out in a sum of Rs. 1,45,24,800. Out of this undisclosed income, a sum of Rs. 86,17,816 has been considered as undisclosed income on account of unexplained shortfall in gold jewellery treating the same as undisclosed income. We fail to understand as to how shortfall in gold jewellery can be considered as an undisclosed income. The searching party found that the actual gold in the business premises was less than recorded in the account books and stock registers. We can understand had there been more stock of gold jewellery in the business premises at the time of search operations, over and above what is recorded in the account books. To treat the excess gold found unrecorded in the accounts as undisclosed income could have been valid and proper. But to add the value of gold jewellery found less than recorded in the account books treating it as undisclosed income is rather prepostero ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster and seized during the search operations. The explanation of the assessee that there are also receipts for corresponding bookings and making of ornaments, details of which are contained in separate receipt register has been totally ignored by the Assessing Officer. The addition has been made purely on conjectures and surmises that there has been unaccounted turnover picking of few instances for a couple of months from one of the seized register, which according to the assessee, is maintained in the regular course of the business. We cannot agree with the Assessing Officer that these recorded transactions in the issue register for booking orders by various employees could be considered as unexplained investment in gold and undisclosed profits from unaccounted turnover to be treated as undisclosed income for the purposes of XIV-B of the Act. The addition of Rs. 2,10,43,312 is thus wholly unjustified and unwarranted and cannot be sustained. 54. The addition of Rs. 9,42,706 in the case of M/s. Vispark Jewellery Manufacturers Pvt. Ltd. towards wastage of gold also cannot be sustained as undisclosed income of the block period. We do not know by what stretch of imagination or argume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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