2007 (7) TMI 469 - HC - Income Tax

Whether on the facts and in the circumstances of the case the Tribunal is right in law in confirming the additions pertaining to the balances in the Indian Bank? Whether on the facts and in the circumstances of the case the Tribunal is right in law in not having posted the appeal for hearing and giving the appellant due notice of the same subsequent to the hearing of the miscellaneous petition filed by the appellant? Whether on the facts and in the circumstances of the case the Tribunal is right in law in passing the impugned order on the merits of the case in gross violation of the principles of natural justice? Held that - While allowing the assessee to establish its stand whether there exists an apparent mistake in the order passed by the Tribunal the Tribunal can expect the assessee only to establish the point to that effect but cannot expect to argue on the issue which the Tribunal failed to decide while passing the orders on the appeal on 21-9-2004.The Tribunal as an ultimate fact finding authority cannot shut the door at the threshold by directing the assessee to argue on the fact in issue while making arguments in respect of an application under Section 254(2) of the Act. Thus the way in which the third issue has been dealt with by the Tribunal at the stage of deciding the miscellaneous petition itself cannot be regarded as a correct approach. The appellant/assessee should have been given an opportunity to put forth its case in respect of the third issue which has been left out for consideration in the original order passed by the Tribunal by giving due opportunity. Hence the impugned order in the appeal is set aside and the matter is remitted back to the Tribunal to reconsider the issue afresh after giving due opportunity to the appellant/assessee.

Summary

Issues:
1. Confirmation of additions pertaining to balances in the Indian Bank
2. Failure to post the appeal for hearing and provide due notice
3. Passing the impugned order in violation of principles of natural justice

Analysis:

Issue 1: Confirmation of additions pertaining to balances in the Indian Bank
The appellant filed an application under Section 254(2) of the Income-tax Act, 1961 for block assessment years 1986-87 to 1996-97, which was decided by the Tribunal. The Tribunal confirmed certain additions made by the Assistant Commissioner of Income-tax, Central Circle, Chennai. The appellant challenged the correctness of the assessment before the Tribunal, which allowed the appeals for some additions but did not consider the third addition. The appellant filed a petition for reconsideration, which the Tribunal entertained but decided against the appellant. The appellant contended that the Tribunal erred in deciding the issue based on a letter filed by the appellant without giving an opportunity to present factual materials. The High Court held that the Tribunal should have allowed the appellant to argue the issue on merits and remitted the matter back to the Tribunal for reconsideration.

Issue 2: Failure to post the appeal for hearing and provide due notice
The appellant raised concerns about the Tribunal not posting the appeal for hearing and not providing due notice after the hearing of a miscellaneous petition. The Tribunal's decision was challenged on the grounds of violation of natural justice. The High Court emphasized that the appellant should have been given a real and reasonable opportunity to establish its case, especially on factual issues. The Court held that the Tribunal's hurried decision without allowing the appellant to present factual materials was not a correct approach and remitted the matter back to the Tribunal for reconsideration.

Issue 3: Passing the impugned order in violation of principles of natural justice
The High Court noted that the Tribunal failed to consider the third addition in the original order, leading the appellant to file a petition for rectification of mistakes under Section 254(2) of the Income-tax Act. The Court emphasized the importance of providing the appellant with a genuine opportunity to present its case on factual issues. It concluded that the Tribunal's decision to not allow the appellant to adduce materials to establish its case violated principles of natural justice. Therefore, the impugned order was set aside, and the matter was remitted back to the Tribunal for reconsideration after giving the appellant a fair opportunity.