9911796707
TMI Blog1997 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ao, Assessing Officer. Since these are connected 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle or thing found as a result 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-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rank of 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. 3/19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively 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 31-3-1997 computing the UDI, details of which are extracted below: - (i) Kirtilal Kalidas & Co. Subject to the above remarks, the total undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. 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 through its reply dated 22-5-1996 had filed a reconciliation statement submitting that there were some mistakes in totalling and some items omitted to be totalled in the physical inventory prepared by the searching party, in para 4.1, the Assessing Officer has recorded the assessee's stock statement of the quantity of gold jewellery which came to 160433.250 grams in respect of total 11838 items on different items of gold jewelleries. After exchange of letters and verification and cross verification of different statements furnished by the assessee, the shortage was worked out at 1042.154 grams which was valued by the Assessing Officer @ Rs. 459 per gram of 22 ct. gold as per information of Jewellery Association Manual and by doing so the addition worked out to Rs. 4,78,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce. It was also contended on the search day, by Shri T. Shantakumar, partner of M/s. Kirtilal Kalidas & Co. and one of the trustees of M/s. M.R. Agros that the cash is also evidenced and recorded in the cash book of the said trust. According to the oath statement of Sri Shantakumar given under section 132(4) of the Act that the closing cash balance of M/s. M.R. Agros on 30-8-1995 was to the tune of Rs. 10,92,712 and the said cash was held by three different persons in the below given manner: ------------------------------------------------ Sri T. Shantakumar Rs. 2,66,399 Dr. Usha K. Mehta Rs. 90,907 Sri Shyam Shir Sagar Rs. 2,20,406 ------------------------------------------------ The Assessing Officer did not believe the explanation and treated the sum of Rs. 5,05,227 as undisclosed income of the block period of this appellant firm. 13. Thus the total undisclosed income for the block period was computed in a sum of Rs. 1,45,24,800 as recorded by us above and tax at 60% of Rs. 8714880 was demanded. This has given rise to the present appeal (ITA No. 93/MDS/97) before this Tribunal. M/s. M.R. Agros (ITA No. 94/MDS/97) 14. The assessee trust filed a return declaring undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only and was not the cash belonging to this appellant-trust. In para. 6 of the assessment order of this appellant-trust, the Assessing Officer has estimated the cost of farm house on the agricultural land owned by the appellant-trust at Narasimhanaicken Palayam along with swimming pool in a sum of Rs. 8 lacs approximately. According to the Assessing Officer the farm house had a built-up area of 3000 sq. ft. and there was also a swimming pool on the right-side of the farm house and according to him, the cost of construction/investment in the swimming pool will be approximately Rs. 1 lakh. The Assessing Officer estimated the cost of construction of the farm house/building at Rs. 300 per sq. ft. 15. For the reasons given by the Assessing Officer in paras 4 to 6, the total addition of Rs. 20,19,665 was made. This is challenged in this appeal before us on the ground that there has been no undisclosed income of the appellant-trust in a sum of Rs. 20,19,665 and whatever undisclosed income was there, has been disclosed in the return to the tune of Rs. 1,47,162. M/s. Vispark Jewellery Mfrs. P. Ltd. (ITA No. 95/MDS/97) 16. In this case, a sum of Rs. 2,10,43,312 is considered as undisclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- It is the claim of the assessee that it received gold for manufacture of various jewellery and after manufacturing the same, they were returned to third parties after recovering and collecting the making charges. The sum and substance of the assessee's argument is that it had only made gold jewellery and all the transactions are recorded in the receipt and issue vouchers. There was a total denial by the appellant-assessee that it had purchased any gold for manufacture and sold gold jewellery after manufacturing it. The Assessing Officer did not accept any of the explanations tendered by the assessee and he examined two persons, namely, Shri L. Radhakrishnan and Shri Pushparaj and recorded their oath statement on 31-3-1997, that is to say on the day when the impugned assessment in this case was made and finalised. The relevant portion of the statement of Shri Radhakrishnan has been recorded by the Assessing Officer at page 4 of the assessment order. Though the Assessing Officer has stated that he has recorded the oath statement of Shri Pushparaj on 31 -3-1997, the relevant portion or the pertinent answers given by the said deponent have not been extracted in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grams, (5) Rs. 459 per gram as on 30-8-1995 should be considered as undisclosed income of the appellant assessee for the block period. Thus, the addition of Rs. 9,42,706 was made towards wastage of gold treating the same as undisclosed income of the appellant-assessee for the block period. This has given rise to the present appeal before this Tribunal. Dr. Usha K. Metha (ITA No. 96/MDS/97) 17. During the course of search of residence of Smt. Maniben K. Mehta situated at 86, Periasamy Road, R.S. Puram, Coimbatore-2, who is the mother of this appellant, the following assets were found: ----------------------------------------------------------------- (a) Gold jewellery - 22 cts. 3,168 gms (b) Gold Jewellery - 14 cts. 781 " (c) Jattar (20% gold) 754 " (d) Diamonds 101.22 " (e) Cash Rs. 90,907 ----------------------------------------------------------------- 17.1 In response to notice under section 158BC dated 11-3-1996, which was served on the appellant-assessee on 19-3-1996, a return was filed declaring undisclosed income in a sum of Rs. 3,58,560 and tax of Rs. 215136 was paid along with a letter dated 3-2-1997. In reply to queries raised by the Assessing Officer in letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer informed the authorised representative of the appellant that the assessee in the course of her statement under section 132(4) had submitted that she purchased the gold jewellery weighing 902.800 grams from April to July 1995 for which the Income-tax Officer demand explanation. The Assessing Officer also wanted to know from the assessee that the difference in quantity of 14 Cts. gold jewellery should not be treated as her unaccounted investment. To these, the assessee's representative M/s. Suri & Co. through their letter dated 27-3-1997 submitted as under: "The assessee had already submitted that the purchase of jewellary mentioned by her at the time of search operation was only remarking of various jewellery as per the designs and latest styles. It is submitted on behalf of the assessee that the assessee has not acquired any fresh good during the period. It is further submitted that the assessee had substantial jewellery already in her possession and she has not further purchased any gold but only has made frequent changes in the designs. In the reply already submitted the assessee has already considered the gold at 22 ct. equivalent weight even in respect of 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to you: - ----------------------------------------------------------------- (a) 22 ct. gold jewellery 3168 grams (b) 14 ct. gold jewellery 781 grams (c) Jattar (which approximately contains 20% gold) 754 grains (d) Diamonds 101.22 Cts. ----------------------------------------------------------------- How do you explain the difference? Ans: 497 grams, being S. No. 76, 78, 79, 80 & 89, are the gold jewellery purchased by me during July-August, 1995. Further, I have also purchased diamonds and coloured stones studded jewellery in gold, being items Nos. 62, 64, 65, 66, 67, 68, 69 and 71, aggregating 405.8 grams were purchased during April-May 1995. The balance of 251 grams, I am not able to explain at present. All the 14 Ct. jewellery have been bought in foreign countries and as they are not valued much in India, I have not declared them in my W.T. statement. Regarding the Jattar jewellery which has less gold content, have been discussed in my wealth-tax return. As stated in earlier para, some diamond studded jewellery have been purchased during this year. The difference in weight can be reconciled only after the diamonds are valued by an approved diamond valuer." The speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cash of Rs. 90,907 found in the residence, it was explained as under (In answer to Question No. 5): "A sum of Rs. 50,000 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 undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also issued to Shri Shantakumar, a partner in the firm of M/s. Kirtilal Kalidas & Co. (Appellant No. 1) and a director 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner without application of mind and without hearing the appellants-assessees, the assessments framed on the basis 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evident from the contents of the assessment orders passed and impugned in these appeals. Sri Santhanakrishnan 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (Appellant No. 3) and M/s. M.R. Agros (Appellant No. 2). According to him since the assessments were made 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer that he has brought to tax the undisclosed income found as a result of search and seizure 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot on these appellant-assessees. From the copies of search warrants dated 26-8-1995 and 30-8-1995 of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Assessing Officer with directions to issue notices under section 158BC of the Act to all these 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done in pursuance or execution or intended execution of the Statute. For what is plainly prohibited 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Board of Direct Taxes for making a particular assessment. While passing assessment 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 mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led or produced or with-held deliberately by a party to a proceeding who is having the possession 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed draft order of assessment of the block period framed by the Assessing Officer pursuant 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 empowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial or prejudicial to any person/assessee. Thus, this act or function to be performed 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d two authoritative decisions of the Apex Court, one in the case of A.K. Kraipak 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 bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated by this Court in State of Orissa v. Dr. (Miss) Binapani Dei AIR 1967 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 'prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice without reference to the administrative realities and other factors 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 vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as a deterrent against possible arbitrary action by the executive 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould reveal a rational nexus between the facts considered 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have recorded elsewhere above in this order and 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 trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alesman which he picked out from one issue register 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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