TMI Blog2008 (7) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... - 41 of 1997 - - - Dated:- 22-7-2008 - K. A. Puj and BANKIM N. MEHTA JJ. Manish J. Shah for the assessee. Manish R. Bhatt for the Commissioner. JUDGMENT The judgment of the court was delivered by 1. K. A. Puj J.- During the pendency of this reference before this court, the applicantassessee, namely, Shri Laxmanbhai S. Patel expired and hence, his heirs and legal representatives are brought on record, vide order dated July 9, 2008, passed in Civil Application No. 142 of 2008 and they are pursuing this reference before this court. 2. The Income-tax Appellate Tribunal, Ahmedabad Bench A, Ahmedabad, vide statement of case drawn in March, 1997, referred to the following question of law for the assessment year 198586, at the instance of the assessee, for the opinion of this court : "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the addition of Rs. 8,78,358 in the hands of the assessee ?" 3. The brief facts giving rise to the present reference are that there was a search and seizure operation under section 132 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") carried out at the resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer. Later on, during the assessment proceedings, the Assessing Officer again gave an opportunity to the assessee to explain as to why the sum of Rs. 8,78,358.75 should not be added in his hands. The assessee filed reply dated January 25, 1988, in which he reiterated the same facts that he has never advanced any amount to Shri Kantilal M. Patel in respect of the said promissory note. He further stated that the statement of Shri Kantilal M. Patel was recorded somewhere in the midnight after putting lot of pressure and that statement had been retracted by the said Kantilal M. Patel. He further corroborated the same story of partners of M/s. Durga Cotton Industries that they had disclosed a sum of Rs. 11 lakhs including this sum of Rs. 8,78,358.75. Again, the case of the assessee was that each of the partners of M/s. Durga Cotton Industries had been assessed by the concerned Income-tax Officer for the sum disclosed by them in the disclosure petition dated September 29, 1986, and once the amount including the amount of Rs. 8,78,358.75 had been taxed in the hands of Kantilal M. Patel, Baldevbhai M. Patel and Babubhai S. Shah, then the said amount cannot be taxed twice in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the assessee. 5. Being further aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the assessee went in appeal before the Income-tax Appellate Tribunal, Ahmedabad and before the Tribunal, the same contentions were reiterated by the assessee. The first contention was that the addition of the impugned amount was made by the Revenue after placing reliance on the original statement of Kantibhai M. Patel and promissory notes but statement of Kantibhai M. Patel could have not been relied upon as the same stood retracted by him through affidavit mentioning that his earlier statement was taken at the late hours of the night and under pressure. The other plea was that the amount of Rs. 8,78,358 was included in the sum of Rs. 11 lakhs which has since been disclosed under the voluntary disclosure scheme by Shri Kantilal M. Patel and other two partners vide disclosure petition and even partners of M/s. Durga Cotton Industries were assessed for the disclosed amount. The other plea was that once the amount of Rs. 11 lakhs including the disputed figure of Rs. 8,78,358 stood assessed in the hands of the three partners of M/s. Durga Cotton Industries, then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple of law to the facts of the case and arrived at an erroneous conclusion in law which cannot be sustained in view of the settled position in law. He has submitted that the statement of Rameshbhai M. Patel on which heavy reliance was placed by the Revenue was not at all referred to in the assessment order and the Assessing Officer has made the addition of Rs. 8,78,358.75 in the hands of the assessee. Neither the copy of the statement was given to the assessee nor any opportunity of crossexamining the said Rameshbhai M. Patel was given to the assessee. Before the learned Commissioner of Income-tax (Appeals), the statement of Rameshbhai M. Patel is produced by the Revenue and though the assessee has raised an objection against production of additional evidence, the said statement was allowed to be produced and the request made by the assessee to allow him to crossexamine the said Rameshbhai M. Patel was not accepted by the learned Commissioner of Income tax (Appeals). He has, therefore, submitted that the entire addition made by the Assessing Officer and confirmed by the learned Commissioner of Income tax (Appeals) as well as the Tribunal is required to be deleted on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the evidence of R could not have been used against the assessee and in the absence of affording a reasonable opportunity of being heard by summoning the said witness the assessment order was vitiated. 14. Mr. Shah further relied on the decision of the hon'ble Supreme Court in the case of Rajesh Kumar v. Deputy CIT [2006] 287 ITR 91 wherein it is held that the principles of natural justice are based on two principles : (i)nobody shall be condemned unheard, and (ii) nobody shall be judge of his own cause. Duty to assign reasons is, however, judgemade law. When civil consequences ensue, there is hardly any distinction between an administrative order and a quasijudicial order. It is now well settled that the thin demarcating line between an administrative order and a quasijudicial order stands obliterated. It is further held that when an authority, be it administrative or quasijudicial, adjudicates on a dispute and if its order is appealable or subject to judicial review, it would be necessary to spell out the reasons therefor. While, however, applying the principles of natural justice the court must also bear in mind the theory of useless formality and the prejudici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the authorities below and submitted that the authorities below have appreciated the facts in a correct perspective and arrived at the correct conclusion which requires no interference by this court as addition was rightly made in the hands of the assessee. He has further submitted that the main argument of the assessee is that the assessee was not given an opportunity of crossexamining Shri Rameshbhai S. Patel, on whose statement heavy reliance was placed by the Assessing Officer. It was argued on behalf of the assessee that by denying the opportunity of crossexamining the said Shri Rameshbhai, the Assessing Officer has violated the principles of natural justice. In this connection, he has submitted that whatever was stated by the said Shri Rameshbhai was not rebutted by the assessee and the same stood proved by all the facts and circumstances of the case available on record. The assessee himself has admitted that he handed over the key of the locker and one envelope containing promissory notes to the said Shri Rameshbhai for safe custody. The assessee has falsely denied the fact that he handed over two envelopes. The authorities have considered the statement of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee. In support of this submission, Mr. Bhatt relied on the decision of the hon'ble Supreme Court in the case of Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 wherein it is held that (i) the declaration under section 24(2) of the Finance (No. 2) Act, 1965, had to relate to income actually earned by the declarant and the Act granted immunity to the declarant alone and not to other persons to whom the income really belonged ; (ii) the finality under section 24(8) of the Finance (No. 2) Act, 1965, was to the order of the Central Board under section 24(6) and not to the assessment of tax made on the declarations furnished under the scheme ; (iii) under section 24(1), the declaration was required to be made in respect of the amount which represented the income of the declarant. The declaration could not be made in respect of an amount which was not the income of the declarant. If, therefore, a person made a false declaration with respect to an amount which was not his income, but was the income of somebody else, then there was nothing to prevent an investigation into the true source of the amount. There was nothing in section 24 of the Finance (No. 2) Act, 1965, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing the final fact finding authority had given its finding after appreciation of facts and evidence on record and hence, findings on questions of pure fact arrived at by the Tribunal are not to be disturbed by this court on a reference unless it appears that there was no evidence before the Tribunal upon which they, as a reasonable man, would come to the conclusion to which they have come and this is so, even though, this court would on the evidence have come to a conclusion entirely different from that of the Tribunal. He has submitted that such a finding can be reviewed only on the ground that there is no evidence to support it or that it is perverse. In support of this submission, he relied on the old decision of the hon'ble Supreme Court in the case of Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 wherein the hon'ble Supreme Court has carved out certain principles emerging from the decided cases. The principles are as under : (i) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (ii) When the point for determination is a mixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that it was not necessary to give such copy to the assessee nor was it necessary to give an opportunity of crossexamining the said Shri Rameshbhai M. Patel as the facts stated by him are admitted by the assessee. The whole issue of the addition in question is required to be viewed in this context. 22. It is an admitted position that right from the beginning, the assessee has stated that no amounts were due to him in respect of the promissory note in question as he had never advanced any amount to Shri Kantilal M. Patel in respect of the said promissory note. It is found from the evidence on record that the statement of Shri Kantilal M. Patel was recorded at about 2 a.m. in the midnight. It was alleged that the said statement was recorded under great strain and tension. Soon thereafter, the said Shri Kantilal M. Patel filed an affidavit pointing out the circumstances under which the said statement was obtained from him under great pressure, tension and coercion. The assessee has also made it clear that there was no business relation between him and the said Shri Kantilal M. Patel for which he could advance such a huge amount to him. It is none of the business of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the key of the locker as well as two envelopes were found. Out of these two envelopes, one envelope contained the alleged promissory note. The assessee had subsequently denied to have given this promissory note to the said Shri Rameshbhai M. Patel in subsequent proceedings. Despite this fact, the said statement of Shri Rameshbhai M. Patel has neither been referred to in the assessment order nor copy thereof was given to the assessee. During the course of the appellate proceedings before the Commissioner of Income-tax (Appeals), the Revenue has made an attempt to produce the same by way of an additional evidence and even at that stage, a request was made for crosse-examination on behalf of the assessee. However, such a request was not granted. The appellate authorities could not have taken the view that cross examination was not necessary. The assessee could have asked the questions to the said Shri Rameshbhai M. Patel with regard to the exact number of envelopes and the contents of the said envelopes. In the absence of such cross examination, it is not justified to arrive at the conclusion that the assessee had given two envelopes to the said Shri Rameshbhai M. Patel and out of ..... 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