TMI Blog1990 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... loan to the minor son of the appellant who is also a member of the Hindu undivided family. The appellant made a recurring deposit with Thanjavur Permanent Bank Ltd. out of the amount taken as loan from the firm. The deposits matured and a sum of Rs. 40,000 including interest was returned on July 22, 1980. That amount was credited to the loan account standing in the name of the son of the appellant. During the assessment year 1981-82, the appellant filed his return of income. It was pleaded that the provisions of section 64 of the Income-tax Act, 1961, were inapplicable and that the interest income out of the recurring deposit could not be subjected to tax in the hands of the appellant inasmuch as the income belonged to the minor son. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of hearing to him, violated the principles of natural justice, thereby vitiating the order. The learned single judge, however, found that since there had been no variation of the tax liability, by the rejection of the application, there was no necessity to provide an opportunity to the appellant and thus there had been no violation of the principles of natural justice. Learned counsel for the appellant has questioned that finding and has reiterated the same plea which had been advanced before the learned single judge. To appreciate the argument of learned counsel, it is desirable to first notice the provisions of section 254(2) of the Income-tax Act, 1961, and that section reads as follows : "The Appellate Tribunal may, at any time w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that appears before logical also because, after the parties had addressed arguments before the assessing authority, the Appellate Assistant Commissioner and the Appellate Tribunal, the necessity of granting a hearing in an application seeking rectification of the order of the Tribunal would arise only in cases mentioned in the proviso and not where no rectification is being made. Admittedly, the communication which was impugned in the writ petition had neither the effect of enhancing the assessment nor reducing the refund or in any other manner increasing the liability of the assessee. By rejecting the application seeking rectification of the order of the Appellate Tribunal, no settled rights of the appellant were altered to its prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Union of India [1981] 51 Comp Cas 210, the apex court opined (p. 227): "The rules of natural justice can operate only in areas not covered by any law validly made. They can supplement the law but cannot supplant it. (per Hegde J. in A. K. Kraipak, AIR 1970 SC 150). If a statutory provision either specifically or by inevitable implication excludes the application of the rules of natural justice, then the court cannot ignore the mandate of the Legislature. Whether or not the application of the principles of natural justice in a given case has been excluded, wholly or in part, in the exercise of statutory power, depends upon the language and the basic scheme of the provision conferring the power, the nature of the power, the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and the scheme of the said provision, we are clearly of the opinion that the principles of natural justice cannot be pressed into aid in cases which are not covered by the proviso to sub-section (2) of section 254. The purpose for which the power of rectification is conferred by section 254(2) of the Act, when considered along with the effect of exercise of that power, also unmistakably exposes the sound logic of confining the right of hearing only to the cases covered by the proviso and not to others. Principles of natural justice do not operate in a vacuum and their compliance depends on the facts and circumstances of each case. So far as the facts of the present case are concerned, we find that the case of the appellant befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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