Commissioner Of Income Tax vs Ashwani Gupta
2010 Latest Caselaw 862 Del

                THE HIGH COURT OF DELHI AT NEW DELHI

%                                           Judgment delivered on: 16.02.2010

+      ITA 1264/2008

COMMISSIONER OF INCOME TAX                                     ... Appellant

                                        - versus -

ASHWANI GUPTA                                                  ... Respondent

Advocates who appeared in this case:-

For the Petitioner : Ms P. L. Bansal with Mr Paras Chaudhry For the Respondent : Mr Salil Kapoor with Mr Sanat Kapoor, Mr Ankit Gupta and Ms Swati Gupta

CORAM:

HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE SIDDHARTH MRIDUL

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in Digest?

BADAR DURREZ AHMED, J (ORAL)

1. This appeal by the revenue is directed against the order dated

08.02.2008 passed by the Income Tax Appellate Tribunal in IT (SS) No.

140/Del/2006 relating to the block period 01.04.1990 to 20.08.2000.

2. The Tribunal has confirmed the order passed by the Commissioner of

Income Tax (Appeals) which held the entire addition made by the Assessing

Officer to be invalid and had deleted the same. The Commissioner of

Income Tax (Appeals) had clearly held that the Assessing Officer had passed

the assessment order in violation of the principles of natural justice

inasmuch as he had neither provided copies of the seized material to the

assessee nor had he allowed the assessee to cross-examine one Mr Manoj

Aggarwal on the basis of whose statement the said addition was made. The

Commissioner of Income Tax (Appeals) also held that the entire addition

deserved to be deleted, particularly so, because the transactions also stood

duly reflected in his regular returns.

3. The Tribunal, after referring to the decision of this Court in the case of

CIT v. SMC Share Brokers : 288 ITR 345 (Del), came to the conclusion

that there was no infirmity in the order of the Commissioner of Income Tax

(Appeals) and, therefore, declined to interfere with the same and dismissed

the appeal of the revenue.

4. The learned counsel for the revenue/ appellant sought to question the

findings of the Tribunal to the effect that the principles of natural justice had

not been followed. She attempted to challenge the finding that copies of the

seized material had not been given to the assessee nor was the assessee

allowed to cross-examine the said Mr Manoj Aggarwal. She sought to draw

our attention to the order-sheet of the Assessing Officer of 25.07.2005 to

make submissions in this regard. But, such an attempt on her part cannot be

allowed at this juncture particularly when the finding regarding violation of

principles of natural justice had been accepted by the revenue before the

Tribunal on more than one occasion. In the first instance, the only ground of

appeal taken by the revenue was that the Commissioner of Income Tax

(Appeals) had erred in deleting the addition of Rs 6,53,250/- made by the

Assessing Officer as income from undisclosed sources. No ground was

taken that the principles of natural justice had, in fact, been followed and

that the Commissioner of Income Tax (Appeals) had wrongly held that

copies of the seized material had not been provided or that opportunity to

cross-examine Mr Manoj Aggarwal had not been provided.

5. Secondly, in fact, a rectification application being MA 264/Del/2008

under Section 254(2) of the Income Tax Act, 1961 had been filed by the

revenue before the said Tribunal. In that also, in paragraph (g) of the

Miscellaneous Application, the revenue had submitted as under:-

"(g) Because, although findings of the Tribunal are factually correct but the decision of the Tribunal is not acceptable because violation of the canons of natural justice in itself is not fatal enough so as to jeopardize the entire proceedings. In the interest of justice, the Tribunal could have set aside the assessment order with the limited purpose of offering assessee an opportunity to cross- examine Shri Manoj Aggarwal before completing the proceedings."

(underlining added)

6. A reading of the said paragraph (g) makes it clear that the revenue had

accepted the findings of the Tribunal on facts as also the position that there

had been a violation of principles of natural justice. However, the revenue's

plea was that the violation of principles of natural justice was not fatal so as

to jeopardize the entire proceedings. The said miscellaneous application was

also rejected by the Tribunal by its order dated 28.11.2008.

7. In view of the foregoing circumstances, we feel that no interference

with the impugned order is called for. The Tribunal has correctly

understood the law and applied it to the facts of the case. Once there is a

violation of the principles of natural justice inasmuch as seized material is

not provided to an assessee nor is cross-examination of the person on whose

statement the Assessing Officer relies upon, granted, then, such deficiencies

would amount to a denial of opportunity and, consequently, would be fatal

to the proceedings. Following the approach adopted by us in SMC Share

Brokers (supra), we see no reason to interfere with the impugned order. No

substantial question of law arises for our consideration.

The appeal is dismissed.

BADAR DURREZ AHMED, J

SIDDHARTH MRIDUL, J FEBRUARY 16, 2010 SR