Block assessment quashed where assessing officer denied repeated requests to cross-examine witness, violating natural justice rules

HC held the block assessment proceedings vitiated for breach of natural justice where the AO refused repeated requests to permit cross-examination of a witness whose statement and recovered documents formed the basis of the case. The Tribunal rightly concluded that, absent the witness being made available for cross-examination despite repeated requests, reliance on that statement to the assessee's detriment was impermissible. The impugned assessment could not stand on that excluded evidence.

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Issues:
1. Violation of principles of natural justice in block assessment proceedings.

Analysis:
The High Court judgment pertains to an appeal by the Revenue against an order passed by the Income Tax Appellate Tribunal related to a block assessment period. The case originated from a search conducted at the premises of an individual, leading to the discovery of documents and books of accounts. Subsequently, a block assessment was made based on the documents and statements obtained. During the assessment proceedings, the assessee requested to cross-examine the individual whose statement was crucial to the case, but the Assessing Officer denied this request. The Tribunal found this denial to be a violation of natural justice, leading to the setting aside of the block assessment.

The Tribunal emphasized that the Assessing Officer, acting as a quasi-judicial authority, was obligated to adhere to the principles of natural justice. Despite repeated requests, the individual whose statement was significant was not made available for cross-examination. The Tribunal's decision to set aside the block assessment was based on this failure to provide an opportunity for cross-examination, which was deemed essential for a fair proceeding. The High Court agreed with the Tribunal's view that without the opportunity for cross-examination, the statement could not be relied upon to the detriment of the assessee.

In the judgment, the High Court dismissed the appeal by the Revenue, stating that no substantial question of law arose for consideration. The Court also rejected the Revenue's reliance on a previous judgment regarding the evidentiary value of the individual's statement, emphasizing the importance of testing such statements through cross-examination before giving them full weight in proceedings against the assessee.

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