2010 (2) TMI 42 - HC - Income Tax

Violation of natural justice due to withholding seized material and denying cross-examination affirmed, impugned order left intact

Violation of principles of natural justice arose from failure to furnish seized material to the assessee and refusal to permit cross-examination of the ... Violation of principal of natural justice - Denial of opportunity - neither provided copies of the seized material to the assessee nor had he allowed the assessee to cross-examine one on the basis of whose statement the said addition was made - Held that:- 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 [2006 (8) TMI 110 - DELHI HIGH COURT], we see no reason to interfere with the impugned order Issues:Appeal against order by Income Tax Appellate Tribunal regarding block period 01.04.1990 to 20.08.2000. Tribunal confirming deletion of entire addition made by Assessing Officer due to violation of natural justice principles. Revenue challenging Tribunal's findings on natural justice principles and rectification application rejected by Tribunal.Analysis:The appeal before the High Court was directed against the Income Tax Appellate Tribunal's order related to the block period from 01.04.1990 to 20.08.2000. The Tribunal had upheld the decision of the Commissioner of Income Tax (Appeals) to invalidate the addition made by the Assessing Officer, leading to its deletion. The Commissioner had found that the Assessing Officer violated natural justice principles by not providing seized material to the assessee or allowing cross-examination of a relevant individual. Additionally, the Commissioner noted that the transactions were reflected in the assessee's regular returns. The Tribunal, referring to precedent, concluded that the Commissioner's decision was sound and declined to interfere, dismissing the revenue's appeal.The revenue, in its challenge, questioned the Tribunal's findings on natural justice principles. However, the High Court noted that the revenue had previously accepted the violation of natural justice principles before the Tribunal. The revenue had even filed a rectification application acknowledging the violation but contending that it was not fatal to the proceedings. This application was rejected by the Tribunal, affirming the earlier decision. The High Court emphasized that a breach of natural justice principles, such as not providing seized material or allowing cross-examination, could deny a fair opportunity and invalidate the proceedings. Citing a previous case, the High Court found no reason to interfere with the Tribunal's decision, as no substantial question of law was raised for consideration.In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision. The Court determined that the Tribunal correctly applied the law to the facts of the case, emphasizing the significance of upholding natural justice principles in such proceedings. The High Court's decision was based on the understanding that a denial of opportunity due to violations of natural justice could render the proceedings invalid, in line with established legal principles.