TaxTMI 
TaxTMI 
1995 (2) TMI 94
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....ding income alleged to be reintroduced by means of hawala entries, and advertisement expenses alleged to be used out of secret bank accounts. The assessee being aggrieved of the assessment order, preferred appeal thereagainst before the CIT(Appeals). The claim of the assessee was rejected by the CIT(Appeals). The assessee Preferred appeal against that order before the Tribunal. The validity of the order was assailed, inter alia, on the ground of natural justice. The assessee disputed the additions on merits also. 3. At the outset, both the parties requested that the first decision be rendered on the preliminary issue concerning the observance of the principles of natural justice while framing the order of assessment. On merits, it was requested that the case may be heard after the deliverance of decision on the preliminary issue. The appeal was, therefore, heard apropos the grounds concerning the canons of natural justice, 4. Briefly the facts - The assessee is engaged in the business of manufacturing of cigarettes. The factories are situated at Bombay and Baroda. Tobacco processing units are at Guntur and Hyderabad. It also gets the cigarettes manufactured through a numbe....
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....bsp; 2,17,96,516 Supervision and technical know-how fees 46,36,348 ---------------- 24,35,11,972 ------------- Loss from sale of cigarettes (Not excluding various other miscellaneous incomes) (-)  ....
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....nbsp; Rs. 7,61,13,473 --------------------------------------------------------------- 8. The result of the enquiry was considered in the light of the materials gathered by the Excise Authorities also. The impact of excise duty on the trade was studied. Upto 28-2-1983, the basis of charge of excise duty on cigarettes was ad valorem. In 1982, the rate of excise duty was approximately 33 per cent of the assessable value. In 1983 budget the duty on cigarettes was converted to specific rates in a graded scale according to slabs, which were relatable to the maximum price required to be printed on the retail packs in compliance with Weights and Measures (Packaged Commodities) Rules, 1977. Progression in duty burden was sought to be maintained by adopting telescopic rate structure. For every entries of five paise in the maximum retail price of 10 cigarettes printed on the pack, there was a corresponding increase in the effective duty rate. The Assessing Officer reflected the relationship between printed prices and duty at selected points ....
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....sp; 75 610 464.00 146.00 318 76 810 624.00 186.00 336 77 910 701.00 206.00 342 77 --------------------------------------------------------- w.e.f. 2-9-1985, only five slabs were retained as follows : --------------------------------------------------------- Maximum Retail price per Excise duty 1000 cigarettes --------------------------------------------------------- Upto Rs. 60 Rs. 42 Rs. 61 to Rs. 170 Rs. 125 Rs. 171 to Rs. 300 ....
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....signs and colour scheme of the packet. Only a suffix like 'special', 'premium', 'regular', etc. was added to the original brand name. No announcement was made regarding the reduction in prices. The brands continued to be advertised by their generic names. The smoking population was left totally unaware about the launch of the so-called new brand or the reduction in its price. They being habituated to paying a particular price for their brand continued to pay the same. Also they identified the brands by the common names by which they were being sold in the streets like 'Panama' for Panama Plain cigarettes comprising of Panama Virginia Special and Panama Special Virginia categories; 'Panama Filter' for Panama Filter, Panama Filter Special and Panama Filter Premium categories, 'Panama Filter Kings' for Panama Filter Kings, Panama Filter Kings Special and Panama Filter Kings Premium categories, 'Blue Bird' for Blue Bird, Blue Bird Regular, Blue Bird Standard; 'Taj Mahal' for Taj Mahal, Taj Mahal Special and Taj Mahal Regular; 'A-1 Filter' for A-1 Filter, A-1 Filter Premium and A-1 Filter Standard etc. This phenomenon of twin branding was started during the period 1981-82 when e.g. Pana....
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....y the words "Special Virginia". This new brand bore an ex-factory price of Rs. 88 and a printed price of Re. 1. It quickly replaced the higher priced brand "Panama Virginia Special" which continued to be marketed simultaneously throughout the subsequent period (upto 1-9-1985) but with a dwindled volume. Actually what was done is that the two brands which were identified by the trade and consumers alike only as one brand viz "Panama" plain cigarettes, were sold by the "Will's of the assessee at the same price namely that of the higher priced brand i.e., "Panama Virginia Special", but at different invoice rates. The differential price in the case of Panama Special Virginia was collected by the WBs in cash. The same, modus operandi, was repeated with regard to almost all other brands marketed by the assessee, e.g. in the case of "Panama Filter Kings", the price of the existing brand, "Panama Filter Kings Premium" was jacked up from an ex-factory price of Rs. 94.16 per m. and printed price of Rs. 1.10 to an ex-factory price of Rs. 163 and a printed price of Rs. 1.85, but soon thereafter, a lower priced twin "Panama Filter Kings Special:" was introduced in the market with an ex-factory ....
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....y the Central Excise Authorities was also viewed and considered, this include - 1. Statement of Shri P. Pandian, Sales Manager of M/s. Shivani Trading Co. P. Ltd., WB of the assessee at Trivandrum; 2. Statement of Shri P.O. Mani, Proprietor of P.S. Mani, WB of the assessee at Quilon; 3. Statement of Ashakinwasti, Managing Partner of M/s. Karpasam Traders, Trivandrum; 4. Statement of Shri Chandramohan, Managing Partner of K.K. Viswanathan, WB of the assessee at Ernakulam; 5. Statement of E.P. Jacab, alias Georgekutty, Partner, M.C. and Emcees Stores, Kottayam; 6. Statement of Shri Ashok Goenka, Officer Incharge, M/s. Durga Trading Co., WB of the assessee at Thirunelvally; 7. Statement of Navrathanmal Tahleswaran, Manager, Casino Business P. Ltd., Madurai; 8. Statement of Dancichan, Director, M/s. Nellai Marketing Pvt. Ltd., Sivakashi; 9. Statement of Shri H. Farookh, Local Field Officer of GTC, Sivakashi. These statements were recorded simultaneously at different places during the course of search proceedings by the Central Excise Authorities on 21-1-1986. 16. The assessee denied the charges. Sale was explained to be through WBs only on princip....
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....generation of premium: (i) The 'basis of charge' of excise duty on cigarettes during the relevant period - provided motivation to the manufacturer and the trade to sell the products above the printed price to increase their realisation in a competitive market; (ii) the products actually sold in the market above the printed price, and various 'clever contrevances' were devised by the manufacturer to general additional amounts of such premium; (iii) the premium so generated were collected by the WBs of the assessee; (iv) the WBs in turn remitted the premium in the form of demand drafts in fictitious names to Bombay, Calcutta, Delhi, etc. These demand drafts were negotiated either through Bank accounts standing in the same names as that of the payees or discounted elsewhere; (v) The question now arise for whose benefit these drafts were remitted; whether for the benefit of the assessee or for the benefit of the WBs. It is pertinent to note that the demand drafts were remitted by different unrelated and unconnected WBs. These were negotiated through the same accounts; {vi) The advertisement expenses incurred through the secret accounts clearly revealed that these were....
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....e objected. It was pointed out by 'Shri Desai that the finding given in 1985-86 is very much relevant for deciding the issues. Mr. Salve suggested that the appeal for the assessment year 1985-86 be heard together. After discussion we decided to hear the appeals for all the three years i.e., assessment years 1984-85 to 1986-87 together. Hence, directions were rendered to fix all the appeals together. Later on it was decided by the Bench that appeal for the assessment year 1986-87 is to be delinked. As Mr. Salve wanted to continue submissions after the study of case reports for all the three years, the case was adjourned to 17-8-1994. On 16-8-1994, the assessee made a prayer for adjournment, the case was adjourned. Again on 19-9-1994, the assessee's counsel had made a request for adjournment in the Court. The hearing was adjourned. On 5-10-1994, Sri Ganeshan, learned advocate for the assessee appeared before us. A copy of the High Court order dated 5-9-1994 in Writ Petition under Excise Act was placed before the Bench. High Court directed the Excise Authorities to allow cross-examination of three persons. The assessee wanted cross-examination of these persons in Income-tax proceeding....
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....se to the assessee, should be disclosed to the appellant and the witnesses should be offered for cross-examination. Reliance was placed on the ratio of the following decisions: (1) Surajmal Mohta & Co. v. A.V. Viswanath Sastri [1954] 26 ITR 1 (SC). (2) State of Kerala v. K.T. Shaduli Grocery Dealer MR 1977 SC 1627. (3) Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29 (SC). (4) Dr. Rash Lal Yadav v. State of Bihar JT [1994] 7 (SC) 62 at 71-73. (5) Vasanji Ghela & Co. v. CST [1977] 40 STC 544 (Bom.) (6) Mahendra Electricals Ltd. v. Union of India 1986 (26) ELT 882 (Bom.) 23. Our attention was also invited on the judgment of Justice Pendse in the assessee's own case. The minutes of the order is reproduced here as under: "In the High Court of judicature at Bombay ordinary original civil jurisdiction writ petition No. 1805 of 1994. G.T.C. Industries Limited and Another .. Petitioners &nb....
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....concept of documentary evidence is misconceived and is directly contrary to the judgment of the Supreme Court in Shaduli's case. 26. The learned counsel stated that the CIT(Appeals) justified non-grant of cross-examination on entirely different grounds, which were never raised or applied or even contemplated by the Assessing Officer- (a) that the relevant facts were fully established in assessment year 1984-85; (b) that the matter stands concluded by the ITAT order for the assessment year 1984-85; (c) that the appellant made the request at the eleventh hour and only as a device for gaining time. It is significant to note that the CIT(Appeals) nowhere sought to justify the non-grant of cross-examination on the ground that the assessee allegedly did not comply with certain letters or notices. Even before the Tribunal, it was contended on behalf of the revenue that more extensive material was gathered in the course of proceedings for the assessment year 1985-86 and in fact the revenue intends to rely on the same for the assessment year 1984-85. The assessee did not ask for cross-examination at the eleventh hour. The purpose was not to gain time. The assessee by letter d....
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....volved in framing charges and giving an opportunity to be heard? The result is obvious from the start. Those who take this view do not, I think, do themselves justice. As everybody who has anything to do with the law, well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change. Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events.'" Further at page 395, it is stated that: "In our view the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary." On the basis of the a....
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....s case against the assessee and seek to contend at the same time that the statements or materials only indirectly support the department's case, and the assessee has no right to cross-examination or inspection. No principle of law and not a solitary judicial decision supports the approach of the revenue. The correct and settled rule is that if a statement or material is an integral part of the case of the department or is relied upon to draw an adverse inference, cross-examination of the person making the statement must be given. The department cannot rely on a statement or material and at the same time seek to deny cross-examination on the ground that the statement is relied upon indirectly or for support or that the department also relies on some other documents or material. In so far as oral evidence is concerned, the aforementioned decisions, and in particular, the judgment in K.T. Shaduli Grocery Dealers'case, make it clear that if it is an integral part of the department's case, natural justice requires that cross-examination, if asked for, must be granted. The revenue should make up its mind, if it is of the opinion that it can make good its case against the appellant by rel....
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....tment, as in the present appeals, which is built, inter alia, on statements of Bank Managers concerned payments into these accounts and operations of these accounts, the Tribunal found upon examination of persons who spoke about the generation of premium and payments from these accounts; (iv) in the assessment year 1984-85, the department did not make out any case against the assessee, on the basis of commission, trading income or interest income. In the assessment year 1985-86, this is the important limb of the department's case against the GTC, in fact the rejection of assessee's books of account by the Assessing Officer in the relevant assessment year is based on this factor. 32. Sri Dastur submitted that even as per the test laid down by the Tribunal for the assessment year 1984-85, the assessee is entitled to the cross-examination. He referred the letter to the CIT(Appeals) dated 3-8-1992 and the letters of the CIT(Appeals) dated 14-12-1993, 5-1-1994. In para-61 of the Tribunal order, it was laid down, that in respect of material from which an inference has been drawn against the assessee, he is entitled to cross-examination. Further, the Tribunal also decided that the a....
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.... otherwise cease to exist as in the case of Satellite Engg. Ltd. v. Union of India [1983] EIT 2177 Bom. (d) where the cross-examination asked for is meaningless, as for example, where the assessee does not dispute the fact deposed to by the witness (as in Kishanlal Agarwal v. Collector of Land Customs AIR 1967 Cal. 80; (e) where the assessee had not asked for cross-examination as in the case of Mr. M.K. Thomas v. State of Kerala [1977] 40 STC 278 (Ker.) (FB) (f) where the department accepts the correctness of the assessee's contention. 35. The normal principle is that ordinary cross-examination has to be granted when asked for. These exceptions prove the normal rule. If the department seeks to rely on any of these exceptions, the burden is squarely on the department to establish the existence of any of them. It was contended that the authorities relied upon by the department, in respect of cross-examination, were rendered entirely on their own peculiar facts, and are clearly distinguishable. None of the authorities cited on behalf of the department can possibly be considered as diluting the ratio of Shaduli, K. Chellaram, Vassanji Ghela and Mahendra Electricals. 36. ....
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....h created reasonable apprehension of bias in the mind of any reasonable person. 39. Our attention was also invited on the letter dated 17th March, 1988. This letter reads as under: "Extremely confidential Bombay, 17th March, 1988. To Shri Gautam Kar, ITO, Central Circle-IX Range-II, Bombay-400 020. Sir, We wish to place on record as under: 1. Since a few months' prior to November 1987, when a false report was published in newspapers implicating us in a purported bank account, purported to be yours, the attitude towards our company is absolutely changed. You have been giving us short notices. You have been demanding information at a short notice. Sometimes you send oral instructions calling upon us to produce records immediately. You have been seeking reference to show-cause notice without giving use enough time to prepare etc., etc. We have in fact informed you time and again that you appear to be biased against us for which we are extremely sorry. 2. On 14th March, 1988 our representative, Mr. Kamdar attended your office with our replies and for personal hearing when he attended your office, instead of hearing him, you handed over another show-cause n....
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....corporate tax evasion in finding himself in trouble. Someone is alleged to have forged his signature, opened a bank account in his name and deposited Rs. 9 lakhs. The pay-in-slips were promptly supplied to a Member of Parliament who complained to the Union Finance Minister. The episode came to light last week Mr. Gautam Kar, the ITO in the Central Wing, lives in Bhandup. The two companies exclusively under his charge are Golden Tobacco Company and Godfrey Philips (India) ltd. Following a complaint that the ITO has been holding huge deposits, the Minister, Mr. N.D. Tivvari, forwarded the matter to the Central Board of Direct Taxes. The vigilance wing of the CBDT began its investigation showed that someone sought to implicate the officer in a trumped-up case. The pay-in-slips showed that the account was being operated at the Bhandup Branch of the Union Bank of India. The account was in the name of one Gautam (Gangeshwar) Kar. The account opening form introductory signature and specimen signature were examined, since the opening of the account on September 21, 1987, Rs. 9 lakhs have been deposited in cash on different occasions and the amount has also been withdrawn. The signature of ....
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....ondent nor anybody from your editorial desk cared to get in touch with us to cross-check the correctness or otherwise of these serious allegations against our company. We state that the items casts aspersions on and implicates GTC in the reported incident and is totally devoid of any truth and is designed to malign and defame our company. We reiterate that our company has nothing to do in any manner with the alleged opening or operation of any bank account in the name of the Income-tax Officer earlier mentioned in the item. Further to reference in the item to the income-tax assessment of our company for the assessment year 1984-85 is clearly motivated to defame and malign the company as the said assessment is subjudice and the presumption made, including that of our company having undisclosed bank accounts - are wholly without any foundation of truth and factual evidence. As you are aware high patched tax assessments and arbitrary additions are a common phenomenon and such assessments have to be rectified by taking recourse to the process of law. The oblique insinuation in the item - that our company had a hand in fixing-up an Income-tax Officer - this to say the least, utterly fal....
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.... (ii) Letter dated 20-1-1988 This was not given in reply to show-cause notice dated 30-12-1987. (iii) Letter dated 4-2-1988 This is reproduced here as under: "The ITO, Central Circle-I" X, Range-II, Old CGO Bldg., Annexure, M.K. Road, Bombay-400 020. Dear Sir: Kindly refer to your show cause letter No. CC-IX/Show Cause/ 87-88 dated 12-2-1988 received by us in the late hours of 15-1-1988. The material furnished in the aforesaid letter is directly connected with the material furnished in your previous show-cause letters No. CC-IX/87-88 dated 9-12-1987 and CC-IX/87-88 dated 30-12-1987 to which we have already furnished a reply asking for certain vital information, clarifications and requesting you to furnish us separate show-cause notice for each year. In absence of any reply from your end it is not possible for us to proceed further in examining the material furnished by you and preparing just and proper reply for the same. We would request you to expedite your reply. . ." (iv) Letter dated 16-2-1988 This was given in reply to ITO letter dated 10-2-1988. (v) Letter dated 16-3-1988. This letter was addressed to CIT, Central-I. Assessee made a request to transfe....
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....developments in the case resemble the proverbial tale of the hare and the tortoise. The proceedings between the Income-tax Department and the GTC regarding assessments for the years 1985-86 and 1986-87 began a year ago and the ITO sought a reply from the company on some pending issues. The reply was to be filed before March 18. The company sent a letter on March 17 seeking extension of time till March 21 as March 18 was a state holiday. Also the company has been pressing for the transfer of the case from the ITO concerned Mr. Gautam Kar. The ITO, having not received the reply on the stipulated time, continued his assessment, completed the order in the morning of March 21 and posted it to the assessee. The same day, in the afternoon the GTC apparently unaware of the developments in the Income-tax Department, filed a writ petition in the High Court seeking to restrain the ITO from processing the assessment of the company. Mr. Justice G.H. Guttal, passed an order restraining the ITO from processing the assessment of the petitioner-company. The company in the writ petition alleged that the officer was "prejudiced and biased" against the company and "no justice can be expected from him"....
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....he suit proceedings vide advocates note dated 18-3-1988, Sri Desai submitted that Assessing Officer was not legally bound to take cognisance of suit proposed to be filed by the assessee, as the same was barred by section 293 of the Income-tax Act, 1961. The section reads as under: "Section 293. No suit shall be brought in any civil court to set aside or modify any proceeding taken or order made under this Act, and no prosecution, suit, or other proceedings, shall lie against the Government or any Officer of the Government for anything in good faith done or intended to be done under this Act." 48. Reliance was placed on the ratio laid down in Sukhdev Chand Asstt. CIT v. Kashmir Singh Bhullar [1984] 150 ITR 578/[1985] 20 Taxman 436 (Punj. & Har.). Notice was said to be riddled with infirmities. No suit number was mentioned on the same. Assessee did not comply the provisions of section 81 of the Civil Procedure Code. Mandatory leave of the Court as required by section 80(2) of CPC was not obtained. Defendant No. 2 (Union of India) was not served with the required notice. It was, therefore, submitted that mere lodging of the suit papers in the office of the High Court is no....
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....s part of natural justice. Sri Desai relied on the following precedents: 1. State of Gujarat v. Mohanlal Jitamalji Porwal [1987] (29) ELT 483 (SC) 2. Kishanlal Agarwalla's case 3. Satellite Engg, Ltd.'s case 4. Kanungo & Co. v. Collector of Customs [1983] ELT 1486 (SC) 5. Union of India v. Tulsiram Patel AIR 1985 SC 1416 6. DCW Ltd v. CCE [1990] (46) ELT 233 (Mad.) 52. In regard to the applicability of Justice Pendse's order dated 5-9-1994 in Excise matter, writ petition No. 1805 of 1994 Sri Desai submitted that it did not set out facts of the case, question arising in the case, reasons for the decision and it did not satisfy the tests laid down by the Apex Court in the case of Arun Mahadeorao Damka v. Addl. Inspector General of Police AIR 1986 SC 1497, laying down the need for stating reasons in the orders in Writ Petitions. He further relied on CIT v. Smt. Minal Rameshchandra [1987] 167 1TR 507/30 Taxman 282 (Guj.) and submitted that the order of Justice Pendse does not lay down ratio or principle which is of binding nature and of universal application as a precedent. Facts were not stated in the order. The distinction between the judgment in rem and judgment....
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....hich it had agreed to file in support of its claim that no premium was being generated or charged on sale of cigarettes. Sri Desai also invited our attention on assessee's letter dated 3/6th August, 1992 addressed to the CIT(Appeals). "Further, since it has all along been the case of the assessee that the cigarettes manufactured by it were sold at a premium as alleged and further that no part of such premium ever came back to the assessee, the assessee would like to adduce evidence both oral and documentary in support of its defence before your goodself". It was submitted with reference to that letter that Assessing Officer, has given reasonable opportunity to the assessee of being heard. Sri Desai also referred and read out ITO's summons and assessee's replies ITO's letter regarding excise notice assessee's reply. 54. Our attention was invited on the prescription of section 101, 103 and 106 of the Evidence Act. It was submitted that the law has coated initial onus on the assessee and the assessee failed to discharge its burden. It was submitted that all the evidence and material relating to other income and sale of other goods were within the special knowledge of the asse....
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....scounted and were deposited in bunches. Referring to the list filed by the assessee concerning the violation of principles of natural justice, Sri Desai invited our attention on- (a) ITO's notice dated 13-3-1987 (b) Copies of 265 drafts handed over to Mr. Kamdar (c) ITO's notice dated 16-2-1988 in regard to income from re-distribution of liquor. Sri Desai also invited our attention on letter dated 12-1-1988, given by the ITO. The said letter is reproduced here as under: '11. In ground No. 18 of your grounds of appeal before CIT(Appeals), Central-I, Bombay, for Assessment year 1984-85, you had mentioned: "The learned ITO failed to appreciate that the assessee-company's activities were under the constant control of the Central Excise Authorities and that such Central Excise Authorities, even after making extensive searches on the assessee-company in 1982 and 1986, had accepted its production figures and had not made any allegations whatsoever that the assessee-company was earning premium on the sale of its products.' The facts mentioned in this ground of appeal are incorrect to the extent that you were already in receipt of show-cause notice issued by various Collec....
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....ut by Sri Desai that assessee claimed that Ashish Trading Co. was its pucca adatiya and all the transactions of purchase and sales were carried by Ashish Trading Co. in its own name. It was submitted that in these circumstances, it was possible on the part of assessee to enforce the presence of Ashish Trading Co. for the conduct of cross-examination of Mr. Dhandhania on his behalf. ITO was under no obligation to call upon Ashish Trading Co. in these circumstances. 61. Sri Desai vehemently contended that principles of natural justice cannot be used to the advantage of person who wants to defeat the very purpose of justice. The principles of natural justice cannot be used to prolong litigation and to gain advantage by dragging the matter. It contemplates the procedural fairness. Assessee was non-cooperative. He did not supply the informations required. He evaded all informations under one or other excuse or pretext. Intention was to gain time. According to Sri Desai ITO acted in consonance with the canons of law. There is no flaw in the order. There is no violation of the principles of natural justice. 62. We have heard the rival submissions in the light of the material placed ....
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....University and presenting his case. The principle of Audi Alteram Partem was enunciated with religious refinement by Fortescue, J. in these terms: "The laws of God and man both give the party an opportunity to make his defence if he has any. I remember, to have heard it observed by very learned man upon such an occasion, that even God himself did not pass sentence upon Adem, before he was called upon to make his defence. Adam (says God) where art thou? Has thou not eaten of the tree, whereof I commanded thee that thou should not eat? And the same question was put to Eve also. (R.V. The Chancellor, Master and Scholars of the University of Cambridge 1723-IS Lr. 557)." 64. The twin principles that constitute the rules of natural justice received particular attention from judges for the purpose of exercising their supervisory jurisdiction. Lord Hewart, C.J. in 1924 stretched Bias into a tight rope when he said in R.V. Susex Justice, ex parte Mccarthy [1924] 1 K.B. 256: "A long line of cases shows that it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done." "Audi Alt....
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.... dried or nicely weighed or measured, therefore, it does not exist......" 67. We now proceed to decide the issue apropos the existence of BIAS as alleged by the assessee against Shri Oautam Kar (ITO). The first maxim of natural justice "Nemo Judex in Causa Sua" is based on three principles: (i) no man shall be a judge in his own cause; (ii) justice should not only be done but manifestly and undoubtedly be seen to be done; (iii) judges, like Ceasor's wife should be above suspicion and, therefore, anything which tends or may be regarded as tending to cause such a person to decide a case otherwise than on evidence must be held to be biased. The word 'bias' as a noun is derived from the French word 'bias' meaning oblique as opposed to straight. The English term 'bias' has reference to the game of bowls wherein it means the weight on one side of a bowl, which gives it a tendency to diverge from straight line when running. Hence, the word has come to mean prejudice; show of favour or disfavour; antagonism; spite; hostility; prepossession that sways the mind. As a verb it means to influence; to prejudice; to prepossess (often unduly). 68. The 'BIAS' which will violate the p....
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....ot arise only because the adjudicating authority had previously participated in the proceedings. In the case of L.K. Ratna, the Apex Court observed thus: - "The nature of the function discharged by the Council in rendering its finding is quasi-judicial, and we are reminded of the observations of this court as far back as Manak Lal v. Dr. Premchand [1957] SCR 575 at pp. 580 & 581; AIR 1957 SC 5 at page 429: It is well settled that every member of a Tribunal that is called upon to try issues in judicial or quasi-judicial proceedings must be able to act judicially; and it is of the essence of judicial decisions and judicial administration that judges should be able to act impartially, objectively and without any bias. In such cases the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the Tribunal might have operated against him in the final decision of the Tribunal. It is in this sense that it is often said that justice must not only be done but must also appear to be done." 72. Contextually, it would be apt to consider the facts on the basis of wh....
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....vestigated by the due procedure of law. Sri Desai relied on the case of Duncan Agro Industries Ltd. wherein it was held that mere possibility of bias is not enough to disqualify Director (Audit) to function as adjudicating Officer - strong probability required for disqualification when institutional bias alleged. This judgment was rendered in the context of reward scheme. In the case of ITC Ltd the Calcutta High Court has held: "Ordinarily an authority is disqualified from adjudicating whenever circumstance points to a real likelihood that he will have a bias, by which is meant an operative prejudice whether conscious or unconscious in relation to a party or issue before him". Hon'ble High Court further observed: "But in case of the nature before me for upholding an abstract principle of law the Court will not allow such a plea to be raised at the instance of a party against whom large scale evasion of public revenue is alleged. If in such a case a party is granted relief on this score that would shake the public confidence in the judicial process of this country." 74. In regard to the news item appeared in the Times of India dated 23-3-1988, Sri Dastur alleged th....
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....that mere allegations of mala fide cannot confer jurisdiction on a court which it otherwise lacks. Section 293 of the Income-tax Act, 1961, specifically bars the jurisdiction of civil courts in proceedings under the Income-tax Act and hence, an allegation of mala fides, on the part of the authorities, will not invest the civil court with jurisdiction to try such a suit. We have also noted that suit proceedings vide advocate's note dated 18-3-1988, were not initiated in the Court or filed in the Court. No suit number was mentioned on the notice. Provisions of section 81 of the Civil Procedure was not complied with. Mandatory leave of the Court, as required under section 82 of the CPC, was not obtained. This could as well turned to be a mere threat for stopping the proceedings. Since the case was getting time-barred by limitation, ITO with a view to safeguard the interest of revenue proceeded to complete the case. There is nothing wrong in mentioning the time. This was probably done by way of abundant caution. We find that ITO did not disobey the order of any Court. No malice or bias can be inferred against the ITO on this count. The integrity of the officer was not questioned. He wa....
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....icular case, tailored to a given set of facts and circumstances. What is made relevant and binding is only the ratio decidendi and no more. The careful drafting-perhaps with reference to analogous statutes-the multiple reading in the Legislature and the discussions which go behind the making of a statute inject a certain degree of sanctity and definiteness of meaning to the words used by the Legislature. The same cannot be said of a judgment which deals only with the particular fact situation on hand. It will be too much to ascribe and read precise meaning to words in a precedent which the judges who wrote them may not have had in mind at all. Equally, it is not possible to impute an intent to render a decision on a point which was not before them and which they never intended to deal with, even though such an inference may seem to flow logically from the ratio decidendi of the case." 81. In the case of Sun Engg. Works (P.) Ltd., the Supreme Court has held as under: "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law de....
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....r [1971] 28 STC 450 (Mad.) the Court held: "The principles of natural justice have a very wide and extensive field for action. They enfold within their net the activities of the revenue in problems of taxation as well. They are not circumscribed to civil actions, since their arms can extend even to correct errors committed by taxing authorities in exercise of statutory powers under the taxation laws of the State." 87. Shri Desai in this connection invited our attention on the ratio of T. Devasahaya Nadar v. CIT[1964] 51 ITR 20 (Mad.), wherein it was held: "It cannot be laid down as a general proposition of law that the Income-tax Department cannot rely upon any evidence which has not been subjected to cross-examination. An ITO occupies the position of a quasi-judicial Tribunal and is not bound by the rules of the Evidence Act, but he must act in consonance with natural justice, and one such rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it. He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an informant for cross-examination though ....
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.... National interest." 90. In the case of Kishanlal Agarwalla. The Court held: "Ordinarily the principle of natural justice is that no man shall be a Judge in his own cause and that no man should be condemned unheard. This letter doctrine is known as audi alteram partem. It is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is-record must be placed on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. That is all that is meant by the doctrine of, audi alteram partem. That no party should be condemned unheard. No natural justice requires that there should be a kind of a formal cross-examination. Formal cross-examination is procedural justice. It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice. Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it {sic), by way of interrogation or by way ....
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....rities had informed appellant of the results of the enquiries and investigations. 93. In the case of Tulsiram Patel. The Apex Court has held that: "So far as the 'audi alteram partm' rule is concerned, both in England and in India, it is well-established that where a right to a prior notice and an opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. This right can also be excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its exclusion; nor can the audi alteram partem rule be invoked if importing it would have the effect of paralysing the administrative process or where the need for promptitude or the urgency of taking action so demands." 94. DCW Ltd.'s case, para 11 of the said decision is reproduced here as under: "The Supreme Court had an occasion to consider the applicability of the principles of natural justice in a recent case in R.S. Dass v. Union of India AIR 1967 SC 593. The Supreme Court in Chairman, Board of Mining Examination v. Ramjee AIR 1977 SC 965 held as follows: 'Natural justice is no unruly hors....
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....er of his true love, although he may not understand her completely and though she is sometimes too difficult for him." - Trial Judge 96. The appellant's basic contention is that the statement of witnesses and materials which are relied upon by the Assessing Officer in the assessment order to reach the conclusions and findings which are adverse to the assessee should be disclosed to the appellant and the witnesses should be offered for cross-examination. Supreme Court in the case of Suraj Mall Mohta & Co. laid down: "the assessee ordinarily has the fullest right to inspect the records and all documents and materials that are to be used against him. Under the provisions of section 37 of the Indian Income-tax Act the proceedings before the Income-tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. In other words, the assessee would have a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal." 97. In the case of K.T. Shaduli Grocery Dealer, it was held: "... the usual mode recognized by law for proving fact is by production of evid....
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....as, it was held that the decision in K.T. Shaduli Grocery Dealer's case, cannot be understood as recognising a right of cross-examination as an invariable attribute of the requirements of reasonable opportunity. The Apex Court has stated the rule with sufficient elasticity and amplitude as to make the right depend on the terms of the statute, the nature of the proceedings or of the function exercised, the conduct of the party and the circumstances of the case. 99. "Whether in a particular case the particular party should have the right to cross-examine or not depends upon the facts and circumstances of a particular case. This is so, because the right to cross-examine is not necessarily a part of reasonable opportunity." This view was taken by the Calcutta High Court in the case of Manindra Nath Chatterjee. Thus in a given case the rule of audi alteram partem may impost a requirement that witnesses whose statements are sought to be relied upon by the authority holding the enquiry should be permitted to be cross-examined by the party affected while in some other case it may not. 100. In the case of Kishanchand Chellaram, the Apex Court was concerned with the evidence which was ....
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....arly, hearing without determination [Over sans Terminer] is also interdicted by the finer norms of justice. That all is required is impartial and fair hearing, and determination of disputes with utmost promptitude. The question whether or not any rules of natural justice had been contravened, should be decided not under any preconceived notions but in the light of the statutory rules and provisions. The violation or otherwise of any rule of natural justice must be a matter of substance not of mere form. It is important to keep in mind the caveat issued by the Apex Court AIR 1977 SC 965 that unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. 105. In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, audi alteram partem'. The principles of natural justice do not require formal cross-examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, ther....
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.... fictitious names to Bombay, Calcutta, Delhi, etc., and these demand drafts were encashed either through bank account standing in the same name as that of the payees or else were discounted. (ii) The advertisement expenses of the assessee-company were incurred through these secret bank accounts. (iii) Assessee-company donated the funds out of these secret bank accounts, viz., donation to Methodist Church out of transfer of funds from the a/c. of H.K. Patel (in assessment year 1984-85) and donation to the Festival of India Committee out of transfer of funds from the a/c. of Shree Associated [current A/c. No. 1724 in Indian Overseas Bank, Bandra West]. This amount was given at the behest of Sri Sanjay Dalmia, President-cum-Director-General of the Company. (iv) One of such bank a/c. was in the name of Moonlight Finance. This was with the Punjab & Sind Bank, Scindia House Branch, New Delhi. The account holder given the following address: B-72, Himalaya House (7th Floor) 23-Kasturba Gandhi Marg, New Delhi. [Current A/c. No. 787] This was also the office address of Mr. Umesh Khaitan, Sitting Director of the assessee-company. (v) Amounts in the shape of commissions, p....
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....id discussion, it is clear, that addition was not made merely on the basis of findings given apropos the secret bank account's, disbursement made out of such account's or on the strength of havala entries, by which the bogus commission and trading income said to have been reintroduced in the books of the assessee. These aspects are only secondary, subordinate and were used to buttress the main matter connected with the amount of addition. The violation or otherwise of any rule of natural justice must be a matter of substance not of mere form. Natural justice should always be used for the furtherance of the cause of justice. The palladium of justice requires, that law suits be not protracted, otherwise treat oppression might be done under the colour and pretence of law [interest republica ut sit finis litum]. These loafty principles which are harbinger of justice cannot be used for dragging the justice in the labyrinth. We have already indicated that adverse evidence and material, relied upon in the order, to reach the finality should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature. Having regard to the facts ....