1970 (2) TMI 103 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement of the assessee to examine witnesses in its presence.
2. Entitlement of the assessee to cross-examine the witnesses.
3. Application of principles of natural justice in assessment proceedings under the U.P. Sales Tax Act.

Detailed Analysis:

1. Entitlement of the Assessee to Examine Witnesses in Its Presence:
The core issue was whether the assessee was entitled to have the witnesses examined by the Sales Tax Officer (S.I.B.) in its presence. The High Court noted that the assessee, M/s. Premier Motors (Pvt.) Ltd., had requested the assessing authority to summon the witnesses who were examined behind its back, to enable the assessee to cross-examine them. This request was rejected by the assessing authority, leading to the assessee's grievance. The appellate authority found this grievance justified and directed that the witnesses should be summoned in the presence of the assessee. However, the revising authority disagreed, asserting that the assessee was not entitled to such an examination. The High Court disagreed with the revising authority, emphasizing that any material or information gathered by the Sales Tax Officer as a result of a private enquiry cannot be used against an assessee without disclosing it to him and affording him an adequate opportunity to rebut the same. The court underscored that the principles of natural justice necessitate that the assessee be given a fair opportunity to meet the case against him.

2. Entitlement of the Assessee to Cross-Examine the Witnesses:
The High Court held that the assessee was indeed entitled to cross-examine the witnesses. The court observed that the statements made by the witnesses before the Sales Tax Officer (S.I.B.) were at variance with the documentary evidence provided by the assessee. The court reasoned that it was necessary for the assessee to confront the witnesses with this documentary evidence to clarify or reconcile their statements. The court emphasized that the assessing authority performs quasi-judicial functions and must conform to the rules of natural justice, which include the right to cross-examine witnesses. The court cited precedents from the Supreme Court, such as Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri and Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, to support its stance that the assessee should be afforded a fair opportunity to rebut the materials used against him.

3. Application of Principles of Natural Justice in Assessment Proceedings:
The High Court stressed that the principles of natural justice apply to assessment proceedings under the U.P. Sales Tax Act. The court referred to the Supreme Court's observations in A.K. Kraipak and Others v. Union of India and Others, which highlighted that administrative powers must be exercised in a fair and just manner. The court noted that the requirement of acting judicially essentially means acting justly and fairly, not arbitrarily or capriciously. The court concluded that the view taken by the revising authority was incorrect and that the appellate authority had rightly remanded the matter to the assessing authority to afford the assessee an opportunity to cross-examine the witnesses.

Conclusion:
The High Court answered the question in the affirmative, in favor of the assessee and against the department. The court held that the assessee was entitled to have the witnesses examined in its presence and to cross-examine them. The court emphasized the necessity of adhering to the principles of natural justice in assessment proceedings and awarded costs to the assessee, assessed at Rs. 100.

Reference Answered Accordingly.