2014 (2) TMI 125 - HC - Income Tax

Principles of natural justice - Validity of addition made upon relying on the statement and affidavit Held that - The principles of natural justice, which are inherent in any adjudicatory process, have been violated - The principles of natural justice are too well engrafted in our system of adjudication for us to dilate upon, except to the extent that where an order is passed in violation of the principles of natural justice and serious prejudice is caused to an assessee, such an order cannot stand the test of judicial scrutiny and must fall on the touchstone of violation of the principles of natural justice the petition allowed to the limited extent of setting aside the conclusions/findings and the additions made on the basis of the statement made by and the affidavit sworn by Sandip Singh but with liberty to the Settlement Commission, to decide the matter afresh Decided partly in favour of Assessee.

Summary

Issues: Violation of principles of natural justice in proceedings before the Settlement Commission.

In this case, the petitioner challenged the order passed by the Income-tax Settlement Commission, arguing that the Commission violated the principles of natural justice by not confronting the petitioner with a statement and affidavit made by Sandip Singh before making an addition to the petitioner's income. The petitioner contended that the order should be set aside, and the Commission should pass a fresh order after giving the petitioner an opportunity to rebut the statement and affidavit. On the other hand, the Revenue argued that as the order was a concession granted to the assessee, the Commission had the right to consider the statement and affidavit. The Revenue further claimed that there was no evidence to suggest the statement or affidavit was incorrect, and the lack of confrontation did not warrant setting aside the order.

The High Court, after hearing both parties and reviewing the order and pleadings, held that the principles of natural justice were indeed violated in this case. The Court emphasized that natural justice is inherent in any adjudicatory process and must not be disregarded. Since the petitioner was not confronted with the statement and affidavit before the addition was made to their income, the Court deemed the order illegal and void to that extent. Consequently, the Court allowed the writ petition to the limited extent of setting aside the conclusions and additions based on Sandip Singh's statement and affidavit. The Settlement Commission was directed to reconsider the matter, giving the petitioner an opportunity to challenge the contents of the statement and affidavit.

Therefore, the Court's decision highlighted the importance of upholding natural justice in adjudicatory processes, emphasizing that orders passed in violation of these principles and causing prejudice to an assessee cannot withstand judicial scrutiny. The judgment serves as a reminder of the significance of procedural fairness and the right to be heard in legal proceedings, ensuring that parties are given a fair opportunity to present their case and challenge any adverse evidence or allegations.