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TMI Blog1991 (5) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... null and void ab initio." 4. We have heard learned authorised representatives of the parties. In the grounds, set up in the memoranda of appeals, the assessee has challenged various additions. The additional ground, which the assessee seeks to raise, relates to those additions. According to the assessee, the assessments insofar as they relate to these additions, are null and void ab initio, as principles of natural justice have been totally violated by the Assessing Officer while making the impugned additions to the total income of the assessee. Through the additional ground, the assessee seeks to raise a legal issue. In our opinion, the additional ground should be admitted and we order accordingly. 5. After admitting the additional ground, learned Sr.departmental representative was given full opportunity to prepare the case for the part menton the additional ground raised on behalf of the assessee and for this purpose several dates were fixed and parties were heard at length. Income from the business, run under the name and style of M/s. Century Plastics has been assessed by the Assessing Officer in the hands of the assessee Shri Shiv Charan Gupta on substantive basis for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of principles of natural justice the order would be a nullity and non est and, therefore, in such a case the question of setting aside such an order to the Assessing Officer with a direction to frame the assessment de novo after observing the principles of natural justice would not arise. Thus, the thrust of the arguments, advanced by Shri Sharma, is that in the instant case, the assessments framed in the case of Shri Shiv Charan Gupta, insofar as they relate to the additions made by the Assessing, Officer by flouting the principles of natural justice would be null and void ab initio and hence the assessments to that extent should be struck down and quashed. In support of this contention Shri Sharma sought to draw strength from the decision of the Kerala High Court in Ponkunnam Traders V. Addl. ITO [1972] 83 ITR 508, which has been affirmed by the Division Bench of the same High Court in Addl. CIT v. Ponkunnam Traders [1976] 102 ITR 366 (Ker.). Reliance, has also been placed on the decision of the Supreme Court in Raja Jagdambika Pratap Narain Singh v. CBDT [1975] 100 ITR 698 and Swadeshi Cotton Mills v. Union of India AIR 1981 SC 818. Reliance has also been placed on the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed additions which were ultimately made in his assessments. In order to cure this technical defect, the assessments on the point may be set aside. Reliance has been placed on the decision of the Supreme Court in the case of the Guduthur Bros. v. ITO [1960] 40 ITR 298. Shri Subhash Kumar also contended that the authorities cited on behalf of the assessee related to the period when sec. 142(3) was in force. It was submitted that u/s 142(3) the assessing officer was required to give an opportunity of being heard to the assessee in respect of the materials collected by him and utilized for the purpose of making the assessment. According to the learned D.R. in view of the amendment introduced w.e.f1-4-1976in sec. 142, the said authorities were no longer applicable in the instant case. 9. In reply, Shri G. C. Sharma reiterated the submissions already made by him. He, however, made it clear that in case the assessments framed in the case of Shri Shiv Charan Gupta in respect of additions were annulled, the protective assessments framed in the case of Smt. Sheela Gupta would become substantive assessments. However, in case assessments in the case of Shri Shiv Charan Gupta relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Amritsar Sugar Mills Co. Ltd. by the Delhi High Court, " it is now well settled that the principles of natural justice have to be complied with if the action taken results in adversely affecting a civil right. The rule of audi alteram partem is one of the facts of the principles of natural justice. This rule requires that a person, who may be adversely affected by a decision, should be given a reasonable opportunity of being heard ". According to the submissions made before us on behalf of the assessee it was this rule of natural justice which has been violated in this case by the Assessing Officer and it is because of breach of this rule that the assessments framed by him become null and void. Some of the decisions, cited on behalf of the assessee, do lay down the proposition that an order passed in violation of principle of natural justice is not merely avoidable order but is void and has to be quashed. This is the ratio of the decision of the Delhi High Court in the case of Amritsar Sugar Mills Co. Ltd. In Swadeshi Cotton Mills' case it has been held by the Hon'ble Supreme Court that a quasi-judicial or administrative decision rendered in violation of the audi alteram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contended before us on behalf of the assessee. 13. The Taxation Laws (Amendment) Act, 1975, introduced an amendment in subsec. (1) of sec. 142 and also inserted sub-secs. (2A), (2B), (2C) and (2D). No amendment was introduced in sub-sec. (3) of sec. 142. Under sub-sec. (2) of sec. 142, the ITO is empowered to make such enquiry as he considers necessary for the purpose of obtaining full information in respect of the income or loss of a person. Sub-sec. (3) of sec. 142 casts an obligation on the assessing officer to give an opportunity of being heard to the assessee in respect of any material gathered on the basis of an enquiry under sub-sec. (2) and which is proposed to be utilized for the purpose of assessment. The provisions contained in sub-sec.(3) thus, give a statutory recognition to the principle of natural justice, audi alteram partem. If an opportunity has not been given by a statutory authority to an affected party before an adverse order is passed against him, it amounts to violation of principles of natural justice. However, when the principle of natural justice of audi alteram partem is given a statutory recognition and becomes part of a statute, in that case, denia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed without affording to the assessee a reasonable opportunity of being heard. The Hon'ble Supreme Court held that since this opportunity was denied to the assessee, therefore, the order of the ITO was vitiated by an illegality, which supervened not at the initial stage of the proceedings but during the course of it It was further held that the ITO was well within its jurisdiction to continue the proceedings from the stage at which the illegality has occurred and to assess the assessee to a penalty, if any, which the circumstances of the case may require. In this case also there was a violation of the statutorily prescribed procedure and the order passed in violation of such procedure was held to be illegal. This authority supports the view that in the instant case also the assessments framed.in the case of Shri Shiv Charan Gupta, insofar as they relate to the various additions made in violation of the procedure prescribed u/s 142(3), are illegal, and that the assessing officer should be asked to proceed from the stage at which the illegality occurred during the course of assessment proceedings. The assessing officer should, therefore, be required to recommence the proceedings from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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