High Court Of Delhi
CIT vs. Dharam Pal Prem Chand Ltd.
Section 143, 260A
Asst. Year 1994-95 & 1996-97
Madan B. Lokur & V.B. Gupta, JJ.
IT Appeal No. 1306 of 2006
4th May, 2007
Counsel Appeared :
Ms. P.L. Bansal with Vishnu Sharma, for the Appellant : B. Gupta with R.K. Chaufla, for the Respondent
JUDGMENT
MADAN B. LOKUR, J. :
The Revenue is aggrieved by an order dt. 31st March, 2005 passed by the Tribunal, Delhi Bench ‘A’ Delhi in ITA No. 2803/Del/1998 and ITA No. 3558/Del/2002 relevant for the asst. yrs. 1994-95 and 1995-96.
The assessee manufacturers chewing tobacco (Zaffrani Patti). One of the issues that arose in the assessment proceedings before the AO was with regard to the raw material used by the assessee and the percentage of the components including silver. The assessee declined to give necessary information on the ground that it was a trade secret which it would not like to divulge.
On this, the AO drew samples of Zaffrani Patti and sent them to the Shri Ram Institute for Industrial Research, New Delhi with a request to ascertain the percentage-wise presence of silver in different qualities/brands of Zaffrani Patti. The said Institute sent its report by a letter dt. 12th March, 1997. On the basis of the report, the AO estimated the total consumption of silver in the manufacture of various products of the assessee. Upon receipt of the report, the assessee filed objections thereto and in the objections it requested for permission to cross-examine the analyst. It appears that the request to cross-examine the analyst was made on more than one occasion but the AO paid no heed to this request and proceeded with the assessment order.
The assessee then preferred an appeal before the CIT(A) and pointed out various objections raised to the report submitted by the Shri Ram Institute for Industrial Research including the fact that a request was made to cross- examine the analyst and the assessee had even offered to deposit the necessary expenses for this purpose, but the AO avoided granting permission for cross-examination.
The CIT(A) accepted the contention of the assessee and concluded that the AO had wrongly avoided granting permission to the assessee to cross-examine the analyst. One of the other objections taken by the assessee was that samples taken were not in an adequate quantity. For the present, we are not really concerned with this contention. The fact remains that the CIT(A) came to the conclusion that the assessee was not given permission to cross- examine the analyst who had prepared the test report obtained from the Shri Ram Institute for Industrial Research and that was enough to vitiate the assessment order.
The Revenue then preferred an appeal against the order of the CIT(A) and by the impugned order the Tribunal dismissed the appeal on the same ground.
We have heard learned counsel for the Revenue who contended that the strict rules of evidence are not applicable to assessment proceedings. On this, we may say that there can hardly be any doubt that the AO had based his assessment order on the report obtained from the Shri Ram Institute for Industrial Research and the correctness of that report was itself under challenge by the assessee who had not only filed objections thereto but also sought permission to cross-examine the analyst. A request to cross-examine was made by the assessee not only on one occasion but on several occasions and the assessee had even agreed to pay the necessary expenses but the AO did not permit cross-examination of the analyst. There is no doubt that even if the strict rules of evidence may not apply, the basic principles of natural justice would apply to the facts of the case. The AO placed reliance upon the report of the Shri Ram Institute for Industrial Research for deciding against the assessee. The report cannot be automatically accepted particularly since there is a challenge to it and the assessee had sought permission to cross- examine the analyst making the report. Since the AO did not permit the correctness or otherwise of the report to be tested, there is a clear violation of the principles of natural justice committed by him in relying upon it to the detriment of the assessee. As observed by the Constitution Bench in C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : (1993) 1 SCC 78 that, “The observance of principles of natural justice is the pragmatic requirement of fair play in action.”
We do not find any error in the view taken by the CIT(A) or by the Tribunal in setting aside the assessment order on the ground that the principles of natural justice were not complied with by the AO who did not permit the assessee to cross-examine the analyst on the basis of whose report the assessment order was passed against the assessee.
No substantial question of law arises for consideration. Dismissed.
[Citation : 295 ITR 105]
