S.R. Nayak, J.
1. The assessee feeling aggrieved by the order of the learned single judge of this court, dated January 22, 1999, in Writ Petition No. 43139 of 1993 has preferred this writ appeal.
2. The facts in brief are :
3. The appellant who claims to be a civil contractor declared a total income of Rs. 86,810 in his return of income filed on February 6, 1992, for the assessment year 1991-92. The return was accompanied by a profit and loss account, balance-sheet, statement of tax deducted at source, etc. The assessing authority in intimation under Section 143(1)(a) of the Income-tax Act, 1961 (for short, 'the Act'), computed the total income of the appellant-assesses at Rs. 5,21,760, as, while processing the return, he found that the assessee had short-totaled the gross bills received from the Karnataka Housing Board (K. H. B). Consequently, the assessing authority added the difference (Rs. 27,55,383 minus 23,20,428) of Rs. 4,34,955 to the income declared by the appellant.
4. Aggrieved by the said action of the assessing authority, the appellant preferred revision under Section 264 of the Act before the Commissioner Income-tax, Karnataka-II, Bangalore. Before the Commissioner, the appellant contended that the income declared was not based on any books of account, as he did not maintain regular books of account ; that the assessing authority failed to allow expenses against additional gross receipts of Rs. 4,34,955 ; and, if, the expenses are allowed, his total income including the income declared earlier, would be Rs. 90,140 only as against Rs. 86,810. In support of that plea, the appellant-assesses filed a computation statement wherein he estimated profit at eight per cent. on net contract receipts and claimed depreciation at Rs. 60,421. The Commissioner of Income-tax having opined that the appellant did not produce any evidence to show that the expenses debited to the profit and loss account filed along with the return, are not in relation to the entire gross bills of Rs. 27,55,383, did not find any merit in the revision petition. Consequently, the Commissioner of Income-tax by his order dated October 29, 1993, dismissed the revision petition and confirmed the intimation issued by the assessing authority under Section 143(1)(a) of the Act.
5. The appellant-assesses, feeling aggrieved by the above order of the Commissioner of Income-tax preferred Writ Petition No. 43139 of 1993, A learned single judge of this court having opined that the intimation issued by the assessing authority under Section 143(1)(a) of the Act was based on the statement submitted by the appellant-assesses himself, which accompanied the return, held that there was nothing wrong on the part of the assessing authority in issuing the impugned intimation. In the result, the learned single judge dismissed the writ petition. Hence, this writ appeal by the assessee.
6. We have heard Sri G. Sarangan, learned senior counsel for the appellant-assesses, and Sri M.V. Seshachala, learned senior standing counsel for the Income-tax Department. The only contention put forth by Sri G. Sarangan before us was that the assessing authority ought not to have added a sum of Rs. 4,34,955 to the income of the appellant-assesses without notice to the appellant-assesses and giving him an opportunity to put forth his case. According to Sri G. Sarangan, such a course was imperative for the assessing authority, particularly having regard to the fact that, in the return filed by the assessee, no allowance has been provided for the materials, wood, sand, labour, etc. Sri G. Sarangan pointed out that a specific ground in that regard was taken in the revision petition. Sri G. Sarangan, in support of his contention placed reliance on the judgments of this court in God Granites v. Under Secretary, Central Board of Direct Taxes : [1996]218ITR298(KAR) and ITO v. Mandira D. Vakharia : [2001]250ITR432(KAR) , judgment of the Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania : [1992]196ITR55(Bom) judgment of the Delhi High Court in CIT v. Modi Spinning and Weaving Mills Co. Ltd. [2002] 258 ITR 65 and judgment of the Gauhati High Court in Namdang Tea Co. (India) Ltd. v. Deputy CIT , Sri M.V. Seshachala, learned senior standing counsel for the Income-tax Department, on the other hand, contended that the law does not require issuance of any notice by the assessing authority, before issuing intimation under Section 143(1)(a) of the Act, particularly, when the intimation falls under Clause (i) of the proviso to Section 143(1)(a) of the Act. In support of his submission, learned senior standing counsel placed reliance on the judgment of this court in Bidar Sahakari Sakkare Kharkhane Niyamat v. Union of India : [1999]237ITR445(KAR) . Mr. Seshachala submitted that Writ Appeal No. 1396 of 1999, filed against the said judgment of the learned single judge was dismissed by a Division Bench of this court by order dated May 29, 2002, and that order was allowed to become final. Learned standing counsel also contended that the appellant-assesses along with the return of income, furnished profit and loss account and balance-sheet, etc., and there is nothing to show that the expenses debited to the profit and loss account are not in relation to the entire gross bills of Rs. 27,55,383. By way of reply, Sri G. Sarangan contended that what fell for consideration in Bidar Sahakari Sakkare Kharkhane Niyamat v. Union of India : [1999]237ITR445(KAR) was constitutional validity of Section 143(1A) and, therefore, the observations made by this court in that judgment are not relevant in construing Section 143(1)(a) of the Act. Sri G. Sarangan also contended that though in certain cases post-decisional hearing could be provided in lieu of pre-decisional hearing as held by the Supreme Court in the case of Smt. Maneka Gandhi v. Union of India, : [1978]2SCR621 , Section 143(1)(a) does not even provide for post-decisional hearing ; therefore, it is imperative that the principles of natural justice should be read into the provisions of Section 143(1)(a). In other words, Sri G. Sarangan submits that before adding a sum of Rs. 4,34,955 to the income of the appellant, the assessing authority should have issued notice to the assessee and given him an opportunity of being heard.
7. There is no dispute and there cannot be any dispute over the fact that the appellant-assesses despite receipt of a sum of Rs. 27,55,383 from the Karnataka Housing Board, Shimoga, showed the receipt of a sum of Rs. 23,20,428 in the return filed by him. The return filed by the appellant-assesses was accompanied by the profit and loss account, balance-sheet, statement of tax deducted at source, etc. Under the proviso to Section 143(1)(a) of the Act, the assessing authority was empowered to make the following adjustments :
'Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely : --
(i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified ;
(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed ;
(iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed.'
8. Under Section 143(1) of the Act, as it originally stood, the assessing authority was required to make a summary assessment, unlike the amended section which requires merely an intimation to be sent. If the assessing authority wanted to make such an assessment on the basis of the return, he had to take the return as he found it. He had no power to make any adjustment. However, after April 1, 1971, Section 143(1)(a) was amended as a result of which, if the assessing authority wanted to make an assessment on the basis of the return as filed, he was entitled to make certain adjustments to the income or loss declared in the return. Under this provision, the assessing authority could rectify any arithmetical error in the return or accounts and documents accompanying it. The assessing authority could allow any deduction, allowance, or relief which, on the basis of the information available in the return, accounts and documents, was prima facie admissible but was not claimed ; and, similarly, he could disallow any deduction, allowance or relief claimed in the return which, on the basis of the information available in such return, accounts or documents was prima facie inadmissible.
9. The new amended provisions have been brought into effect from April 1, 1989, under the Direct Tax Laws (Amendment) Act, 1989. As a result, there is no summary assessment to start with. Only an intimation has to be sent by the assessing authority, as set out in Section 143(1)(a) as in force. Since there is no assessment, the right of the assessee to object to a summary assessment has also been deleted. It is true that, as held by the Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania : [1992]196ITR55(Bom) , the errors which were mainly required to be corrected were only arithmetical errors reflected in the accounts or documents accompanying the return. Therefore, it is true, no substantial adjustments, which would require examination of any document or which would require a hearing to be given to the assessee are contemplated.
10. Therefore, the question for our consideration is whether, the assessing authority, in the facts and circumstances of the case, was justified in adding the sum of Rs. 4,34,955 to the income of the appellant under Clause (i) of the proviso to Section 143(1)(a) of the Act. Having heard learned counsel for the parties, we are inclined to agree with learned senior standing counsel, Income-tax Department, that the assessing authority was well justified in adding the sum of Rs. 4,34,955 to the income of the assessee, on the basis of the return and the documents accompanying it, filed by the assessee himself. The return filed by the appellant-assesses was accompanied by profit and loss account, balance-sheet, statement of tax deducted at source, etc. The assessee, instead of showing Rs. 27,55,383 as income received from the K. H. B., Shimoga, as reflected by the documents produced by himself, admittedly, showed the receipt at Rs. 23,20,428. The difference being a sum of Rs. 4,34,955, the assessing authority was justified in adding that sum to the income of the appellant-assesses. The ground urged before the Commissioner of Income-tax that the assessing authority did not make any allowance towards materials, wood, sand, labour, etc., also does not deserve acceptance. Nothing is produced before the assessing authority or before the Commissioner of Income-tax or before this court to show that the expenses debited to the profit and loss account which were filed along with the return are not in relation to the entire gross bills of Rs. 27,55,383 received from the K. H. B., Shimoga. It is not the case of the appellant-assesses that the assessing authority failed to consider the expenses which the assessee might have incurred in connection with the earning of gross receipts of Rs. 27,55,383. It also needs to be noticed that it is not the case of the appellant-assesses that he has some evidence in the form of separate books of account or otherwise to show that he incurred some expenditure in connection with the earnings of Rs. 27,55,383. In that view of the matter, non-issuance of notice by the assessing authority before the impugned intimation under Section 143(1)(a) of the Act was sent, would not vitiate the impugned intimation.
11. This court in Bidar Sahakari Sakkare Kharkhane Niyamat v. Union of India : [1999]237ITR445(KAR) , while upholding the validity of Section 143(1A) and Section 143(1)(a) of the Act, held that the very object of Section 143(1)(a) of the Act by making prima facie adjustment is to avoid hearing being given. We are in respectful agreement with the view of the learned judge. Further, the object of new Section 143, is carefully stated by the Central Board of Direct Taxes in its Circular No. 549, dated October 31, 1989 : [1990]182ITR1(Mad) . In the said circular, it has stated thus (page 23) :
'The new Section 143, as substituted by the Amending Act, 1987, while dispensing with the necessity of passing assessment orders in all cases, did not contain any deterrent provision against filing of incorrect returns to show lesser tax liabilities. Consequently, the new scheme of assessment was liable to be misused by unscrupulous taxpayers, who might return lesser income by making obvious mistakes or by claiming obviously incorrect deductions and taking a chance that if the same are detected by the Department, they would have to pay the correct tax only ... Besides its deterrent effect, the purpose of this levy is also to persuade all the taxpayers to fill their returns of income carefully to avoid mistakes. It is thus a sort of negligence tax on the assessee and compensates the Department for the effort involved in detecting the obvious mistakes committed by the taxpayers in their returns of income or loss.'
12. The court also held that the provisions of Section 143(1)(a) cannot be considered to be violative of the principles of natural justice or discriminatory, arbitrary or unreasonable being violative of Articles 14 and 265 of the Constitution of India.
13. The judgments cited by Sri G. Sarangan are of no help to sustain his contention that the assessing authority ought to have issued notice and given an opportunity of being heard to the appellant before adding Rs. 4,34,955 to his income on the basis of the return filed and documents produced by the appellant.
14. In God Granites v. Under Secretary, Central Board of Direct Taxes : [1996]218ITR298(KAR) , the petitioner therein had sought deduction of the profits derived from export of dressed granite, in computing the total income, in the return submitted by it for the assessment year 1993-94. The petitioner had returned a total income of Rs. 44,135. The Assessing Officer disallowed the deduction of Rs. 37,13,849 claimed by the petitioner under Section 80HHC and added the same to the total income, by way of adjustment under Section 143(1)(a) of the Act. The petitioner was not heard in the matter. In the premise of that fact situation, a learned single judge of the court held (page 307) :
'Under the first proviso to Section 143(1)(a), the Assessing Officer could make an adjustment in the income, by disallowing the deduction claimed in the return, only if it is prima facie inadmissible, on the basis of the information available in such return or accounts or documents accompanying the return. It cannot be said that inadmissibility of the claim of the petitioner in regard to deduction under Section 80HHC, is so clear and self-evident from the return and the annexed documents, that the Assessing Officer could have recourse to adjustment by disallowance, under Section 143(1)(a). The fact that on ultimate analysis, the petitioner may not be entitled for the deduction claimed from the total income does not mean that recourse can be had to disallowance under Section 143(1)(a), dispensing with hearing and denying the opportunity to the petitioner to challenge the assessment. Under the guise of effecting an adjustment under Section 143(1)(a), the Assessing Officer cannot decide debatable issues. Reference may be made in this behalf to the decision of the Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania : [1992]196ITR55(Bom) wherein it is held that unless the inadmissibility of a deduction is evident and obvious (as in the case of Section 154), from the return and its annexures, the Assessing Officer who wants to disallow a deduction or a claim, is bound to follow the procedure under Section 143(2) of giving a notice to the assessee; and that no substantial adjustments which require examination of evidence or which would require a hearing, are contemplated under Section 143(1)(a). Hence, the intimation dated March 31, 1995 (annexure C), is liable to be set aside. The petitioner is entitled to a notice under Section 143(2) even though the result of the hearing and consequential disposal may lead to the same result, as a consequence of this decision.'
15. In CIT v. Modi Spinning and Weaving Mills Co. Ltd. [2002] 258 ITR 65 , the assessee declared a net loss of Rs. 8,56,21,293 for the assessment year 1990-91. The return filed by the assessee was examined under Section 143(1)(a) of the Act and an addition of Rs. 15,84,216 was made as the assessee had not filed and furnished any evidence in support of the deduction claimed under Section 43B of the Act. The assessee filed an application on March 21, 1995, under Section 154 of the Act for rectification which was dismissed. On appeal, the Commissioner Income-tax (Appeals) after examining the matter in detail remanded it to the Assessing Officer to obtain proof of payment, examine it and allow deduction if permissible under the provisions of the Act. The assessee filed further appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal allowed the assessee's appeal. That led to the Revenue to prefer the appeal to the Delhi High Court. The Delhi High Court held (page 69) :
'In the instant case when the information was available on record and payments were made in the prescribed form but no proof was furnished by the assessee, then the only course left with the Assessing Officer was to call for the information by issuing a notice to the assessee. This is imperative in consonance with the principles of natural justice. This opportunity could have been given to the assessee even at the time of disposing of the application under Section 154.'
16. In the same judgment, it was further held that (page 69) :
'. . . that the stage of furnishing of proof is reached as and when the proof is demanded by the Income-tax Officer on a notice under Section 143(2) being issued. If no proof in support of the claim was available with the Income-tax Officer, he could have issued a notice under Section 143(2), but he could not have unilaterally made this disallowance by seeking to invoke the provisions of the first proviso to Section 143(1).'
17. In Namdang Tea Co. (India) Ltd. v. Deputy CIT , the petitioner-assesses submitted his return of income for the assessment year 1992-93 relevant to the previous year 1991-92 on December 30, 1992, showing a total income of Rs. 93,50,050. The total tax including surcharge payable by the petitioner was Rs. 48,38,650. A sum of Rs. 1,83,416 was payable by the petitioner on account of interest under sections 234B and 234C of the Act. Thus, a total amount of Rs. 50,22,066 was payable by the petitioner and the tax so determined was actually paid by it. Along with the return the petitioner furnished details of computation of taxable income for the year ending on March 31, 1992, and also the details of the depreciation allowable, additions made to the fixed assets during the year 1992, amounts disallowable under Section 143(16) (sic) of the Act, etc. The first respondent, however, made prima facie adjustments in the purported exercise of the powers under Section 143(1)(a) of the Act and added back certain income mentioned in paragraph 5 of the petition. The first respondent accordingly determined the adjusted total income at Rs. 1,54,33,291 and the total tax payable was determined at Rs. 69,44,981 along with surcharge of Rs. 10,41,747. Additional tax under Section 143(1A) of the Act amounting to Rs. 6,29,615 was also levied. After adjustment of the amount already paid a sum of Rs. 60,59,651 was determined as tax payable by the petitioner. The petitioner filed a petition under Section 154 of the Act for rectification of the mistake apparent on the face of the record. It was pointed out in the said rectification petition that the addition in the purported exercise of the powers under Section 143(1)(a) of the Act had resulted in double taxation in the hands of the petitioner. It was submitted that the profit before taxation was Rs. 4,97,94,521 which included other income of Rs. 73,72,014. The petitioner submitted that from the break-up it would be clear that the other income of Rs. 73,72,014 included the income which had been added back by the first respondent. Accordingly, the petitioner prayed before the first respondent to rectify the mistakes apparent on the face of the records and also to stay the tax demand of Rs. 60,59,651, till disposal of the petition under Section 154 of the Act. The petition under Section 154 was disposed of by order dated June 10, 1993. By the said order, the first respondent rectified other mistakes. However, so far as interest on deposit and interest on loan were concerned, the first respondent refused to rectify and upheld the addition of the same. Accordingly, after making computation, a sum of Rs. 49,16,088 was determined as payable on account of income-tax, additional tax and interest. The said action of the Deputy Commissioner Income-tax was called in question in a writ petition. In the facts and circumstances of the case, the Gauhati High Court held that the addition of various incomes to the total income in the purported exercise of the power under Section 143(1)(a) of the Act was illegal and without jurisdiction. Placing reliance on two decisions of the Bombay High Court in Khatau Junkar Ltd. v. K.S. Pathania : [1992]196ITR55(Bom) and in Indian Rayon and Industries Ltd. v. J.R. Kanekar, Asst. CIT : [1993]200ITR747(Bom) . We are at a loss to understand how, the above judgments cited by Sri G. Sarangan would in any way support the contention advanced by him that the impugned intimation should have been preceded by a notice to the appellant-assesses to have his say in the matter. Suffice it to state that all the decisions cited by learned senior counsel dealt with situations falling under Clause (ii) and/or Clause (iii) of the proviso to Section 143(1)(a) of the Act and not under Clause (i) of the proviso. Therefore, these decisions have no bearing in the decision-making in the present case. The object of principles of natural justice is to foster justice and not to thwart justice. The principles of natural justice should reflect and guard the values of fairness and impartiality. It is true that audi alteram partem and nemo judex in causa sua are twin formidable pillars supporting natural justice. In order to decide whether in the instant case notice to the assessee before issuance of intimation under Section 143(1)(a) of the Act was necessary, it becomes necessary to know whether the appellant-assesses suffered any prejudice on account of non-issuance of notice. It is not the case of the appellant-assesses that the assessing authority made use of some undisclosed information or evidence before he added a sum of Rs. 4,34,955 to his income. Addition is made solely on the basis of the return filed by the assessee and the documents produced by him. Principles of natural justice are not engraved on tablets of stone as Lord Bride of Harwich said in Lloyd v. McMahon [1987] 1 All ER 1118 (CA). The Supreme Court in Rattan Lal Sharma v. Managing Committee, Dr. Hari Ram (Co-education) Higher Secondary School : (1993)IILLJ549SC opined that natural justice is not a fixed but a flexible concept, that there is no invariable standard of fair hearing and that each case has to be decided on its own merits. Since the principles of natural justice are not 'embodied' rules and, therefore, it is not possible nor practicable to precisely define the parameters of natural justice ; that the aim of the principles of natural justice is to secure justice or to prevent miscarriage of justice and not to thwart justice; that there is no invariable standard of reasonableness in the matter of hearing and whether in a particular case natural justice has been contravened or not is ultimately for the courts to decide. The Supreme Court in Union of India v. J.N. Sinha, : (1970)IILLJ284SC and Chandra Bhawan Boarding and Lodging v. State of Mysore, : (1970)IILLJ403SC , opined that each case has to be decided on its own merits. In Mineral Development Ltd. v. State of Bihar, : [1960]2SCR609 , the Supreme Court observed that the concept of fair hearing is 'an elastic one and is not susceptible of easy and precise definition'. Again, the Supreme Court in Fedco (P.) Ltd. v. S.N. Bilgrami and Ors., : [1960]2SCR408 , observed that there can be no invariable standard for reasonableness in such matters except that the court's conscience must be satisfied that the person against whom an action is proposed has had a fair chance of convincing the authority who proposes to take action against him that the ground on which the action is proposed are either non-existence, or even if they exist, they do not justify the proposed action. The core decision on this question will necessarily and invariably depend upon the peculiar facts and circumstances of each case, including the nature of the decision-making body, the nature of the action proposed, the grounds on which the action is proposed, the materials on which the allegations are based, the attitude of the party against whom the action is proposed in showing cause against such proposed action, the nature of the plea raised by him, his admissions by conduct or otherwise of some or all of the allegations, the effect of the ruling made and all other matters which help the mind of the authority in coming to a fair conclusion on the question. In Smt. Maneka Gandhi v. Union of India, : [1978]2SCR621 , the Supreme Court was pleased to observe (page 628) :
'The rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of the case.'
18. Although, at one point of time, non-compliance of principles of natural justice was considered to be per se having a prejudicial effect, that position has been altered by the apex court by evolving the 'prejudice theory'.
19. In the instant case, it cannot be said that non-issuance of notice by the assessing authority before he sent intimation under Section 143(1)(a) has resulted in any prejudice to the appellant-assesses. We say this because, the addition made by the assessing authority to the income of the appellant-assesses was exclusively and solely on the basis of the disclosure made by the assessee himself in the return filed and the documents produced by him. The assessee cannot be permitted to approbate and reprobate.
20. In the result and for the foregoing reasons, we do not find any substantive or weighty ground to interfere with the order of the learned single judge.
21. In the result, the writ appeal is dismissed with no order as to costs.