1. When these three appeals together with several other appeals of similar type were pending in the Tribunal all over the country, the Chief Commissioner of Income-tax III, Delhi, addressed a letter dated 14-8-1998 bringing to the notice of the President the pendency of several appeals, involving block assessment orders, filed by the assessee in which grounds/additional grounds were raised about the legality of the approval given by the Commissioners of Income-tax approving the block assessment orders. The main contention of the assessees in those cases is that the Commissioner is required by law to give an opportunity of hearing to the assessees before giving approval and it is also contended that the Commissioner is required by law to record his reasoning in writing while approving the order of the Assessing Officer. This issue is involved in almost all the block assessments all over the country numbering hundreds. There is a possibility of difference of opinion amongst different Benches of the Tribunal and, therefore, he requested to constitute a Special Bench to decide the issue, so that uniformity of decision be achieved. He further stated that the decision will have far reaching consequences.
He suggested formation of the Special Bench to answer the following questions : (1) (a) Whether the Commissioner while approving the order of Assessing Officer under section 158BC of the Act is required by law to necessarily give an opportunity of hearing to the assessee (b) Whether the approval of an order by the Commissioner without giving an opportunity of being heard to the assessee, would render the order of Assessing Officer void ab initio or would be only an infirmity curable in law (2) (a) Whether the provisions of section 158BG require the Commissioner to record his reasons in writing for approving the order of Assessing Officer passed under section 158BC of the Act.
(b) Whether the approval of Commissioner without recording his reasons in writing for approving the order would render the order of Assessing Officer ab initio void or would be only an infirmity curable in law The President accordingly constituted the Special Bench for consideration and decision of the above questions. The Special Bench was formulated at Delhi. Wide publicity about the formation of Special Bench and the questions coming up before the Special Bench was given by intimating in the Notice Boards of all the Benches throughout the country and very many interveners also have put in their appearances and advanced their arguments regarding the questions formulated. In I.T.A. (SS) No. 5555/Del/96, ground No. 8 was specifically taken and it is as follows : "That the impugned assessment is otherwise bad in law and unsustainable as while granting approval to the impugned assessment, the learned CIT-Delhi-III had not granted any opportunity whatsoever to the appellant." 2. In I.T.A. (SS) No. 113/DEL/97 which is an appeal against block assessment in which Shri Jaipal Aggarwal is the appellant, the Docket order dated 5-1-1999 shows the Tribunal to have granted permission to amend ground No. 1 and the amended ground No. 1 reads as under : "That the impugned block assessment order dated 29-4-1997 as passed by the learned Assessing Officer is illegal and void ab initio inter alia because :- (a) The Ld. CIT-III, Delhi appears to have given his approval mechanically & without applying his mind independently also without affording an opportunity to the appellant of being heard.
The Bench had allowed the amended ground to be incorporated and to advance arguments on that ground during the course of arguments. Shri O. P. Sapra, the learned advocate appeared for Shri Jaipal Aggarwal.
3. In ITA (SS) No. 127/Del/97 which is also an appeal which had arisen from the block assessment in the case of Smt. Vidhu Aggarwal, is represented by Shri O. P. Sapra, learned Advocate. It would appear that Smt. Vidhu Agarwal is the wife of Shri Jaipal Agarwal. In both these cases, conditional stay was granted by A-Bench of the Tribunal by its order dated 30-4-1998.
4. Thus, the Special Bench was formed to decide the above questions in the three matters mentioned above. Apart from the question of legality or otherwise of the approval granted by the Commissioner while making assessment order against each of these three assessees, each of the appeals contains several other grounds also which are to be decided independently. The learned Advocates appearing for the assessees as well as the Counsel for the department, Shri S. D. Kapila agreed and permitted us to give our decision on the above questions. We sought their permission and consent, because we are aware of the provisions of section 255(3) of the Income-tax Act, which gives powers to the President of the Tribunal to constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a Judicial Member and one an Accountant Member for disposal of any particular case. Now, ordinarily, the case means (sic) involving entire appeal.
The question whether a particular ground of appeal can constitute the subject-matter of decision before a Special Bench falls for our immediate consideration. If it is permissible under law, then there will not be any legal impediment for the validity of this Special Bench order. Fortunately, we came across a decision of Goa, Daman & Diu Judicial Commissioner's Court clarifying the meaning of the word 'case', in Communidade of Velguem of Bicholim through Yeshwant Vishnu Sahastrabudhe v. Vassant Vithal Govekar AIR 1969 Goa, Daman & Diu 37.
The question in that case was whether the permission of the Administrative Tribunal in terms of section 9 of Code of Comunidades, 1961, was necessary before such suit was entertained. In fact, the plaintiff in suit having felt aggrieved over the decision by the Subordinate Judge moved the High Court under section 115 CPC. In support of the contention that no permission of the Administrative Tribunal was necessary, inter alia, because what is sought to be agitated before the High Court is that the permission is not necessary because it is only a revision against an interlocutory order passed by the Sub-Judge and therefore, it cannot be considered as 'any case which has been decided'. The Hon'ble Court did not appear to have admitted the soundness of this contention. They held : "The expression 'case' includes civil proceedings other than suits, and is not restricted to the entirety of the proceedings in a Civil Court." Therefore, to our minds, it would appear that even if a part of the proceedings are involved in the civil revision petition coming up before the High Court under section 115 CPC, it should be considered to be a case. Therefore, applying it to the facts of the present case, even if we are not deciding the whole case, but only part of the case, the President of the Tribunal is entitled to formulate a Special Bench within the meaning of section 255(3) of the Act, in view of the meaning of the word 'case' given in the above decision.
5. Further, the Hon'ble Supreme Court had an occasion to consider what is meant by the word 'case' in CIT v. Bidhu Bhusan Sarkar [1967] 63 ITR 278. In that case, their Lordships were considering the validity of the proceedings of reopening made under section 34 of the Indian Income-tax Act, 1922. The reopening notice dated 11-2-1956 was issued and the assessment was made on 2-5-1956. By that date, no proceeding was pending and connected proceeding was ordered to be filed. The question was, whether in those circumstances, an order of transfer was valid, even though proceedings were not pending. The Hon'ble Supreme Court held, as part of Head Note at page 279 as follows : "The Explanation to section 5(7A) makes it clear that the word 'case' in relation to any person whose name is specified in the order of transfer means all proceedings under the Act in respect of any year which may be pending on the date of the transfer, and also includes all proceedings under the Act which may be commenced after the date of transfer in respect of any year." Therefore, any proceedings involved in the case can also be considered to be a case. As we have already observed that ground No. 8 was specifically taken and in other two cases, the Tribunal permitted amendment of ground No. 1 and allowed the appellants to agitate the validity of the approval granted by the Commissioner. The Karnataka High Court in United Breweries Ltd. v. ACIT [1995] 211 ITR 256/83 Taxman 263, while considering the validity of the transfer order made under section 127 of the Income-tax Act, 1961, considered the meaning of the word 'case' and they held as per the Head Note at page 256 as follows : "In section 127 of the Income-tax Act, 1961, the word 'case' is used in a comprehensive sense for pending proceedings as well as for proceedings to be instituted in future. Consequently, an order of transfer can be validly made even if there is no proceeding pending and the purpose of transfer in such an event will simply be that all future proceedings have to take place before the officer to whom the case of the assessee is transferred." Thus, the word 'case' comprehends all proceedings comprising the case.
In a way, we are of the opinion that whole includes all its component parts, so, though the case may be comprised of several proceedings and several grounds, each of the ground involved in the case can constitute a proceeding and that itself can be taken to mean to be a case within the meaning of section 255(3) of the Act.
6. Otherwise, insurmountable difficulties will have to be faced with.
If case is taken to mean all proceedings in a case, then since these are all block assessments and each block comprises of ten years, we have to virtually decide the facts and circumstances, validity or otherwise of the assessments made for 30 years and it would be highly difficult to deal with the case in a reasonable time and, therefore, the sensible and purposeful interpretation of the word 'case' occurring in section 255(3) of the Act is felt justified to be adopted, especially when both the sides agreed to this course of action when specifically put by us during the course of hearing.
7. It is no doubt true that the word 'approval' occurring in section 158BG had come up for consideration before different Benches of the Tribunal and they have taken divergent views also on the subject. A Division Bench decision in Kritilal Kalidas & Co. v. Dy. CIT [1998] 67 ITD 573 (Mad.) took the following view at page 607 of the Report : "The proviso to section 158BG put an embargo on the power of the Assessing Officer that no order of assessment for the block period shall be passed without the previous approval of the Commissioner. A careful reading of the phraseology 'with the previous approval' employed in section 158BG makes it abundantly clear that the granting of previous approval by the Commissioner is not an idle formality. The Legislature in its proper wisdom knew that making of an order of assessment for the block period under Chapter XIV-B will adversely affect and deprive the citizens of their properties and other rights guaranteed under the Constitution, and, therefore, mandated that the Assessing Officer shall not make any order of assessment of the block period until he obtained the previous approval of the Commissioner. From the scheme of Chapter XIV-B it is clear that the Assessing Officer does not afford any opportunity to the assessee to raise any objections or hearing after the enquiries are completed on the basis of seized material and before passing of the order of assessment of the block period, though such person/assessee is likely to be affected by the final order of assessment of the block period after the enquiries conducted and completed by him. After the enquiry is completed by the Assessing Officer he has to apply his mind and then frame an order of assessment of the block period under section 158BC or under section 158BD and at that stage the assessee or any other person cannot enter the mind of the Assessing Officer and discern or find out the result of the enquiry, i.e., to say whether he is going to pass a favourable or an adverse order. It is for this reason the Legislature in its wisdom thought that a Senior Officer of the Department of the rank of Commissioner should give approval to the proposed draft order of assessment of the block period framed by the Assessing Officer pursuant to enquiry conducted by him as provided in the relevant provisions of the Income-tax Act, 1961." The Bombay Bench of the Tribunal in ITA (SS) No. 85/MUM/96 decided on 9th March, 1999 had taken a contrary view. They have taken the view that at the time of granting approval, the Commissioner has been discharging only administrative functions and not judicial functions and as such, principles of natural justice do not come into play while disposing of the administrative matters. Since the assessee has no concern with such administrative matters and it is confined only to a higher official and a lower official. In our opinion, the first thing to be decided in order to find out the correct answer to the question posed is to find out the purpose for which approval of the Commissioner is needed, and, secondly, to determine whether grant of approval is an administrative act or a judicial act. In our understanding as well as according to the decided case law, if it is an administrative act, then principles of natural justice, even though violated, does not vitiate the proceedings. But if it is a judicial proceeding, then principles of natural justice have to be complied with. Nextly, it is our duty to find out what are the principles of natural justice and how many times or chances of hearing the assessee should be given in order to comply with the principles of natural justice. Next, it should also be considered whether there is any necessity for the Legislature to point out the necessity of giving an opportunity of hearing to the assessee at a particular stage of the proceeding and in the absence of such a direction from the Legislature, whether audi alteram partem should still be complied with whether there are any exceptions to the application of audi alteram partem or it is absolute and cannot be violated under any circumstances and we should also consider whether giving right of appeal to the assessee in which the assessee would have agitated whatever he wants to contend in the assessment proceedings would be sufficient compliance of audi alteram partem.
8. Before dealing with these aspects, let us see what is meant by 'approval' because the controversy arose from out of the word 'approval' used in section 158BG. Section 158BG underwent a change by the Income-tax (Amendment) Act, 1997 and Finance (No. 2) Act, 1998 from 1-1-1997 and 1-10-1998 respectively. The old section before amendment stood as under : The order of assessment for the block period shall be passed by an Assessing Officer not below the rank of an Assistant Commissioner : Provided that no such order shall be passed without the previous approval of the Commissioner." After the amendment by the above two Acts, some changes occurred and therefore, the section as well as Proviso thereunder are extracted as per the amendment : "158BG. Authority competent to make block assessment.
The order of assessment for the block period shall be passed by an Assessing Officer not below the rank of an Assistant Commissioner or Deputy Commissioner or an Assistant Director or Deputy Director, as the case may be : Provided that no such order shall be passed without the previous approval of - (a) the Commissioner or Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997; (b) the Joint Commissioner or the Joint Director, as the case may be, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or after the 1st day of January, 1997." The word 'approval' is defined to mean as follows : (at page 94 of Black's Law Dictionary, Special Deluxe Fifth Edition) : "The act of confirming, ratifying, assenting, sanctioning, or consenting to some act or thing done by another. 'Approval' implies knowledge and exercise of discretion after knowledge. McCarten v. Sanderson, 111 Mont. 407, 109 P. 2D. 1108, 1112." 9. Now, let us examine the provisions of Chapter XIV-B themselves in order to appreciate the correct set up in which the proviso to section 158BG occurs and to appreciate the enactment of that proviso. Chapter XIV-B comprising of sections 158B and ending with 158BH came into the statute by the Finance Act, 1995 with effect from 1-7-1995. The Chapter is styled as "Special procedure for assessment of search cases". This chapter is mainly intended to curb black money and where undisclosed income was found out in the search proceedings for a block period of 10 years, it should be brought into regular books of account, to allow to put it validly into circulation. However, the said black money which is found out by the search conducted by the department under section 132 or found out from the books of account or other documents or assets as requisitioned under section 132A is charged to tax. Section 158BA states that where search is conducted on or after 30-6-1995 or where requisition is made of account books, other documents or assets under section 132A, the Assessing Officer should proceed to to assess the undisclosed income in accordance with the provisions of this Chapter.
The word 'undisclosed income' is defined under section 158B(b) which is an inclusive definition and it includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act. 'Block period' is also a term defined and it means the previous years relevant to assessment years preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A, and includes, in the previous year in which such search was ted or requisition made, the period upto the date of the commencement of such search or, as the case may be, the date of such requisition. Under section 158BA, undisclosed income should be assessed by the Assessing Officer in accordance with the provisions of Chapter XIV-B and such undisclosed income is liable to tax at the rate of 60% under section 113. In the Explanation given under section 158BA, it is clearly slated that the assessment under this Chapter shall be in addition to regular assessment in respect of each previous year included in the block period and it is also stated that the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period. Under section 158BB, method of computation of undisclosed income for the block period is given. Section 158BC sets out the procedure for making block assessment. It states that where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then the Assessing Officer shall serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, if the search was initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period. In case of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 notice can be served on such person to file the return within a period not being less than 15 days, but not more than 45 days. The return once filed cannot be revised. There is no necessity to issue 148 notice.
After filing of the return or in cases where no return was filed, the Assessing Officer shall determine the undisclosed income for the block period under sub-sections (b), (c) and (d) of section 158BC, which are as follows : "(b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall so far as may be, apply; (c) the Assessing Officer on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment, 10. If the real intention of the Legislature is that the learned Commissioner has to grant his approval only after hearing the assessee and only after his passing a reasoned order for approval and thus the approval is expected to be a judicial proceeding and the approval is a judicial approval, then the wording of sub-section (c) would not have been as stated above, but it would have read as "shall pass an order of assessment and determine the tax payable by him on the basis of such assessment, as modified by the order of the Commissioner while granting approval under section 158BG proviso". However, no such words are occurring in section 158BC(c) and, therefore, this is one of the main reasons which made us prone to think that the approval contemplated under section 158BG proviso is only an administrative approval and not a judicial approval. Under section 158BE, there is a time limit prescribed for completing the block assessment. If the search is made after 30-6-1995, but before the 1st day of January, 1997, assessment would be completed within one year from the end of the month in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed. But if it is a search conducted after 1-1-1997, the time was enlarged to two years for completion of the block assessment. Ordinarily, for completing the assessments, it is well-known that two years period is prescribed, but for the block assessment, the period was purposely reduced to one year in order to complete such cases as early as possible. The utility of completing such assessments as quickly as possible particularly in lesser time than the time allowed for completion of ordinary assessment may also be known by the fact that Income-tax Appellate Tribunal is made the first appellate authority in all block assessment cases, instead of the CIT(A) in ordinary type of assessments. Thus, in ordinary type of assessments, the Income-tax Appellate Tribunal used to be the second appellate authority and the assessee used to have three-tier hearings, first before the Assessing Officer, second before the CIT(A)/Dy. CIT(A) and third before the Tribunal. However, in block assessment, there is only two-tier hearing. One is before the Assessing Officer and another is before the tribunal as the first appellate authority. Therefore, a comprehensive study of Chapter XIV-B will reveal the intention of the Legislature to separately deal with the block assessment cases and also to hasten or reduce the time gap for completion of such assessments to the minimum. If there is no anxiety on the part of the Legislature to complete the block assessments more quickly than the ordinary assessments, there would not have been any necessity to insert any Chapter XIV-B at all. Further, under Chapter XIV-B it is enough if the assessee pays 60% of the tax under section 113 of the Act and he is not liable to any penalty, interest, prosecution etc. It is made very clear in section 158BF that no interest under the provisions of section 234A, 234B or 234C or penalty under the provisions of clause (c) of sub-section (1) of section 271 or section 271A or section 271B shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment. Section 158BG specified special category of Assessing Officers not below the rank of Assistant Commissioner or Dy.
Commissioner or Asstt. Director or Dy. Director. Therefore, the intention of the Legislature in inserting Chapter XIV-B appears to be to unearth as much black money as possible and also to complete the assessments as quickly as possible, quicker than the time which may take for ordinary assessments and appeals thereafter. Under section 158BC(b) already quoted above, opportunity of hearing should be given to the assessee, since such opportunity is a must under section 142 and sub-sections (2) and (3) of section 143. Sections 142(2) and (3) read as follows : "(2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary.
(3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub-section (2) or any audit under sub-section (2A) and proposed to be utilised for the purpose of the assessment." Thus, the full information and material gathered, which is sought to be used against the assessee while making assessment, is obliged to be brought to the notice of the assessee and his explanation must be sought for and obtained before making an assessment by the Assessing Officer. Now, unless the assessment order is prepared and produced before the Commissioner for his approval, it would not be known to the assessee. In such circumstances, how is it possible for the assessee to know that certain contentions raised by him were not dealt with, certain deductions were not considered, certain legal submissions made were not considered by the Assessing Officer, in which case only giving second chance for hearing to the assessee would be of any use. However, the assessment made by the Assessing Officer would be valid assessment order only when the Commissioner approves it; and before approval of the said draft order, if any, is not expected to be served on the assessee. If the draft order is served him, then only he would be knowing what are the omissions and commissions and errors committed by the Assessing Officer while framing the assessment. Therefore, one thing is very clear that before valid assessment order is passed, with the approval of the Commissioner, the assessee is already given a full scale hearing. In such a case, especially when in the wording of section 158BG proviso there is no provision ordained by the Legislature to give an opportunity to the assessee to make his submissions, to hear and to pass a reasoned order, before granting approval, can it be said that a second time hearing should also be granted to the assessee and the refusal to give the same amounts to violating the principles of natural justice, especially having regard to the very meaning of the word 'approval' already quoted above. In our humble opinion, it is enough if the assessee is given a fair chance of hearing before completion of assessment and it is not necessary to give him a second time hearing before granting approval.
11. The principles of audi alteram partem, their meaning, their ambit, the extent to which said right can be exercised, limitations to the exercise of that right in certain circumstances and to cover exigencies etc. are all fully dealt with in a Full Bench decision of the Hon'ble Supreme Court in Union of India v. Tulsiram Patel AIR 1985 SC 1416, in which whole of the law on the subject together with case law was discussed. It was held that the principles of natural justice apply also where any Tribunal authority or body of men, not coming within the definition of "State" in Article 12, is charged with the duty of deciding a matter. In such a case, the principles of natural justice require that it must decide such matter fairly and impartially. Then, amplifying what should be done to comply with the rule of natural justice, their Lordships held the following : "96. The rule of natural justice with which we are concerned in these appeals and Writ Petitions, namely, the audi alteram partem rule, in its fullest amplitude means that a person against whom an order to his prejudice may be passed should be informed of the allegations and charges against him, be given an opportunity of submitting his explanation thereto, have the right to know the evidence, both oral or documentary, by which the matter is proposed to be decided against him, and to inspect the documents which are relied upon for the purpose of being used against him, to have the witnesses who are to give evidence against him examined in his presence and have the right to cross-examine them, and to lead his own evidence, both oral and documentary, in his defence. The process of a fair hearing need not, however, conform to the judicial process in a court of law, because judicial adjudication of causes involves a number of technical rules of procedure and evidence which are unnecessary and not required for the purpose of a fair hearing within the meaning of audi alteram partem rule in a quasi-judicial or administrative inquiry." Their Lordships also held that though the two rules of natural justice, namely, nemo judex in causa sua and audi alteram partem, have now a definite meaning and connotation in law and their content and implications are well understood and firmly established, they are nonetheless not statutory rules. Each of these rules yields to and changes with the exigencies of different situations. They do not apply in the same manner to situations which are not alike. These rules are not cast in a rigid mould nor can they be put in a legal strait-jacket.
They are not immutable but flexible. These rules can be adapted and modified by statutes and statutory rules and also by the constitution of the Tribunal which has to decide a particular matter and the rules by which such Tribunal is governed. There is no difference in this respect between the law in England and in India. Their Lordships also considered the position as to when it can be said that principles of natural justice are violated. In this connection, they have adopted the quoted portion in the decision in Suresh Koshy George v. University of Kerala AIR "The question whether the requirements of natural justice have been met by the procedure adopted in a given case must depend to a great extent on the facts and circumstances of the case in point, the constitution of the Tribunal and the rules under which it functions." Similarly, their Lordships also approvingly quoted their earlier decision in A. K. Kraipak v. Union of India AIR 1970 SC 150, particularly the portion extracted by them from page 157 : "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 that case."Union of India v. Col. J.N. Sinha AIRKraipak v. Union of India 'the aim of rules of natural justice is to secure justice or to put it negatively, to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law but supplement it.' It is true that if a statutory provision can be read consistently with the principles of natural justice, the courts should do so because it must be presumed that the Legislatures and the statutory authorities intend to act in accordance with the principles of natural justice.
But if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the principles of natural justice then the court cannot ignore the mandate of the Legislature or the statutory authority and read into the concerned provision the principles of natural justice." 12. Keeping in mind the above principle of law, we will have to read section 158BG proviso which we have already extracted above. In the whole of the proviso, nowhere it is found that before previous approval was granted by the Commissioner or Director, they should give opportunity to the assessee, invite objections and then dispose of their objections before granting approval. Had it been the intention, the Legislature would have clearly come out that opportunity to the assessee before approval should by the Commissioner. However, no such words, either expressedly or impliedly or contextually, can be read into the proviso to section 158BG. According to us, the Legislature is well aware that even while preparing the draft assessment order to be put before the Commissioner, the assessee is completely and fully heard, allowed to make submissions, and arguments, to raise objections, produce all documents in his favour and therefore, they must have felt that principles of natural justice were already complied with before competing the assessment and there is no need for the Commissioner once again to give a similar chance to the assessee to make his submissions on the assessment order which came up for approval of the Commissioner, which would amount to giving the fight of audi alteram partem a second time. We have already stated that under section 158BC(b), the A.O.should necessarily give a reasonable opportunity to the assessee to putforth his case under section 142(2), (3) or under section 143 and therefore, in view of this, principles of natural justice having been given already under the provisions of section 158BC(b), the Legislature for reasons which are obvious was silent in providing a second opportunity to the assessee at the time when the Commissioner is to approve the assessment framed by the A.O. In such circumstances, is there any scope to argue that despite the omission of necessary direction to give the right of audi alteram partem before granting approval by the Commissioner, still such a right should be given, otherwise approval itself would become bad. In this connection, we can do no better than quoting the decision of the Hon'ble Supreme Court in Swadeshi Cotton Mills v. Union of India AIR 1981 SC 818. At pages 846-47, their Lordships held the following : "Where authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner, natural justice will have to be observed in that manner and in no other. No wider right than that provided by statute can be claimed nor can the right be narrowed. Where the statute, is silent about the observance of the principles of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice. The implication of natural justice being presumptive it may be excluded by express words of statute or by necessary intendment." Therefore, absence of necessary direction to give right of representation to the assessee before grant of approval by the Commissioner should be taken to mean that the intention of the Legislature is not to grant such right to the assessee at that stage because the implication of natural justice may be excluded by necessary intendment also. Further, we are of the opinion that this is a fit case where the maxim "expressum facit cessare tacitum" (when their is express mention of certain things, then anything not mentioned is excluded) applies. This maxim is approved by the Hon'ble Supreme Court in B. Shankara Rao v. State of Mysore AIR 1969 SC 453 at Page 459.
Therefore, applying this maxim to the case on hand, we will have to take it to mean that since the Legislature did not provide right of making representation to the assessee before an assessment is approved by the Commissioner, it should be taken to mean that such right never existed with the assessee. In connection with the disciplinary proceedings taken against a Government servant and challenging the said disciplinary proceedings under Article 311 of the Constitution of India in the case of Suresh Koshy George v. University of Kerala AIR 1969 SC 198 their Lordships considered whether the general feeling that a Government servant would get two inquiries, one before issuing a show cause notice to be followed by another inquiry thereafter is correct or not. Holding it to be not correct, at page 204 they held the following : "There seems to be an erroneous impression in certain quarters evidently influenced by the provisions in Art. 311 of the Constitution particularly as they stood before the amendment of that article that every disciplinary proceeding must consist of two inquiries, one before issuing the show cause notice to be followed by another inquiry thereafter. Such is not the requirement of the principles of natural justice. Law may or may not prescribe such a course." Therefore, it is clear that the Legislature is entitled to give an assessee either one chance or two chances to represent himself before the assessment is completed. However, in this case, they have denied giving second opportunity to the assessee. Therefore, denial of second opportunity cannot be termed as violation of the requirements of principles of natural justice in view of the above decision.
13. In this connection, the Madras High Court in S. Ramakrishnan v.ITAT [1992] 193 ITR 147/65 Taxman 232, which is a judgment rendered by Chief Justice of India Dr. A. S. Anand (as he then was), held as per the Head Note of the decision as Follows : "Where a statutory provision either specifically or by inevitable implication excludes the application of the rules of natural justice, then the court cannot ignore the mandate of the Legislature and extend the application of the rules even to the excluded categories." Therefore, since second time right of representation on behalf of the assessee is not granted before the Commissioner approves the assessment order, it cannot be interpreted to mean that right of such natural justice should be read into the provision even though it is apparent that it is impliedly barred. In section 158BG proviso, the Legislature did not even order that the provisional assessment prepared by the A.O.either before putting it for approval to the Commissioner or after putting it to the Commissioner a copy of it should be served to the assessee and his objections should be invited on which hearing should take place and a reasoned order of the Commissioner should be delivered and thus the order of approval should be a judicial order. Unless and until all the above things are presumed to be present in the wording of the proviso to section 158BG, it cannot successfully be argued that the approval of the Commissioner is a judicial order in which case only rule of natural justice can be said to be violated. Then, what is the role of the Commissioner while granting approval to the assessment order prepared by the A.O. and putting it before him for approval. We have already seen what is meant by 'approval'. The word 'approval' means to be satisfied with, to sanction officially, to ratify, to pronounce good, think or judge well of; admit the propriety or excellence of; be pleased with; distinguishable from 'authorize', meaning to permit a thing to be done in future. Therefore, the ordinary meaning of the word approval can never be synonymous to satisfaction which is derived from out of judicial proceedings. On the other hand, it means that the Commissioner is administratively satisfied with the assessment. It means to confirm, ratify, sanction or consent to some act or thing done by another, to sanction officially. The meaning of the word 'approve' does not carry meaning of authorisation. In order to satisfy himself, the Commissioner can go through the assessment and after going through, he can confirm, ratify, sanction or give consent or give sanction officially. Therefore, the intendment of the word 'approve' is only to give official sanction and nothing more. There is no scope that the word 'approve' admit of any judicial proceeding. When there is no judicial proceeding, there is no question of audi alteram partem rule to apply. We are inclined to think that under the facts and circumstances and the set up in which proviso under 158BG was obtaining, 'approve' means exercise of an administrative authority. In Union of India v. J. N. Sinha AIR 1971 SC 40, the question that cropped up before the Hon'ble Supreme Court was while making a person compulsorily retired under FR 56(j), whether any show cause notice as to why retirement should not be given by the appropriate authority before forming bona fide opinion to do so in public interest and whether such a notice is a condition precedent. Their Lordships held as per the Head Note that where an appropriate authority bona fide forms opinion that a Government servant be retired in public interest, he can pass order of compulsory retirement. That opinion cannot be challenged before Courts. Nor Rule 56(j) requires that the opportunity to show cause against compulsory retirement must be given. Order of compulsory retirement can be challenged only on ground that either the requisite opinion was not formed or that the order was passed arbitrarily or on collateral grounds.
14. The learned departmental representative relied upon the following case law :New Prakash Transport Co. Ltd. v. New Suwarna Transport Co. Ltd. AIRState Bank of India v. S. S. Koshal These authorities were filed in order to show what is meant by a speaking order. In these cases, the Hon'ble Supreme Court held the view that the order being one of affirmance, appellate authority was not bound to say more. Affirmance by itself is conforming to the principles of natural justice and it would sufficiently amount to speaking order.Superintendent of Police (CBI) v. Deepak Chowdhary This is filed for the proposition that before grant of sanction under section 6 of the Prevention of Corruption Act, 1947, opportunity of hearing is not required to be given to the accused, since it is an administrative act. Copy of the judgment is furnished at pages 71 to 73 of the departmental paper book. The following appears as part of Head Note of the decision : "The grant of sanction is only an administrative function, though it is true that the accused may be saddled with the liability to be prosecuted in a Court of law. What is material at that time is that the necessary facts collected during investigation constituting the offence have to be placed before the sanctioning authority and it has to consider the material. Prima facie, the authority is required to reach the satisfaction that the relevant facts would constitute the offence and then either grant or refuse to grant sanction. The grant of sanction, therefore, being administrative act the need to provide an opportunity of hearing to the accused before according sanction does not arise."Raipur Development Authority v. Chokhamal Contractors AIR 1990 SC 1426.F. N. Roy v. Collector of Customs AIR This last case is cited for the following proposition, which is to be found at page 649 of the report : "There is no rule of natural justice that at every stage a person is entitled to a personal hearing. Moreover when the appeal against the orders of the Customs authorities was filed beyond limitation, and the appellate authorities dismissed the appeal as barred by limitation without hearing the appellant, there is no violation of the rule of natural justice." (9) Ramesh Chand Industries Ltd. v. Union of India [1999] 143 Taxation 295 (Delhi).
In this latest case of the Delhi High Court, when the A.O. asked the assessee to compulsorily get his accounts audited, the assessee challenged the initiation of audit by way of a Writ. There was no allegation of mala fide for not obtaining previous approval of the Commissioner and in those circumstances, the question was whether the Writ asked for can be granted. In this judgment, it is held that the A.O. must obtain the previous approval of the Chief Commissioner or Commissioner. The intervention of such a high ranking authority is a in-built protection to the assessee against any arbitrary or unjust exercise of the powers by the A.O. It is not the chic of the petitioner that such previous approval of the Chief Commissioner or the Commissioner has not been obtained. There is no allegation of mala fide.Union of India v. Banwari Lal Agarwal JT In this case, it was contended that the Chief Commissioner or the Director General were given powers u/s 279(2) of the Income-tax Act to compound any offence either before or after the institution of the proceedings. The Writ was sought for quashing the criminal proceedings.
The Writ was dismissed as incompetent stating that simply enabling provision is there and there is no compulsion to exercise it necessarily.Ossein & Gelatine Mfrs. Associations of India v. Modi Alkalies & Chemicals Ltd. AIRBhut Nath Mete v. State of West Bengal AIR Copy of this judgment (Sr. No. 14) is provided at pages 120 to 134 of the departmental paper book. In this case, it is held that there is no substance in the argument that a speaking order should be passed by Government or by the Advisory Board while approving or advising continuation of detention although a brief expression of the principal reasons is desirable. The communication of grounds, the right to make representation and the consideration thereof by the Advisory Board made up of men with judicial experience, the subject-matter being the deprivation of freedom, clearly implies a quasi-judicial approach. The bare bones of natural justice in this context need not be clothed with the ample flesh of detailed hearing and elaborate reasoning.
A speaking order, like a regular judicial performance, is neither necessary nor feasible.State of Kerala v. K. T. Shaduli Grocery Dealer AIR 1977 SC 1627 copy of which is provided at pages 135 to 145.
Copy of this judgment (Sr. No. 16) is provided at pages 146 to 162 of the paper book. This is an English case which considered the requirements of section 6 of the Income-tax Management Act, 1964 under the provisions of which the late assessments to which the section applies can only be raised by leave of a single general or special Commissioner and it makes no reference to a right of audience or to make representations and read grammatically. The question was whether it is proper and tenable. It is held that the only person whose views are to be before the Commissioner is the inspector or other officer of the board. Upholding the validity of the action, the House of Lords held : "I would not attach so much importance to this factor if I thought that the result of excluding the right to a hearing would be to produce a substantial injustice to the taxpayer, which, as I shall show, it does not, or if the contrast between the language of section 6 and the statutory procedures existing before that section was enacted did not make it quite obvious, at least to me, that the draftsman's omission of mention of any right to make representations was deliberate and that the procedure envisaged the exclusion of any such right." "Despite the majestic conception of natural justice on which it was argued, I do not believe that this case involves any important legal principle at all. On the contrary, it is only another example of the general proposition that decisions of the courts on particular statutes should be based in the first instance on a careful, even meticulous, construction of what that statute actually means in the context in which it was passed. It is true, of course, that the Courts will lean heavily against any construction of a statute which would be manifestly unfair. But they have no power to amend or supplement the language of a statute merely because on one view of the matter a subject feels himself entitled to a larger degree of say in the making of a decision that the statute accords him. Still less is it the functioning of the courts to form first a judgment on the fairness of an Act of Parliament and then to amend or supplement it with new provisions so as to make it conform to that judgment.
The doctrine of natural justice has come in for increasing consideration in recent years, and the courts generally, and your Lordships' House in particular, have, I think rightly, advanced its frontiers considerably. But at the same time they have taken an increasingly sophisticated view of what it requires in individual cases."Union of India v. Jyoti Prakash Mittar AIR The learned D.R. has provided copy of page No. 1204 of Black's Law Dictionary regarding the definition of proceedings. So also copy of page No. 46 of Black's Law Dictionary regarding the definition of Administrative Law. Regarding the definition of 'proceeding', inter alia, it is stated that the term 'proceeding' may refer not only to a complete remedy but also to a mere procedural step that is Part of a larger action or special proceeding. A Proceeding includes action and special proceedings before judicial Tribunals as well as proceedings pending before quasi-judicial officers and boards.Madhya Pradesh Industries Ltd. v. Union of India AIR 1966 SC 671State Bank of Patiala v. S. K. Sharma AIR Apart from the above decisions, the learned Departmental Representative/Special Counsel distinguished the decisions cited on behalf of the assessee and the distinguishing factors are furnished at pages 320 to 322 of the paper book.
15. We have heard the arguments of the assessee having been advanced by Shri Anand Prakash, the learned Advocate. He submitted that the principles of natural justice are incorporated into enactment passed by the Legislature. Where no such incorporation is found in any of the provisions of an enactment, it cannot be applied. He further submitted that unless there is clear exclusion prohibiting application of principles of natural justice, principles of natural justice should be taken to be applicable to the provision of an enactment. He next submitted that the Hon'ble Supreme Court has pointed out that in a particular section, natural justice must be read into and in support of this proposition, he relied upon the decision of the Hon'ble Supreme Court in Bidi Supply Co. v. Union of India [1956] 29 ITR 717. It would appear that the case before the Hon'ble Supreme Court involved transfer of the assessment proceedings from one officer to the other without giving any notice whatsoever to the assessee. The Supreme Court, while discussing whether an order of transfer without giving notice to the assessee is legal and permissible, held at page 729 as follows : "Section 24 of the Civil Procedure Code is wider but that was a law made before the Constitution and, in any case, such an order would be open to review by this Court and in a suitable case, should the High Court act arbitrarily or along non-judicial lines, such as directing a transfer without recording reasons and without hearing the parties concerned when it is possible to affor them a hearing, the matter would be set right here. There is a big difference between investing a judicial authority with such powers and other non-judicial bodies because judges must act in accordance with a recognised procedure and obey the laws of natural justice, unless there is express indication to the contrary in the statute.
What is the position here There is no hearing, no reasons are recorded, just peremptory orders transferring the case from one place to another without any warning; and the power given by the Act is to transfer from one end of India to the other, nor is that power unused. We have before us in this Court a case pending in which a transfer has been ordered from Calcutta in West Bengal to Ambala in the Haryana." Therefore, it can be seen that a distinction is drawn between Civil Court and the Administrative Tribunal. Their Lordships held that the Constitution is not for the exclusive benefit of Governments and States; it is not only for lawyers and politicians and officials and those highly placed. It also exists for the common man, for the poor and the humble, for those who have businesses at stake, for the butcher, the baker and the candlestick maker. It lays down for this land 'a rule of law' as understood in the free democracies of the world it constitutes India into a Sovereign Democratic Republic and guarantees in every page rights and freedom to the individual side by side and consistent with the overriding power of the State to act for the common good of all.
16. The learned Advocate on behalf of the assessee also cited the decision of the Hon'ble Supreme Court in Pannalal Binjraj v. Union of India [1957] 31 ITR 565, which is also a case of transfer of assessment by the Commissioner from the charge of one I.T.O. to the other. While disposing of that case, the Hon'ble Supreme Court laid down the following dictum : "It would be prudent if the principles of natural justice are followed, where circumstances permit, before any order of transfer under section 5(7A) of the Act is made by the C.I.T. or the Central Board of Revenue, as the case may be, and notice is given to the party affected and he is afforded opportunity of representing his view on the question and the reasons of the order are reduced, however briefly, to writing.
Omnibus and wholesale orders of transfer of all proceedings against a particular assessee are saved by the explanation to sub-section (7A) which was added by the Indian Income-tax (Amendment) Act of 1956 to get over the situation created by the decision of the Supreme Court in Bidi Supply Co. v. Union of India & Others.
In our considered view, these two decisions deal with the transfer of the case but not granting of any approval. Therefore, the facts are very different. Secondly, in the cases before us, when the assessment is made, the A.O. already gave full opportunity to represent the case of the assessee in the proceedings u/s 142(3) and also u/s 143.
Therefore, it cannot be argued in these cases that principles of natural justice were violated. We have already stated that giving approval does not involve judicial proceeding. When there is no judicial proceeding and when we have already held that it is an administrative act, there is no question of violation of principles of natural justice in not intimating the assessee before granting approval by the Commissioner. The next contention is that the provision analogous to section 142(3) was not in existence previously in the Income-tax Act and it came into statute book only from 1-4-1972, as can be seen from Seth Gurumukh Singh v. CIT [1944] 12 ITR 393, 394 Lahore.
In that case, the assessment related to assessment years 1934-35, 1935-36 and 1936-37. In that case, the assessment made u/s 23(3) in the case of Seth Gurmukh Singh (supra) was alleged to have been vitiated by the fact that in arriving at his conclusion the A.O. based that partly on circumstantial evidence and partly on material derived from inquiries made behind the back of the assessee which were never disclosed to the assessee. In Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC), the question debated was what are the circumstances under which Article 136 of the Constitution can be invoked. Opposing the Writ Petition filed before the Supreme Court, two contentions were sought to have been raised by the Solicitor-General who appeared for the Revenue. In the first instance, it was argued that leave should not have been granted against the order of the Income-tax Tribunal when remedy provided by the Income-tax Act itself were available for correcting the errors of the Tribunal and had in fact been taken but without success. It was further said that the power conferred on the Supreme Court by Article 136 of the Constitution being an extraordinary power, its exercise should be limited to cases of patent and glaring errors of procedure, or where there has been a failure of justice because of the violation of the rules of natural justice or like causes but that this discretionary power should not be exercised for the purpose of reviewing findings of fact when the law dealing with the subject has declared those findings as final and conclusive. Secondly, it was contended that the finding given by the I.T.O. and affirmed by the A.A.C. and the Tribunal was based on material and it could not be said that these bodies had acted arbitrarily in this matter. Rejecting the first contention advanced by the learned Solicitor-General, it was held that the power given under Article 136 being an exceptional and overriding power, naturally it has to be exercised sparingly and with caution and only in special and extraordinary situations. Beyond that it is not possible to fetter the exercise of this power by any set formula or rule. It is however, plain that when the Court reaches the conclusion that a person has been dealt with arbitrarily or that a Court or Tribunal within the territory of India has not given a fair deal to a litigant, then no technical hurdles of any kind like the finality of finding of facts or otherwise can stand in the way of the exercise of this power, because the whole intent and purpose of this article is that it is the duty of this Court to see that injustice is not perpetuated or perpetrated by decisions of Courts and Tribunals because certain laws have made the decisions of these Courts or Tribunals final and conclusive. Regarding the second contention, they have entirely agreed with the learned Solicitor-General when he said that the I.T.O. is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the I.T.O. is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment u/s 23(3).
The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh's case (supra). We are unable to understand how these two decisions would come to the help of the assessee. Firstly, we are not on point of extraordinary jurisdiction conferred on the Supreme Court under Article 136 of the Constitution. Secondly, such Gurumukh Singh (supra) is a case decided when provision of section 142(3) was never in existence in the Income-tax Act, since they came into the Statute book only from 1-4-1972. Therefore, we are unable to see relevance of the ratios of these two decisions for the disposal of any of the issues before us.
17. The next decision cited before us by the learned advocate for the assessee is of the Bombay High Court in Devidas v. Union of India [1993] 200 ITR 697. The brief facts of the case as well as the decision of the Bombay High Court thereon are the following : The petitioner resided and carried on business at Gondia where he was assessed to income-tax upto the assessment year 1986-87. Since he did not file the return of income for the subsequent years at Gondia, he was served with notices u/s 142 by the A.O. Gondia. The petitioner had not filed the return for the assessment year 1987-88 anywhere. But, for the subsequent years, he filed the return at Nagpur. He raised an objection to the jurisdiction of the A.O., to assess his income on the ground that he had shifted his entire business activity to Kamptee. He also requested for transfer of his case from Gondia to Nagpur. The Commissioner made enquiries, called for the report from the A.O. and, on that basis, (but without hearing the petitioner) rejected the application by making a short order dated January 14, 1991, saying that transfer would not be "in the interest of the Revenue". On a Writ petition to quash the order, the Hon'ble Bombay High Court held as follows : "Held, that an enquiry had been made and that material had been used against the assessee without affording him an opportunity to offer any explanation. The impugned order was vitiated because of absence of hearing and recording or reasons. The order was liable to be quashed." The above is a case where no opportunity at all was afforded to the assessee, but the same does not hold good in the facts of our present case. In our present case, before assessment proceedings were taken up and during the assessment proceedings, notices were duly given u/s 142(2) and (3) as well as u/s 143. It is only after affording reasonable Opportunity that the assessment orders were drafted put up for approval of the Commissioner. Since we have already held that approval does not mean giving consent etc. which we have already discussed above, approval does not warrant to give an opportunity to the assessee of being heard or for the Commissioner to write a speaking order and therefore, this decision in Devidas's case (supra) is neither here nor there.
18. The next decision cited before us is of the Hon'ble Supreme Court in of India [1993] 199 ITR 530/65 Taxman 440 at 553. Our particular attention was drawn to the following passage :- "It must, however, be borne in mind that courts have generally read into the provisions of the relevant sections a requirement of giving a reasonable opportunity of being heard before an order is made which would have adverse civil consequences for the parties affected. This would be particularly so in a case where the validity of the section would be open to a serious challenge for want of such an opportunity.
It is true that the time frame within which the order for compulsory purchase has to be made is a fairly tight one, but, in our view, the urgency is not such as would preclude a reasonable opportunity of being heard or to show cause being given to the parties likely to be adversely affected by an order of purchase u/s 269 UD(1). The enquiry pursuant to the explanation given by the intending purchaser or the intending seller might be a somewhat limited one or a summary one but we decline to accept the submission that the time limit provided is so short as to preclude an enquiry or show cause altogether." In this case, show cause notice was never given, and the order which going to be passed was for acquisition of the property which is exproprietary in nature. Here, no reasonable opportunity was ever given before the impugned purchases were made (compulsory acquisition order was passed). However, that it is not the case before us. Full opportunities were already given to the assessee before passing an assessment order and thus, it is quite distinguishable and the ratio of this decision, in our humble opinion, does not apply to the facts of the cases.
19. The next decision relied on was Guru Nanak Estates v. CIT [1994] 208 ITR 118 (Cal.). In this case, waiver of penalty and interest was involved. The CIT proposed to waive the penalty holding that the assessee had fulfilled the conditions prescribed in section 273A. No reason was given by the C.B.D.T. for refusal of approval. The question was whether the CBDT's order was liable to be quashed. It is held by the Calcutta High Court as per Head Note of the decision at page 119 as follows : "The limitations placed on the exercise of power of a Commissioner under section 273A are equally applicable to the exercise of power by the Board. That is to say an opportunity of being heard whether orally or by way of a representation must be given to the assessee by the Board and the Board must dispose of such representation with reasons which must be cogent and sufficient and not 'laconic or nebulous'. It is well-established that discretionary orders will be interfered with, where the orders have been passed arbitrarily or in violation of the principles of law." At page 121, the following para of the Head Note is also important to be noted : "As far as the assessment years 1982-83 and 1983-84 were concerned, the firm had been served with notice under section 139(2). As such it was not entitled to ask for waiver of penalty under sections 271(1)(i) and 273 or waiver of interest under section 139(8), 215 or 217. But the firm could ask for waiver of penalty imposed or imposable under section 271(1)(iii). Admittedly, no notice either under section 139(2) or 148 had been served in respect of the other three assessment years, viz., 1979-80, 1980-81 or 1981-82. The reference by the Commissioner to the Board for approval of the imposition of penalty under sections 273 and 271(1)(i) was not warranted since the aggregate amount of penalty did not exceed Rs. 1 lakh as provided under section 273A(2)(a). It was, therefore, the Commissioner's satisfaction alone which was relevant in this case for the purpose of waiver of penalty under sections 273 and 271(1)(i) and the waiver of interest under sections 139(8) and 215." Therefore, this decision cannot be said to be of any favour of the assessee. In the years in which notices under section 139(2) were served, the assessee is not entitled to pray for waiver of penalty under sections 271(1)(i) and 273 or waiver of interest under sections 139(8), 215 and 217. Therefore, in these cases also, opportunity to putforth all the contentions before the assessment was made were already granted to the assessees by issue of notices under sections 142(2) and (3) as well as 143 even at the stage of 158BC(b) which sets out the procedure for block assessment. Therefore, we do not see any relevance of this decision to the case of the assessee.Institute of Chartered Accountants of India v. L. K. Ratna AIR 1987 SC 71. In this case, disciplinary proceedings were sought to be taken against a Chartered Accountant governed by Chartered Accountants Act 38 of 1949. The report of the disciplinary committee was considered by the Council and on the mere report a finding whether he is or he is not guilty is sought to be given. The erring Chartered Accountant was not given any sort of notice or hearing on the disciplinary committee's report. In that connection, the Hon'ble Supreme Court held the following as appearing in the Head Note at page 72 : "In fairness and justice, the member is entitled to know why he has been found guilty. The case can be so serious that it can attract the harsh penalties provided by the Act. Moreover, the member has been given a right of appeal to the High Court under section 22A of the Act. To exercise his right of appeal effectively he must know the basis on which the Council has found him guilty. A finding by the Council is the first determinative finding on the guilt of the member. It is a finding by a Tribunal of first instance. The conclusion of the Disciplinary Committee does not enjoy the status of a 'finding'. Moreover, the reasons contained in the report by the Disciplinary Committee for its conclusion may or may not constitute the basis of the finding rendered by the Council. The Council must, therefore, state the reasons for its finding." In this case also, the right of audi alteram partem was never given to the erring Chartered Accountant and the Council solely depended upon the report of the disciplinary committee. The disciplinary committee's report was held not enjoying the status of a finding. However, the same cannot be said to the assessment order passed by the Assessment Order under section 158BC(c). Further, in the case before us, notices under sections 142(2) and (3) as well as 143 were all issued and all the arguments as well as seized material were all considered alongwith the oral submissions, if any, made by the assessees or their Advocates before preparing the assessment orders. Therefore, the set of facts available before the Hon'ble Supreme Court in this case are quite different from the set of facts available in the cases before us and this decision of the Hon'ble Supreme Court does not apply and cannot be of any help to the assessees.
21. Another decision cited before us is CIT v. Jai Prakash Singh [1996] 219 ITR 737/85 Taxman 407 (SC). In that case, the original assessee died and only one out of many legal representatives was issued notices under sections 142(1) and 143(2). The return filed by the legal representative concerned is voluntary and it disclosed the entire income of the deceased. Assessment was completed. For the first time in appeal, the legal representative raised an objection that the notices are not being issued to other legal representatives, who are 9 in number. The Hon'ble Supreme Court held that in those circumstances the assessment was irregular but not null and void. The Hon'ble Supreme Court held at page 738 as follows : "An omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions (charging sections). Any such omission or defect may render the order irregular - depending upon the nature of the provision not complied with - but certainly not void or illegal." Here, in this case, firstly similar defect in service of notice to any one legal representative out of several was not there. Secondly, even according to the Hon'ble Supreme Court, the assessment does not become illegal or invalid, though it becomes irregular. Therefore, the facts are different and ratio of the decision does not apply to the facts on hand.
22. It was argued that when an assessment has to pass through two officials before it attained finality, principles of natural justice would apply in the proceedings before both the authorities and for this proposition, reliance is placed upon Guru Nanak Estate's case (supra).
At page 137, the Calcutta High Court held the following : "In my view, the limitations placed on the exercise of power of the Commissioner under section 273A are equally applicable to the exercise of power by the Board. That is to say an opportunity of being heard whether orally or by way of a representation must be given to the assessee by the Board and also the Board must dispose of such representation with reasons which must be cogent and sufficient and not 'laconic or nebulous'.
I am fortified in this view by the observations of the Supreme Court in dealing with the order passed on a settlement under section 245D(1) of the Act in the decision of R. B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission (I.T. and W.T.) [1989] 176 ITR 169 : AIR 1989 SC 1038. 1040 to the following effect." This decision also does not apply according to us, since 158BG does not contain specific provision enabling the assessee to be given an opportunity of being heard by the CIT before grant of approval, and the approval itself is not a judicial proceeding. We have already held that while approving the assessment, the Commissioner merely exercises administrative function of putting seal of approval to the assessment order. Since before the Assessing Officer himself the assessee was given adequate opportunity, there was no necessity to give a second opportunity before the Commissioner while granting approval. Therefore, this decision does not apply to the facts of the assessee's case.
23. Shri M. S. Syali, learned Senior Advocate appearing on behalf of Intervener Shri Niranjan Lal Goyal [IT (SS) A. No. 119/DEL/95] cited before us the decision of the Hon'ble Supreme Court Mansukh Lal Chauhan v. State of Gujarat 1997 7 SCC 622. In that case, the Hon'ble Supreme Court had considered what is meant by 'sanction'. They held that it implies application of mind in Administrative Law and while taking administrative action, if there is no application of mind or lack of application of mind, the order issued in exercise of statutory power would be bad in law. In that case, the question centered round sanction for prosecution under section 197 of Cr.P.C. The said sanction for prosecution requires valid sanction. The word 'sanction' was held to carry independent application of mind to the facts of the case as also material and evidence collected during investigation by the authority competent to grant sanction essential. In that case, even the direction of the High Court directing the sanctioning authority to grant sanction was given and in pursuance of the said direction, sanction was granted by the authority. Even then, on the ground that it does not amount to independent application of the mind of that authority before granting sanction, the Hon'ble Supreme Court held that the said authority can validly question by filing a Writ in the High Court and that the maxim actus curiae neminem gravabit (act of the court harms no one) applies.
Firstly, this case is dealing with the meaning of the word 'sanction' and not 'approval' with which we are concerned and we have already dealt with the meaning of word approval and it does not include either judicial sanction or this judgment cannot be of any help to the assessee. Sanction is different from approval and these words have no connection or the meaning of the words are quite different and distinct.
24. The next decision relied upon is again a Supreme Court decision in [1990] 2 SCC 48, Management of M. S. Nally Bharat Engg. Co. Ltd. v.State of Bihar. In this case, the point involved is transfer of proceedings from one Labour Court/Tribunal to another and the question was whether the opportunity of pre-decisional hearing and reasoned order are essential for a valid order of transfer. The portion relied upon was from paras 19, 20, 21, 22 & 23 of the said decision, which are as follows : "19. It may be noted that the terms 'fairness of procedure', 'fair play in action', 'duty to act fairly' are perhaps used as alternatives to 'natural justice' without drawing any distinction.
But Prof. Paul Jackson points out that 'Such phrases may sometimes be used to refer not to the obligation to observe the principles of natural justice but, on the contrary. to refer to a standard of behaviour which, increasingly, the courts require to be followed even in circumstances where the duty to observe natural justice is inapplicable' ('Natural Justice' by Paul Jackson, 2nd edn. page 11).
20. We share the view expressed by Professor Jackson. Fairness, in our opinion, is a fundamental principle of good administration. It is a rule to ensure the vast power in the modern State is not abused but properly exercised. The State power is used for proper and not for improper purposes. The authority is not misguided by extraneous or irrelevant considerations. Fairness is also a principle to ensure that statutory authority arrives at a just decision either in promoting the interest or affecting the rights of persons. To use the time hallowed phrase 'that justice should not only be done but be seen to be done' is the essence of fairness equally applicable to administrative authorities. Fairness is thus a prime test for proper and good administration. It has no set form or procedure. It depends upon the facts of each case. As Lord Pearson said in Pearlberg v. Varty (at p. 547), fairness does not necessarily require a plurality of hearings or representations and counter-representations. Indeed, it cannot have too much elaboration of procedure since wheels of administration must move quickly.
21. A case with a not dissimilar problem was in Pannalal Binraj v. Union of India. There the Commissioner of Income-tax by the power vested under section 5(7-A) of I.T. Act, 1922, transferred 'an assessee's case from one I.T.O. to another without hearing the assessee. Section 5(7-A) of the I.T. Act, 1922 provided : (ITR p.
573) : 'The CIT may transfer any case from one ITO subordinate to him to another, and the Central Board of Revenue may transfer any case from any one ITO to another. Such transfer may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the ITO from whom the case is transferred.' 22. This section did not provide for affording an opportunity to the assessee before transferring his case from one ITO to another. The assessee challenged the constitutional validity of the section. This Court upheld its validity on the ground that it is a provision for administrative convenience. N. H. Bhagwati, J., speaking for this Court, however remarked : (ITR p. 589) '... it would be prudent if the principles of natural justice are followed, where circumstances permit, before any order of transfer under section 5(7-A) of the Act is made by the CIT or the Central Board of Revenue, as the case may be, and notice is given to the party affected and he is afforded a reasonable opportunity of representing his views on the question and the reasons of the order are reduced however briefly to writing... There is no presumption against the bona fide or the honesty of an assessee and normally the income-tax authorities would not be justified in refusing to an assessee a reasonable opportunity of representing his views when any order to the prejudice of the normal procedure laid down in section 64(1) and (2) of the Act is sought to be made against him, be it transfer from one ITO within the State to an ITO without it, except of course where the very object of the transfer would be frustrated notice was given to the party affected.
23. Section 5(7-A) was replaced by section 127 of the I.T. Act, 1961, which now makes it obligatory to record reasons in making the order of transfer after affording a reasonable opportunity of being heard to the assessee in the matter. In Ajantha Industries v. Central Board of Direct Taxes this Court considered the validity of a transfer order passed under section 127 and it was held that merely recording of reasons on the file was not sufficient. 'It was essential to give reasons to the affected party. The order of transfer in that case was quashed for not communicating reasons to the assessee'.' In this case, it is clear that under section 5(7-A) of the Indian Income-tax Act, 1922 before a transfer of one case from one ITO to another by Commissioner in whose jurisdiction both the ITOs function, hearing of the assessee before transfer order was passed was not essential. However, section 127 of the Income-tax Act, 1961, now enjoins an obligation to afford a reasonable opportunity of being heard to the assessee in the matter before transfer of case from one ITO to the other is ordered. Therefore, the principle enunciated in this judgment would only point out that if it is a mandate of the section itself to give a reasonable opportunity before passing an order, then it should be taken to be the intention of the Legislature to afford a reasonable opportunity to the assessee. However, in this case, we have already pointed out that section 158BG proviso does not contemplate giving of any notice before approval of the Commissioner was granted.
Therefore, this case is quite in accordance with the principles to be applied and in consonance with the Madras High Court's decision in S.Ramakrishnan's case (supra).
25. The next decision relied on is the decision of the Hon'ble Supreme Court arising from the Bombay High Court in Municipal Corporation of Greater Standard Engg. Co. Ltd. AIR 1991 SC 1362. That decision lays down the real meaning and procedure to be followed while applying 4(3) of the Bombay Municipal Corporation Act, 1888.
In that connection, following is held by the Bombay High Court as per Head Note given at page 1362 of the reported judgment at page 34 of the paper book filed by Shri M. S. Syali : "The property tax is the major source of Corporation revenue.
Consultation by State Govt. for recognising subsidised housing scheme for industrial workers with Municipal Corporation as envisaged under the Explanation is therefore definitely a matter of importance and consequence to the Corporation. Section 154 provides for fixing the rateable value of the building for the purpose of levying property tax. Sub-section (1) provides a general principle for fixing the rateable value. Sub-section (3) is an exception to that principle and it is required to be followed in certain specified categories. The Corporation is bound to follow the exception provided under sub-section (3) if the building has been erected as part of a recognised scheme of subsidised housing for industrial workers. In such a case, the rateable value shall not exceed Rs. 32 for each such temement inclusive of' all service and other charges. That would affect the financial interest of the Corporation. The consultation referred to in the Explanation is a safeguard added in favour of the Corporation because the Corporation is likely to suffer to some extent its revenue in a given case.
Therefore the right to be consulted in opposition to a claim or proposal which will adversely affect its financial interests is to be regarded as mandatory. There must be opportunity for the Corporation to express its views on the recognised scheme and the terms thereof. The opinion expressed by the Corporation may not be binding on the Government to take decision. The Govt. may take its own decision but consultation with the Corporation must be there on the essential points and the core of the subject involved. The consultation must enable the Corporation to consider the pros and cons of the question as to the concessional rate of property tax. If there is no such consultation the Corporation cannot be compelled to fix the rateable value of the building under sub-section (3)."Union of India v. M. L. Capoor AIR 1974 SC 87 a photocopy of which is provided at pages 16 to 33 of the paper book. In this case, question of selection to the I.A.S. and I.P.S. became point of debate and that too its appointment by promotion for which regulations were passed in 1955.
Their Lordships interpreted Regulation No. 5(5). The question was whether in a promotion of post a junior may be preferred against a senior. However, while overlooking the claim of a senior, the Selection Committee selected a junior and recorded its reasons. In the Head Note of the decision at page 88, it is held as follows : "It is incumbent on the Selection Committee to state reasons in a manner which would disclose how the record of-each-superseded officer stood in relation to records of other who were to be preferred. This is in the context of the effect upon the rights of aggrieved persons who are entitled to protection under Articles 14 and 16 of the Constitution and particularly this is the only remaining visible safeguard against possible injustice and arbitrariness in making selections." Now, this case, in our humble opinion, deals with selection made. It does not concern itself with either the meaning of the word 'approval 'or 'prior approval' which primarily falls for our interpretation in this case and we are not concerned with any service law matter or promotions in one cadre or other. Further, the selection committee is bound to give reasons. It was not the case of the assessee that no reasons were given by the Assessing officer to proposed assessment order for approval before putting the same for approval before the Commissioner and, therefore, this decision, our humble opinion, does not have any relevance to the facts of the present case.
27. The next decision relied upon by the learned senior advocate of the Supreme Court Shri M. S. Syali is the decision of the Hon'ble Supreme Court in Rameshwar Bhartia v. State of Assam AIR 1952 SC 405. He relied upon page 7 of the paper book and para 10 of the judgment. Their Lordships of the Supreme Court were concerned with the word'sanction' occurring in Assam Food Grains Control Order. Fortunately, in this case, a distinction between sanction and direction is clearly brought out. Paras 10 and 11 read as follows : "10. Under sub-section (3)(a) of section 2, 'Assam Food Grains Control Order 'Director' means 'the Director of Supply, Assam, and includes, for the purpose of any specific provision of this order, any other officer duly authorised in that behalf by him or by the Provincial Government by notification in the Official Gazette'.
Section 88 provides : 'No prosecution in respect of an alleged contravention of any provision of this order shall be instituted without sanction of the Director.' Little confusion is likely to arise from the employment of the word Director' in the Control Order and the word 'directs' in the illustration to section 556 of the Code. It has to be borne in mind that a sanction by the Director within the meaning of the Code does not necessarily mean "a direction given by him that the accused should be prosecuted." 11. In both cases of sanction and direction, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there be no sanction, in the other case, there is a positive order that the prosecution should be launched. For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case. In the case of a direction, a further element that the accused deserves to be prosecuted is involved." Again, the meaning of the word 'approve' is quite different from meaning of the word 'sanction', much more different from the meaning of the word 'direction'. In the cited case, it is clarified that for a sanction all that is necessary for one to be satisfied about is the existence of a prima facie case. However, in the case of a direction, a further element that the accused deserves to be prosecuted is involved.
Even in the definition of the meaning of the word 'approval' given in the Black's Law Dictionary, Special Deluxe, 5th Edn. the word 'approve' is distinguishable from authorisation meaning to permit a thing to be done in future. So 'approve' and 'authorisation' are quite different from each other. Now, let us come to 'sanction'. One of the meaning which can be given to the word 'approve' is 'sanction' and sanction means to sanction officially or to pronounce it good or be pleased with. It is not as if that in all these cases this sort of sanction is not obtained from the Commissioner and the assessees do not want to assail the approval on the ground that it was not granted. What they wanted to establish was that principles of natural justice were violated, that the right of representation was not given by the Commissioner at the time of granting approval, reasoned order was not passed by the Commissioner at the time of granting approval, a proceeding did not take place before the Commissioner at the time of granting approval. All this, in the absence of any specific legislative mandate directing that any such proceedings should take place before the approval is granted and when there are absence of necessary words of any proceeding in section 158BG proviso, therefore, this decision does not run counter to the procedure already followed by the revenue in this case. What is required is sanction and sanction is already granted by the Commissioner and while granting approval, the Commissioner is quite satisfied that the assessment order proposed and put up before him was according to law.
28. Shri M. S. Syali also provided the meaning of the word 'Approval' from various dictionaries by Words and Phrases Permanent Edition Vol.
3A at pages 502 & 503, Corpus Juris Secundum Vol. 6 at pages 126 to 129. In Words and Phrases Permanent Edition Vol. 3A at pages 502 & 503, it is stated that the very act of 'approval' imports the act of passing judgment, the use of discretion, and the determination as a deduction therefrom unless limited by the context of the statute. This meaning is culled out from the decision in Full v. Board of University and School Lands of State of North Dakota 129 N.W. 1029, 1032, 21 N.D. 212. In Corpus Juris Secundum Vol. 5 at pages 126 to 129, on the meaning of the word, approval', it is said that the word 'approval' is susceptible of different meanings, depending upon the subject-matter and context concerning which the term is employed and the object and purpose to be subserved or accomplished. Generally, the word implies favourable conviction manifested by affirmation concerning a specific matter submitted for decision. "Approval' necessarily involves discretionary power, which ordinarily is complete unless limited in some way. It generally implies knowledge and the exercise of discretion after knowledge, the act of passing judgment or the exercise of judgment, the use of discretion and the determination as a deduction therefrom, in some cases "approval" implies the exercise of judicial action or discretion, while in other cases it unplies the exercise of only an administrative function or capacity and not in a judicial sense. The word "approve" does not necessarily import the exercise of discretion, but from the connection in which the term is used it, often involves the idea of discretion and adjudication, and is seldom construed as requiring a mere ministerial act, but rather embraces both direction and confirmation. The term sometimes necessarily implies the exercise of discretion on the part of the person or persons approving, for the power to approve ordinarily implies a power to disapprove, or to withhold approval, but does not give the right of arbitrary rejection.
It has been said that the term denotes more than an unexpressed mental Acquiescence, implies a revisory proceeding, as the term is only appropriate to such an act, but not necessarily the power to initiate or carry out.
29. The distinction between legislative function, administrative function and judicial function and the differences among them are sought to be clearly brought out for our proper appreciation and pointed attention. It is said that a judicial decision is made according to law and an administrative decision is made according to administrative policy. A judge attempts to find what is the correct solution according to legal rules and principles and an administrator attempts to find what is the most expedient and desirable solution in the public interest. The mental exercises of judge and administrator are fundamentally different. The judge's approach is objective, guided by his idea of the law. The administrator's approach is empirical, guided merely by expediency. The nature, of functions of so-called administrative Tribunals, such as special security and industrial Tribunals, have judicial rather than administrative functions, sin cc their sole task is to find facts and apply law objectively. A quasi-judicial function is an administrative function which the law requires to be exercised in some respects as if it were judicial. A standard example is a minister deciding whether or not to confirm a compulsory purchase order or to allow a planning appeal after a public inquiry. The decision itself is administrative, dictated by policy and expediency. But the procedure is subject to the principles of natural justice, which require the minister to act fairly towards the objector and not (for example) to take fresh evidence without disclosing it to them. A quasi-judicial decision is therefore an administrative decision which is subject to some measure of judicial procedure, such as the principles of natural justice.
30. Assuming without admitting that there is necessity to give a chance to the assessee to make his submissions before the CIT is obliged to give his approval to the assessment order under section 158BG proviso, is the availability of an appeal against the assessment to the Tribunal and to assail the assessment order in all ways or facets permissible underlaw, the question would be whether affording a right of appeal to the Tribunal can be taken to be sufficient compliance to the principles of natural justice in the facts and circumstance of the case. By Finance Act, 1995 with effect from 1-7-1995, sub-section (1)(b) is introduced in the, tax Act, 1961 to section 253, which is as follows : 253(1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order - (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997." Thus the assessment order passed under Chapter XIV-B is made appealable before the Tribunal. Whether providing appeal against the assessment made can be said to be making up the deficiency while not granting an opportunity to the assessee for making his submissions before the Commissioner while approving the order of assessment under section 158BG proviso We have already discussed this matter which is approved by some of the decisions which we have already quoted in the prior paras of our order. However, we want to supplement our view point by quoting the Administrative Law HWR and Shri M. Forsyth, Oxford University Press, at page 566 : Natural justice is concerned with the exercise of power, that is to say, with acts or orders which produce legal results and in some way alter one man's, someone's legal position to his disadvantage. But preliminary steps, which in the results may not involve immediate legal consequences may lead to acts or orders which did so. In this case, the protection of one procedure may be needed throughout and the successive steps must be considered not only separately but also as above. The question must always be whether looking at the statutory procedure as a whole, each separate step is fair to persons affected.
The House of Lords considered this question in an Income-tax case where the tax authorities, which determines whether the objects of some transactions is tax avoidance, were required to show a prima facie case to the Tribunal. The Tribunal refused to allow the tax-paper to be represented, or to see evidence submitted to it by authorities at that stage. The House of Lords upheld this ruling, since the tax-payer would have full opportunity to state his case to the Tribunal in the latter proceedings.' At page 545 in the same Book, the topic debated was whether a hearing given on appeal is an acceptable substitute for, the hearing not given, or not properly given, before the final decision is in some cases an arguable question. It was observed..
"An observance of natural justice equally at both stages; and accordingly natural justice is violated if the true charge is not put forward only at the appellate appeal stage. He distinguished Canadian case in which a law student had been refused leave to take a Degree. He had been allowed to submit only a written statement to the faculty Council. But on appeal had been given a full oral hearing and represented by counsel in a fully judicial proceeding and the Supreme Court of Canada held that the appeal as having cured the defect.' 31. Having regard to the above discussion, we answer the questions posed to the Special Bench as follows : In answer to question No. 1(a), we hold that an opportunity of hearing to the assessee need not necessarily be given by the Commissioner under section 158BG proviso, while a proving the assessment order put up for his approval and that the said assessment order becomes quite valid and perfect in law undersection 158BC. In answer to question no. 1(b), we hold that simply because an opportunity of being heard was not given to the assessee by the Commissioner while approving the assessment order not render the assessment order void ab initio and there is no infirmity in such an order. Even supposing it is taken that there is infirmity, "it is curable under law by giving the opportunity to the assessee to advance, full-scale arguments in the appeal proceedings against the assessment order under section 158BC. In answer to question No. 2(a), we hold that provisions of section 158BC do not require the Commissioner to record his reasons in writing while approving the order of the Assessing Officer under section 158BG proviso and for that reason, the assessment order passed under section 158BC does not suffer from any infirmity.
In answer to question No. 2(b), we hold that the approval of the Commissioner without recording any reasons in writing for a proving the order would not render the order of the Assessing Officer void ab initio and would not invalidate the assessment order. Assuming without admitting "'that some infirmity is there, it is curable under law, since the order of assessment passed under section 158BC is made appealable under section 253(1)(b) of the Income-tax Act in which the assessee is entitled to canvass all the points available to invalidate any part of the assessment and thus the defect, if any, existing previously would be completely cured.
32. In the result, the Special Bench answers all the questions referred to it. We want to make it very clear that the purpose for granting opportunity to the Interveners to participate in the proceedings is succinctly laid down by the Hon'ble Supreme Court in Saraswati Industrial Syndicate Ltd v. CIT [1999] 237 ITR 1/103 Taxman 395. In the Head Note of that decision, it is held as follows : The only purpose of granting an intervention application is to entitle the intervenor to address arguments in support of one or the other side. Having heard the arguments, we have decided in the assessee's favour. The intervenors may take advantage of that order." Therefore, in this case, the intervenors also should be taken to have failed to secure any advantage from the order of the Special Bench, inasmuch as the original assessees which are three in number failed. As regards, the merits involved in the other points in each of these assessee's case, we direct that they should be heard by regular Division Benches. It is significant that we have got the power to give this direction, inasmuch as one among us is the President of the Income-tax Appellate Tribunal.