M/S.YENKEYT ROLLER FLOUR MILLS vs. ASSISTANT COMMISSIONER OF INCOME TAX

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WP(C)/12094/2014HC KeralaKLHC01057718201403 June 2014Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the denial of an adequate opportunity to the petitioner to cross-examine the third-party witness violated the principles of natural justice, specifically the rule of 'audi alteram partem'. The Court found that the Assessing Officer's insistence that only the previously authorized representative could conduct the cross-examination was erroneous. The right to be represented by a legal practitioner of one's choice is an inherent right of a litigant, and the filing of an authorization does not preclude engaging another advocate. The Court emphasized that the right to cross-examine a witness whose statement is relied upon by the Assessing Officer is an inviolable part of the fair hearing principle. Consequently, the assessment order dated March 31, 2014, was set aside. The proceedings are to recommence from the stage where the denial of opportunity occurred. The third party is to be summoned again, and the petitioner must be given an adequate opportunity to cross-examine the witness within two months. Final orders are to be passed only after this opportunity is effectively provided.

What were the facts?

The petitioner, M/s. Yenkey Roller Flour Mills, is challenging an assessment order dated March 31, 2014, and a demand notice issued by the Assistant Commissioner of Income Tax. The dispute arose during the re-opening of assessment for the assessment year 2006-07. The Assessing Officer proposed to rely on the statement of a third party. The petitioner requested to cross-examine this third party, who was summoned on March 24, 2014. However, the petitioner's authorized representative could not appear. The petitioner's Managing Director, accompanied by another advocate, requested to cross-examine the witness. The Assessing Officer insisted that only the previously authorized representative could conduct the cross-examination, and when the Managing Director expressed inability, the evidence was closed, and the assessment order was passed.

What were the issues?

1. Whether the denial of an adequate opportunity to the assessee to cross-examine a third-party witness, whose statement was sought to be relied upon for re-opening an assessment, violates the principles of natural justice, specifically the rule of 'audi alteram partem'? (Question of law and fact, concerning Section 147 and Section 148 of the Income Tax Act, 1961). Assessee's Contentions: The assessee argued that they were not afforded a fair opportunity to cross-examine the third-party witness. They contended that the Assessing Officer wrongly insisted that only the initially authorized representative could conduct the cross-examination, despite the Managing Director being present with another advocate. The assessee relied on the principle of 'audi alteram partem' and the right to be represented by a legal practitioner of choice. Revenue's Contentions: The judgment does not record any specific contentions made by the revenue regarding the denial of cross-examination opportunity.

Which sections of the Income-tax Act were involved?

Section 147,Section 148

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN TUESDAY, THE 3RD DAY OF JUNE 2014/13TH JYAISHTA, 1936 WP(C).No. 12094 of 2014 (J) ---------------------------- PETITIONER : ------------------ M/S.YENKEYT ROLLER FLOUR MILLS, REGD. OFFICE, 6/1183, CHEROOTTY ROAD, CALICUT-673032 REPRESENTED BY ITS PARTNER N.K.KHALID. BY ADV. SRI.C.P.MOHAMMED NIAS RESPONDENT : -------------------- ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), INCOME TAX DEPARTMENT AAYAKAR BHAVAN (NORTH BLOCK), MANANCHIRA, KOZHIKODE-673001. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03-06-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BP WP(C).No. 12094 of 2014 (J) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- P1: TRUE COPY OF THE NOTICE DATED 23.3.2013 ISSUED BY THE RESPONDENT. P2: TRUE COPY OF THE REQUEST DATED 4.5.2013 SUBMITTED BY THE PETITIONER. P3: TRUE COPY OF THE LETTER DATED 13.5.2013 ISSUED BY THE RESPONDENT. P4: TRUE COPY OF THE OBJECTION FILED BY THE PETITIONER ON 27.11.2013. P5: TRUE COPY OF THE LETTER DATED 9.12.2013 SENT BY THE RESPONDENT. P6: TRUE COPY OF THE PRE-ASSESSMENT NOTICE DATED 17.2.2014 ISSUED BY THE RESPONDENT TO THE PETITIONER. P7: TRUE COPY OF THE OBJECTIONS VIDE A LETTER DATED 21.2.2014 SUBMITTED BY THE PETITIONER. P8: TRUE COPY OF THE PETITION DATED 25.2.2014 FILED BY THE PETITIONER BEFORE THE JOINT COMMISSIONER OF INCOME TAX. P9: TRUE COPY OF THE LETTER DATED 28.02.2014 SENT BY THE PETITIONER TO THE RESPONDENT. P10: TRUE COPY OF THE LETTER DATED 13.3.2014 ALONG WITH THE ACCOMPANYING SUBMISSION OF PARISONS ROLLER FLOUR MILLS PVT. LTD. P11: TRUE COPY OF THE ORDER DATED 14.3.2014 OF THE JOINT COMMISSIONER OF INCOME TAX, RANGE 2, CALICUT. P12: TRUE COPY OF THE LETTER DATED 25.3.2014 SENT BY THE RESPONDENT. P13: TRUE COPY OF THE ASSESSMENT ORDER DATED 31.3.2014 PASSED BY THE RESPONDENT. P14: TRUE COPY OF THE DEMAND NOTICE DATED 31.3.2014. RESPONDENT(S)' EXHIBITS : --------------------------------------- //TRUE COPY// P.A. TO JUDGE BP K.VINOD CHANDRAN, J - - - - - - - - - - - - - - - - - - - - W.P.(C).No. 12094 of 2014 - - - - - - - - - - - - - - - - Dated 3rd June, 2014 - - - - - - - - - - - - - - - - - - - - - - - -

JUDGMENT The sole question which this Court is called upon to decide is as to the denial of an adequate opportunity to the petitioner, an assessee; insofar as not having been provided with a fair chance, to cross examine the third party witness, whose statements are sought to be relied on in re-opening an assessment.

2.

The brief facts necessary for the disposal of the writ petition, are that the petitioner had asked for summoning a third party, whose statement was sought to be relied on by the Assessing Officer, in the proposal to re-open assessment and to make additions to the petitioner's income for the assessment year 2006-07. The third party was summoned and was present before the respondent on 24.03.2014. 3. The authorized representative was not able to appear on the said date. Hence, the petitioner, along with another Advocate approached the respondent and requested for cross-examination

by the Advocate

who accompanied the Petitioner. However, strangely enough, the Officer took the view that only the representative already authorized by the petitioner could conduct the cross examination. Hence, the petitioner, Managing Director who was present along with the Advocate, was asked to cross examine the witness. On the Managing Director expressing his inability and incapacity to do the same, the Officer went ahead and closed the evidence, as also passed an order dated 31.03.2013 as evidenced by Ext.P13 proceedings.

4.

A demand notice was also issued pursuant to Ext.P3 order being passed. The assessee's contention that he was not afforded a fair opportunity in the proceeding before the respondent, is to be upheld on the short facts stated above. The right to a fair hearing, though held to be a flexible rule, is definitely an inviolable rule. The notice provided under Section 148 before making an assessment, reassessment or re-computation under Section 147 is not an empty formality. It postulates a fair hearing before the re-opening is done. The right to cross-examine a witness, whose statements are sought to be relied on by the assessing Officer, in the re-opening has also been held to be a part of the inviolable rule of 'audi alteram partem' by the Honourable Supreme Court as early as in State of Kerala v. K.T.Shaduli Yusuff [1977 (39) STC 478). The right to be represented by a legally trained person, an Advocate, is inbuilt; unless the statute specifically prohibits the same; as is prohibited under Section 36 of the Industrial Disputes Act, 1947. The right to engage a legal practitioner, and one of his/her choice is the option, nay, right of the litigant/client. The filing of an authorization does not prohibit the engagement of another Advocate; which may be for very many reasons. That is a matter between the litigant and the respective counsel and need not for a moment detain the authority; from permitting the litigant to avail of expert legal services,

provided

there

is a valid authorisation.

5.

Ext.P13 order passed by the respondent Assessing Officer is hence, set aside on the short but all encompassing vibrant ground of violation of the principles of natural justice enshrined in the rule of 'audi alteram partem”. Needless to say, this Court has not looked into the merits of the order. Proceedings shall commence from the stage at which it has been declared to be bad by this Court. The third party shall be summoned and the petitioner given adequate opportunity to cross examine the said witness. Same shall be done within a period of two months from the date of receipt of a copy of this judgment. Final orders shall be passed only after such opportunity for cross-examination has been afforded, effectively and not at the will and caprice of the authority, but regulated by the binding precedents and well established principles, which it would be demeaning for the authority to be tutored upon. Writ petition allowed leaving the parties to suffer their respective costs. K.VINOD CHANDRAN, Judge Mrcs

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