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It is well settled principle of law that
assessment proceedings are quasi-judicial proceedings. As such, the Assessing
Officer when he holds an enquiry and makes an assessment under the Income-tax
Act, though he is not a court the proceedings are still judicial proceedings.
As the Supreme Court again and again has laid down, though the Assessing
Officer is not a Court and is to some extent a party or judge in his own
case, fundamentally he must proceed in a judicial manner and come to a
judicial conclusion upon properly ascertained facts. In Surajmall Mohta
vs. Visvanatha Sastri, 26 ITR 1 (SC), Mahajan CJ observed: "The assessment
has to be made on all relevant materials and on evidence and the assessee
has the fullest right to inspect the records and all documents and materials
that are to be used against him. Under the provisions of section 37 of
the Indian Income-tax Act, 1922, the proceedings before the Income Tax
Officer are judicial proceedings and all the incidents of such judicial
proceedings have to be observed before the result is arrived at.
The broad principles which emerge from
the judgements of the various High Courts can be summarised as under.
1. Principles of natural justice
The Assessing Officer exercises quasi-judicial functions and therefore
he is governed by the principles governing judicial proceedings. Therefore,
as the judicial officer, he is bound to follow the principles of natural
justice, that is, he must proceed without any bias and he must give sufficient
opportunity to the assessee to place his case before the Department and
he must conduct himself in accordance with the principles of justice,
equity and good conscience (Dhakeswari Cotton Mills Ltd. vs. CIT, 26 ITR
775 (SC)). As he has to follow the principles of natural justice, he must
give reasons in his order for a particular decision. That is, his order
must reveal the basis on which he has come to a particular decision. In
view of the same principle, the Assessing Officer cannot rely on any evidence
or any fact in arriving at his conclusions without first pointing out
the same to the assessee and giving him a reasonable opportunity of meeting
the case which is ultimately made out in the assessment order. If any
of these principles of natural justice is violated, the assessment is
vitiated and the Court would set aside such order which is passed in contravention
of the principles of natural justice.
2. Duty of Assessing Officer
The proceedings before the Officer are with a view to find out the correct
tax liability that could be imposed and collected from the assessee. As
such, the officer is duty bound to exercise his power in the manner most
beneficial to the assessee and not more beneficial to the revenue and
most adverse to the assessee. It is the duty of the Assessing Officer
to draw the attention of the assessee to the deductions, reliefs and refunds
to which he seems to be entitled on the facts of the case, if the assessee
has omitted to make the claim. The Board’s Circular dated 11-4-1955 also
requires the Assessing Officer to do so. If excess tax has been paid by
inadvertence, or if tax is illegally recovered or retained, the Assessing
Officer is bound to refund it under the general law and independent of
Chapter XIX or any other provisions of the Act [OCM vs. CIT, 138 ITR 689
(All); Deepchand Jain vs. ITO, 145 ITR 676 (P & H)]. If he fails to
do so, the Court may issue a writ, direction or order compelling to grant
the refund (Narayan Row vs. Model Mills, 64 ITR 67 (SC), Vallabh vs. UOI,
155 ITR 560 (SC)).
3. Burden of proof
The ordinary presumption of law is that the apparent state of affairs
is real unless the contrary is proved; and therefore the burden of proving
that a transaction is sham or the person in whose name the property stands
is not the real owner but only a benamidar for another, is on the taxing
authorities. The presumption is in favour of good faith and non-concealment
of income. It is for the Department to prove that a particular receipt
constitutes income. However, if a particular receipt is income, if the
assessee is claiming that a particular income is exempt
from the taxation it is for the assessee to prove that such income is
exempt from taxation.
A humane and considerate administration of the relevant provisions of
the Income-tax Act would go a long way in allaying the apprehensions of
the assessees and if that is done in all the true spirit, no assessee
will be in a position to charge the revenue with administering the provisions
of the Act with an evil eye and unequal hand. It was held in Pannalal
Binjraj vs. Union of India, 31 ITR 565 (SC).
4. Doctrine of res judicata
Rule of res judicata is not applicable to assessments under the Income-tax
Act and therefore findings in one year do not constitute res judicata
for the following years. However, this general rule is subject to the
qualification that a finding reached in the assessment proceeding for
the earlier year, after due enquiry, would not be reopened in a subsequent
year, if no fresh facts are found in the subsequent assessment year. Under
income-tax law, though the principles of res judicata are not applicable
and assessee as well as department is free to challenge order in a different
year, judicial propriety requires consistency. Unless there is something
new coming or change in law is coming after the earlier decision was taken,
after due application of mind such decision taken earlier will have to
be followed in similar circumstances in the later year. That is, there
must be substantial ground for one Assessing Officer to differ from the
view taken by another Assessing Officer in an earlier assessment year.
Therefore, finding of a fact on similar circumstances will have to be
followed in the later year and finding in the earlier year as a relevant
piece of evidence and therefore it cannot be arbitrarily departed from.
However, it is open for the assessee and also Department to reject the
earlier findings on substantial ground, that is, some new angle is looked
into or new evidence is brought in or a mistake in the earlier fact is
brought to the notice.
5. Doctrine of promissory estoppel
The true principle of promissory estoppel seems to be that where one party
has by his words or conduct made to the other a clear and unequivocal
promise which is intended to create legal relations or effect a legal
relationship to arise in the future, knowing or intending that it would
be acted upon by the other party to whom the promise is made and it has
in fact so acted upon by the other party, the promise would be binding
on the party making it and he would not be entitled to go back upon it,
if it would be inequitable to allow him do so having regard to the facts
which have taken place between the parties, and this would be irrespective
of whether there is any pre-existing relationship between the parties
or not. [Motilal Padampur Sugar Mills Co. Ltd. vs. State of Uttar Pradesh,
118 ITR 326 (SC)]. However, it must be noted that the principles of res
judicata will not be applicable to statute. It is said that rule of estoppel
is not applicable to statute. It is also said that though the rule of
estoppel is not applicable to assessments, the income tax authorities
may take into consideration the behaviour of the assessee over a long
period of time in deciding a question of fact. [CIT vs. Durga Prasad More,
82 ITR 540 (SC)]. Again the principle of estoppel has no application to
successive assessments.
It has been held that the advertisement
in newspapers cannot act as estoppel or deprive ITO of statutory powers.
Doctrine of approbate and reprobate cannot operate against the provisions
of a statute [CIT vs. V. MRP Firm, 56 ITR 67 (SC)].
6. Doctrine of waiver
Waiver means abandonment of a right, and it may be express or implied
from conduct, but its basic requirement is that it must be an intentional
act with knowledge. There can be no waiver unless the person who is said
to have waived is fully informed as to his right and with full knowledge
of such right, he intentionally abandons it. However, there is no question
of waiver in case of statutory provisions which are applied to procedural
matters. A proper service of notice for re-assessment proceedings giving
a substantial right cannot be waived by the assessee. No plea of waiver
can be allowed to be raised unless it is pleaded and factual foundation
for it is laid in the pleadings [Motilal Padampat Sugar Mills Co. Ltd.
vs State of UP 118 ITR 326 (SC)]. |
