JAGADISAN J. - The following questions stand referred under the Indian Income-tax Act.
'1. Whether the Tribunal was entitled to use the statement of Solomon Nadar as material for basing any finding adverse to the assessee when Solomon Nadar was not made available for examination by the assessee
2. Whether independent of Solomon Nadars statement, there was any material for the Tribunal to find that Rs. 24,000 constituted the income of the assessee in the relevant year of account.
The assessee is a general merchant in Ceylon. He owns house-properties in India. His assessment under the India Income-tax Act, for the assessment year 1947-48, corresponding to the previous year ended on March 31, 1947, was completed under section 23 (3). But subsequently, the Income-tax Officer commenced proceedings under section 34 of the Act on the basis of certain information that the assessee had acquired properties in Ceylon during the accounting year but failed to disclose it in the books of account. The properties of the value of Rs. 24,000 were said to have been purchased at Baligoda, Ceylon. In response to the notice, the assessee submitted that the original assessment was not liable to be reopened and that he had not made any money besides the income which has already been taxed. The Income-tax Officer added Rs. 24,000 to the income previously computed.
On appeal, the Appellate Assistant Commissioner confirmed this view of the Income-tax Officer. The assessee contended before him that he did not purchase any property at Baligoda during the accounting year and produced before him a certificate given by the Registrar of Lands Office at Ratnapuram stating that no new property was registered in the name of the assessee during the relevant year. The addition was sustained on the strength of information got from one Solomon Nadar, who stated that he was a partner of the assessee in 'black market' operations, that the total profit of Rs. 48,000 was dividend and taken in two equal shares. At that stage, the assessee came to know that the department acted upon Solomon Nadars statement that the assessee had earned an income of Rs. 24,000 from the activities of the firm of which both Solomon Nadar and the assessee were partners. There was no denial of the partnership, but the assessee only stated that he had fallen out with Solomon Nadar. This is tacit admission that Solomon Nadar was not a person unknown to him and that they were connected with each other financially.
There was a further appeal to the Income-tax Appellate Tribunal by the assessee. The Tribunal thought it fair that the assessee should have an opportunity to cross-examine Solomon Nadar, who had not been examined in his presence. The Tribunal, therefore, remanded the proceedings to the Income-tax Officer for further examination of Solomon Nadar after due notice to the assessee.
Unfortunately, Solomon Nadar, who was a resident of Ceylon, did not choose to go to India. Every time a date was fixed for the enquiry, he was resourceful to offer some excuse for his not being able to be present. Ultimately, he sent the following letter on February 2, 1958, to the department :
'Besides the information hitherto furnished, I think I will have no more information to furnish. While my statement has been accepted and assessment has been completed including the undisclosed profits, it is left to your department to determine the tax liability of the above who was then a partner. In the circumstances, the cross-examination of Mr. Devasahaya Nadar on me will be of no benefit and is not warranted.'
In the remand report, reference was made by the officer that the assessee had purchased a property No. 1 Gorakpola, Kalathara District, Colombo, for Rs. 6,000 many years ago and that he had been receiving a rental income of Rs. 25 per mensem from that property and that this item of purchase was not reflected in the account books of the assessee.
On these materials, the Tribunal considered the question afresh and reached the conclusion that there were materials on record to justify the addition made by the department. The Tribunal accepted the statement of Solomon Nadar. It was of the view that it must be true as it was made against his own interest. The absence of any purchase of land at Baligoda during the year in question was held to be of no consequence.
The question now before us is whether Solomons statement untested by cross-examination can be relied upon as evidence and whether, after excluding the statement, there are materials to justify the addition of Rs. 24,000. Mr. Swaminathan, learned counsel for the assessee, contends that the evidence of Solomon Nadar cannot be relied upon by the department as the assessee was not afforded an opportunity to cross-examine him. Learned counsel also contends that it is because the Tribunal was unable to accept the evidence of Solomon Nadar recorded behind the back of the assessee that the proceedings were remanded to give the assessee an opportunity for cross-examination.
We are of opinion that it cannot be said as a general proposition of law that any evidence upon which the department might rely should have been subjected to cross-examination. The procedure for assessment is indicated in section 23 (3) of the Act. The Income-tax Officer is not a court. Having regard to the nature of the proceedings, he occupies the position of a quasi judicial tribunal. He is not bound by the rules of evidence in the Indian Evidence Act. The limit of the enquiry and the kind of materials or evidence which he can act upon cannot be specified and the statute has not attempted it. Wide though his powers be, he must act in consonance with rules of natural justice. One such rule is that he shall not use any material against the assessee without giving him an opportunity to meet it - Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax. The source of information for the material against the assessee need not be divulged. In fairness to the assessee he should be told what is against him, so that he may, if he can, displace it. It is no denial of natural justice if the Income-tax Officer refuses to produce an informant for being cross-examined by the assessee. If any witness is examined in the presence of the assessee, he must of course have a right of cross-examination. Several decisions have considered the scope of the Income-tax Officers powers and the rights of the assessee as regards the procedure of assessment and we do not think we need cover the field over again : Seth Gurmukh Singh v. Commissioner of Income-tax; Ganeshdas Kaluram v. Commissioner of Income-tax : Seth Nathuram Munnalal v. Commissioner of Income-tax; Nagulakonda Venkata Subba Rao v. Commissioner of Income-tax. The range of natural justice is wide and whether or not there has been violation of natural justice would depend on the facts and circumstances of the case. In short, the Income-tax Officer cannot assess by keeping the assessee in the dark as to the materials against him.
In the present case, the basis of reassessment is only Solomon Nadars statement. There is nothing else to support it. Can his statement accepted as true This is for the department to decide. It is not an extraneous circumstance which ought to be excluded from consideration. The value or weight to be attached to it falls within the exclusive jurisdiction of the department and the Tribunal. This court cannot reweigh or reappraise the evidence leading to the assessment and reach a contrary conclusion. Such is the limited jurisdiction of this court. In our opinion Solomon Nadars statement was sufficient evidence and there is no error in treating it as proper material to make the assessment.
Question No. 1 is answered in the affirmative and against the assessee. Question No. 2 is answered in the negative.
There will be no order as to costs.