Madan B. Lokur, J.:— The Revenue is aggrieved by, an order dated 31st March,. 2005, passed by the Income-tax Appellate Tribunal, Delhi Bench “A” Delhi in I.T.A No. 2803(Del) of 1998 and I.TA No. 3558(Del) of 2002 relevant to the assessment years 1994-95 and 1996-97.
2. The assessee manufactures chewing tobacco (zaffrani patti). One of the issues that arose in the assessment proceedings before the Assessing Officer was with regard to the raw material used by the assessee and the percentage of the components including silver. The assessee declined to give necessary information on the ground that it was a trade secret which it would not like to divulge. On this, the Assessing Officer drew samples of zaffrani patti and sent them to the Shri Ram Institute for Industrial Research, New Delhi, with a request to ascertain the percentage-wise presence of silver in different qualities/brands of zaffrani patti. The said institute sent its report by a letter dated March 12, 1997. On the basis of the report, the Assessing Officer estimated the total consumption of silver in the manufacture of various products of the assessee.
3. Upon receipt of the report, the assessee filed objections thereto and in the objections it requested for permission to cross-examine the analyst. It appears that the request to cross-examine the analyst was made on more than one occasion but the Assessing Officer paid no heed to this request and proceeded with the assessment order.
4. The assessee then preferred an appeal before the Commissioner of Income-tax (Appeals) and pointed out various objections raised to the report submitted by the Shri Ram Institute for Industrial Research including the fact that a request was made to cross-examine the analyst and the assessee had even offered to deposit the necessary expenses for this purpose, but the Assessing Officer avoided granting permission for cross-examination.
5. The Commissioner of Income-tax (Appeals) accepted the contention of the assessee and concluded that the Assessing Officer had wrongly avoided granting permission to the assessee to cross-examine the analyst. One of the other objections taken by the assessee was that samples taken were not in an adequate quantity. For the present, we are not really concerned with this contention. The fact remains that the Commissioner of Income-tax (Appeals) came to the conclusion that the assessee was not given permission to cross-examine the analyst who had prepared the test report obtained from the Shri Ram Institute for Industrial Research and that was enough to vitiate the assessment order.
6. The Revenue then preferred an appeal against the order of the Commissioner of Income-tax (Appeals) and by the impugned order the Tribunal dismissed the appeal on the same ground.
7. We have heard learned counsel for the Revenue who contended that the strict rules of evidence are not applicable to assessment, proceedings. On this, we may say that there can hardly be any doubt that the Assessing Officer had based his assessment order on the report obtained from the Shri Ram Institute for Industrial Research and the correctness of that report was itself under challenge by the assessee who had not only filed objections thereto but also sought permission to cross-examine the analyst. A request to cross-examine was made by the assesseemot only on one occasion but on several occasions and the assessee had even agreed to pay the necessary expenses but the Assessing Officer did not permit cross-examination of the analyst.
8. There is no doubt that even if the strict rules of evidence may not apply, the basic principles of natural justice would apply to the facts of the case. The Assessing Officer placed reliance upon the report of the Shri Ram Institute for Industrial Research for deciding against the assessee. The report cannot be automatically accepted particularly since there is a challenge to it and the assessee had sought permission to cross-examine the analyst making the report. Since the Assessing, Officer did not permit the correctness of otherwise of the report to be tested, there is a clear violation of the principles of natural justice committed by him in relying upon it to the detriment of the assessee. As observed by the Constitution Bench in C.B Gautam v. Union of India, [1993] 199 ITR 530 (SC); (1993) 1 SCC 78, that, “The observance of the principles of natural justice is the pragmatic requirement of fair play in action”.
9. We do not find any error in the view taken by the Commissioner of Income-tax (Appeals) or by the Income-tax Appellate Tribunal in setting aside the assessment order on the ground that the principles of natural justice were not complied with by the Assessing Officer who did not permit the assessee to cross-examine the analyst on the basis of whose report the assessment order was passed against the assessee.
10. No substantial question of law arises for consideration. Dismissed.
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