R.V Raveendran, J.:— This appeal by the assessee is against the order of the Income-tax Appellate Tribunal, Bangalore Bench, dated September 29, 2003, in I.T (SS) A. No. 54.Bang of 2002 relating to the block period 1990-91 to 1999-2000.
2. The Assessing Officer passed a block assessment order dated June 25, 2001, under section 158BC of the Income-tax Act, 1961 (“the Act” for short), in pursuance of a search conducted under section 132 of the Act on July 13, 1999. The said assessment order was passed after obtaining the previous approval from the Joint Commissioner of Income-tax (Range 4), Bangalore, as required under section 158BG of the Act. The assessee challenged the assessment order before the Commissioner of Income-tax (Appeals)-II, Bangalore, in I.T.A No. 436.CIT(A)-II/2001-02. The appeal was allowed in part by an order dated February 7, 2002, granting certain reliefs. The assessee filed a further appeal before the Tribunal and the Tribunal by an order dated September 29, 2003, allowed the said appeal in part granting some more reliefs. The appellant is aggrieved by the non-grant of other reliefs sought by him. The appellant contends that the appeal ought to have been allowed in entirety. He contends that the following substantial questions of law arise for consideration in this appeal:
“(i) Before granting the previous approval granted under section 158BG for making an order of assessment for a block period, whether the Joint Commissioner is required to give a hearing to the assessee; and whether failure to do so will violate the principles of natural justice and thereby invalidate the previous approval as also the order of assessment for the block period?
(ii) Whether, on the facts, the Tribunal is correct in law in holding that the amount of Rs. 22 lakhs constitutes income in the hands of the appellant and others; and if so whether the Tribunal is justified in law in holding that the amounts have to be assessed in the hands of respective persons without hearing such persons?
(iii) Whether the Tribunal is justified in law in holding that the appellant is liable to be assessed for income of Rs. 2,00,000 on account of deficit stock?”
Re.: Question No. (i)
3. Section 158BG provides that no order of assessment for the block period shall be passed by the Assessing Officer without the previous approval of the Joint Commissioner in respect of a search initiated under section 132. The assessee contends that before granting previous approval under section 158BG for an order of assessment made under section 158BC,. the Joint Commissioner should have given a hearing to the assessee. It is submitted that the power to grant previous approval under section 158BG is an amalgam of appellate and revisional power and, therefore, the right to a hearing should be read into section 158BG. It is also contended that the Tribunal failed to consider this ground though specifically urged before it.
4. Chapter XIV-B contains a special procedure for assessment of search cases. Section 158BC prescribes the procedure for block assessment. Clause (c) of section 158BC enables the Assessing Officer, on determination of the undisclosed income of the block period, to pass an order of assessment and determine the tax payable by him on the basis of such assessment. Clause (b) requires the Assessing Officer to proceed 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, while determining the undisclosed income of the block period. It is thus evident that the procedure clearly contemplates the Assessing Officer giving a hearing to the assessee before making an assessment order in regard to the block period.
5. Clause (k) of section 246A provides for an appeal against the order of assessment for the block period made by the Assessing Officer under clause (c) of section 158BC. Sub-section (2) of section 250 provides for a hearing of the appeal. Thus, the assessee is heard by the Assessing Officer before making the assessment order under section 158BC. If the assessee is aggrieved by the assessment order he has a remedy by way of an appeal under section 246A where also he is heard. There is no need, therefore, for the Joint Commissioner to give a hearing before giving previous approval under section 158BG. Firstly, the statute does not provide for such a hearing; secondly, the principles of natural justice also do not require such a hearing having regard to the fact that the assessee gets a hearing before the assessment and also a hearing if he files an appeal against the order of assessment; and thirdly, the order passed by the Joint Commissioner granting previous approval under the proviso to section 158BG is in exercise of administrative power on being satisfied that the order of assessment has been made in accordance with the provisions of Chapter XIV-B. The previous approval is purely an internal matter and it does not decide upon any rights of the assessee. The joint Commissioner, while examining the matter under the proviso to section 158BG does not examine or adjudicate upon the rights or obligations of the assessee, but only considers whether the Assessing Officer has fulfilled the requirements of Chapter XIV-B.
6. In V. C. Shukla v. State (Delhi Administration)), 1980 Supp SCC 249 : AIR 1980 SC 1382, the Supreme Court gave the following example (page 1416):
“In cases where law requires sanction to be given by the appointing authority before a prosecution can be launched against a Government servant, it has never been suggested that the accused must be heard before sanction is accorded….”
7. Where a statute requires the executive to take an administrative action after being satisfied or after forming an opinion as to the existence of a state of circumstances, the action is based on the subjective satisfaction. It is well settled that any administrative action based either on policy or on subjective assessment, it does not prejudicially affect any vested right or interest, need not be preceded by a hearing, unless the statute specifically provides for the same. Therefore, in the absence of any provision for opportunity of hearing in section 158BG, there is no need for the Joint Commissioner to give a hearing to the assessee before granting “previous approval” under section 158BG. The first question is, therefore, answered against the assessee.
Re.: Question No. (ii)
8. A sum of Rs. 22,00,000 was added by the Assessing Officer to the income of the assessee as undisclosed income by way of interest. The Commissioner of Income-tax (Appeals) confirmed the same. The Tribunal held that the said interest was earned on the amount financed to M/s. Balakrishna group. It was held that the assessee had financed M/s. Balakrishna group through his own funds, the funds of his Hindu undivided family and the funds of his daughter-in-law's proprietary concern (Praveen Textiles). The assessee had admitted in his statement recorded on July 13, 1999 (date of search), that a sum of Rs. 22 lakhs was received as interest on the following lending: Rs. 25 lakhs advanced by cheque by M/s. Praveen Textiles (of which the assessee's daughter-in-law was the proprietrix), Rs. 15 lakhs advanced by cheque by the assessee's proprietary concern (H. Ashok Kumar and Co.) and Rs. 73,00,000 advanced in cash. The Tribunal observed:
“3.2 While examining the issue of advances to Balakrishna group it has been found and held that the amount was advanced to Balakrishna group out of the funds belonging to the assessee, the Hindu undivided family of the assessee amounting to Rs. 73 lakhs and also by the daughter-in-law of the assessee. The interest pertains to the entire advances and it cannot be said that the entire, interest received is out of the advance given by the assessee alone. In the circumstances, the sum of Rs. 22 lakhs which is already received and is refinanced is to be considered as income of the respective lenders, i.e, the assessee, the assessee-Hindu undivided family and M/s. Praveen Textiles of which the appellant's daughter-in-law is the proprietrix. Thus to the extent of interest received pertaining to the amount financed by the assessee out of his proprietary concern it is to be assessed in the hands of the assessee and balance to be taxed in respective cases. The Assessing Officer shall examine the issue and consider only that portion in the interest income which is not earlier offered in the regular return filed by the assessee.”
9. The finding that Rs. 22 lakhs was the undisclosed income in the hands of the assessee, the assessee's Hindu undivided family and Praveen Textiles is a pure finding of fact arrived at on the admission made by the assessee on July 13, 1999, which was duly recorded. The admission is not disputed. Nor has the assessee subsequently demonstrated that the admission is incorrect. Therefore, we find no reason to interfere with the finding that Rs. 22 lakhs is the undisclosed income. The further finding that the entire sum of Rs. 22 lakhs is not the undisclosed income of the assessee alone, but of the assessee, his Hindu undivided family and his daughter-in-law is a finding beneficial to the assessee, as otherwise the assessee would have to bear the tax and other burdens relating to the entire undisclosed income of Rs. 22 lakhs. The Tribunal has now restricted the liability of the assessee to his portion of the interest income of Rs. 22 lakhs. Any attempt by the assessee to disturb that finding would result in the entire Rs. 22 lakhs being treated as undisclosed income of the assessee. It is next contended that the finding of the Tribunal that the portions of the interest income of the assessee's Hindu undivided family and daughter-in-law, out of Rs. 22 lakhs, will have to be taxed in the respective cases, is opposed to the principles of natural justice, as neither the assessee's Hindu undivided family, nor the assessee's daughter-in-law have been heard in the matter. According to the appellant, the Tribunal ought to have restricted its direction that the undisclosed income be taxed, to the share of the assessee in Rs. 22 lakhs. It is contended that the direction to tax the balance in the hands of other persons could have been made only after giving appropriate notices to such persons and hearing them. On a careful reading of para 3.2 of the order of the Tribunal, we find that there is no infirmity or violation of principles of natural justice. The Tribunal has clearly stated that the Assessing Officer shall examine the issue and consider only such portion of the interest income, which is not earlier offered, in the regular return filed by the assessee. The observation that the balance has to be taxed in the respective cases necessarily means that the balance has to be taxed in accordance with law, after issue of appropriate notices and grant of hearing to the other persons concerned, that is the assessee's Hindu undivided family and the assessee's daughter-in-law. There is no basis for the assumption that the Tribunal has directed the Assessing Officer to assess the balance of the interest amount in the hands of third parties without giving them an opportunity of hearing. Hence, the second question does not arise for consideration at all.
Re: Question No. (iii)
10. The third question relates to the liability of the assessee to be assessed for the income of Rs. 2,00,000 on account of deficit stock. This is purely a question of fact. Learned counsel for the assessee fairly conceded that the said issue did not involve any question of law, much less substantial question of law.
11. The appeal is, therefore, dismissed as having no merit.