# Vinod Kumar Jain v. State of U.P. & Ors

- **Citation:** (2024) 5 ILRA 2097
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-05-31
- **Case number:** Writ C No. 20603 of 2007
- **Bench:** Shekhar B. Saraf
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/vinod-kumar-jain-v-state-of-u-p-ors-52048
- **Pages:** 13

## Headnote

Rules, 1997- The Petitioner purchased certain
plots of land and paid stamp duty-name
recorded as bhumidhar with transferable rightsafter three years he received a show cause
notice based on an alleged inspection reportmatter proceeded exparte and order passed
same day imposing deficiency of stamp and
penalty with interest- nature of land at the time
of execution was agricultural -authorities
treated the land as non-agricultural-when St.
conducts a spot inspection without involving
property owner-it undermines credibility and
fairness of entire valuation process-impugned
order quashed.

W.P. allowed. (E-9)

List of Cases cited:

## Text

_Characters 0–39,972 of 43,995. This is a partial read: ask again with offset=39972 for what follows._

5 All. Vinod Kumar Jain Vs. State of U.P. & Ors.
2097
orders. As a result the writ petition is
dismissed being devoid of merits. There
shall however be no order as to Costs.
----------
(2024) 5 ILRA 2097
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 31.05.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.

Writ C No. 20603 of 2007

Vinod Kumar Jain ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Ms. Aarushi Khare, Advocate

Counsel for the Respondents:
Mr. Rishi Kumar, Addl. C.S.C.

The U.P. Stamp (valuation of Property)
Rules, 1997- The Petitioner purchased certain
plots of land and paid stamp duty-name
recorded as bhumidhar with transferable rightsafter three years he received a show cause
notice based on an alleged inspection reportmatter proceeded exparte and order passed
same day imposing deficiency of stamp and
penalty with interest- nature of land at the time
of execution was agricultural -authorities
treated the land as non-agricultural-when St.
conducts a spot inspection without involving
property owner-it undermines credibility and
fairness of entire valuation process-impugned
order quashed.

W.P. allowed. (E-9)

List of Cases cited:

1. Smt. Pushpa Sareen Vs St. of U.P. reported in
(2015) 0 Supreme (All) 132

2. Raj Kumar Vs St. of U.P. & ors. (Writ-C
No.19644 of 2016 decided on April 13, 2023)
3. S.R. Cold Storage Vs Union of India & ors.
reported in 2022 SCC online (All) 550; {[2022]
448 ITR 37 (All)}

4. Mrs. Maneka Gandhi Vs Union of India & anr.
reported in (1978) 1 SCC 248

5. St. of Kerala Vs K.T. Shaduli Grocery Dealer
Etc. reported in (1977) 2 SCC 777

6. Dharampal Satyapal Limited Vs Deputy
Commissioner of Central Excise, Gauhati & ors.
reported in (2015) 8 SCC 519

7. Madhyamam Broadcasting Limited Vs Union
of India & ors. 15 reported in ILR 2023 (2) Kerala
545; (2023 SCC OnLine 366)

8. St. Bank of India & ors. Vs Rajesh Agarwal &
ors. reported in (2023) 6 SCC 1

9. Ridge Vs Baldwin reported in [1964] AC 40

(Delivered by Hon'ble Shekhar B. Saraf, J.)

1. The instant writ petition under
Article 226 of the Constitution of India has
been
filed
by
Vinod
Kumar
Jain
(hereinafter referred to as the 'Petitioner')
assailing the order dated December 7, 2006
passed by the District Magistrate/Collector,
Jhansi (hereinafter referred to as the
'Respondent No. 2').

FACTS

2. The facts giving rise to the
instant writ petition are delineated below:

 a.
The
Petitioner
purchased
certain plots of land vide a registered sale
deed dated July 17, 2002 and the paid stamp
duty on the same.

b. The name of the Petitioner was
recorded in revenue records as bhumidhar
with transferable rights.

c. After a period of three years
from the date of execution of the sale deed,
2098 INDIAN LAW REPORTS ALLAHABAD SERIES
the Petitioner was served with a show cause
notice dated January 7, 2005 which was
based on an alleged inspection report dated
December 4, 2004.

d. On the date fixed, that is on
June 26, 2006, the authority concerned
proceeded with the matter ex parte and
passed an order on the same day imposing
deficiency of stamp, penalty along with
interest on the Petitioner. The Petitioner
submitted an application on the same day
before the authority concerned in order for
his reply to be taken on record. However,
the authority concerned rejected the said
application saying that since the order has
been passed, the reply will not be
considered.

e. Aggrieved with the aforesaid
order dated June 26, 2006 the Petitioner
approached this Court by way of a writ
petition which was dismissed by this Court
on the ground that the Petitioner had an
alternative efficacious remedy available.

f.
Thereafter,
the
Petitioner
preferred a revision application before the
Respondent No.2 and deposited 1/3rd of the
deficit
amount
as
alleged
by
the
Department. The said revision application
was dismissed vide order dated December
7, 2006.

g. Aggrieved by the order dated
December 7, 2006, the Petitioner has
preferred the instant writ petition before
this Court.

CONTENTIONS
OF
THE
PETITIONER

3. Learned counsel appearing on
behalf of the Petitioner has made the
following submissions:

 a. The nature of the land at the
time of execution of the sale deed dated
July 17, 2002 was agricultural and the same
has been admitted by the Respondent No.2
in his order dated June 26, 2006.

b. The authorities concerned have
treated the land as non- agricultural for the
purposes of levying additional stamp duty.
This too has been done after three years of
the execution of the registered instrument
without there being any material basis to do
so or any exemplar to compare. .
 c. No notice was give to the
Petitioner regarding the alleged spot
verification. The same has also not been
denied by the Respondents. The spot
verification was not carried out as per Rule
7(3)(c) of the Uttar Pradesh Stamp
(Valuation of Property) Rules, 1997
(hereinafter referred to as "the Rules"),
which is mandatory.
 d. As per Rule 7(3)(c) of the
Rules, spot inspection has to be conducted
after giving due notice to the parties to the
instrument. While a spot inspection was
conducted on January 4, 2004, no notice of
the same was ever given to the Petitioner.
After the said spot inspection, a show cause
notice dated January 7, 2005 was issued to
the Petitioner.

e. At the relevant point of time,
the land in question was agricultural in
nature and there were no structures or any
activity apart from agriculture being carried
out on the said land.

f. The Collector must have
material on record to come to a finding as
to the potential use of the land and only
thereafter, assess the same on the basis of
such potential use.

4 g. Spot inspection report does
not disclose any material relied upon to
come to the conclusion that the Petitioner's
land is non-agricultural in nature.

h. Respondents do not dispute the
fact that the Petitioner's land was being
used only for agricultural purposes at the
5 All. Vinod Kumar Jain Vs. State of U.P. & Ors.
2099
time of execution of the sale deed and also
at the time of the alleged spot inspection.

CONTENTIONS
OF
THE
RESPONDENTS

4. Learned Additional Chief Standing
Counsel appearing on behalf of the State
Respondents has made the following
submissions:

 a. A proceeding under Section
47-A of the Act was initiated on the basis
of the report of the Tehsildar which
indicated that true facts were not stated in
the sale deed as provided under Section 27
of the Act. As per relevant provisions of the
Rules, the Petitioner has not paid stamp
duty correctly.

b. The Petitioner did not file any
reply to the show cause notice issued
against him even after several opportunities
were provided for the same.

c. The Collector, Jhansi, after
considering the report of the Tehsildar and
the Committee and the relevant provisions
has determined the deficiency along with
penalty.

d. The Collector placed reliance
on the spot inspection report of the revenue
authority, which was based on the
prevailing market value at the time of
registration of the sale deed. The order of
the Collector, Jhansi determining the
deficiency was in accordance with the
relevant provisions.

e. The Petitioner despite the
opportunity being given could not produce
any reliable evidence in support of his case
and as such the Respondent No.2 has
rightly dismissed the revision application
filed by the Petitioner as the Respondent
No.2 did
5 not find any grounds to interfere
with the earlier order passed by Collector.

f. The order impugned in the
instant writ petition was passed after
affording full opportunity of hearing as per
the relevant provisions and applicable rates
prevailing in the market.

g. The reports submitted by
Tehsildar, Asst. Commissioner Stamp and
the Additional Collector (F&R) were on
record and the contention of the Petitioner
in this regard is misconceived.

ANALYSIS
AND
CONCLUSION

5. I have heard the learned counsel
appearing for the parties and perused the
materials on record.

6. On the power of the Collector
under Section 47-A of the Act, reference
can be made to the judgment of the Full
Bench of this Court in Smt. Pushpa
Sareen v. State of U.P. reported in (2015)
0 Supreme (All) 132 penned by the
Hon'ble Dr. D.Y. Chandrachud, C.J. (as his
Lordship
then
was).
The
relevant
paragraphs are extracted herein:

 "26.
The
true
test
for
determination by the Collector is the
market value of the property on the date of
the
instrument
because,
under
the
provisions of the Act, every instrument is
required to be stamped before or at the time
of execution. In making that determination,
the Collector has to be mindful of the fact
that the market value of the property may
vary from location to location and is
dependent upon a large number of
circumstances having a bearing on the
comparative advantages or disadvantages
of the land as well as the use to which the
land can be put on the date of the execution
of the instrument.
2100 INDIAN LAW REPORTS ALLAHABAD SERIES
 27. Undoubtedly, the Collector is
not permitted to launch upon a speculative
inquiry about the prospective use to which
a land may be put to use at an uncertain
future date. The market value of the
property has to be determined with
reference to the use to which the land is
capable reasonably of being put to
immediately or in the proximate future. The
possibility of the land becoming available
in the immediate or near future for better
use and enjoyment reflects upon the
potentiality of the land. This potential has
to be assessed with reference to the date of
the execution of the instrument. In other
words, the power of the Collector cannot be
unduly circumscribed by

6 ruling out the potential to which
the land can be advantageously deployed at
the time of the execution of the instrument
or a period reasonably proximate thereto.
Again the use to which land in the area had
been put is a material consideration. If the
land surrounding the property in question
has been put to commercial use, it would be
improper to hold that this is a circumstance
which should not weigh with the Collector
as a factor which influences the market
value of the land.

28. The fact that the land was put
to a particular use, say for instance a
commercial purpose at a later point in time,
may not be a relevant criterion for deciding
the value for the purpose of stamp duty, as
held by the Supreme Court in State of U.P.
and others vs. Ambrish Tandon and
another11. This is because the nature of the
user is relateable to the date of purchase
which is relevant for the purpose of
computing the stamp duty. Where, however,
the potential of the land can be assessed on
the date of the execution of the instrument
itself, that is clearly a circumstance which
is
relevant
and
germane
to
the
determination of the true market value. At
the same time, the exercise before the
Collector has to be based on adequate
material and cannot be a matter of
hypothesis or surmise. The Collector must
have material on the record to the effect
that there has been a change of use or other
contemporaneous sale deeds in respect of
the adjacent areas that would have a
bearing on the market value of the property
which
is
under
consideration.
The
Collector, therefore, would be within
jurisdiction in referring to exemplars or
comparable sale instances which have a
bearing on the true market value of the
property which is required to be assessed.
If the sale instances are comparable, they
would also reflect the potentiality of the
land
which
would
be
taken
into
consideration in a price agreed upon
between a vendor and a purchaser."

7. Upon a perusal of the judgment
in Smt. Pushpa Sareen's case (supra),
what emerges is that the Collector can
assess the potential use of the land on the
date of execution of the instrument for
determination of true market value.
However, this exercise by the Collector has
to be based on adequate materials and
cannot be a matter of hypothesis or surmise.
The Collector's finding as to the potential
use of the land must be backed by sufficient
evidence. In the absence of any materials or
sufficient evidence to support its findings,
the Collector cannot base his valuation on
conjectures and surmises.

8. Further reliance can be placed
on the judgment of a Coordinate Bench of
this Court in Raj Kumar v. State of U.P.
and others (Writ-C No.19644 of 2016
decided on April 13, 2023) wherein it was
held that spot inspection has to be carried
out in terms of Rule 7(3)(c) of the Rules.
Furthermore, the Court held that burden of
5 All. Vinod Kumar Jain Vs. State of U.P. & Ors.
2101
proof is on the State to establish the
payment of deficient stamp duty. It was
further held that the valuation of the land in
question has to be made on concrete
grounds. The relevant paragraphs of Raj
Kumar's case (supra) are delineated
below:

 17. Moreover, had the allegation
of the State been to the effect that though
the land was purchased for agricultural
purposes, but its user was immediately
changed and on the date of sale deed, it was
being used for any other purpose like,
industrial, commercial or even residential,
the situation would have been different.
Even in those situations, spot inspection at
the relevant point of time was a necessity,
but, admittedly, in the present case, no spot
inspection has been carried out. Necessity
of spot inspection and its mandatory
nature, with reference to Rule 7 (3) (c) of
the aforesaid Rules of 1997, has been
reiterated, time and again by this Court in
various authorities including Ajay Agarwal
and others vs Commissioner Lucknow and
others, reported in 2023 (2) ADJ 561 (LB),
and Ram Khelawan alias Bachcha vs State
of U.P. and another, reported in 2005 (2)
AWC 1087.
*****

19. The observations/findings
recorded in the orders impugned are also
contrary to principles of burden of proof
particularly, in a case where proceedings
arise out of a fiscal statute. Once the State
was proceeding to impose deficient stamp
duty upon the petitioner, the entire burden
lay upon the State to establish beyond
reasonable doubt that the petitioner made
some concealment at the time of getting the
sale deed executed in his favour or that
within a close proximity of dates, the user
of the land in dispute was changed so as to
levy additional stamp duty. Nothing to this
effect has been brought on record, rather,
not only the findings recorded in the orders
impugned are contrary to the provisions of
the Indian Stamp Act, 1899, as applicable
in the State of U.P. as well as U.P. Stamp
(Valuation of Property) Rules, 1997, but
certainly contrary to the law consistently
laid down by this Court.

9. When the State seeks to impose
additional financial liabilities, such as
higher stamp duty, it must provide clear and
compelling evidence to justify its claims.
This principle ensures that property owners
are not subjected to arbitrary or unjustified
financial burdens. It serves as a cornerstone
of fairness and accountability in the legal
process, protecting individuals and entities
from potential misuse of governmental
power. In the context of stamp duty, the
burden of proof involves demonstrating
that the assessed value of the property, and
thus the calculated duty, is accurate and
based on tangible, verifiable data. This
requirement is essential to prevent arbitrary
valuations
that
could
result
from
assumptions or inadequate investigations.
By ensuring that the State must justify its
claims with clear evidence, the principle
safeguards property owners from potential
overreach and ensures that any additional
financial burdens are warranted and fair.
Courts have constantly underscored that
when the State seeks to levy additional
taxes or duties, it must do so based on
robust and substantiated evidence. For
instance, in the case of Raj Kumar v. State
of U.P (supra), this Court highlighted that
the entire burden of establishing the
necessity for additional stamp duty lies
with the State. This Court emphasized that
without concrete evidence demonstrating a
change in the land's use or value, the
imposition of additional duty would be
unfounded and unjust. Similarly, in the
2102 INDIAN LAW REPORTS ALLAHABAD SERIES
landmark case of Smt. Pushpa Sareen v.
State of U.P. (supra), the Full Bench of this
Court elaborated on the nature and extent of
evidence required from the State. The
judgment in Pushpa Sareen (supra)
underscored that the State must provide
detailed and specific evidence about the
land's current use, potential use, and
market value. General assumptions or
indirect evidence are insufficient to meet
this burden. The court's insistence on a high
standard of proof reflects the principle's
role in ensuring fairness and protecting
property owners' rights.

10. In the present case, indubitably
the spot verification was not carried out as
per the Rules. Such being the case, the
burden of proof that rested solely on the
Revenue to indicate the nature of the land
and the potential use of the land was not
discharged properly. The spot verification
was conducted without affording an
opportunity to the Petitioners, and the same
cannot be sustained.

11. It is trite law that principles of
audi alteram partem are required to be
followed by the authority and giving a go
by to the same results in violation of the
principles of natural justice. One may
examine the development of the law in
relation to natural justice. The Division
Bench of this Court in S.R. Cold Storage
v. Union of India and Others reported in
2022 SCC online (All) 550; {[2022] 448
ITR 37 (All)} held as follows:

"25. The first and foremost
principle of natural justice is commonly
known as audi alteram partem rule. It says
that no one should be condemned unheard.
Notice is the first limb of this principle. It
must be precise and unambiguous. It should
appraise the party determinatively the case
he has to meet. Time given for the purpose
should be adequate so as to enable him to
make his representation. In the absence of
a notice of the kind and reasonable
opportunity, the order passed becomes
wholly vitiated. Thus, it is but essential that
a party should be put on notice of the case
before any adverse order is passed against
him. It is an approved rule of fair play.

26. The principles of natural
justice are those rules which have been laid
down by the courts as being the minimum
protection of the rights of the individual
against the arbitrary procedure that may be
adopted by a judicial, quasi-judicial and
administrative authority while making an
order affecting those rights. These rules are
intended to prevent such authority from
doing injustice. Even an administrative
order which involves civil consequences
must be consistent with the rules of natural
justice.

27.
The
expression
"civil
consequences" encompasses infraction of
not merely property or personal rights but
of civil liberties, material deprivations, and
non-pecuniary damages. In its wide
umbrella comes everything that affects a
citizen in his civil life.

28. Natural justice has been
variously defined by different judges, for
instance a duty to act fairly, the substantial
requirements of justice, the natural sense of
what is right and wrong, fundamental
justice and fair-play in action. Over the
years by a process of judicial interpretation
two
rules
have
been
evolved
as
representing the principles of natural
justice in judicial process, including
therein quasi-judicial and administrative
process. They constitute the basic elements
of a fair hearing, having their roots in the
innate sense of man for fair-play and justice
which is not the preserve of any particular
race or country but is shared in common by
5 All. Vinod Kumar Jain Vs. State of U.P. & Ors.
2103
all men. The first rule is "nemo judex in
causa sua" or "nemo debet esse judex in
propria causa sua" that is no man shall be
a judge in his own cause. The second rule
is "audi alteram partem", that is, "hear the
other side". A corollary has been deduced
from the above two rules and particularly
the audi alteram partem rule, i. e., "he who
shall decide anything without the other side
having been heard, although he may have
said what is right, will not have been what
is right" or in other words, as it is now
expressed, "justice should not only be done
but should manifestly be seen to be done".
Natural justice is the essence of fair
adjudication, deeply rooted in tradition and
conscience, to be ranked as fundamental.
The purpose of following the principles of
natural justice is the prevention of
miscarriage of justice."

12. The Supreme Court, in the
celebrated constitutional judgment in Mrs.
Maneka Gandhi v. Union of India and
another reported in (1978) 1 SCC 248,
while dealing with a challenge laid to an
order by which a passport was impounded,
expounded upon the significance of the
principles of audi alteram partem to the
doctrine of natural justice. Justice P.N.
Bhagwati while authoring the judgment
beautifully expounded the said principles as
follows:

 "14. But at the same time it must
be remembered that this is a rule of vital
importance in the field of administrative
law and it must not be jettisoned save in
very exceptional circumstances where
compulsive necessity so demands. It is a
wholesome rule designed to secure the rule
of law and the court should not be too ready
to eschew it in its application to a given
case. True it is that in questions of this kind
a fanatical or doctrinaire approach should
be avoided, but that does not mean that
merely
because
the
traditional
methodology of a formalised hearing may
have the effect of stultifying the exercise of
the statutory power, the audi alteram
partem should be wholly excluded. The
court must make every effort to salvage this
cardinal rule to the maximum extent
permissible in a given case. It must not be
forgotten
that
"natural
justice
is
pragmatically flexible and is amenable to
capsulation under the compulsive pressure
of circumstances". The audi alteram
partem rule is not cast in a rigid mould and
judicial decisions establish that it may
suffer situational modifications. The core of
it must, however, remain, namely, that the
person affected must have a reasonable
opportunity of being heard and the hearing
must be a genuine hearing and not an empty
public relations exercise. That is why
Tucker, L.J., emphasised in Russel v. Duke
of Norfolk [(1949) 1 All ER 109] that
"whatever standard of natural justice is
adopted, one essential is that the person
concerned should have a reasonable
opportunity of presenting his case". What
opportunity may be regarded as reasonable
would necessarily depend on the practical
necessities of the situation. It may be a
sophisticated full-fledged hearing or it may
be a hearing which is very brief and
minimal : it may be a hearing prior to the
decision or it may even be a post-decisional
remedial hearing. The audi alteram partem
rule is sufficiently flexible to permit
modifications and variations to suit the
exigencies of myriad kinds of situations
which may arise."

13. Subsequently, the Supreme
Court, in State of Kerala v. K.T. Shaduli
Grocery Dealer Etc. reported in (1977) 2
SCC 777, examined the principle of natural
justice as follows:
2104 INDIAN LAW REPORTS ALLAHABAD SERIES
 "2. Now, the law is well settled
that tax authorities entrusted with the
power to make assessment of tax discharge
quasi- judicial functions and they are
bound to observe principles of natural
justice in reaching their conclusions. It is
true, as pointed out by this Court in
Dhakeswari Cotton Mills Ltd. v. CIT [AIR
1955 SC 154:(1955) 1 SCR 941:(1955) 27
ITR 126] that a taxing officer "is not
fettered by technical rules of evidence and
pleadings, and that he is entitled to act on
material which may not be accepted as
evidence in a court of law", but that does
not absolve him from the obligation to
comply with the fundamental rules of
justice which have come to be known in the
jurisprudence of administrative law as
principles of natural justice. It is, however,
necessary to remember that the rules of
natural justice are not a constant: they are
not absolute and rigid rules having
universal application. It was pointed out by
this Court in Suresh Koshy George v.
University of Kerala [AIR 1969 SC 198 :
(1969) 1 SCR 317 : (1969) 1 SCJ 543] that
"the rules of natural justice are not
embodied rules" and in the same case this
Court approved the following observations
from the judgment of Tucker, L.J. in Russel
v. Duke of Norfolk [(1949) 1 All ER 109] :

"There are, in my view, no words
which are of universal application to every
kind of inquiry and every kind of domestic
tribunal. The requirements of natural
justice must depend on the circumstances of
the case, the nature of the inquiry, the rules
under which the tribunal is acting, the
subject-matter that is being dealt with, and
so forth. Accordingly I do not derive much
assistance from the definitions of natural
justice which have been from time to time
used, but, whatever standard is adopted,
one essential is that the person concerned
should have a reasonable opportunity of
presenting his case."
 3. One of the rules which
constitutes a part of the principles of
natural justice is the rule of audi alteram
partem which requires that no man should
be condemned unheard. It is indeed a
requirement of the duty to act fairly which
lies on all quasi- judicial authorities and
this duty has been extended also to the
authorities
holding
administrative
enquiries involving civil consequences or
affecting rights of parties because as
pointed out by this Court in A.K. Kraipak v.
Union of India [(1969) 2 SCC 262 : (1970)
1 SCR 457] "the aim of the rules of natural
justice is to secure justice or to put it
negatively, to prevent miscarriage of
justice" and justice, in a society which has
accepted socialism as its article of faith in
the Constitution is dispensed not only by
judicial or quasi-judicial authorities but
also
by
authorities
discharging
administrative functions. This rule which
requires an opportunity to be heard to be
given to a person likely to be affected by a
decision is also, like the genus of which it is
a species, not an inflexible rule having a
fixed connotation. It has a variable content
depending on the nature of the inquiry, the
framework of the law under which it is held,
the constitution of the authority holding the
inquiry, the nature and character of the
rights affected and the consequences
flowing from the decision. It is, therefore,
not possible to say that in every case the
rule of audi alteram partem requires that a
particular specified procedure is to be
followed. It may be that in a given case the
rule of audi alteram partem may import a
requirement
that
witnesses
whose
statements are sought to be relied upon by
the authority holding the inquiry should be
permitted to be cross- examined by the
party affected while in some other case it
5 All. Vinod Kumar Jain Vs. State of U.P. & Ors.
2105
may not. The procedure required to be
adopted for giving an opportunity to a
person to be heard must necessarily depend
on facts and circumstances of each case."

14. Justice P.N. Bhagwati further
expounded on the necessity of disclosing to
the assessee the information relied upon by
the authorities. The relevant extract is
provided below:

 "12. This Court further fully
approved of the four propositions laid
down by the Lahore High Court in Seth
Gurmukh Singh v. Commissioner of Income
Tax [(1944) 12 ITR 393 (Lahore HC)]. This
Court was of the opinion that the Taxing
Authorities
had
violated
certain
fundamental rules of natural justice in that
they did not disclose to the assessee the
information
supplied
to
it
by
the
departmental representatives. This case
was relied upon by this Court in a later
decision in Raghubar Mandal Harihar
Mandal's case (supra) where it reiterated
the decision of this Court in Dhakeswari
Cotton Mills Ltd.'s case (supra), and while
further endorsing the decision of the
Lahore High Court in Seth Gurmukh
Singh's case pointed out the rules laid down
by the Lahore High Court for proceeding
under sub- section (3) of Section 23 of the
Income-tax Act and observed as follows:
 "The rules laid down in that
decision were these: (1) While proceeding
under sub-section (3) of section 23 of the
Income-tax Act, the Income-tax Officer is
not bound to rely on such evidence
produced by the assessee as he considers to
be false; (2) if he proposes to make an
estimate in disregard of the evidence, oral
or documentary, led by the assessee, he
should in fairness disclose to the assessee
the material on which he is going to found
that estimate; (3) he is not however
debarred from relying on private sources of
information, which sources he may not
disclose to the assessee at all; and (4) in
case he proposes to use against the
assessee the result of any private inquiries
made by him, he must communicate to the
assessee the substance of the information
so proposed to be utilised to such an extent
as to put the assessee in possession of full
particulars of the case he is expected to
meet and should further give him ample
opportunity to meet it, if possible."

It will thus be noticed that this
Court clearly laid down that while the
Income-tax Officer was not debarred from
relying on any material against the
assessee, justice and fair-play demanded
that the sources of information relied upon
by the Income-tax Officer must be disclosed
to the assessee so that he is in a position to
rebut the same and an opportunity should
be given to the assessee to meet the effect
the aforesaid information."

15. Going forward, the Supreme
Court in Dharampal Satyapal Limited v.
Deputy Commissioner of Central Excise,
Gauhati and others reported in (2015) 8
SCC
519
outlined
the
fundamental
importance of providing an opportunity for
hearing before making any decision, and
characterized it as a basic requirement in
any legal proceedings. The Supreme Court
further propounded that compliance with
principles of natural justice is an implied
mandatory
requirement,
and
nonobservance
of
these
principles
can
invalidate the exercise of power. Relevant
paragraphs have been extracted below:

 28. It is on the aforesaid
jurisprudential
premise
that
the
fundamental principles of natural justice,
including audi alteram partem, have
developed. It is for this reason that the
2106 INDIAN LAW REPORTS ALLAHABAD SERIES
courts have consistently insisted that such
procedural fairness has to be adhered to
before a decision is made and infraction
thereof has led to the quashing of decisions
taken. In many statutes, provisions are
made ensuring that a notice is given to a
person against whom an order is likely to
be passed before a decision is made, but
there may be instances where though an
authority is vested with the powers to pass
such orders, which affect the liberty or
property of an individual but the statute
may not contain a provision for prior
hearing. But what is important to be noted
is that the applicability of principles of
natural justice is not dependent upon any
statutory provision. The principle has to be
mandatorily applied irrespective of the fact
as to whether there is any such statutory
provision or not.
***
30. Wade [Administrative Law (1977) 395]
also emphasises that principles of natural
justice operate as implied mandatory
requirements, non-observance of which
invalidates the exercise of power.
***
35. From the aforesaid discussion, it
becomes clear that the opportunity to
provide
hearing before
making any
decision was considered to be a basic
requirement in the court proceeding. Later
on, this principle was applied to other
quasi-judicial
authorities
and
other
tribunals and ultimately it is now clearly
laid down that even in the administrative
actions, where the decision of the authority
may result in civil consequences, a hearing
before taking a decision is necessary. It
was, thus, observed in A.K. Kraipak v.
Union of India; [(1969) 2 SCC 262] that if
the purpose of rules of natural justice is to
prevent miscarriage of justice, one fails to
see how these rules should not be made
available to administrative inquiries. In
Maneka Gandhi v. Union of India; [(1978)
1 SCC 248] also the application of
principle of natural justice was extended to
the administrative action of the State and its
authorities. It is, thus, clear that before
taking an action, service of notice and
giving of hearing to the noticee is required.
In
Maharashtra
State
Financial
Corporation v. Suvarna Board Mills;
[(1994) 5 SCC 566] , this aspect was
explained in the following manner :

"3. It has been contended before
us by the learned counsel for the appellant
that principles of natural justice were
satisfied before taking action under Section
29, assuming that it was necessary to do so.
Let it be seen whether it was so. It is well
settled that natural justice cannot be placed
in a straitjacket; its rules are not embodied
and they do vary from case to case and from
one fact-situation to another. All that has to
be
seen
is
that
no
adverse
civil
consequences are allowed to ensue before
one is put on notice that the consequence
would follow if he would not take care of
the lapse, because of which the action as
made known is contemplated. No particular
form of notice is the demand of law. All will
depend on facts and circumstances of the
case."

16. One may further refer to the
recent judgment of the Supreme Court in
Madhyamam Broadcasting Limited v.
Union of India and others reported in
ILR 2023 (2) Kerala 545; (2023 SCC
OnLine
366)
wherein
the
Hon'ble
Supreme
Court
highlighted
that
the
principles of natural justice of which audi
alteram partem is a part, guarantee a
reasonable
procedure
which
is
a
requirement entrenched in Articles 14, 19
and 21 of the Constitution of India. Chief
Justice Dr. D.Y. Chandrachud while
authoring the judgment has succinctly
5 All. Vinod Kumar Jain Vs. State of U.P. & Ors.
2107
examined the principles of natural justice
and after examining the Supreme Court's
ratio in umpteen cases has penned the
relevant paragraph which is extracted
below:

 "47. The judgment of this Court
in Maneka Gandhi (supra) spearheaded
two doctrinal shifts on procedural fairness
because of the constitutionalising of
natural justice. Firstly, procedural fairness
was no longer viewed merely as a means to
secure a just outcome but a requirement
that holds an inherent value in itself. In
view of this shift, the Courts are now
precluded from solely assessing procedural
infringements based on whether the
procedure would have prejudiced the
outcome of the case [See S.L. Kapoor v.
Jagmohan; (1980) 4 SCC 379 "The nonobservance of natural justice is itself
prejudice to any man and proof of prejudice
independently of proof of denial of natural
justice is unnecessary"; also see Swadeshi
Cotton Mills v. Union of India; A.I.R. 1981
S.C. 818]. Instead, the courts would have to
decide if the procedure that was followed
infringed upon the right to a fair and
reasonable procedure, independent of the
outcome. In compliance with this line of
thought, the courts have read the principles
of natural justice into an enactment to save
it from being declared unconstitutional on
procedural grounds [See Olga Tellis v.
Bombay Municipal Corporation: (1985) 3
SCC 545; C.B. Gautam v. Union of
India:(1993) 1 SCC 78; Sahara India
(Firm), Lucknow v. Commissioner of
Income Tax, Central-I: (2008) 14 SCC 151
and Kesar Enterprises v. State of Uttar
Pradesh: (2011) 13 SCC 733]. Secondly,
natural
justice
principles
breathe
reasonableness
into
the
procedure.
Responding to the argument that the
principles of natural justice are not static
but are capable of being moulded to the
circumstances, it was held that the core of
natural justice guarantees a reasonable
procedure which is a constitutional
requirement entrenched in Articles 14, 19
and 21. The facet of audi alterum partem
encompasses the components of notice,
contents of the notice, reports of inquiry,
and materials that are available for
perusal. While situational modifications
are permissible, the rules of natural justice
cannot be modified to suit the needs of the
situation to such an extent that the core of
the principle is abrogated because it is the
core
that
infuses
procedural
reasonableness. The burden is on the
applicant to prove that the procedure that
was followed (or not followed) by the
adjudicating authority, in effect, infringes
upon the core of the right to a fair and
reasonable hearing."

17. Chief Justice Dr. D.Y.
Chandrachud has further elaborated on the
principles of natural justice in State Bank
of India and others v. Rajesh Agarwal
and others reported in (2023) 6 SCC 1.
The relevant paragraph is delineated below:

"36. We need to bear in mind that
the principles of natural justice are not
mere legal formalities. They constitute
substantive obligations that need to be
followed
by
decision-
making
and
adjudicating authorities. The principles of
natural justice act as a guarantee against
arbitrary action, both in terms of procedure
and substance, by judicial, quasi-judicial,
and
administrative
authorities.
Two
fundamental principles of natural justice
are entrenched in Indian jurisprudence: (i)
nemo judex in causa sua, which means that
no person should be a judge in their own
cause; and (ii) audi alteram partem, which
means
that
a
person
affected
by
2108 INDIAN LAW REPORTS ALLAHABAD SERIES
administrative, judicial or quasi-judicial
action must be heard before a decision is
taken.
The
courts
generally
favor
interpretation of a statutory provision
consistent with the principles of natural
justice because it is presumed that the
statutory authorities do not intend to
contravene fundamental rights. Application
of the said principles depends on the facts
and circumstances of the case, express
language and basic scheme of the statute
under which the administrative power is
exercised, the nature and purpose for which
the power is conferred, and the final effect
of the exercise of that power." .

18. The common thread that runs
across these judgments is that although the
principle of audi alteram partem can evolve
itself given the facts and circumstances of
each case, its significance and applicability
is universal. Audi alteram partem, which is
a part of the doctrine of natural justice,
finds
its
roots
primarily
in
the
constitutionally
guaranteed
ideal
of
equality. This principle ensures that no one
is condemned, penalized, or deprived of
their rights without a fair and reasonable
opportunity of hearing. It acts as a
safeguard
against
arbitrary
decisionmaking, upholding the principle of due
process while also providing a crucial
foundation for just and equitable legal or
administrative proceedings.

19. The principle of natural justice
dictates that individuals affected by a
decision must be given an opportunity to
present their case and contest any adverse
findings. This principle, often encapsulated
in the Latin phrase "audi alteram partem"
(hear the other side), is a fundamental
aspect of fair legal procedures. When a spot
inspection is conducted ex parte, it violates
this principle by depriving the property
owner of their right to be heard.

20. The importance of adhering to
principles
of
natural
justice
in
administrative actions has been repeatedly
emphasized by the courts. In the case of
Ridge v. Baldwin reported in [1964] AC 40
, the House of Lords held that failure to
observe the principles of natural justice
renders a decision void.