Sri.Arun Thomas, Thiruvalla V. ACIT, Thiruvalla

ITA 116/COCH/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2518 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: T M SREEDHARANSR
• Keywords: Charitable institution; Principle of natural justice
• Section: 12A; 147; 263

Judgement Text

1 ITA NO. 116/COCH/2012 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 116/COCH/2012 (ASSESSMENT YEAR 2007-08) SHRI ARUN THOMAS VS THE A.C.I.T., CIR.1 KANNATTU ARUN FINANCIERS THIRUVALLA CHENGANNUR, PATHANAMTHITTA PAN : AAATM4587A (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI T.M. SREEDHARAN,SR COUNSEL RESPONDENT BY : SMT. SUSAN GEORGE VARGHESE DATE OF HEARING : 12-06-2013 DATE OF PRONOUNCEMENT : 28-06-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF ADMINISTRATIVE COMMISSIONER DATED 20-03-2012 FOR TH E ASSESSMENT YEAR 2007-08. 2 ITA NO. 116/COCH/2012 2. SHRI T.M. SREEDHARAN, THE LD.SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER AFTER DETAILED ENQUIRY ACCEPTED THE RETURN OF INCOME INCLUDING THE PAYMENT OF INTEREST ON THE FUNDS BORROWED ON PERSONAL ACCOUNT. THE ADMINISTRATIVE COMMISSION ER, HOWEVER, FOUND THAT TAX WAS DEDUCTED AT SOURCE ON THE INTEREST PAY MENT. INTEREST PAID OUTSIDE THE BOOKS OF ACCOUNT WAS ALLOWED AS DEDUCTI ON. ACCORDINGLY, IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT, THE ADMI NISTRATIVE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSME NT. 3. ACCORDING TO THE LD.SENIOR COUNSEL, THERE ARE TW O PRE CONDITIONS TO BE SATISFIED FOR INVOKING THE JURISDICTION OF REVISION U/S 263 OF THE ACT. ACCORDING TO THE LD.SENIOR COUNSEL, THE ORDER SHOUL D BE ERRONEOUS AND ALSO SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENU E. IF ANYONE OF THE CONDITIONS IS ABSENT, RECOURSE TO SECTION 263 CANNO T BE MADE. THE LD.SENIOR COUNSEL PLACED HIS RELIANCE ON THE JUDGME NT OF THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO LTD VS CIT (2000) 243 ITR 83 (SC). 4. THE LD.SENIOR COUNSEL FURTHER SUBMITTED THAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09, THIS TRIBUNAL HAD AN OCCASION TO 3 ITA NO. 116/COCH/2012 EXAMINE THE ISSUE AND FOUND THAT A SIMILAR INTEREST PAID WAS ALLOWABLE U/S 36(1)(III) OF THE ACT. SINCE THIS TRIBUNAL HAD ALR EADY TAKEN A DECISION IN RESPECT OF THE PAYMENT OF INTEREST, ACCORDING TO TH E LD.SENIOR COUNSEL, THE ORDER OF THE ASSESSING OFFICER IS NOT ERRONEOUS. 5. REFERRING TO THE NOTICE ISSUED BY THE ADMINISTRA TIVE COMMISSIONER PROPOSING TO REVISE THE ORDER U/S 263 OF THE ACT, T HE LD.SENIOR COUNSEL POINTED OUT THAT THE NOTICE ISSUED TO THE ASSESSEE WAS NOT SIGNED BY THE ADMINISTRATIVE COMMISSIONER HIMSELF, BUT THE INCOME -TAX OFFICER HAS SIGNED THE NOTICE ON BEHALF OF THE ADMINISTRATIVE C OMMISSIONER. THEREFORE, THE NOTICE SIGNED BY THE INCOME-TAX OFFI CER IS NOT A VALID ONE. 6. ON THE CONTRARY, SMT. SUSAN GEORGE VARGHESE, THE LD.DR SUBMITTED THAT THERE IS NO NEED FOR ISSUING THE NOTICE U/S 26 3 OF THE ACT. WHAT IS REQUIRED IS AN OPPORTUNITY SHALL BE GIVEN TO THE AS SESSEE. SECTION 263, ACCORDING TO THE LD.DR, DOES NOT SPEAK OF ANY NOTIC E. BEFORE TAKING ANY DECISION, AN OPPORTUNITY SHALL BE GIVEN TO THE ASSE SSEE. THE LD.DR PLACED HER RELIANCE ON THE JUDGMENT OF THE APEX COURT IN C IT VS ELECTRO HOUSE (1971) 82 ITR 824 (SC). 4 ITA NO. 116/COCH/2012 7. REFERRING TO THE ASSESSMENT ORDER, THE LD.DR POI NTED OUT THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ORDER. THE ORDER DOES NOT DISCLOSE THE APPLICATION OF MIND. ACCORDING TO THE LD.DR, THE FAILURE OF THE ASSESSING OFFICER TO CONDUCT ENQUIRY IS ERRONEO US AND THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS PREJUDICIA L TO THE INTEREST OF THE REVENUE. THE LD.DR POINTED OUT THAT THE ASSESSMENT ORDER BEING A QUASI JUDICIAL ORDER HAS TO CONTAIN REASONING FOR THE CON CLUSION. ACCORDING TO THE LD.DR, THE ASSESSMENT ORDER SHALL BE A SPEAKING ORD ER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE ADMINI STRATIVE COMMISSIONER. THE ASSESSMENT ORDER DOES NOT CONTAIN ANY REASONING . THE ASSESSING OFFICER WITHOUT ANY DISCUSSION ACCEPTED THE RETURN FILED BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE PROCEEDINGS BEFORE THE A SSESSING OFFICER ARE JUDICIAL PROCEEDINGS. A DECISION IN A JUDICIAL PRO CEEDING SHALL BE A SPEAKING ONE. IN OTHER WORDS, THE ORDER OF THE ASSESSING O FFICER SHALL CONTAIN REASONS FOR THE CONCLUSION REACHED THEREIN. THIS T RIBUNAL IS OF THE 5 ITA NO. 116/COCH/2012 CONSIDERED OPINION THAT THE ASSESSMENT ORDER SHALL INDICATE THE APPLICATION OF MIND OF THE CONCERNED ASSESSING OFFICER TO THE M ATERIALS AVAILABLE ON RECORD. IT IS WELL SETTLED PRINCIPLES OF LAW THAT JUDICIAL / ADMINISTRATIVE ORDERS SHALL SPEAK FOR THEMSELVES. THE REASON FOR THE CONCLUSION SHALL CONTAIN IN THE ORDER ITSELF. THE REASON FOR THE CO NCLUSION REACHED IN AN ORDER CANNOT BE SUBSTITUTED EITHER BY WAY OF AN AFF IDAVIT OR DOCUMENT IN APPEAL / REVISIONAL PROCEEDINGS. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE INSTANT CASE THE ORD ER OF THE ASSESSING OFFICER IS A NON SPEAKING ONE. IT DOES NOT DISCLOS E THE APPLICATION OF MIND. AS SUCH, IT IS NOT ONLY ERRONEOUS BUT ALSO PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THEREFORE, IN THE GIVEN CIRCUMSTANCES, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENT OF THE APEX CO URT IN THE CASE OF MALABAR INDUSTRIAL CO LTD (SUPRA) MAY NOT BE OF ANY ASSISTANCE TO THE ASSESSEE. 9. NO DOUBT, THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09 FOUND THAT THE INTEREST ON THE BORROWED FUNDS IS AN ALLOWABLE EXPENDITURE U/S 36(1)(III) OF THE ACT. HOWEVER, EACH ASSESSMENT YE AR IS SEPARATE AND INDEPENDENT. THE ASSESSING OFFICER HAS TO VERIFY W HETHER THE VERY SAME 6 ITA NO. 116/COCH/2012 BORROWED FUNDS CONTINUED FOR THE YEAR UNDER CONSIDE RATION OR NOT; OR THE ASSESSEE HAS BORROWED ANY OTHER LOANS. SINCE THE A SSESSING OFFICER HAS NOT VERIFIED / EXAMINED THE NATURE OF THE BORROWED FUND S FOR THE YEAR UNDER CONSIDERATION, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT MERELY BECAUSE THIS TRIBUNAL ALLOWED THE CLAIM OF THE ASSE SSEE U/S 36(1)(III) THAT DOES NOT MEAN THAT THE ASSESSING OFFICER NEED NOT D ISCUSS THE MATTER IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER IS EXPECTE D TO CONSIDER THE ORDER OF THIS TRIBUNAL AND EXPRESS HIS OPINION AS TO HOW IT IS APPLICABLE OR OTHERWISE TO THE FACTS WHICH AROSE FOR CONSIDERATIO N FOR THE YEAR UNDER CONSIDERATION. THEREFORE, MERELY BECAUSE THIS TRIB UNAL ALLOWED THE CLAIM OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IT DOES NOT MEAN THAT THE ASSESSING OFFICER NEED NOT PASS A SPEAKING ORDER. THIS TRIBUNAL IS OF THE CONSIDERED OPINION, THAT THE ASSESSING OFFICER IS B OUND TO PASS A SPEAKING ORDER WITH REFERENCE TO THE MATERIALS ON RECORD. 10. NOW COMING TO THE CONTENTION OF THE LD.SENIOR C OUNSEL THAT THE NOTICE ISSUED WAS NOT SIGNED BY THE ADMINISTRATIVE COMMISSIONER HIMSELF BUT SIGNED BY THE INCOME-TAX OFFICER, WE HAVE CAREF ULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF ELECTRO H OUSE (SUPRA). IN THE 7 ITA NO. 116/COCH/2012 CASE BEFORE THE APEX COURT, A SIMILAR CONTENTION WA S RAISED. THE APEX COURT, AFTER REFERRING TO SECTION 33B OF THE INCOME -TAX ACT, 1922 FOUND THAT SECTION 33B DID NOT SPEAK OF ANY NOTICE. WHAT IS R EQUIRED IS AN OPPORTUNITY HAS TO BE GIVEN. ALL THAT IS REQUIRED BEFORE REACH ING A DECISION IS THE COMMISSIONER SHALL GIVE AN OPPORTUNITY TO THE ASSES SEE. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 26 3 OF THE INCOME-TAX ACT, 1961. THE PROVISIONS OF SECTION 263 OF THE INCOME- TAX ACT, 1961 ARE IDENTICALLY WORDED AS THAT OF SECTION 33B OF THE IN COME-TAX 1922. THEREFORE, THE OBSERVATION OF THE APEX COURT IN REG ARDS TO SECTION 33B OF THE INCOME-TAX ACT, 1922 IS SQUARELY APPLICABLE EVE N IN RESPECT OF PROVISIONS OF SECTION 263 OF THE ACT. THEREFORE, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHAT IS REQUIRED BY SECTION 263 OF THE ACT IS TO GIVE AN OPPORTUNITY TO THE ASSESSEE BEFORE TAKING A DECI SION. IN THIS CASE, SUCH OPPORTUNITY WAS GIVEN, THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE NOTICE ISSUED BY THE ADMINISTRATIVE COMMISSIONE R. 11. IT MAY NOT BE OUT OF PLACE TO POINT OUT THAT TH E ORDER OF ASSESSMENT BEING QUASI JUDICIAL ORDER, THE ASSESSING OFFICER I S EXPECTED TO RECORD HIS OWN REASONING FOR THE CONCLUSION REACHED THEREIN. UNLESS SUCH REASONS ARE 8 ITA NO. 116/COCH/2012 RECORDED, THE PURPOSE OF PROVIDING REVISIONAL / APP ELLATE JURISDICTION IN THE INCOME-TAX ACT WOULD BE DEFEATED. IN OTHER WORDS, THE REVISIONAL / APPELLATE AUTHORITY MAY NOT BE ABLE TO APPRECIATE T HE REASONS FOR THE CONCLUSIONS REACHED BY THE ASSESSING OFFICER. THER EFORE, TO MAKE THE APPELLATE / REVISIONAL JURISDICTION EFFECTIVE, THE ASSESSING OFFICER IS BOUND TO RECORD HIS OWN REASONING FOR THE CONCLUSION ARRIVED AT. 12. WE FIND THAT THE PUNJAB & HARYANA HIGH COURT HA D AN OCCASION TO EXAMINE THIS ISSUE IN COMMISSIONER OF INCOME-TAX VS SUNIL KUMAR GOEL (2005) 274 ITR 53 (P&H) AND AFTER CONSIDERING THE J UDGMENT OF THE APEX COURT IN MUKHERJEE (S.N.) VS UOI (1990) AIR 1990 SC 1984 HAS OBSERVED AS FOLLOWS: IN S.N. MUKHERJEE V. UNION OF INDIA, AIR 1990 SC 1984, A CONSTITUTION BENCH OF THE SUPREME COURT DISCUSSED T HE DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRA LIA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBER OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULLED OUT THE FOLLOWING PROPOSITIONS (PA GE 1995): THE DECISIONS OF THIS COURT REFERRED TO ABOVE IND ICATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASO NS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGH ED WITH THE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHOR ITY 9 ITA NO. 116/COCH/2012 EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPERVISORY JURISDICTION OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTITUTION AND THAT THE REASON S, IF RECORDED, WOULD ENABLE THIS COURT OR THE HIGH COURT S TO EFFECTIVELY EXERCISE THE APPELLATE OR SUPERVISORY P OWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONS IDERATIONS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING TH IS VIEW ARE THAT THE REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTEE CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLAR ITY IN THE DECISIONS; AND (III) MINIMIZE CHANCES OF ARBITRARIN ESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HAS BEEN DRAW N BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIE S EXERCISING JUDICIAL FUNCTIONS ON THE GROUND THAT A JUDGE IS TR AINED TO LOOK AT THINGS OBJECTIVELY UNINFLUENCED BY CONSIDERATION S OF POLICY OR EXPEDIENCY WHEREAS AN EXECUTIVE OFFICER GENERALL Y LOOKS AT THINGS FROM THE STAND POINT OF POLICY AND EXPEDIENC Y. REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUD ICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHOR ITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINIST RATIVE AUTHORITY MUST RECORD REASONS FOR ITS DECISION, ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE R ECORDED OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVICES A S ALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECI SION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH A RE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPI NION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOV ERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI- JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECISION IS SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IT MAY, 10 ITA NO. 116/COCH/2012 HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION OF A COUR T OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PA RTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE A UTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERS Y. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REV ISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GI VE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AG REES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. IN TESTEELS LTD V. N.M. DESAI (1970) 37 FJR 7; AIR 1970 GUJ 1, A FULL BENCH OF THE GUJARAT HIGH COURT HAS M ADE AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT A ND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIO NS MADE IN THE DECISION. THE SAME ARE (HEADNOTE OF AIR 1970 ( GUJ)): THE NECESSITY OF GIVING REASONS FLOWS AS A NECESS ARY COROLLARY FROM THE RULE OF LAW WHICH CONSTITUTES ON E OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-U P. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUD ICIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXP EDIENCY. THEY MUST DECIDE THE MATTER SOLELY ON THE FACTS OF THE PARTICULAR CASE, SOLELY ON THE MATERIAL BEFORE THEM AND APART FROM ANY EXTRANEOUS CONSIDERATIONS BY APPLYING PRE- EXISTING LEGAL NORMS TO FACTUAL SITUATIONS. NOW THE NECESSI TY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVA NCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHE CKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND EXCLUDES OR, AT ANY RATE, MINIMIZES ARBITRARINESS I N THE DECISION-MAKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORD ER IS BASED ON THE POWER OF JUDICIAL REVIEW WHICH IS P OSSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME CO URT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HAVE THE POWER 11 ITA NO. 116/COCH/2012 UNDER THE SAID PROVISIONS TO QUASH BY CERTIORARI A QUASI-JUDICIAL ORDER MADE BY AN ADMINISTRATIVE OFFICER AND THIS PO WER OF REVIEW CAN BE EFFECTIVELY EXERCISED ONLY IF THE ORD ER IS A SPEAKING ORDER. IN THE ABSENCE OF ANY REASONS IN S UPPORT OF THE ORDER, THE SAID COURTS CANNOT EXAMINE THE CORRE CTNESS OF THE ORDER UNDER REVIEW. THE HIGH COURT AND THE SUP REME COURT WOULD BE POWERLESS TO INTERFERE SO AS TO KEEP THE ADMINISTRATIVE OFFICER WITHIN THE LIMITS OF THE LAW . THE RESULT WOULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THER E WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRIC E. IF THIS REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SU BJECT TO JUDICIAL SCRUTINY AND CORRECTION. IF THE ORDER PASSED BY THE TRIBUNAL IS SCRUTINIZED IN THE LIGHT OF THE AFOREMENTIONED PROPOSITION OF LAW, WE DO NOT FIND ANY DIFFICULTY IN SETTING ASIDE THE SAME ON THE GRO UND OF VIOLATION OF THE RULES OF NATURAL JUSTICE. THE FLO WERY LANGUAGE USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF T HE RESPONDENTS PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN OUR OPINION, THE TRIBU NAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPS ETTING WELL REASONED ORDERS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). IT SHOULD HA VE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTION 2 71D AND 271E OF THE ACT IN CONJUNCTION WITH OTHER PROVISION S OF THE SAME FAMILY AND THEN DECIDED BY A REASONED ORDER WH ETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOU LD HAVE CLEARLY REFLECTED THE APPLICATION OF MIND BY THE LE ARNED MEMBERS. 13. THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN TOYOTA MOTOR CORPORATION VS COMMISSIONER OF INCOME-TAX (20 08) 306 ITR 52 (SC). THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 53 O F THE ITR: 12 ITA NO. 116/COCH/2012 WE ARE NOT INCLINED TO INTERFERE WITH THE IMPUGNE D ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD T HAT THE ASSESSING OFFICER HAD DISPOSED OF THE PROCEEDINGS S TATING THE PENALTY PROCEEDINGS INITIATED IN THIS CASE UNDER SE CTION 271C READ WITH SECTION 274 OF THE INCOME-TAX ACT, 1961 A RE HEREBY DROPPED. ACCORDINGLY TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUN AL REFERRED TO CERTAIN ASPECTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN S HORT, THE I.T. ACT) WAS IMPERMISSIBLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HI GH COURT HAS DONE IS TO REQUIRE THE ASSESSING OFFICER TO PAS S A REASONED ORDER. THE HIGH COURT WAS OF THE VIEW THAT THE TRI BUNAL COULD NOT HAVE SUBSTITUTED ITS OWN REASONINGS WHICH WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE, ALL RELEVANT ASPECTS WERE PLACED FOR CONS IDERATION AND IF THE OFFICER DID NOT RECORD REASONS, THE ASSE SSEE CANNOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THIS STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN U P BY THE ASSESSING OFFICER ON REMAND, IT SHALL BE HIS DUTY T O TAKE INTO ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATE RIALS, IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. 14. WE ALSO FIND THAT THE ALLAHABAD HIGH COURT IN A RECENT UNREPORTED JUDGMENT EXPRESSED ITS SHOCK AND ANGUISH THE WAY IN WHICH THE ASSESSMENT ORDERS AND THE REVISIONAL ORDERS ARE BEING PASSED. IN FACT, THE ASSESSEE, M/S FATEH CHAND CHARITABLE TRUST IN WRIT TAX NO.162 9 OF 2010 (JUDGMENT DATED 27-05-2013) BEFORE THE ALLAHABAD HIGH COURT R ECEIVED DONATION OF 13 ITA NO. 116/COCH/2012 RS.5.23 CRORES. THE ASSESSING OFFICER ACCEPTED THE SAME WITHOUT ANY ENQUIRY AND REASONING IN THE ASSESSMENT ORDER. THE COMMISSIONER OF INCOME-TAX INITIATED PROCEEDINGS TO CANCEL THE REGI STRATION U/S 12A OF THE ACT. HOWEVER, IT WAS DROPPED WITHOUT RECORDING ANY REASON. SUBSEQUENTLY, THE CASE WAS REOPENED AND NOTICE WAS ISSUED U/S 147 OF THE ACT. THE ASSESSEE CHALLENGED THE NOTICE ISSUED FOR REOPENING THE ASSESSMENT BY WAY OF WRIT PETITION. WHILE CONSIDER ING THE WIT PETITION, THE ALLAHABAD HIGH COURT EXPRESSED ITS SHOCK AND ANGUIS H ON THE WAY IN WHICH THE ORDERS ARE BEING PASSED BY THE INCOME-TAX AUTHO RITIES. IN FACT, THE ALLAHABAD HIGH COURT HAS OBSERVED AS FOLLOWS: THE INCOME TAX AUTHORITIES ARE REQUIRED TO ADMINI STER THE ACT. THE RIGHT TO ADMINISTER, CANNOT OBVIOUSLY INCLUDE THE RIGHT TO MAL-ADMINISTER. THUS, WE FIND NO WORDS TO EXPRESS ANGUISH AS WHAT KIND OF GOVERNANCE IT HAD BEEN. THERE IS ANOTHER REASON FOR IGNORING THE AFORESAID ORDER, DROPPING THE CANCELLATION PROCEEDING OF REGISTRATIO N. THE SAID ORDER DOES NOT CONTAIN ANY REASON. REASONS INTRODU CE CLARITY IN AN ORDER. REASON IS THE HEART BEAT OF EVERY CON CLUSION AND 14 ITA NO. 116/COCH/2012 WITHOUT THE SAME IT BECOMES LIFELESS. (SEE RAJ KIS HORE JHA VERSUS STATE OF BIHAR AND OTHERS, AIR 2003 SC 4664) . EVEN IN RESPECT OF ADMINISTRATIVE ORDERS LORD DENN ING M.R. IN BREEN VS. AMALGAMATED ENGINEERING UNION, (1 971) ALL. E.R. 1148) OBSERVED: THE GIVING OF REASONS IS ONE OF THE FUNDAMENTALS OF GOOD ADMINISTRATION. FAILURE TO GIVE REASONS AMOUNTS TO DENIAL OF JUSTI CE. REASONS ARE LIVE LINKS BETWEEN THE MIND OF THE DECI SION TAKER TO THE CONTROVERSY IN QUESTION AND THE DECISION OR CONCLUSION ARRIVED AT. REASONS SUBSTITUTE SUBJECTIVITY BY OBJ ECTIVITY. THE EMPHASIS ON RECORDING REASONS IS THAT IF THE DECISI ON REVEALS THE INSCRUTABLE FACE OF THE SPHINX, IT CAN, BY ITS SILENCE, RENDER IT VIRTUALLY IMPOSSIBLE FOR THE COURTS TO PERFORM T HEIR APPELLATE FUNCTION OR EXERCISE THE POWER OF JUDICIAL REVIEW O N ADJUDGING THE VALIDITY OF THE DECISION. RIGHT TO REASON IS A N INDISPENSABLE PART OF A SOUND JUDICIAL SYSTEM; REASONS AT LEAST S UFFICIENT TO INDICATE AN APPLICATION OF MIND TO THE MATTER BEFOR E COURT. ANOTHER RATIONALE IS THAT THE AFFECTED PARTY CAN KN OW WHY THE DECISION HAS GONE AGAINST HIM. ONE OF THE SALUTARY REQUIREMENTS OF NATURAL JUSTICE IS SPELLING OUT REA SONS FOR THE ORDER MADE; IN OTHER WORDS, A SPEAKING-OUT. THE I NSCRUTABLE FACE OF THE SPHINX IS ORDINARILY INCONGRUOUS WITH A JUDICIAL OR QUASI-JUDICIAL PERFORMANCE. 15 ITA NO. 116/COCH/2012 A FEEBLE ARGUMENT WAS ADVANCED THAT THE COMMISSION ER OF INCOME TAX BEING HIGHER IN HIERARCHY THAN ADDITI ONAL COMMISSIONER OF INCOME TAX, THE INITIATION OF THE P ROCEEDINGS AT THE INSTANCE OF ADDITIONAL COMMISSIONER OF INCOM E TAX IS BAD. IN VIEW OF OUR ABOVE CONCLUSION THAT THE ORDER DRO PPING THE PROCEEDING UNDER SECTION 12A WAS NOT A VALID AC TION ON THE PART OF THE COMMISSIONER OF INCOME TAX, THE SAID AR GUMENT IS REJECTED. HAVING REGARD TO WHAT HAS BEEN SAID ABOVE. WE FIN D THAT IT IS A CASE WHERE THE THEN ASSESSING OFFICER (SHRI BHOPAL SINGH), THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-II, MUZAFFARNAGAR AND SHRI KUNDAN MISRA, THE THEN COMMI SSIONER OF INCOME TAX, MUZAFFARNAGAR WHO PASSED THE ORDER D ATED 25.1.2008 HAVE ABDICATED THEIR DUTIES. THE COURT I N THE EXERCISE OF SUPERVISORY JURISDICTION UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA CANNOT BE A MUTE SPECT ATOR. SUCH ACTIONS ON THE PART OF THE DEPARTMENT NOT ONLY BRIN G DISREPUTE TO THE DEPARTMENT BUT ALSO ENCOURAGE THE DISHONEST ASSESSEES AND PROMOTES THE NEFARIOUS ACTIVITIES WHICH NOT ONL Y CAUSES LOSS TO REVENUE BUT ALSO PROMOTES DISHONESTY. AN H ONEST TAX PAYER FEELS CHEATED. LET THE MATTER BE EXAMINED BY THE CHIEF 16 ITA NO. 116/COCH/2012 COMMISSIONER OF INCOME TAX AND APPROPRIATE DEPARTME NTAL PROCEEDINGS MAY BE TAKEN OUT AGAINST THE ERRING OFF ICIALS. A COPY OF THIS JUDGMENT MAY ALSO BE SENT TO THE CHAIR MAN OF THE CENTRAL BOARD OF DIRECT TAXES FOR AN APPROPRIATE AC TION. 15. IN VIEW OF THE ABOVE JUDGMENTS OF THE PUNJAB & HARYANA HIGH COURT AND ALLAHABAD HIGH COURT AS ALSO THE APEX COURT, IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO RECORD REASONS IN THE A SSESSMENT ORDER. RECORDING OF REASON WOULD NOT ONLY ENABLE THE REVIS IONAL / APPELLATE AUTHORITIES TO DISCHARGE THEIR FUNCTION EFFECTIVELY BUT ALSO REPOSE CONFIDENCE IN THE SYSTEM. 16. IN VIEW OF THE ABOVE, WE ARE UNABLE TO ACCEPT T HE CONTENTION OF THE LD.SENIOR COUNSEL. ACCORDINGLY, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH JUNE, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 28 TH JUNE, 2013 PK/- 17 ITA NO. 116/COCH/2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH