Slipons India P.Ltd, Calicut V. ACIT, Calicut

ITA 119/COCH/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65060 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 16-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: M V VENUGOPAL
• Keywords: Gift; Depreciation; Principle of natural justice
• Section: 263

Judgement Text

1 ITA NO. 119/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.119/COCH/2012 (ASSESSMENT YEAR 2007-08) SLIPONS INDIA PVT LTD VS A.C.I.T., CIR.2(1) 7/330A, KOLATHARA CALICUT NALLALAM, CALICUT 673 655 PAN : AAGCS7645L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.V. VENUGOPAL RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 29-11-2012 DATE OF PRONOUNCEMENT : 21-12-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE TAXPAYER IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER PASSED U/S 263 OF THE I .T. ACT, 1961 FOR THE ASSESSMENT YEAR 2007-08. 2. SHRI M.V. VENUGOPAL, THE LD.REPRESENTATIVE FOR T HE TAXPAYER SUBMITTED THAT THE ADMINISTRATIVE COMMISSIONER IN E XERCISE OF HIS POWERS U/S 263 OF THE INCOME-TAX ACT FOUND THAT THE ASSESS ING OFFICER HAS NOT 2 ITA NO. 119/COCH/2012 EXAMINED THE CLAIM OF THE TAXPAYER. ACCORDING TO T HE LD.REPRESENTATIVE, THE ASSESSING OFFICER CALLED FOR DETAILS WITH REGARD TO THE CLAIM OF THE TAXPAYER AND THE TAXPAYER HAS SUBMITTED ALL THE DETAILS AS R EQUIRED BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER HAS EXAM INED ALL THOSE DOCUMENTS AND THEREAFTER ACCEPTED THE CLAIM OF THE TAXPAYER. MERELY BECAUSE THE ASSESSING OFFICER HAS NOT DISCLOSED ALL THOSE DETAI LS IN THE ASSESSMENT ORDER, THE TAXPAYER CANNOT BE PENALIZED. WE HEARD SMT. S VIJAYAPRABHA, THE LD.DR ALSO. 3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER DISCUSSED ABOUT THE DEPRECIATION AND FOUND THAT THE TAXPAYER HAS CLAIMED EXCESS DEPRECIATION TO THE EXTENT OF RS.53,245. IN RESPECT OF OTHER CLAIM WITH REGARD TO GIFT SCHEME, ADVERTISEMENT EXPENSES, TDS ON ROYALTY, NO DISCUSSIONS WERE MADE IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO APPL Y HIS MIND TO THE MATERIALS AVAILABLE ON RECORD AND BRING ON RECORD T HE FACTS SO AS TO ENABLE THE APPELLATE AUTHORITY TO EXERCISE ITS APPELLATE P OWER WHENEVER THE ASSESSMENT ORDER IS CHALLENGED BEFORE THE APPELLATE FORUM. THE IMPUGNED ORDER OF THE ASSESSING OFFICER DOES NOT DISCLOSE TH E APPLICATION OF MIND WITH 3 ITA NO. 119/COCH/2012 REGARD TO CLAIM MADE BY THE TAXPAYER. THE ASSESSIN G OFFICER HAS FAILED TO BRING ON RECORD THE FACTS RELATING TO THE CLAIM MAD E BY THE TAXPAYER. AS RIGHTLY SUBMITTED BY THE LD.REPRESENTATIVE FOR THE TAXPAYER, THE TAXPAYER CANNOT BE PENALIZED FOR THE NEGLIGENCE OF THE ASSES SING OFFICER IN PASSING APPROPRIATE ORDER OF ASSESSMENT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT ASKING THE ASSESSING OFFICER TO APPLY HIS MIND TO THE FACTS ON RECORD AND THEREAFTER PASS A SPEAKING ORDER DOES NOT AMOUNT TO PENALISING THE TAXPAYER. THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT ASKING THE ASSESSING OFFICER TO PASS A SPEAKING ORDER AFTER AP PLYING HIS MIND TO THE MATERIALS AVAILABLE ON RECORD WOULD DEFINITELY HELP THE TAXPAYER. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE APPL ICATION OF MIND BY THE ASSESSING OFFICER ON THE MATERIALS AVAILABLE ON REC ORD SHALL BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. THE ASSESSMENT ORDER SHALL CONTAIN REASONS FOR DECISION. UNFORTUNATELY THE ASSESSMENT ORDER DOES NOT DISCLOSE THE APPLICATION OF MIND AND IT DOES NOT CONTAIN ANY REA SON FOR ACCEPTING THE CLAIM OF THE TAXPAYER. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY EX ERCISED HIS POWERS U/S 263 OF THE INCOME-TAX ACT. IT MAY NOT BE OUT OF PL ACE TO MENTION HERE THAT THE PUNJAB & HARYANA HIGH COURT HAD AN OCCASION TO E XAMINE THIS ISSUE IN 4 ITA NO. 119/COCH/2012 COMMISSIONER OF INCOME-TAX VS SUNIL KUMAR GOEL (200 5) 274 ITR 53 (P&H). THE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING TH E JUDGMENT OF THE APEX COURT IN MUKHERJEE (S.N.) VS UOI (1990) AIR 199 0 SC 1984 HAS OBSERVED AS FOLLOWS: IN S.N. MUKHERJEE V. UNION OF INDIA, AIR 1990 SC 1 984, A CONSTITUTION BENCH OF THE SUPREME COURT DISCUSSED T HE DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRAL IA, 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 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 TRAI NED TO LOOK AT THINGS OBJECTIVELY UNINFLUENCED BY CONSIDERATIONS OF POLICY 5 ITA NO. 119/COCH/2012 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-JUDI CIAL 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 OPIN ION, 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. I T MAY, 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 MAD E AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT AN D WE CAN 6 ITA NO. 119/COCH/2012 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 JUDI CIALLY 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, CHEC KS 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 PO SSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME CO URT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HAVE THE POWER 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. 7 ITA NO. 119/COCH/2012 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 FLOW ERY LANGUAGE USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF TH E 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 PROVISIONS 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. 4 THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER T HIS 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: 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 8 ITA NO. 119/COCH/2012 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. SINCE THE ASSESSMENT ORDER DOES NOT REFLECT THE APP LICATION OF MIND AND IT DOES NOT CONTAIN REASONS FOR APPLYING THE MIND OF T HE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ADMI NISTRATIVE COMMISSIONER HAS RIGHTLY EXERCISED HIS JURISDICTION U/S 263 OF TH E INCOME-TAX ACT. ACCORDINGLY THIS TRIBUNAL DO NOT FIND ANY MERIT IN THE APPEAL OF THE TAXPAYER. 5. IN THE RESULT, THE APPEAL OF THE TAXPAYER STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DECEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 21 ST DECEMBER, 2012 PK/- 9 ITA NO. 119/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