Medall Health Care Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1288/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8167 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: T VASUDEVAN
• Keywords: Principle of natural justice
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1288/MDS/2015 ' (' / ASSESSMENT YEAR : 2010-11 M/S MEDALL HEALTH CARE PVT. LTD., NO.67, 2 ND FLOOR, TNPL BUILDING, MOUNT ROAD, GUINDY, CHENNAI - 600 034. PAN : AABCP 9015 E V. THE PRINCIPAL COMMISSIONER OF INCOME TAX, CHENNAI-4, CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE ,-*+ . / / RESPONDENT BY : SH. PATHLAVATH PEERYA, CIT 0 . 1$ / DATE OF HEARING : 05.01.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 22.01.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, CHENNAI-4 , CHENNAI, DATED 23.03.2015 AND PERTAINS TO ASSESSMENT YEAR 20 10-11. 2. SHRI T. VASUDEVAN, THE LD. COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT 2 I.T.A. NO.1288/MDS/15 AFTER MAKING PROPER ENQUIRY. IN FACT, THE ASSESSIN G OFFICER CALLED FOR THE DETAILS PERTAINING TO CONFIRMATION OF BUSINESS LOSS, PAYMENT MADE TO REGISTRAR OF COMPANIES, CLAIM OF DEPRECIATI ON ON GOODWILL, OPERATIONAL EXPENSES, ETC. THE PRINCIPAL COMMISSIO NER IN EXERCISE OF HIS REVISIONAL POWER UNDER SECTION 263 OF THE IN COME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOUND THAT THE ASSESSING OFFICER HAS NOT DISCUSSED AND VERIFIED THE CLAIM OF THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. COUNSEL, HE FOUND THAT THE ORD ER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF REVENUE. ACCORDING TO THE LD. COUNSEL, THE PRINCIP AL COMMISSIONER DIRECTED THE ASSESSING OFFICER TO DISALLOW THE CLAI M OF THE ASSESSEE AND TO MAKE A FRESH ASSESSMENT. PLACING RELIANCE O N THE UNREPORTED JUDGMENT OF BOMBAY HIGH COURT IN CIT V. FINE JEWELLERY (INDIA) LTD. IN INCOME TAX APPEAL NO.296 OF 2013 DA TED 3 RD FEBRUARY, 2015, THE LD.COUNSEL SUBMITTED THAT IF TH E ASSESSING OFFICER CONDUCTED AN ENQUIRY AND ACCEPTED THE CLAIM OF THE ASSESSEE, IT IS NOT NECESSARY TO DISCUSS THE SAME I N THE ASSESSMENT ORDER. THE FACT THAT THE ASSESSMENT ORD ER DOES NOT CONTAIN ANY DISCUSSION WITH REGARD TO ENQUIRIES MAD E BY THE ASSESSING OFFICER AND THE REASONS FOR THE DECISION TAKEN, IT DOES NOT MEAN THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND. THE VERY 3 I.T.A. NO.1288/MDS/15 FACT THAT THE ASSESSING OFFICER RAISED SPECIFIC ENQ UIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS SHOWED THAT THE AS SESSING OFFICER APPLIED HIS MIND TO THE FACTS OF THE CASE. THEREFORE, THE PRINCIPAL COMMISSIONER IS NOT JUSTIFIED IN EXERCISI NG HIS REVISIONAL JURISDICTION UNDER SECTION 263 OF THE ACT. 3. ON THE CONTRARY, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSING OFFICER, BEING A QUASI-JUDICIAL AUTHORITY, AND THE PROCEEDIN G BEFORE HIM BEING A JUDICIAL PROCEEDING, THE ASSESSMENT ORDER S HALL CONTAIN THE REASONS FOR CONCLUSION. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER IS EXPECTED TO MAKE PROPER ENQUIRY AND PASS A SPEAKING ORDER IN RESPECT OF THE ISSUES ARISING FOR CONSIDER ATION. SINCE THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ASSESSMENT ORDER, ACCORDING TO THE LD. D.R., THE PRINCIPAL COM MISSIONER HAS RIGHTLY EXERCISED HIS REVISIONAL JURISDICTION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ASSESSMENT. THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ASSESSMEN T ORDER WITH REGARD TO ISSUES ARISING FOR CONSIDERATION. THE CO NTENTION OF THE 4 I.T.A. NO.1288/MDS/15 LD.COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSING O FFICER CALLED FOR DETAILS AND THE SAME WERE FILED BEFORE HIM. THEREFO RE, THERE WAS PRESUMPTION THAT THE ASSESSING OFFICER APPLIED HIS MIND TO THE FACTS OF THE CASE AND ACCEPTED THE CASE OF THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROCEEDING BEFOR E THE ASSESSING OFFICER BEING A JUDICIAL PROCEEDING, THE ASSESSING OFFICER IS EXPECTED TO RECORD HIS OWN REASONS FOR THE CONCLUSI ON REACHED. WHETHER IT IS AN ADMINISTRATIVE ORDER OR JUDICIAL O RDER, THE REASONS FOR CONCLUSION OR DECISION TAKEN HAS TO BE RECORDED IN THE ORDER ITSELF. THE REASON FOR THE CONCLUSION REACHED IN T HE ORDER CANNOT BE SUBSTITUTED BY WAY OF FILING AN AFFIDAVIT OR DOCUME NT IN A PROCEEDING THAT MAY TAKE PLACE AT A LATER STAGE. WE FIND THAT THE PUNJAB &HARYANA HIGH COURT HAD AN OCCASION TO EXAMINE THIS ISSUE IN CIT V. SUNIL KUMAR GOEL [2005] 274 ITR 53. THE PUNJAB &HARYANA HIGH COURT, AFTER CONSIDERING THE JUDGMENT OF THE CONSTI TUTIONAL BENCH OF THE APEX COURT IN S.N.MUKHERJEE V. UNION OF INDIA, 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 TH E DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRALIA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBER OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULL ED OUT THE FOLLOWING PROPOSITIONS (PAGE 1995) : 5 I.T.A. NO.1288/MDS/15 'THE DECISIONS OF THIS COURT REFERRED TO ABOVE INDI CATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASONS TH E APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMER ICAN COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGHED WITH T HE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHORITY EXERCIS ING QUASI- JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JU RISDICTION OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS W ELL AS THE SUPERVISORY JURISDICTION OF THE HIGH COURTS UNDER A RTICLE 227 OF THE CONSTITUTION AND THAT THE REASONS, IF RECORDED, WOULD ENABLE THIS COURT OR THE HIGH COURTS TO EFFECTIVELY EXERCIS E THE APPELLATE OR SUPERVISORY POWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONSIDERATIONS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING THIS VIEW ARE THAT THE REQ UIREMENT OF RECORDING REASONS WOULD (I) GUARANTEE CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLARITY IN THE DECISIONS; AND (III) MINIMISE CHANCES OF ARBITRARINESS IN DECISION MAKIN G. IN THIS REGARD A DISTINCTION HAS BEEN DRAWN BETWEEN ORDINAR Y COURTS OF LAW AND TRIBUNALS AND AUTHORITIES EXERCISING JUDICIA L FUNCTIONS ON THE GROUND THAT A JUDGE IS TRAINED TO LOOK AT THING S OBJECTIVELY UNINFLUENCED BY CONSIDERATIONS OF POLICY OR EXPEDIEN CY WHEREAS AN EXECUTIVE OFFICER GENERALLY LOOKS AT THINGS FROM THE STAND POINT OF POLICY AND EXPEDIENCY. REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHORI TY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL F UNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISD ICTION BY THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CO NSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THI S COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECOR D REASONS FOR ITS DECISION, ARE OF NO LESS SIGNIFICANCE. THES E CONSIDERATIONS SHOW THAT THE RECORDING OF REASONS B Y AN ADMINISTRATIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINESS AND ENSURES A DEGR EE OF FAIRNESS IN THE PROCESS OF DECISION-MAKING. THE SAI D PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND ITS APPLIC ATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQ UIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN 6 I.T.A. NO.1288/MDS/15 ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL F UNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECISION IS SU BJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IT MAY, HOWEVE R, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION OF A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CI RCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE AUTHORITY HAS GIVEN DUE CON SIDERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING O F REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELL ATE OR REVISIONAL AUTHORITY AGREES WITH THE REASONS CONTAI NED 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 MADE AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT AND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN THAT DECISI ON. THE SAME ARE (HEADNOTE OF AIR 1970 (GUJ): 'THE NECESSITY OF GIVING REASONS FLOWS AS A NECESSA RY COROLLARY FROM THE RULE OF LAW WHICH CONSTITUTES ONE OF THE B ASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-UP. THE ADMINISTRA TIVE AUTHORITIES HAVING A DUTY TO ACT JUDICIALLY CANNOT THEREFORE DE CIDE ON CONSIDERATIONS OF POLICY OR EXPEDIENCY. THEY MUST D ECIDE 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 NECESSITY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE DUTY TO ACT J UDICIALLY. IT INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF EXTRA NEOUS OR IRRELEVANT CONSIDERATIONS AND EXCLUDES OR, AT ANY RA TE, MINIMISES ARBITRARINESS IN THE DECISION-MAKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORDE R IS BASED ON THE POWER OF JUDICIAL REVIEW WHICH IS POSSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME COURT 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 7 I.T.A. NO.1288/MDS/15 ADMINISTRATIVE OFFICER AND THIS POWER OF REVIEW CAN BE EFFECTIVELY EXERCISED ONLY IF THE ORDER IS A SPEAKING ORDER. IN THE ABSENCE OF ANY REASONS IN SUPPORT OF THE ORDER, THE SAID COURT S CANNOT EXAMINE THE CORRECTNESS OF THE ORDER UNDER REVIEW. T HE HIGH COURT AND THE SUPREME COURT WOULD BE POWERLESS TO I NTERFERE SO AS TO KEEP THE ADMINISTRATIVE OFFICER WITHIN THE LIMIT S OF THE LAW. THE RESULT WOULD BE THAT THE POWER OF JUDICIAL REVIEW W OULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CI TIZEN, THERE WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAP RICE. 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 SCRUTINISED IN THE LIGHT OF THE AFOREMENTIONED PROPOSITION OF LAW, WE DO NOT FIND A NY DIFFICULTY IN SETTING ASIDE THE SAME ON THE GROUND OF VIOLATION OF THE RU LES OF NATURAL JUSTICE. THE FLOWERY LANGUAGE USED BY THE TRIBUNAL TO JUSTIF Y ITS ACCEPTANCE OF THE RESPONDENT'S PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN OUR OPINION, THE TRIBUNAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPSETTING WELL REASONED ORDE RS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TA X (APPEALS). IT SHOULD HAVE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTIONS 271D AND 271E OF THE ACT IN CONJUNCTION WITH OTHER PROVISIONS OF THE SAME FAMILY AND THEN DECIDED BY A REASONED ORDER WHETHER THE RE SPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. T HE ORDER PASSED BY THE TRIBUNAL SHOULD HAVE CLEARLY REFLECTED THE APPLICAT ION OF MIND BY THE LEARNED MEMBERS. 5. IN VIEW OF THE JUDGMENT OF APEX COURT IN S.N.MUK HERJEE (SUPRA), THE JUDGMENT OF BOMBAY HIGH COURT IN FINE JEWELLERY (INDIA) LTD. (SUPRA) MAY NOT BE APPLICABLE TO THE F ACTS OF THE CASE. BY PLACING RELIANCE ON THE JUDGMENT OF APEX COURT I N S.N.MUKHERJEE (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE ORDER OF THE PRINCIPAL COMMISSIONER. HOWEVER, THE ASSESSING OFF ICER IS EXPECTED TO MAKE AN INDEPENDENT ENQUIRY. THEREFORE , WE DIRECT THE 8 I.T.A. NO.1288/MDS/15 ASSESSING OFFICER TO CONDUCT AN INDEPENDENT ENQUIRY AND PASS A SPEAKING ORDER BY RECORDING HIS OWN REASONS WITHOUT BEING INFLUENCED BY ANY OF THE OBSERVATION MADE BY THE PR INCIPAL COMMISSIONER IN HIS IMPUGNED ORDER. 6. WITH THE ABOVE OBSERVATION, THE APPEAL OF THE AS SESSEE IS DISMISSED. ORDER PRONOUNCED ON 22 ND JANUARY, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 22 ND JANUARY, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. PRINCIPAL CIT, CHENNAI-4, CHENNAI-34 4. 68 ,1 /DR 5. 9' : /GF.