Jose Menacherry, Palakkad V. DCIT, Trichur

ITA 247/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68947 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: C B M WARRIER
• Keywords: Revision of order; Principle of natural justice
• Section: 40A(3); 12A; 147; 263

Judgement Text

1 ITA NO.245 TO 250 /COCH/2013 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. 245 TO 250/COCH/2013 (ASSESSMENT YEARS 2003-04 TO 2008-09) SHRI JOSE MENACHERY VS DY.CIT, CENT.CIR 1, AYODHYA NAGAR THRISSUR PALLIPPURAM ROAD KALLIKKAD, PALAKKAD PAN : ABPPJ8545H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CBM WARRIER RESPONDENT BY : SHRI M ANIL KUMAR, CIT SMT. S VIJAYAPRABHA DATE OF HEARING : 09-07-2013 DATE OF PRONOUNCEMENT : 30-08-2013 O R D E R PER N.R.S. GANESAN (JM) ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE RESPECTIVE ORDERS PASSED BY THE ADMINISTRATIVE COMMISSIONER U/ S 263 OF THE ACT FOR THE ASSESSMENT YEAR 2003-04 TO 2008-09. SINCE COMM ON ISSUE ARISES FOR CONSIDERATION, ALL THE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO.245 TO 250 /COCH/2013 2. SHRI CBM WARRIER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEARS 2003-04 TO 2005-06 TH E COMMISSIONER OF INCOME-TAX DIRECTED THE ASSESSING OFFICER TO DISALL OW THE CASH PAYMENTS U/S 40A(3) OF THE ACT. ACCORDING TO THE LD.REPRESE NTATIVE, THE COMMISSIONER OF INCOME-TAX HAS NOT GIVEN ANY OPPORT UNITY TO THE ASSESSEE TO EXPLAIN HOW SECTION 40A(3) IS NOT APPLI CABLE TO THE FACTS OF THE CASE. HE SIMPLY DIRECTED THE ASSESSING OFFICER TO DISALLOW THE PAYMENTS. ACCORDING TO THE LD.REPRESENTATIVE, THE ORDER PASSE D BY THE COMMISSIONER OF INCOME-TAX U/S 263 LACKS CLARITY, THEREFORE, IT CANNOT BE ENFORCED. FOR THE ASSESSMENT ORDERS, 2005-06 AND 2006-07 THE COMM ISSIONER OF INCOME-TAX DIRECTED THE ASSESSING OFFICER TO DISALL OW PAYMENTS MADE TOWARDS ADVERTISEMENT, SALE PROMOTION, ETC. FOR TH E ASSESSMENT YEAR 2007-08 THE COMMISSIONER OF INCOME-TAX DIRECTED THE ASSESSING OFFICER TO DISALLOW COMMISSION AND BROKERAGE PAID BY THE ASSES SEE. ACCORDING TO THE LD.REPRESENTATIVE, THE COMMISSIONER OF INCOME-T AX DIRECTED THE ASSESSING OFFICER TO DISALLOW EXPENDITURE U/S 40(A) (IA) AND 40A(3) OF THE ACT WITHOUT SPECIFYING THE AMOUNT. ACCORDING TO TH E LD.REPRESENTATIVE, THE COMMISSIONER OF INCOME-TAX CANNOT DIRECT THE ASSESS ING OFFICER TO DISALLOW THE EXPENDITURE WITHOUT EXAMINING THE BOOKS OF ACCO UNT. FROM THE COPY OF THE LEDGER ACCOUNT, ACCORDING TO THE LD.REPRESENTAT IVE, NOT A SINGLE ITEM OF EXPENDITURE EXCEEDED THE LIMIT OF RS.20,000 WHEN TH E COMMISSION AND BROKERAGE WAS PAID. THEREFORE, THE ADMINISTRATIVE COMMISSIONER IS NOT 3 ITA NO.245 TO 250 /COCH/2013 CORRECT IN DIRECTING THE ASSESSING OFFICER TO DISAL LOW ANY PART OF THE PAYMENT MADE TOWARDS COMMISSION AND BROKERAGE. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT ALL THE ASSESSMENT ORDERS FO R THE ASSESSMENT YEARS 2003-04 TO 2008-09 WERE SUBJECT MATTER OF APPEALS B EFORE THE CIT(A) AND ALSO BEFORE THIS TRIBUNAL. WITH REGARD TO PAYMENT OF COMMISSION AND BROKERAGE, THIS TRIBUNAL RESTRICTED THE DISALLOWANC E TO 5% BY AN ORDER DATED 11-01-2013. THEREFORE, ACCORDING TO THE LD.R EPRESENTATIVE, THE EXERCISE OF POWERS U/S 263 BY THE COMMISSIONER OF I NCOME-TAX IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR SU BMITTED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE PROVISIONS OF SECTION 40A(3) AND 40(A)(IA) OF THE ACT WHILE COMPLETING THE ASSESSMEN TS. THE NON CONSIDERATION OF THE PROVISIONS OF THE ACT AT THE T IME OF COMPLETION OF THE ASSESSMENTS MAKES THE ASSESSMENTS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, ACCORDING TO T HE LD.DR, THE COMMISSIONER OF INCOME-TAX HAS RIGHTLY EXERCISED HI S POWERS U/S 263 OF THE ACT. WHEN THE APPEALS OF THE ASSESSEE WERE CONS IDERED BY THIS TRIBUNAL, THIS TRIBUNAL CONFIRMED THE ORDERS OF THE CIT(A) WITH REGARD TO COMMISSION EXPENDITURE. THIS TRIBUNAL FOUND THAT I N THE ABSENCE OF ANY BILLS OR VOUCHER, THE CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 5%. ACCORDINGLY, THE ORDERS OF CIT(A) WERE CONFIRMED. THIS TRIBUNAL HAD NO 4 ITA NO.245 TO 250 /COCH/2013 OCCASION TO EXAMINE THE APPLICATION OF SECTION 40(A )(IA) OF THE ACT. THEREFORE, ACCORDING TO THE LD.DR, THE ADMINISTRATI VE COMMISSIONER HAS RIGHTLY EXERCISED HIS JURISDICTION U/S 263 OF THE A CT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WITH REG ARD TO COMMISSION PAYMENT FOR THE ASSESSMENT YEARS 2006-07 AND 2007-0 8, THE MATTER WAS SUBJECT MATTER OF APPEALS BEFORE CIT(A) AS WELL AS BEFORE THIS TRIBUNAL. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE A SSESSEE TO THE EXTENT OF 40%. HOWEVER, THE CIT(A) RESTRICTED THE SAME TO 5% . THIS TRIBUNAL FOUND THAT THE CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOW ANCE TO 5%. ACCORDINGLY, THE ORDER OF CIT(A) WAS CONFIRMED. 5. NOW THE COMMISSIONER OF INCOME-TAX IN EXERCISE O F HIS POWERS U/S 263 OF THE ACT FOUND THAT PROVISIONS OF SECTION 40( A)(IA) WERE NOT CONSIDERED. THEREFORE, HE DIRECTED THE ASSESSING O FFICER TO DISALLOW THE CLAIM. THE FACT REMAINS IS THAT THE PAYMENT WITH R EGARD TO COMMISSION WAS SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) AND ALSO BEFORE THIS TRIBUNAL. THE DISALLOWANCE WAS RESTRICTED TO 5% IN THE ABSENCE OF BILLS AND VOUCHERS. SECTION 263(1)(C) CLEARLY SAYS THAT THE POWERS OF THE COMMISSIONER OF INCOME-TAX SHALL EXTEND TO SUCH MAT TER AS HAD NOT BEEN CONSIDERED AND DECIDED IN APPEALS. IN THIS CASE, T HE APPLICATION OF SECTION 5 ITA NO.245 TO 250 /COCH/2013 40(A)(IA) WAS NOT CONSIDERED AND DECIDED EITHER BY CIT(A) OR BY THIS TRIBUNAL. THEREFORE, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT IN VIEW OF SPECIFIC PROVISION OF SECTION 263(1)(C) OF THE A CT, THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY EXERCISED HIS REVISIONAL J URISDICTION. 6. NOW COMING TO APPLICATION OF SECTION 40A(3), ADM ITTEDLY, THIS WAS NOT CONSIDERED BY THE ASSESSING OFFICER IN ANY OF THE A SSESSMENT YEARS UNDER CONSIDERATION. THE ONLY CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING OFFICER SIMPLY DIRECTED THE ASSESSING OFFICER TO DI SALLOW THE CLAIM WITHOUT EXAMINING THE BOOKS OF ACCOUNT AND WITHOUT GIVING O PPORTUNITY TO THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE ADMINISTRATIVE COMMISSIONER INSTEAD OF DIRECTING TH E ASSESSING OFFICER TO DISALLOW THE CLAIM OF THE ASSESSEE OUGHT TO HAVE DI RECTED THE ASSESSING OFFICER TO EXAMINE THE BOOKS OF ACCOUNT AND CONSIDE R THE CLAIM OF THE ASSESSEE IN THE LIGHT OF PROVISIONS OF SECTIONS 40( A)(IA) AND 40A(3) OF THE ACT. TO THIS EXTENT, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THERE IS A JUSTIFICATION IN THE CONTENTIONS OF THE ASSESSEE. 7. THIS TRIBUNAL FIND THAT THE ASSESSING OFFICER IS A QUASI JUDICIAL AUTHORITY AND THEREFORE HE IS EXPECTED TO CONSIDER ALL THE CLAIMS OF THE ASSESSEE AND BRING ON RECORD ALL THE RELEVANT MATER IAL FACTS AND RECORD HIS REASONINGS FOR THE DECISIONS ARRIVED AT THEREIN. T HE FAILURE OF THE 6 ITA NO.245 TO 250 /COCH/2013 ASSESSING OFFICER TO BRING ON RECORD THE REASONS FO R THE DECISIONS TAKEN WITH REGARD TO THE CLAIM OF THE ASSESSEE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) AND 40A(3) OF THE ACT IS AN ERROR WHICH I S PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. IN FACT THE PUNJAB & HARYANA HIGH COURT HAD AN O CCASION TO EXAMINE THIS ISSUE IN COMMISSIONER OF INCOME-TAX VS SUNIL KUMAR GOEL (2005) 274 ITR 53 (P&H) AND AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN MUKHERJEE (S.N.) VS UOI (1990) AI R 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 THE DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRALIA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBE R OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULLED OUT THE FOLLOWING PROPOSITIONS (PAGE 1995): THE DECISIONS OF THIS COURT REFERRED TO ABOVE INDICATE THAT WITH REGARD TO THE REQUIREMENT TO REC ORD REASONS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGHED WITH THE COURT FOR HOLDING THAT A N ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT S UCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION O F THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS TH E SUPERVISORY JURISDICTION OF THE HIGH COURTS UNDER A RTICLE 227 OF THE CONSTITUTION AND THAT THE REASONS, IF RE CORDED, 7 ITA NO.245 TO 250 /COCH/2013 WOULD ENABLE THIS COURT OR THE HIGH COURTS TO EFFEC TIVELY EXERCISE THE APPELLATE OR SUPERVISORY POWER. BUT T HIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONSIDERATIO NS 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) INTR ODUCE CLARITY IN THE DECISIONS; AND (III) MINIMIZE CHANCE S OF ARBITRARINESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HAS BEEN DRAWN BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIES EXERCISING JUDICIAL F UNCTIONS ON THE GROUND THAT A JUDGE IS TRAINED TO LOOK AT TH INGS OBJECTIVELY UNINFLUENCED BY CONSIDERATIONS OF POLIC Y OR EXPEDIENCY WHEREAS AN EXECUTIVE OFFICER GENERALLY L OOKS AT THINGS FROM THE STAND POINT OF POLICY AND EXPEDI ENCY. REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHORITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI- JUDICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE E XERCISE OF ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AU THORITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WH ICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT A N ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION, ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE RECORDED OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVICES A SALUTARY PURPOS E, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINESS AND EN SURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION-MAK ING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHI CH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINIST RATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRES PECTIVE OF THE FACT WHETHER THE DECISION IS SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IT MAY, HOWEVER, 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 CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASO NS ARE 8 ITA NO.245 TO 250 /COCH/2013 CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE AUTHO RITY 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 APP ELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELLATE OR REVISIONA L AUTHORITY AGREES 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 MADE AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE S UBJECT AND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN THE DECISION. THE SAME ARE (HEADNOTE OF AIR 1970 (GUJ)): THE NECESSITY OF GIVING REASONS FLOWS AS A NECESSARY COROLLARY FROM THE RULE OF LAW WHICH CONS TITUTES ONE OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUT IONAL SET- UP. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY T O ACT JUDICIALLY CANNOT THEREFORE DECIDE ON CONSIDERATION S OF POLICY OR EXPEDIENCY. 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 NECESSITY OF GIVING RE ASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHECKS T HE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND EXCLUDES OR, AT ANY RATE, MINIMIZES ARBITRARINE SS IN THE DECISION-MAKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORDER IS BASED ON THE POWER OF JUDICIAL REVIEW WHIC H IS POSSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND T HE 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 ADMINISTRATIVE OFFICER AND THIS POWER OF REVIEW CAN BE 9 ITA NO.245 TO 250 /COCH/2013 EFFECTIVELY EXERCISED ONLY IF THE ORDER IS A SPEAKI NG ORDER. IN THE ABSENCE OF ANY REASONS IN SUPPORT OF THE ORD ER, THE SAID COURTS CANNOT EXAMINE THE CORRECTNESS OF THE O RDER UNDER REVIEW. THE HIGH COURT AND THE SUPREME 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 W OULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CI TIZEN, THERE WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARI NESS AND CAPRICE. IF THIS REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SUBJECT TO JUDICIAL SCRUTINY AND CORRE CTION. 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 O N THE GROUND OF VIOLATION OF THE RULES OF NATURAL JUSTICE . THE FLOWERY LANGUAGE USED BY THE TRIBUNAL TO JUSTIFY IT S ACCEPTANCE OF THE RESPONDENTS PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN OUR O PINION, THE TRIBUNAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPSETTING WELL REASONED ORDERS P ASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). IT SHOULD HAVE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTION 271D AND 271E OF THE ACT IN CONJUNCTION WITH OTHER PROVISIONS OF THE SAM E FAMILY AND THEN DECIDED BY A REASONED ORDER WHETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DEL ETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOU LD HAVE CLEARLY REFLECTED THE APPLICATION OF MIND BY T HE LEARNED MEMBERS. 9. THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN TOYOTA MOTOR CORPORATION VS COMMISSIONER OF INCOME- TAX (2008) 306 ITR 52 (SC). THE APEX COURT HAS OBSERVED AS FOLLOW S AT PAGE 53 OF THE ITR: 10 ITA NO.245 TO 250 /COCH/2013 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 STATING THE PENALTY PROCEEDINGS INITIATED IN THIS C ASE UNDER SECTION 271C READ WITH SECTION 274 OF THE INCOME-TA X ACT, 1961 ARE HEREBY DROPPED. ACCORDINGLY TO THE HIGH C OURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUNAL REFERRED TO CERTAIN ASPE CTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER S ECTION 263 OF THE INCOME-TAX ACT, 1961 (IN SHORT, THE I.T . ACT) WAS IMPERMISSIBLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY THE ASSESSEE BE FORE THE ASSESSING OFFICER. WHAT THE HIGH COURT HAS DON E IS TO REQUIRE THE ASSESSING OFFICER TO PASS A REASONED ORDER. THE HIGH COURT WAS OF THE VIEW THAT THE TRIBUNAL CO ULD NOT HAVE SUBSTITUTED ITS OWN REASONINGS WHICH WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE, ALL RELEVANT ASPECTS WER E PLACED FOR CONSIDERATION AND IF THE OFFICER DID NOT RECORD REASONS, THE ASSESSEE CANNOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THIS STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN UP BY THE ASSESSING OFFICER ON REMAND, IT SHA LL BE HIS DUTY TO TAKE INTO ACCOUNT ALL THE RELEVANT ASPE CTS INCLUDING THE MATERIALS, IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. 10. 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 ORDE RS ARE BEING PASSED. IN FACT, THE ASSESSEE, M/S FATEH CHAND CHA RITABLE TRUST IN WRIT TAX NO.1629 OF 2010 (JUDGMENT DATED 27-05-2013 ) BEFORE THE 11 ITA NO.245 TO 250 /COCH/2013 ALLAHABAD HIGH COURT RECEIVED DONATION OF RS.5.23 C RORES. THE ASSESSING OFFICER ACCEPTED THE SAME WITHOUT ANY ENQ UIRY AND REASONING IN THE ASSESSMENT ORDER. THE COMMISSIONE R OF INCOME- TAX INITIATED PROCEEDINGS TO CANCEL THE REGISTRATIO N U/S 12A OF THE ACT. HOWEVER, IT WAS DROPPED WITHOUT RECORDING ANY REASO N. SUBSEQUENTLY, THE CASE WAS REOPENED AND NOTICE WAS ISSUED U/S 147 OF THE ACT. THE ASSESSEE CHALLENGED THE NOTICE ISS UED FOR REOPENING THE ASSESSMENT BY WAY OF WRIT PETITION. WHILE CONS IDERING THE WIT PETITION, THE ALLAHABAD HIGH COURT EXPRESSED ITS SH OCK AND ANGUISH ON THE WAY IN WHICH THE ORDERS ARE BEING PASSED BY THE INCOME-TAX AUTHORITIES. IN FACT, THE ALLAHABAD HIGH COURT HAS OBSERVED AS FOLLOWS: THE INCOME TAX AUTHORITIES ARE REQUIRED TO ADMINISTER THE ACT. THE RIGHT TO ADMINISTER, CANNO T OBVIOUSLY INCLUDE THE RIGHT TO MAL-ADMINISTER. THU S, 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 REGISTRATION. THE SAID ORDER DOES NOT CONTAIN ANY REASON. 12 ITA NO.245 TO 250 /COCH/2013 REASONS INTRODUCE CLARITY IN AN ORDER. REASON IS T HE HEART BEAT OF EVERY CONCLUSION AND WITHOUT THE SAME IT BECOMES LIFELESS. (SEE RAJ KISHORE JHA VERSUS STAT E OF BIHAR AND OTHERS, AIR 2003 SC 4664). EVEN IN RESPECT OF ADMINISTRATIVE ORDERS LORD DENNING M.R. IN BREEN VS. AMALGAMATED ENGINEERING UNION, (1971) 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 DECISI ON OR CONCLUSION ARRIVED AT. REASONS SUBSTITUTE SUBJECTI VITY BY OBJECTIVITY. THE EMPHASIS ON RECORDING REASONS IS THAT IF THE DECISION REVEALS THE INSCRUTABLE FACE OF THE S PHINX, IT CAN, BY ITS SILENCE, RENDER IT VIRTUALLY IMPOSSIBLE FOR THE COURTS TO PERFORM THEIR APPELLATE FUNCTION OR EXERC ISE THE POWER OF JUDICIAL REVIEW ON ADJUDGING THE VALIDITY OF THE DECISION. RIGHT TO REASON IS AN INDISPENSABLE PART OF A SOUND JUDICIAL SYSTEM; REASONS AT LEAST SUFFICIENT 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 SALU TARY REQUIREMENTS OF NATURAL JUSTICE IS SPELLING OUT REA SONS FOR 13 ITA NO.245 TO 250 /COCH/2013 THE ORDER MADE; IN OTHER WORDS, A SPEAKING-OUT. TH E INSCRUTABLE FACE OF THE SPHINX IS ORDINARILY INCO NGRUOUS WITH A JUDICIAL OR QUASI-JUDICIAL PERFORMANCE. A FEEBLE ARGUMENT WAS ADVANCED THAT THE COMMISSIONER OF INCOME TAX BEING HIGHER IN HIERARCH Y THAN ADDITIONAL COMMISSIONER OF INCOME TAX, THE INITIATION OF THE PROCEEDINGS AT THE INSTANCE OF AD DITIONAL COMMISSIONER OF INCOME TAX IS BAD. IN VIEW OF OUR ABOVE CONCLUSION THAT THE ORDER DROPPING THE PROCEEDING UNDER SECTION 12A WAS NOT A VALID ACTION ON THE PART OF THE COMMISSIONER OF INC OME TAX, THE SAID ARGUMENT IS REJECTED. HAVING REGARD TO WHAT HAS BEEN SAID ABOVE. WE FIND THAT IT IS A CASE WHERE THE THEN ASSESSING OFF ICER (SHRI BHOPAL SINGH), THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-II, MUZAFFARNAGAR AND SHRI KUNDAN MISRA, THE THEN COMMISSIONER OF INCOME TAX, MUZAFFARNAGAR WHO PASSED THE ORDER DATED 25.1.2008 HAVE ABDICATED THEIR DUTIES. THE COURT IN THE EXER CISE OF SUPERVISORY JURISDICTION UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA CANNOT BE A MUTE SPECTATOR. SUCH ACTIONS ON THE PART OF THE DEPARTMENT NOT ONLY BRIN G DISREPUTE TO THE DEPARTMENT BUT ALSO ENCOURAGE THE 14 ITA NO.245 TO 250 /COCH/2013 DISHONEST ASSESSEES AND PROMOTES THE NEFARIOUS ACTIVITIES WHICH NOT ONLY CAUSES LOSS TO REVENUE BU T ALSO PROMOTES DISHONESTY. AN HONEST TAX PAYER FEELS CHE ATED. LET THE MATTER BE EXAMINED BY THE CHIEF COMMISSIONE R OF INCOME TAX AND APPROPRIATE DEPARTMENTAL PROCEEDINGS MAY BE TAKEN OUT AGAINST THE ERRING OFFICIALS. A C OPY OF THIS JUDGMENT MAY ALSO BE SENT TO THE CHAIRMAN OF T HE CENTRAL BOARD OF DIRECT TAXES FOR AN APPROPRIATE AC TION. 11. IN VIEW OF THE ABOVE JUDGMENTS OF THE PUNJAB & HARYANA HIGH COURT AND ALLAHABAD HIGH COURT AS ALSO THE APEX COU RT, IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO RECORD REASONS IN THE ASSESSMENT ORDER. RECORDING OF REASON WOULD NOT ON LY ENABLE THE REVISIONAL / APPELLATE AUTHORITIES TO DISCHARGE THE IR FUNCTION EFFECTIVELY BUT ALSO REPOSE CONFIDENCE IN THE SYSTEM. THEREFOR E, WE ARE OF THE CONSIDERED OPINION THAT THERE WAS AN ERROR IN THE O RDER OF THE ASSESSING OFFICER INASMUCH AS THAT THE ASSESSING OF FICER HAS NOT RECORDED HIS REASONS FOR REACHING A CONCLUSION. 12.. WE ALSO FIND THAT THE APEX COURT IN THE CASE O F APPROPRIATE AUTHORITY, AHMEDABAD & ANOTHER VS HINDUMAL BALMUKAN D INVESTMENT CO PVT LTD & ANOTHER (2001) 251 ITR 660 (SC) FOUND THAT A SPEAKING 15 ITA NO.245 TO 250 /COCH/2013 ORDER MUST SPEAK FOR ITSELF AND A REFERENCE TO SHOW CAUSE NOTICE IS UNCALLED FOR. IT IS ALSO WELL SETTLED PRINCIPLES O F LAW THAT JUDICIAL ORDER SHALL SPEAK FOR ITSELF AND THE REASON FOR THE CONCL USION REACHED IN THE JUDICIAL ORDER SHALL CONTAIN IN THE ORDER ITSELF. REASON FOR A DECISION CANNOT BE SUBSTITUTED OR SUPPLEMENTED BY WAY OF AN AFFIDAVIT OR OTHERWISE. 13. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE COMMISSIONER OF INCOME-TAX HAS RIGHTLY EXERCISE D HIS POWERS U/S 263 OF THE ACT. HOWEVER, HE OUGHT NOT TO HAVE DISALLOW ED THE CLAIM OF THE ASSESSEE STRAIGHT AWAY. IN OTHER WORDS, THE ADMINI STRATIVE COMMISSIONER OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO EXA MINE THE BOOKS OF ACCOUNT IN THE LIGHT OF PROVISIONS OF SECTION 40(A) (IA) AND 40A(3) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO E XAMINE THE BOOKS OF ACCOUNT IN THE LIGHT OF PROVISIONS OF SECTIONS 40(A )(IA) AND 40A(3) OF THE ACT AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW WITHOUT BEING INFLUENCED BY ANY OF THE OBSERVATIONS MADE BY THE C OMMISSIONER OF INCOME-TAX IN THE IMPUGNED ORDER. THE ORDER OF THE ADMINISTRATIVE COMMISSIONER IS MODIFIED TO THIS EXTENT. 14. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE STAND DISMISSED. 16 ITA NO.245 TO 250 /COCH/2013 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH AUGUST, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 30 TH AUGUST, 2013 PK/- 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