Geosoft Technologies(Trivandrum) Ltd, Trivandrum V. ACIT, Trivandrum

ITA 279/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64723 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADUMNA KUMAR SINGH
• Assessee Lawyers: K GEORGE PHILIP
• Keywords: Principle of natural justice
• Section: 263; 2

Judgement Text

1 ITA NO. 279/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 279/COCH/2011 (ASSESSMENT YEAR 2006-07) GEOSOFT TECHNOLOGIES (TRIVANDRUM) LTD VS THE A.C.I .T., CIR.1(1) 233-235, NILA TRIVANDRUM TECHNOPARK CAMPUS TRIVANDRUM PAN : AABCG2095B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K GEORGE PHILIP RESPONDENT BY : SHRI PRADUMNA KUMAR SINGH DATE OF HEARING : 26-07-2012 DATE OF PRONOUNCEMENT : 10-08-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER PASSED U/S 263 DATED 16 -03-2011 FOR THE ASSESSMENT YEAR 2006-07. 2. SHRI K GEORGE PHILIP, THE LD.REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ADMINISTRATIVE COMMISSIONER REVISED THE ORDER O F THE ASSESSING OFFICER IN RESPECT OF DEFERRED EXPENDITURE WORKED OUT BY THE AS SESSEE. ACCORDING TO THE LD.REPRESENTATIVE, THE ADMINISTRATIVE COMMISSIONER INVOKED HIS JURISDICTION U/S 2 ITA NO. 279/COCH/2011 263 ON THE OBJECTION RAISED BY THE AUDIT WING OF TH E DEPARTMENT. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE ADMINISTRAT IVE COMMISSIONER HAS NOT EXERCISED HIS OWN DISCRETION IN REVISING THE ORDER OF THE ASSESSING OFFICER. REFERRING TO THE JUDGMENT OF THE CALCUTTA HIGH COUR T IN JEEWANLAL (1929) LTD VS ADDL.CIT (1977) 108 ITR 407 (CAL) THE LD.REPRESENTA TIVE SUBMITTED THAT THE COMMISSIONER HAS TO EXERCISE HIS DISCRETION AND JUD GMENT OF HIS OWN. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESS ING OFFICER, IN FACT, HAD CALLED FOR THE DETAILS AND AFTER EXAMINING THE EXPENDITURE AND OTHER PARTICULARS CONTAINED IN THE BALANCE-SHEET, ETC. ACCEPTED THE CL AIM OF THE ASSESSEE FOR DEFERRED EXPENDITURE. THEREFORE, THE ORDER OF THE ADMINISTRATIVE COMMISSIONER IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI PRADUMNA KUMAR SINGH, THE L D.DR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE DEFERRED EXPENDITURE IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER WITHOU T ANY APPLICATION OF MIND HAD ACCEPTED THE CLAIM OF THE ASSESSEE TOWARDS DEFERRED EXPENDITURE. THEREFORE, THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY INVOKED HIS JURISDICTION U/S 263 OF THE INCOME-TAX ACT. 4. WE HAVE CONSIDERED SUBMISSIONS ON EITHER SIDE AN D ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICE R APPARENTLY ALLOWED RS. 48,04,938 AS DEFERRED EXPENDITURE. THE ADMINISTRAT IVE COMMISSIONER FOUND THAT THE MANNER IN WHICH THE DEFERRED EXPENDITURE WAS QU ANTIFIED AND CLAIMED IN THE RETURN OF INCOME IS NOT UNIFORM AND THERE ARE VARYI NG FACTORS. THE ASSESSING OFFICER HAS NOT CALLED FOR ANY DETAILS AND EXAMINED THE SAME. THEREFORE, THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 3 ITA NO. 279/COCH/2011 4.1 THE ORDER OF ASSESSMENT IS A QUASI JUDICIAL ORD ER. THE ASSESSING OFFICER IS EXPECTED TO EXAMINE THE CLAIM OF THE ASSESSEE IN DE TAIL AND RECORD HIS OWN REASON IN THE ASSESSMENT ORDER EITHER FOR ALLOWING OR DISALLOWING THE CLAIM OF THE ASSESSEE. THE ORDER SHALL BE A SPEAKING ORDER. IN OTHER WORDS, THE ORDER SHALL CONTAIN THE REASONS FOR A DECISION. THE PUNJAB & H ARYANA HIGH COURT HAD AN OCCASION TO EXAMINE THIS ISSUE IN COMMISSIONER OF I NCOME-TAX VS SUNIL KUMAR GOEL (2005) 274 ITR 53 (P&H). THE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN MUKHER JEE (S.N.) VS UOI (1990) AIR 1990 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, 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 (PAGE 1995): THE DECISIONS OF THIS COURT REFERRED TO ABOVE IND ICATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASONS TH E APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMERICA N COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGHED WITH THE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION O F THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPE RVISORY JURISDICTION OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTIT UTION AND THAT THE REASONS, IF RECORDED, WOULD ENABLE THIS COURT OR TH E HIGH COURTS TO EFFECTIVELY EXERCISE THE APPELLATE OR SUPERVISORY P OWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONSIDERATIO NS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING THIS VIEW ARE THAT THE REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTE E CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLARITY IN THE DEC ISIONS; AND (III) MINIMIZE CHANCES OF ARBITRARINESS IN DECISION MAKING . IN THIS REGARD A DISTINCTION HAS BEEN DRAWN BETWEEN ORDINARY COURT S OF LAW AND TRIBUNALS AND AUTHORITIES EXERCISING JUDICIAL FUNCT IONS ON THE GROUND 4 ITA NO. 279/COCH/2011 THAT A JUDGE IS TRAINED TO LOOK AT THINGS OBJECTIVEL Y UNINFLUENCED BY CONSIDERATIONS OF POLICY OR EXPEDIENCY WHEREAS AN E XECUTIVE OFFICER GENERALLY LOOKS AT THINGS FROM THE STAND POINT OF PO LICY AND EXPEDIENCY. REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISDICTIO N BY THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CONSIDERATION S, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN H OLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASONS FOR IT S DECISION, ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW TH AT THE RECORDED OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVICES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND IT S APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT T O APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THERE FORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUD ICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECISION IS SU BJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IT MAY, HOWEVER, BE A DDED 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 RE ASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO IN DICATE THAT THE AUTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF REASONS IS GREATER IN A C ASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLA TE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GI VE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AGREES WIT H 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 SUBJECT AND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN THE DECISI ON. THE SAME ARE (HEADNOTE OF AIR 1970 (GUJ)): 5 ITA NO. 279/COCH/2011 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-UP. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUDICIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXPEDIENCY. THEY MU ST 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 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 R ATE, MINIMIZES 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 POSS ESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME COURT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HAVE THE POWE R UNDER THE SAID PROVISIONS TO QUASH BY CERTIORARI A QUASI-JUDICIAL ORDER MADE BY AN 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. THE HIG H 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 WOULD BE STULT IFIED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THERE WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRICE. IF THI S REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SUBJECT TO JUDICI AL 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 GROUND OF VIOLATION OF THE RULES OF NATURAL JUSTICE. THE FLOWERY LANGUAGE USE D BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF THE RESPONDENTS PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN O UR OPINION, THE TRIBUNAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGE NT REASONS FOR UPSETTING WELL REASONED ORDERS PASSED BY THE ASSESS ING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). IT SHOULD HAVE DIRECTED 6 ITA NO. 279/COCH/2011 ITS ATTENTION TO THE LANGUAGE OF SECTION 271D AND 2 71E OF THE ACT IN CONJUNCTION WITH OTHER PROVISIONS OF THE SAME FAMIL Y AND THEN DECIDED BY A REASONED ORDER WHETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. T HE ORDER PASSED BY THE TRIBUNAL SHOULD HAVE CLEARLY REFLECTED THE A PPLICATION OF MIND BY THE LEARNED MEMBERS. 4.2 THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN TOYOTA MOTOR CORPORATION VS COMMISSIONER OF INCOME-TAX (2008) 30 6 ITR 52 (SC). THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 53 OF THE ITR : WE ARE NOT INCLINED TO INTERFERE WITH THE IMPUGNE D ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD THAT THE A SSESSING OFFICER HAD DISPOSED OF THE PROCEEDINGS STATING THE PENALTY PROCEEDINGS INITIATED IN THIS CASE UNDER SECTION 271C READ WITH SECTION 274 OF THE INCOME-TAX ACT, 1961 ARE HEREBY DROPPED. ACCORD INGLY TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPI NG THE PROCEEDINGS. THE TRIBUNAL REFERRED TO CERTAIN ASPE CTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN SHORT, THE I.T. ACT) WAS IMPERMISSI BLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATERIALS PURPOR TEDLY PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HIGH 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 REQU IRED TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO TH E ASSESSEE, ALL RELEVANT ASPECTS WERE 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 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. 4.3 IN VIEW OF THE ABOVE IT IS OBLIGATORY ON THE PA RT OF THE ASSESSING OFFICER TO RECORD REASON FOR ALLOWING OR DISALLOWING THE CLAIM OF THE ASSESSEE TOWARDS 7 ITA NO. 279/COCH/2011 DEFERRED EXPENDITURE. SINCE THE ASSESSMENT ORDER D ID NOT CONTAIN ANY REASON IT DID NOT REFLECT THE APPLICATION OF MIND OF THE ASSE SSING OFFICER. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ADMINIST RATIVE COMMISSIONER. ACCORDINGLY THE SAME IS CONFIRMED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH AUGUST, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 10 TH AUGUST, 2012 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