Shivananda Yoga Vedanta Dhanwantari Ashram, Trivandrum V. The Jt.CIT, Trivandrum

ITA 297/COCH/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7241 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 17-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-06-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR; K K JOHN
• Assessee Lawyers: ABRAHAM JOSEPH MARCOS
• Keywords: Business income; Depreciation; Business expenditure; Charitable institution; Principle of natural justice; Reasonable cause; Assessment record
• Section: 143(3); 12A; 10B; 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO. 297/COCH/2014 ASSESSMENT YEAR : 2010-11 SIVANANDA YOGA VEDANTA DHANWANTARI ASHRAMAM, NEYYAR DAM P.O., TRIVANDRUM-695 572. [PAN: AAFTS 7916J] VS. THE JOINT COMMISSIONER OF INCOME-TAX, RANGE-1, TRIVANDRUM. (ASSESSEE -APPELLANT) (RVENUE-RESPONDENT ) ASSESSEE BY SHRI ABRAHAM JOSEPH MARCOS, ADV. REVENUE BY SHRI K.K.JOHN, SR. DR & SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 17/09/2014 DATE OF PRONOUNCEMENT 24/09/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 18-03-2014 PASSED U/S. 263 OF THE I.T. ACT BY THE C IT, TRIVANDRUM FOR THE ASSESSMENT YEAR 2009-10. 1.1. THERE WAS DELAY OF 31 DAYS IN FILING THE APPEA L BY THE ASSESSEE. THE ASSESSEE HAS FILED CONDONATION PETITION ACCOMPANIED BY AFFIDAVIT WHEREIN IT WAS STATED THAT THE DELAY WAS ON ACCOUNT OF DELAY I N GETTING LEGAL OPINION I.T.A. NO.297/COCH/2014 2 FROM THE CONSULTANT ON THIS ISSUE. THE ASSESSEE SU BMITTED THAT THE DELAY WAS NOT WILLFUL AND DELIBERATE AND HENCE, THE DELAY MAY BE CONDONED. 1.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE RECORD. WE FIND THAT THE REASONS ADVANCED BY THE ASSESSEE ARE BONAFIDE A ND THERE WAS REASONABLE CAUSE FOR THE DELAY IN FILING THE APPEAL BY THE ASSESSEE. HENCE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR ADJUD ICATION. 2. THE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF THE INCOME FROM YOGA, AYURVEDIC TREATMENT ETC. AS BUSIN ESS INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 29/07/2009 RETURNING TOTAL INCOME AS NIL. THE RETURN WAS SE LECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. AC T ON 30/11/2011. ON EXAMINATION OF THE ASSESSMENT RECORDS, THE CIT NOTI CED THAT THE ASSESSEE HAD INCOME UNDER THE HEADS YOGA, AYURVEDA AND OTHER PROGRAMMES ETC. THESE WERE CONSTRUED AS BUSINESS EXPENSES. THE OBJ ECTS AND ACTIVITIES OF THE ASSESSEE FALL UNDER ADVANCEMENT OF ANY OTHER O BJECT OF GENERAL PUBLIC UTILITY, THEREBY ATTRACTING THE PROVISIONS OF SECTI ON 2(15) OF THE I.T. ACT. THE ASSESSEE WAS, HOWEVER, ALLOWED EXEMPTION U/S. 11 OF THE ACT. THE THEN CIT VIDE PROCEEDINGS DATED 04/03/2011 HAD WITHDRAWN THE REGISTRATION U/S. I.T.A. NO.297/COCH/2014 3 12A GRANTED TO THE ASSESSEE. THEREAFTER A NOTICE W AS ISSUED TO THE ASSESSEE ON 09/01/2011 PROPOSING TO REVISE THE ASSE SSMENT ORDER BY CIT U/S. 263 OF THE I.T. ACT. 4. THE LD. AR SUBMITTED BEFORE THE CIT THAT THE ASS ESSING OFFICER HAD COMPLETED THE ASSESSMENTS FOR THE EARLIER YEARS BY TAKING A CONSISTENT VIEW THAT IT WAS A CHARITABLE TRUST. ACCORDING TO THE L D. AR, THE MAIN OBJECT WAS ESTABLISHMENT OF TRAINING CENTRES, FOR PROPAGATING, TEACHING AND PRACTICING YOGIC CULTURE, PHILOSOPHY AND YOGIC PRACTICES INCLU DING THE TREATMENT UNDER AYURVEDA AND OTHER SYSTEMS OF MEDICINES ALSO. THE LD. AR TOOK OBJECTION IN TAKING A DIFFERENT VIEW OVER THE VIEW TAKEN BY T HE ASSESSING OFFICER FOR THE PAST SEVERAL YEARS AND OBJECTED TO THE INVOCATI ON OF PROVISIONS OF SEC. 263 AND CLAIMED THAT THE ASSESSMENT WAS NEITHER ERR ONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. AR FURTHER SUBMITTED THAT THE OBSERVATION THAT ITS OBJECTS FALL UNDER THE CATEGOR Y THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WAS ERRONEO US BECAUSE THESE OBJECTS ARE MAINLY FOR THE PURPOSE OF EDUCATION AND MEDICAL RELIEF. THE LD. AR ALSO SUBMITTED THAT THE ASSESSEE IS NOT LIABLE TO FILE A UDIT REPORT U/S. 44AB OF THE ACT AS IT HAS FILED THE AUDIT REPORT IN FORM 10B AS A CHARITABLE TRUST. 5. THE LD. DR RELIED ON THE ORDER OF THE CIT PASS ED U/S. 263 OF THE I.T. ACT. I.T.A. NO.297/COCH/2014 4 6. THE CIT OBSERVED THAT THE INCOME DERIVED FROM T HE PROPERTY HELD UNDER TRUST IS EXEMPT ONLY TO THE EXTENT IT IS APPL IED FOR CHARITABLE PURPOSES IN INDIA. ACCORDING TO THE CIT, THE ASSESSEE HAD I NCOME FROM ACTIVITIES WHICH ARE NOT CHARITABLE IN NATURE DURING THE F.Y. 2008-09. ON EXAMINATION OF THE ORDER SHEET AND SUBMISSIONS OF T HE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THE CIT OBSERVED THAT THE A SSESSING OFFICER HAD ONLY CONSIDERED THE ISSUE OF DISALLOWANCE OF THE CL AIM OF DEPRECIATION. THE ASSESSING OFFICER HAS NOT TAKEN A VIEW IN RESPECT O F THE SPECIFIC LIMB UNDER WHICH THE ASSESSEE DERIVED EXEMPTION OF 2(15) OF TH E ACT. THE CIT(A) RELIED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (243 ITR 83) WHEREIN IT WAS HEL D THAT IF THE ASSESSING OFFICER HAS MADE AN INCORRECT APPLICATION OF LAW BA SED ON INCORRECT ASSUMPTION OF FACTS, THE ORDER IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDING TO THE CIT, THE ISSUE OF W HETHER THE CONTENTION OF THE ASSESSEE THAT IT IS IMPARTING YOGA EDUCATION AN D THEIR ACTIVITIES COME UNDER THE PURVIEW OF EDUCATION WOULD NOT MEET THE REQUIREMENTS OF EDUCATION AS UNDERSTOOD AND ESTABLISHED WITHIN TH E PROVISION OF SECTION 2(15). THE WORD EDUCATION AS GIVEN IN SEC. 2(15) MEANS SYSTEMATIC INSTRUCTION, SCHOOLING OR TRAINING AND THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDGE, SKILL, MIND AND CHARACTER OF STUDENT S BY NORMAL SCHOOLING. THE CIT RELIED ON THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF I.T.A. NO.297/COCH/2014 5 LOK SIKSHANA TRUST (101 ITR 234) WHEREIN IT WAS HEL D THAT THE ADVANCEMENT OF EDUCATION RESULTING INDIRECTLY DOES NOT COME UNDER THE HEAD EDUCATION. THE VARIOUS COURSE AND PROGRAMMES CONDUCTED BY THE ASSESSEE ARE IMPARTED BY CHARGING FEES AND THEREFOR E, THE DECLARED OBJECTS AND ACTUAL ACTIVITIES OF THE TRUST COULD NOT BE CON STRUED AS EDUCATION FOR THE PURPOSE OF SEC. 2(15) AND CAN BE CATEGORIZED ON LY UNDER THE HEAD GENERAL PUBLIC UTILITY. 7. REGARDING EXEMPTION OF MEDICAL RELIEF, THE CIT O BSERVED THAT YOGA HAS NOT RECOGNIZED SYSTEM OF MEDICINE AND DOES NOT FIGURE IN THE APPROVED LIST NOR IS THERE ANY SCIENTIFIC BODY OF EVIDENCE T O ESTABLISH THAT YOGA IS A MEDICAL SCIENCE WHICH WOULD PROVIDE MEDICAL RELIEF. YOGA IS ONLY SUPPLEMENTARY AND THERAPEUTIC IN VALUE AND CANNOT B E CONSIDERED AS A SYSTEM OF TREATMENT FOR DISEASES BY ITSELF. THE AS SESSEE WAS NOT ABLE TO ESTABLISH WITH EVIDENCE THAT THEY WERE ENGAGED IN P ROVIDING MEDICAL RELIEF. THUS AS BOTH MEDICAL RELIEF AND EDUCATION ARE NOT A PPLICABLE, THE ASSESSEE QUALIFIED FOR EXEMPTION ONLY UNDER THE HEAD GENERAL PUBLIC UTILITY CATEGORY. 8. REGARDING THE ISSUE OF DEPRECIATION ALLOWANCE, T HE CIT OBSERVED THAT THIS ISSUE WAS NOT CONSIDERED BY THE ASSESSING OFFI CER AND THERE WAS NO EVIDENCE OF SUCH CONSIDERATION. THUS, ACCORDING TO THE CIT, THE RATIO OF MALABAR INDUSTRIAL CO. LTD., CITED SUPRA WILL NOT B E APPLICABLE IN THIS CASE. I.T.A. NO.297/COCH/2014 6 THIS IS A CASE WHERE ONE OF MANY POSSIBLE VIEWS HAV ING BEEN TAKEN. THEREFORE, ACCORDING TO THE CIT, THE RATIO OF TOYAT O MOTOR CORPORATION (306 ITR 49) WILL BE APPLICABLE AND ATTRACTS REVISIONARY PROCEEDINGS. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US AND ALSO GONE THROUGH ALL THE JUDGMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP THE LEGAL I SSUE WITH REFERENCE TO THE JURISDICTION OF INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHEME OF THE IT ACT IS TO LEVY AN D COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO ERRONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CE RTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS HELD IN THE CASE OF MAL ABAR INDUSTRIES CO. LTD., VS. CIT (243 ITR 83) (SC), THE COMMISSIONER CAN EXE RCISE REVISION JURISDICTIONAL U/S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE WORD ERRONEOUS HAS NOT BEEN D EFINED IN THE INCOME TAX ACT. IT HAS BEEN HOWEVER DEFINED AT PAGE 562 IN BLACKS LAW DICTIONARY (SEVENTH EDITION) THUS; ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM TH E LAW. THE WORD ERROR HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: I.T.A. NO.297/COCH/2014 7 ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TRUE OR THAT WHAT IS TRUE IS FALSE. AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW LEXICON REPRINT 2002, THE WORD ERROR HAS BEEN DEFINED TO MEAN- ERROR: A MISTAKEN JUDGEMENT OR DEVIATION FROM THE T RUTH IN MATTERS OF FACT, AND FROM THE LAW IN MATTERS OF JUDGEMENT ERR OR IS A FAULT IN JUDGEMENT, OR IN THE PROCESS OR PROCEEDING TO JUDGE MENT OR IN THE EXECUTION UPON THE SAME, IN A COURT OF RECORD; WHICH IN THE CIVIL LAW IS CAL LED A NULLITYIE (TERMES DE LA LEY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INA DVERTENCE S.99 CPC AND S.215 CR.PC. ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPECT THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION. 10. AT PAGE 650 OF THE AFORESAID LAW LEXICON, TH E SCOPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAINED THUS: AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COU RSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INTENTIONAL. A MI STAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCONCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLEDGE , A MISTAKE IS FROM INSUFFICIENT OR FALSE OBSERVATION. BLUNDER IS A PRA CTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMITTED THROUGH GLARING IG NORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR MAY BE OVERL OOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIED, BUT THE SHAME OR RIDICU LE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERACT. STRICTLY SPEAKING , HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A PHANTASM OF THE IMAGI NATION. THE ONE COMES OF DISORDERED VISION, THE OTHER OF DISCARDED IMAGIN ATION. IT IS EXTENDED IN MEDICAL SCIENCE TO MATTERS OF SENSATION, WHETHER TH ERE IS NO CORRESPONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACCOUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALL Y IN ONE REMARKABLE OTHERWISE FOR ACCURATE INFORMATION AND RIGHT DECISI ON. IT IS EXCEPTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO B E DECEIVED. 11. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUG HT TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN WHETHER IT SUFFERS FROM ANY OF I.T.A. NO.297/COCH/2014 8 THE AFORESAID FORMS OF ERROR. IN OUR VIEW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 WOULD BE ERRONEOUS AND FALL IN TH E AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INTER ALIA, BASED ON AN INCORREC T ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW OR NON-APPLICATION OF MIND TO SOMETHING WHICH WAS OBVIOUS AND REQUIRED APPLICATION OF MIND OR BAS ED ON NO OR INSUFFICIENT MATERIALS SO AS TO AFFECT THE MERITS OF THE CASE AN D THEREBY CAUSE PREJUDICE TO THE INTEREST OF THE REVENUE. 12. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO RE MOVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFFICER TAKES A WRONG DE CISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQU IRY WAS PRIMA FACIE WARRANTED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGARD AN ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUM STANCES OF THE CASE, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRIE S BEFORE ACCEPTING THE CLAIM MADE BY THE ASSESSEE IN HIS RETURN. THE REASO N IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION O N THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESSING OFFICE R UNDER THE INCOME-TAX ACT IS NOT ONLY THAT OF AN ADJUDICATOR BUT ALSO OF AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN, WHICH IS AP PARENTLY IN ORDER BUT CALLS I.T.A. NO.297/COCH/2014 9 FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH THE ROL ES EFFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FA CTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOUSLY ON T HE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCED BY THE ASSE SSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS UNDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED THAT THE PRESENT ASSESSMENT WA S MADE U/S. 143(3) OF THE INCOME-TAX ACT. IN OTHER WORDS, THE ASSESSING O FFICER WAS STATUTORILY REQUIRED TO MAKE THE ASSESSMENT UNDER SECTION 143(3 ) AFTER SCRUTINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECT ION (1) OF SECTION 143. BULK OF THE RETURNS FILED BY THE ASSESSEES ACR OSS THE COUNTRY IS ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WIT HOUT ANY SCRUTINY. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE A SSESSING OFFICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING O R REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOUL D BE FAIR NOT ONLY TO THE ASSESSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE ASSES SING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF THE ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF THA T IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND, HE HAS A DUTY TO P ROTECT THE INTERESTS OF THE REVENUE AND TO SEE THAT NO ONE DODGED THE REVEN UE AND ESCAPED WITHOUT PAYING THE LEGITIMATE TAX. THE ASSESSING OF FICER IS NOT EXPECTED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WH AT THE ASSESSEE CLAIMS BEFORE HIM. IT IS HIS DUTY TO ASCERTAIN THE TRUTH O F THE FACTS STATED AND THE I.T.A. NO.297/COCH/2014 10 GENUINENESS OF THE CLAIMS MADE IN THE RETURN WHEN T HE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. ARBITRARIN ESS IN EITHER ACCEPTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN M ADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHERE THE INQUIR IES OUGHT TO HAVE BEEN MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE THERE IS ANYTHING WRONG WITH HIS ORDER IF ALL THE FACTS STATED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORRECT. THE C OMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ER RONEOUS NOT ONLY WHEN IT CONTAINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPED ORDER WHIC H SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH ARE CALLED FOR IN TH E CIRCUMSTANCES OF THE CASE. IN TAKING THE AFORESAID VIEW, WE ARE SUPPORTE D BY THE DECISIONS OF THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI V. C IT (67 ITR 84) (SC), SMT. TARA DEVI AGGARWAL V. CIT ITR 323) (SC), AND M ALABAR INDUSTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC). 13. IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON'B LE COURT HAS HELD AS UNDER: THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECT ION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN TH E SAME CATEGORY FALL THE ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NA TURAL JUSTICE OR WITHOUT I.T.A. NO.297/COCH/2014 11 APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARIN ESS IN DECISION-MAKING WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAUSES PREJUDICE TO AN ASSESSEE OR TO THE STATE EXCHEQUER. THE LEGISLATU RE HAS TAKEN AMPLE CARE TO PROVIDE FOR THE MECHANISM TO HAVE SUCH PREJ UDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH REVISIONA L JURISDICTION OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH APPEALS A ND OTHER MEANS OF JUDICIAL REVIEW, THE PREJUDICE CAUSED TO THE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISDICTION OF TH E COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DECISION-MAKING CAUSI NG PREJUDICE TO EITHER PARTY CANNOT THEREFORE BE ALLOWED TO STAND AND STAR E AT THE LEGAL SYSTEM. IT IS DIFFICULT TO COUNTENANCE SUCH ARBITRARINESS IN T HE ACTIONS OF THE ASSESSING OFFICER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INTEREST OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS THE STATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS CAN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF THE ASSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE I NSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PREJUDICED. WHILE M AKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. HE IS THE INVEST IGATOR, PROSECUTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATOR HE IS AN ARBITRAT OR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIRES INTO A SUBSTANTIAL M ATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDING ON THE RELEVANT ISSUE GIVING, HOWSOEVER BRIEFLY, HIS REASONS THEREFOR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1990 SC 1984, IT HAS BEEN OBSERVED BY THE HON'BLE SUPREM E COURT AS FOLLOWS: REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL FUNCTIONS, WO ULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISDICTION BY THE APPELLATE OR SU PERVISORY AUTHORITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY M UST RECORD REASONS FOR ITS DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSIDE RATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OR ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL R EVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HOWEVER, BE ADDED THA T IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISI ON OF A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PA RTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASON S ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE AUTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF RE ASONS IS GREATER IN A CASE I.T.A. NO.297/COCH/2014 12 WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. TH E APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GI VE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AGREES WITH THE R EASONS CONTAINED IN THE ORDER UNDER CHALLENGE. 14. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPREME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785. IT IS SETTLED LAW THAT WHILE MAKING ASSESSMENT ON ASSESSE E, THE ITO ACTS IN A QUASI-JUDICIAL CAPACITY. AN ASSESSMENT ORDER IS AME NABLE TO APPEAL BY THE ASSESSEE AND TO REVISION BY THE COMMISSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER ON A SUBSTANTIAL ISSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLACED BY THE LEARN ED COUNSEL FOR THE ASSESSEE ALSO POINTS TO THE SAME DIRECTION. THEY HA VE HELD THAT ORDERS, WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVEN UE, MUST BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IF THE ASSESSING OFFICERS ARE ALLOWED TO MAKE ASSESSMENTS IN AN ARBI TRARY MANNER, AS HAS BEEN DONE IN THE CASE BEFORE US, THE ADMINISTRATION OF REVENUE IS BOUND TO SUFFER. IF WITHOUT DISCUSSING THE NATURE OF THE TRA NSACTION AND MATERIALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN ADDI TION TO THE INCOME OF THE ASSESSEE, THE SAME WOULD HAVE BEEN CONSIDERED E RRONEOUS BY ANY APPELLATE AUTHORITY AS BEING VIOLATIVE OF THE PRINC IPLES OF NATURAL JUSTICE WHICH REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. WE FIND NO REASON WHY THE SAME VIEW SHOULD N OT BE TAKEN WHEN AN ORDER IS AGAINST THE INTERESTS OF THE REVENUE. AS A MATTER OF FACT SUCH ORDERS I.T.A. NO.297/COCH/2014 13 ARE PREJUDICIAL TO THE INTERESTS OF BOTH THE PARTIE S, BECAUSE EVEN THE ASSESSEE IS DEPRIVED OF THE BENEFIT OF A POSITIVE F INDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIENTLY ESTABLISHED HIS CASE. 15. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAID THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN THE FOLLOWING CASE S: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERRO R OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISED PROCEEDS ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF MIND. (III) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN OR WHERE HE FAILS TO MAKE THE REQUISITE ENQUIRIES OR EXAMINE TH E GENUINENESS OF THE CLAIM WHICH IS CALLED FOR IN THE CIRCUMSTANCES OF T HE CASE. 16. WE SHALL NOW TURN TO THE FACTS OF THE CASE T O SEE WHETHER THE CASE BEFORE US IS COVERED BY THE AFORESAID PRINCIPLES. A PERUSAL OF THE I.T.A. NO.297/COCH/2014 14 ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER DO ES NOT SHOW ANY APPLICATION OF MIND ON HIS PART. HE SIMPLY ACCEPTED THE INCOME DECLARED BY THE ASSESSEE. THIS IS A CASE WHERE THE ASSESSING OF FICER MECHANICALLY ACCEPTED WHAT THE ASSESSEE WANTED HIM TO ACCEPT WIT HOUT ANY APPLICATION OF MIND OR ENQUIRY. THE EVIDENCE AVAILABLE ON RECO RD IS NOT ENOUGH TO HOLD THAT THE RETURN OF THE ASSESSEE WAS OBJECTIVELY EXA MINED OR CONSIDERED BY THE ASSESSING OFFICER. IT IS BECAUSE OF SUCH NON CO NSIDERATION OF THE ISSUES ON THE PART OF THE ASSESSING OFFICER THAT THE RETUR N FILED BY THE ASSESSEE STOOD AUTOMATICALLY ACCEPTED WITHOUT ANY PROPER SCR UTINY. THE ASSESSMENT ORDER PLACED BEFORE US IS CLEARLY ERRONEOUS AS IT W AS PASSED WITHOUT PROPER EXAMINATION OR ENQUIRY OR VERIFICATION OR OBJECTIVE CONSIDERATION OF THE CLAIM MADE BY THE ASSESSEE. THE ASSESSING OFFICER HAS COM PLETELY OMITTED TO EXAMINE THE ISSUES IN QUESTION FROM CONSIDERATION A ND MADE THE ASSESSMENT IN AN ARBITRARY MANNER. HIS ORDER IS A C OMPLETELY NON-SPEAKING ORDER. IN OUR VIEW, IT WAS A FIT CASE FOR THE LEARN ED COMMISSIONER TO EXERCISE HIS REVISIONAL JURISDICTION UNDER SECTION 263 WHICH HE RIGHTLY EXERCISED BY CANCELLING THE ASSESSMENT ORDER AND DI RECTING THE ASSESSING OFFICER TO PASS A FRESH ORDER CONSIDERING THE ISSUE S RAISED BY THE CIT. IN OUR VIEW, THE ASSESSEE SHOULD HAVE NO GRIEVANCE IN THE ACTION OF LEARNED COMMISSIONER IN EXERCISING THE JURISDICTION U/S. 26 3 OF THE IT ACT. I.T.A. NO.297/COCH/2014 15 17. IT WAS HOWEVER CONTENDED BY THE LEARNED COUN SEL THAT THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN ACCEPTING THE RETURN OF THE ASSESSEE WITH REFERENCE TO EXPENDITURE AND HENCE, THE COMMIS SIONER WAS NOT JUSTIFIED IN ASSUMING THE REVISIONAL JURISDICTION U NDER SECTION 263. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE AFORESAID SUBMISSIONS. AS ALREADY STATED EARLIER, AN ORDER BECOMES ERRONEOUS BECAUSE INQUIRIES, WHICH OUGHT TO HAVE BEEN MADE ON THE FACTS OF THE CASE, WERE NO T MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF A LL THE FACTS STATED OR THE CLAIMS MADE IN THE RETURN ARE ASSUMED TO BE CORRECT . THUS, IT IS MERE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE THE NE CESSARY INQUIRIES OR TO EXAMINE THE CLAIM MADE BY THE ASSESSEE IN ACCORDANC E WITH LAW, WHICH RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE. NOTHING MORE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE. ONE WOULD NOT KNOW AS TO WHAT WOULD HAVE HAPPENED IF TH E ASSESSING OFFICER HAD MADE THE REQUISITE INQUIRIES OR EXAMINED THE CL AIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. HE COULD HAVE ACCEPTED THE ASS ESSEE'S CLAIM. EQUALLY, HE COULD HAVE ALSO REJECTED THE ASSESSEE'S CLAIM DE PENDING UPON THE RESULTS OF HIS ENQUIRY OR EXAMINATION INTO THE CLAIM OF THE ASSESSEE. THUS, THE FORMATION OF ANY VIEW BY THE ASSESSING OFFICER WOUL D NECESSARILY DEPEND UPON THE RESULTS OF HIS INQUIRY AND CONSCIOUS, AND NOT PASSIVE, EXAMINATION INTO THE CLAIM OF THE ASSESSEE. IF THE ASSESSING OF FICER PASSES AN ORDER MECHANICALLY WITHOUT MAKING THE REQUISITE INQUIRIES OR EXAMINING THE CLAIM I.T.A. NO.297/COCH/2014 16 OF THE ASSESSEE IN ACCORDANCE WITH LAW, SUCH AN ORD ER WILL CLEARLY BE ERRONEOUS IN LAW AS IT WOULD NOT BE BASED ON OBJECT IVE CONSIDERATION OF THE RELEVANT MATERIALS. IT IS THEREFORE, THE MERE FAILU RE ON THE PART OF THE ASSESSING OFFICER IN NOT MAKING THE INQUIRIES OR NO T EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW THAT PER SE REN DERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. NOTHING ELSE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE TO SHOW T HAT THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. 18. ADVERTING TO THE FACTS OF THE PRESENT CASE , THE ASSESSMENT ORDER DATED 30/11/2011 IS SILENT ON THE ENQUIRY CONDUCTED BY THE ASSESSING OFFICER WITH REGARD TO YOGA, AYURVEDIC TREATMENT ET C. THERE IS NO DISCUSSION ON THIS ISSUE. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE REASON THAT THERE IS WRONG ASSUMPTION OF FACTS. WE ARE INCLINED TO MODIFY THE ORDER OF THE CIT. INSTEAD OF MAKING ADDITION DIRECTLY, AND TREATING I NCOME FROM YOGA AS BUSINESS INCOME, THE ASSESSING OFFICER IS DIRECTED TO CONDUCT NECESSARY ENQUIRY WITH REGARD TO YOGA, AYURVEDIC TREATMENT ET C. AND THEREUPON DECIDE THE SAME. HE SHOULD EXAMINE THE ISSUE AFRESH AND S HOULD NOT BE INFLUENCED BY ANY FINDINGS OF THE CIT. WITH THIS O BSERVATION, WE REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. WE UPHOLD THE ORDER OF THE CIT TO THIS EXTENT. I.T.A. NO.297/COCH/2014 17 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 24-09-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 24TH SEPTEMBER 2014 GJ COPY TO: 1. SIVANANDA YOGA VEDANTA DHANWANTARI ASHRAMAM, NEY YAR DAM P.O., TRIVANDRUM-695 572. 2. THE JOINT COMMISSIONER OF INCOME-TAX, RANGE-1, T RIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN BENC H