ITO, New Delhi V. Shri Hemant Surana, New Delhi

ITA 3245/DEL/2011

• Counselvise Citation: 324520114 RSA 2011
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Assessee Lawyers: DR RAKESH GUPTA; ASHWANI TANEJA ARS
• Keywords: Business expenditure; Principle of natural justice; Retrospective amendment
• Section: 37(1); 43(5); 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM ITA NO.3245/DEL/2011 ASSESSMENT YEAR:2007-08 INCOME TAX OFFICER, WARD 37(1), ROOM NO.409, N BLOCK, VIKAS BHAWAN, I.P. ESTATE, NEW DELHI V/S. SHRI HEMANT SURANA, A-401, DEFENCE COLONY, NEW DELHI-24 [PAN NO.: AATPS 4960 N] C.O. NO.237/DEL/2011 ( IN I.T.A. NO.3245/DEL/2011) ASSESSMENT YEAR:2007-08 SHRI HEMANT SURANA, A-401, DEFENCE COLONY, NEW DELHI-24 V/S. INCOME TAX OFFICER, WARD 37(1), ROOM NO.409,N BLOCK, VIKAS BHAWAN, I.P. ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY DR. RAKESH GUPTA & SHRI ASHWANI TANEJA, ARS REVENUE BY SHRI RIS GILL, DR DATE OF HEARING 14-02-2012 DATE OF PRONOUNCEMENT 24-02-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 16 TH JUNE, 2011 BY THE REVENUE AND THE CORRESPONDING CROSS OBJECTION[CO] FILED ON 14 TH JULY, 2011 BY THE ASSESSEE AGAINST AN ORDER DATED 25.03.2011 OF THE LD. CIT(A )-XXVIII, NEW DELHI, RAISE THE FOLLOWING GROUNDS:- I.T.A. NO.3245/D/2011[REVENUE] 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 2 ` `3,11,85,809/- ON ACCOUNT OF DISALLOWANCE OF LOSS O N TRADING OF SHARES AS NOT AN ALLOWABLE EXPENDITURE U /S 37(1) IN VIEW OF VIOLATION OF CLAUSE 11 MENTIONED I N THE 1 ST SCHEDULE OF THE CHARTERED ACCOUNTANT ACT, 1949 (AMENDED IN 2006) AS DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER AND THAT TOO WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER AND THEREBY VIOLATING RULE 46A OF THE I.T. RULES. 2) THE APPELLANT CRAVES TO ADD, AMEND OR MODIFY THE GROUNDS OF APPEAL AT ANY TIME. C.O. NO.237/D/2011[ASSESSEE] 1) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DELETING THE ADDITION OF ` ` 11,00,000/- MADE BY LEARNED AO BEING THE AMOUNT OF UNSECURED LOANS RECEIVED BY THE ASSESSEE. 2) THAT THE ASSESSEE CRAVES THE LEAVE TO ADD, MODIF Y, AMEND OR DELETE ANY OF THE GROUNDS OF CROSS OBJECTI ONS AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE W ITHOUT PREJUDICE TO EACH OTHER. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL OF THE REVENUE, FACTS IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLA RING INCOME OF ` `5,13,624/- FILED ON 31.10.2007 BY THE ASSESSEE, WAS SELECTED FOR SCR UTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HERE AFTER REFERRED TO AS THE ACT) ISSUED ON 15.09.2008. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE REFLECTED LOSS OF ` `3,11,85,809/- IN THE BUSINESS OF SHARES AND SOUGHT TO SET IT OFF AGAINST PROFESSIONAL INCOME, COMMISSION RECEIPTS AND PROFI T FROM TRADING IN PROPERTY AS ALSO AGAINST SHARE OF PROFIT FROM SURANA & ASSOCIA TES, A CHARTERED ACCOUNTANT FIRM. ACCORDING TO THE AO, SINCE THE ASSESSEE WAS A CHARTERED ACCOUNTANT BY PROFESSION, THE LOSS OF ` `3,11,85,809/- WAS NOT ADMISSIBLE IN TERMS OF EXPLANATION TO SECTION 37(1) OF THE ACT. TO A QUER Y BY THE AO, THE ASSESSEE REPLIED THAT FOR ANY DEFAULT UNDER THE CHARTERED AC COUNTANTS ACT, COGNIZANCE COULD BE TAKEN BY THE INSTITUTE OF CHARTERED ACCOUN TANTS OF INDIA AND THERE BEING ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 3 NO DEFAULT IN TERMS OF PROVISION OF THE ACT, THE LO SS CLAIMED WAS ADMISSIBLE. INTER ALIA, THE ASSESSEE RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN DR. T.A. QURESHI VS. CIT (2006) 157 TAXMAN 514 (SC). HOWEVE R, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND WHILE REFERRING TO FIRST SCHEDULE TO THE CHARTERED ACCOUNTANTS ACT OF INDIA CONCLUDED THAT T HE ASSESSEE COULD NOT ENGAGE IN ANY BUSINESS OR PROFESSION OTHER THAN TH E PROFESSION OF CA. ACCORDINGLY, SINCE THE LOSS IN SHARE TRADING BUSIN ESS WAS IN CONSEQUENCE OF A PURPOSE PROHIBITED BY LAW, THE AO DISALLOWED THE CL AIM OF LOSS OF ` ` 3,11,85,809/-. 3. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE IN THE FOLLOWING TERMS:- 2.3 THE SUBMISSIONS OF THE APPELLANT AND THE FAC TS HAVE BEEN CAREFULLY CONSIDERED. THE APPELLANT HAS ARGUED THAT HE IS A CHARTERED ACCOUNTANT BY THAT HE IS A CHARTE RED ACCOUNTANT BY QUALIFICATION BUT NOT IN PRACTICE, SU O MOTO ON 31 ST MARCH, 2007. IT WAS STATED THAT THE PROVISIONS OF CLAUSE 11 OF THE FIRST SCHEDULE REFERRED TO BY THE A.O. ARE APPLICABLE ONLY TO CHARTERED ACCOUNTANTS IN PRACTI CE AND ARE THEREFORE, NOT APPLICABLE TO THE APPELLANT. THE APPELLANT FURTHER ARGUED THAT ALTERNATIVELY, EVEN I F THERE IS ANY VIOLATION OF THE CHARTERED ACCOUNTANTS ACT, THI S IS TO BE DEALT WITH ONLY BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THEY CAN ONLY REPRIMAND, SUSPEND OR IMPOSE A FINE. IT WAS STATED THAT THIS D OES NOT RESULT IN ANY DEFAULT UNDER THE INCOME TAX ACT. 2.4 THE APPELLANT ARGUED THAT UNDER THE EXPLANATION TO SECTION 37, THE AMOUNT PROPOSED TO BE DISALLOWED HA S TO BE AN EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE, WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. IN THE PRESENT CASE, THE A.O. HAS DISALLOWED LOSS A ND NOT EXPENDITURE. THE APPELLANT POINTED OUT THAT LOSS IS ENTIRELY DIFFERENT FROM EXPENDITURE. LOSS MEANS DAMAGE, DISADVANTAGE ETC CAUSED BY LOSING SOMETHING WHEREAS EXPENDITURE MEANS AN EXPENDITURE/SPENDING . EXPENDITURE IS VOLUNTARILY DONE AND WITH AN INTENT TO DERIVE SOME TANGIBLE OR INTANGIBLE BENEFITS FROM THE SPEND ING, WHEREAS THERE IS NO LOSS WHICH IS VOLUNTARILY DONE OR INCURRED. ALL THE LOSSES HAPPEN INVOLUNTARILY AND T HERE IS NEVER AN INTENT TO INCUR A LOSS. ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 4 2.5 THE APPELLANT ARGUED THAT UNDER THE EXPLANATION TO SECTION 37, THE AMOUNT PROPOSED TO BE DISALLOWED HA S TO BE AN EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. IN THE MEMORANDUM OF FINANCE (NO.2) BILL, 1998 , IT WAS MENTIONED THAT THE PROPOSED AMENDMENT WILL RESULT I N DISALLOWANCE OF THE CLAIM MADE BY CERTAIN TAXPAYERS OF PAYMENTS ON ACCOUNT OF PROTECTION MONEY, EXTORTION, HAFTA, BRIBES ETC. AS BUSINESS EXPENDITURE. THE APP ELLANT ARGUED THAT IT TRADING IN SHARES IS CERTAINLY NOT I N THE SAME CLASS AS THE ACTIVITIES OF PROTECTION MONEY, EXTORT ION, HAFTA BRIBES ETC. 2.6 THE APPELLANT ARGUED THAT HE HAD INCURRED LOSS IN SHARES IN F & 0 SEGMENT AND SUCH LOSSES ARE SPECIFICALLY EXCLUDED FROM BEING SPECULATIVE TRANSACTION U/ S 43(5) AND ALLOWED AS BUSINESS LOSSES. IT WAS STATED THAT SINC E SHARE TRADING IS NOT AN ILLEGAL ACTIVITY, AND IT IS A LOS S AND NOT AN EXPENDITURE, THE SAID ADDITION NEEDS TO BE DELETED. THE APPELLANT FURTHER ARGUED THAT ALTHOUGH TRADING IN S HARES IS NOT AN ILLEGAL BUSINESS BUT STILL WITHOUT PREJUDICE TO THE SAME, FOR THE PURPOSES OF TAXATION, THERE IS NO DIS TINCTION MADE BETWEEN LEGAL AND ILLEGAL BUSINESS. PROFITS FR OM AN ILLEGAL BUSINESS ARE SUBJECT TO TAX JUST AS FROM A LEGAL BUSINESS. 2.7 THE APPELLANT RELIED ON THE SUPREME COURT DECIS ION IN DR. T.A. QURESHI V. CIT (2006) 287 ITR 547. HE ARGU ED THAT THE A.O. HAS STATED THAT 'THE CASE LAW ADDUCED DOES NOT COME TO THE RESCUE OF THE ASSESSEE SINCE IT IS DISTINGUISHABLE ON FACTS AND ISSUES' WITHOUT ACTUAL LY DISTINGUISHING THE CASE LAW ON FACTS AND ISSUES. 2.8 IN THE ASSTT. ORDER, THE A.O. HAS NOT BEEN ABLE TO SUCCESSFULLY REBUT THE ARGUMENTS OF THE APPELLANT. THE A.O. HAS DISALLOWED BUSINESS LOSS BY INVOKING THE EXPLANATION BELOW SECTION 37(1). THERE IS A CLEAR DISTINCTION BETWEEN BUSINESS EXPENDITURE AND BUSINE SS LOSS. IN DR. T.A. QURESHI V. CIT (2006) 287 ITR 547 , THE HON'BLE SUPREME COURT HELD THAT THE EXPLANATION TO SECTION 37 IS APPLICABLE IN CASE OF BUSINESS EXPEND ITURE AND NOT BUSINESS LOSS. THE HON'BLE COURT HELD THAT 'THE EXPLANATION TO SECTION 37 HAS REALLY NOTHING TO DO WITH THE PRESENT CASE AS IT IS NOT A CASE OF A BUSINESS EXPENDITURE, BUT OF BUSINESS LOSS' THE APPELLANT HAS FURTHER ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 5 ARGUED THAT HE IS A CHARTERED ACCOUNTANT BY QUALIFI CATION BUT NOT IN PRACTICE, HAVING SURRENDERED THE CERTIFICATE OF PRA CTICE AND THAT THE PROVISIONS OF CLAUSE 11 OF THE FIRST SCHEDULE REFER RED TO BY THE A.O., ARE APPLICABLE ONLY TO CHARTERED ACCOUNTANTS IN PRACTICE, AND ARE THEREFORE, NOT APPLICABLE TO THE APPELLANT. THE A.O. HAS NOT BEEN ABLE TO SHOW WHY CLAUSE 11 IS APPLICABLE IN TH IS CASE. THE APPELLANT HAS FURTHER ARGUED THAT IN THE MEMORANDUM OF FINANCE (N0.2) BILL, 1998, IT WAS MENTIONED THAT THE PROPOS ED AMENDMENT WILL RESULT IN DISALLOWANCE OF CLAIM MADE BY CERTAI N TAXPAYERS OF PAYMENTS ON ACCOUNT OF PAYMENT OF PROTECTION MONEY, EXORTION, HAFTA, BRIBES ETC. AS BUSINESS EXPENDITURE. THE A. O. HAS NOT BEEN ABLE TO SHOW THAT THE EXPLANATION BELOW SECTION 37( 1) WOULD COVER ANY SUCH VIOLATIONS BY THE APPELLANT, AS ARE IMPUTE D IN THE ASSTT. ORDER. CONSIDERING THE APPELLANTS SUBMISSIONS AND THE FACTS, AND THE JUDICIAL DECISIONS ON THE SUBJECT, THE ADDITION MADE BY THE A.O. IS NOT LEGALLY TENABLE, AND IS DELETED. THE GROUND IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE SUPPORTED THE FINDINGS OF THE LD. CIT(A). INTER ALIA, THE LD. AR RELIED UPON THE DECISION IN CIT VS. M/S THE STOCK AND BOND TRADING COMPANY IN I.T.A. NO.4117 OF 2010 (BOMBAY );STATE B ANK OF SAURASHTRA VS. DCIT,93 ITD662(AHD.);TN VOHRA VS. DCIT,7 SOT 642(DE L.),DR. TA QUERESHI VS. CIT,287 ITR 547(SC); CIT VS. PIARA SINGH,124 ITR 40 (SC); CIT VS. LACHATOORAH TEA CO. LTD.,200 ITR 391(CAL.) AND EXTRACTS FROM TH E COMMENTARY BY CHATURVEDI & PITHSARIA-PAGE 742 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISIONS. INDISPUTABLY , THE ASSESSEE, A CHARTERED ACCOUNTANT, INCURRED LOSS OF ` ` 3,11,85,809/- IN THE BUSINESS OF TRADING IN SHARES. THE AO DISALLOWED THE CLAIM OF SET OFF OF LOSS, HAV ING RECOURSE TO THE EXPLANATION TO SECTION 37(1) OF THE ACT WHILE LD. CIT(A) ALLOWE D THE CLAIM ON THE GROUND THAT THE SAID EXPLANATION WAS ATTRACTED ONLY IN THE CASE OF ANY EXPENDITURE AND NOT IN THE EVENT OF LOSS. THE ISSUE BEFORE US IS AS TO WHETHER OR NOT EXPLANA TION BELOW SECTION 37(1) OF THE ACT, INSERTED BY THE FINANCE A CT, 1998 WITH RETROSPECTIVE EFFECT FROM 1-4-1962, IS APPLICABLE IN THIS CASE.. THIS EXPLANATION LAYS DOWN THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PUR POSE WHICH IS AN OFFENCE OR ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 6 WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO H AVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND NO DEDUCTION OR ALLOWANCE S HALL BE MADE. IT IS WELL SETTLED THAT THIS EXPLANATION IS APPLICABLE ONLY TO AN EXPENDITURE AND NOT TO A LOSS [DR. T. A. QUERESHI (SUPRA) & TN VOHRA(SUPRA).]. THERE IS A DISTINCTION BETWEEN THE EXPENDITURE AND LOSS. 'AN EXPENDITURE IS SOMETH ING OR OTHER WHICH THE TRADER PAYS OUT'; AS OBSERVED BY FINLAY J. IN ALLEN V. FAR QUSHARSON BROS. & CO. 17 TAX CASES 59, 'I THINK SOME SORT OF VOLITION IS INDICAT ED'. HE CHOOSES TO PAY OUT SOME DISBURSEMENT; IT IS AN EXPENSE; IT IS SOMETHING 'WH ICH COMES OUT OF HIS POCKET. A LOSS IS SOMETHING DIFFERENT. THAT IS NOT A THING WH ICH HE EXPENDS OR DISBURSES. THAT IS A THING WHICH, SO TO SPEAK, COMES UPON HIM AB EXTRA.' EVEN OTHERWISE, IN THE INSTANT CASE, THE LD. CIT(A) CONCLUDED THAT TH E ASSESSEE IS A CHARTERED ACCOUNTANT BY QUALIFICATION BUT NOT IN PRACTICE, HA VING SURRENDERED THE CERTIFICATE OF PRACTICE AND THAT THE PROVISIONS OF CLAUSE 11 OF THE FIRST SCHEDULE REFERRED TO BY THE A.O., ARE APPLICABLE ONLY TO CHARTERED ACCOU NTANTS IN PRACTICE, AND ARE THEREFORE, NOT APPLICABLE TO THE ASSESSEE. THE REV ENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THESE FINDINGS OF FAC TS OF RECORDED BY THE LD. CIT(A). IN VIEW OF THE FOREGOING ,WE ARE NOT INCLINED TO IN TERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1 IN THE APPEAL OF THE REVENUE IS DISMISSED. 6. COMING NOW TO GROUND NO.1 IN THE CO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE VIDE ORDER S HEET ENTRY DATED 6.11.2009 TO FURNISH DETAILS OF UNSECURED LOANS, ACCOUNT CONF IRMATION, BANK STATEMENT, COPIES OF RETURNS AND BALANCE SHEET AS ALSO PROFIT AND LOSS ACCOUNT OF THE UNSECURED CREDITORS. HOWEVER, THE ASSESSEE DID NOT FURNISH ANY REPLY. EVEN THE NOTICE DATED 23.11.2009 AND18 TH DECEMBER, 2009 WENT UNRESPONDED. IN THESE CIRCUMSTANCES, SINCE THE ASSESSEE FAILED TO ESTABLI SH IDENTITY AND CREDITWORTHINESS OF UNSECURED CREDITORS NOR ESTABLI SHED GENUINENESS OF THE TRANSACTIONS, THE AO ADDED AN AMOUNT OF ` 11LACS U/S 68 OF THE ACT. 7. ON APPEAL, LEARNED CIT(A) UPHELD THE FINDINGS O F AO IN THE FOLLOWING TERMS:- ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 7 3.2 THE SUBMISSIONS OF THE APPELLANT AND THE FACTS HAVE BEEN CAREFULLY CONSIDERED. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS GIVEN DETAILS OF THE OPPORTUNITIES GIVE N TO FILE EVIDENCE IN RESPECT OF THE LOAN SHOWN AND /THE APPELLANTS F AILURE TO COMPLY. IN VIEW OF THE FACTS MENTIONED IN THE ASSESSMENT OR DER, IT IS CLEAR THAT THE APPELLANT HAS NOT FILED THE REQUIRED EVIDE NCE DURING ASSESSMENT PROCEEDINGS TO ESTABLISH THE IDENTITY AN D CREDITWORTHINESS OF THE CREDITOR AND THE GENUINENES S OF THE TRANSACTION. IN VIEW OF THE ABOVE, THE ADDITION MA DE BY THE ASSESSING OFFICER DOES NOT REQUIRE ANY INTERFERENCE . THE GROUND IS DISMISSED. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF LEARNED CIT(A).WHILE INVITING OUR ATTENTION TO DOCU MENTS PLACED AT PAGE 15 TO 20 OF THE PAPER BOOK, THE LD. AR CONTENDED THAT THE A O HAD COMPLETED THE HEARING IN THEIR CASE ON 23 RD DECEMBER, 2009 WHILE THE ASSESSEE SUBMITTED ON 24.12.2009, AN AFFIDAVIT OF MS. ANJANA VOHRA, HER CONFIRMATION AND COPY OF A LETTER DATED 24 TH DECEMBER, 2009 ADDRESSED TO THE MANGER OF THE BAN K, SEEKING COPY OF HER PASS BOOK, ALONG WITH THEIR LETTER DAT ED 24 TH DECEMBER, 2009. THOUGH THESE DOCUMENTS WERE PLACED BEFORE THE LD. CIT(A), HE DID NOT RECORD ANY FINDINGS ON THIS ASPECT AND UPHELD THE ADDITIO N MADE BY THE AO .INTER ALIA, THE LD. AR RELIED UPON DECISIONS IN CIT VS. ORISSA CORPORATION (P) LTD., 159 ITR 78 (SC); NEMI CHAND KOTHARI VS. CIT, 264 ITR 254 (G AU);AND ARAVALI TRADING CO. VS. INCOME TAX OFFICER, 187 TAXMAN 338;AND DECI SION DATED 21.9.2011 IN CIT VS. DATAWARE PRIVATE LTD. IN ITA NO. 263 OF 201 1. THE LD. DR , ON THE OTHER HAND, SUPPORTED THE FINDINGS IN THE IMPUGNED ORDER ON THE GROUND THAT THE DOCUMENTS NOW PLACED BEFORE THE BENCH, WERE NEVER P LACED BEFORE THE LD. CIT(A) OR THE AO. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE DOCUMENTS PLACED AT SL. NO . 3 ON PAGE NO.15-20 OF THE PAPER BOOK VIZ. AFFIDAVIT OF MS. ANJANA VOHRA, HER CONFIRMATION AND PAN DETAILS WERE NEVER CONSIDERED BY THE AO, HAVING BEEN SUBMIT TED BEFORE THE AO AFTER THE CONCLUSION OF HEARING ON 23.12.2009. THERE IS NO SL . NO.4 IN THE PAPER BOOK; ADMITTEDLY SL. NOS. IN THE PAPER BOOK HAVING BEEN WRONGLY NUMBERED. THOUGH ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 8 THE LD. CIT(A) REFERRED TO THE RELEVANT SUBMISSIONS OF THE ASSESSEE IN THE IMPUGNED ORDER AND THESE DOCUMENTS ARE STATED TO H AVE BEEN PLACED BEFORE HIM, HE DID NOT RECORD HIS SPECIFIC FINDINGS IN TH E LIGHT OF THESE DOCUMENTS AND MERELY AFFIRMED THE ORDER OF THE AO. A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUT HORITY MUST PASS REASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEF ORE IT. THE APPLICATION OF MIND TO THE MATERIAL FACTS AND THE A RGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF T HE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATIO N, THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE REQUI REMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF BY T HE QUASI- JUDICIAL AUTHORITIES HAS BEEN READ AS AN INTEGRAL P ART OF THE CONCEPT OF FAIR PROCEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y, CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND MINIMIZES ARBITRARINESS IN THE DECISION-MAKING PROC ESS. HONBLE JURISDICTIONAL HIGH COURT IN THEIR DECISION IN VODA FONE ESSAR LTD. VS. DRP,196 TAXMAN423(DELHI) HELD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS, IT IS OBLIGATORY ON ITS PART TO ASCRIBE COGENT AND GERMAN E REASONS AS THE SAME IS THE HEART AND SOUL OF THE MATTER AND FURTHER, THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER IS CALLED IN QUESTION BEFORE THE SUP ERIOR FORUM. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CO NCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB,(199 5)1SCC 760(SC)].AS ALREADY OBSERVED, THE IMPUGNED ORDER SU FFERS FROM LACK OF REASONING AND IS NOT A SPEAKING ORDER ON THE IS SUE OF ADDITION U/S 68 OF THE ACT. IN VIEW OF THE FOREGOING, WE CON SIDER IT FAIR AND ITA NO.3245/DEL./2011 & CO NO. 237/DEL./2011 9 APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE AFORESAID ISSU E, AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF VARIOUS JUDICIA L PRONOUNCEMENTS INCLUDING THOSE REFERRED TO ABOVE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY TH AT WHILE REDECIDING THE APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISI ONS OF SEC. 250(6) OF THE ACT, BRINGING OUT CLEARLY AS TO WHETHER OR N OT IDENTITY AND CREDITWORTHINESS OF THE AFORESAID CREDITOR AND GENU INENESS OF THE TRANSACTIONS, IS ESTABLISHED IN THIS CASE. WITH THE SE OBSERVATIONS, GROUND NO. 1 IN THE CO IS DISPOSED OF. 10. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL OF THE REVENUE AS ALSO IN THE CO OF THE ASSESSEE, ACCORDINGLY, BOTH THESE GROUNDS ARE DISMI SSED. 11. NO OTHER ARGUMENT OR SUBMISSION WAS MADE BE FORE US. 12. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED WHILE THE CO IS ALLOWED BUT FOR STATISTICAL PURPOSES. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. SHRI HEMANT SURANA,A-401, DEFENCE COLONY, NE W DELHI 2. INCOME TAX OFFICER, WARD 37(1), NEW DELHI 3. CIT(A)-XVIII, NEW DELHI. 4. CIT CONCERNED. 5. DR, ITAT,C BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ORDER PRONOUNCED IN OPEN COURT