A.Gomathi Shankar, CHENNAI V. ITO, CHENNAI

ITA 530/CHNY/2014

• Counselvise Citation: 53021714 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: G BASKAR
• Keywords: Principle of natural justice
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.530/MDS/2014 / ASSESSMENT YEAR : 2009-10 SHRI A. GOMATHI SHANKAR PROP. RIGHT LEATHER OVERSEAS NO.34, WUTHUCATTAN STREET PERIAMET CHENNAI 600 003 VS. THE INCOME TAX OFFICER BUSINESS WARD X(4) CHENNAI [PAN ABDPG 2869 D ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI G BASKAR, ADVOCATE /RESPONDENT BY : DR B NISCHAL, JCIT / DATE OF HEARING : 06 - 07 - 2015 ! / DATE OF PRONOUNCEMENT : 21 - 08 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE ADMINISTRATIVE COMMISSIONER-IX, CHENNAI, DATED 27.1.2014 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. SHRI G BASKAR, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER ITA NO.530/14 :- 2 -: CALLED FOR THE DETAILS OF CONFIRMATION FROM THE SUN DRY CREDITORS, DETAILS OF SALARY AND BONUS, RENT PAID, LEDGER COPIES OF FO REIGN COMMISSION PAYMENTS AND DETAILS OF TDS DEDUCTED ETC. THE AS SESSEE ALSO BY HIS LETTER DATED 10.11.2011 FILED ALL THE DETAILS CALLE D FOR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER, AFTER CONSIDERING ALL THE DETAILS FILED BY THE ASSESSEE, ALLOWED THE PAYMENT OF COMMISSION TO NON-RESIDENTS. HOWEVER, THE ADMINISTRATIVE COMMISSIONER IN THE GUI SE OF EXERCISING HIS REVISIONAL JURISDICTION U/S 263 OF THE ACT, FO UND THAT THE PAYMENT OF COMMISSION WAS MADE TO NON-RESIDENTS, THEREFORE, IT WAS LIABLE FOR TDS AT THE TIME OF MAKING PAYMENT. THE CIT FURTHER FOUND THAT U/S 40(A)(I)OF THE ACT, THE ASSESSING OFFICER OUGHT TO HAVE DISALLOWED A SUM OF ` 19,54,363/-. ACCORDINGLY, THE CIT DIRECTED THE AS SESSING OFFICER TO DISALLOW PAYMENT OF FOREIGN COMMISSION O F ` 19,54,363/- U/S 40(A)(I) OF THE ACT. 3. THE LD. COUNSEL SUBMITTED THAT SINCE THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE DETAILS FILED BY THE A SSESSEE AND TAKEN ONE VIEW, THE CIT CANNOT SUBSTITUTE HIS OWN VIEW AN D DISALLOW THE CLAIM U/S 40(A)(I) OF THE ACT. REFERRING TO THE O RDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NO.2334/MDS/2014 DATED 2.1.2015, THE LD. COUNSEL SUBMITTED FOR ASSESSMENT YEAR 2011-12, THIS TRIBUNAL, AFTER FOLLOWING THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN CIT VS FAIZAN SHOES PVT. LTD [2014] 367 ITR 155, ALLOWE D THE CLAIM OF THE ITA NO.530/14 :- 3 -: ASSESSEE. THEREFORE, THE CIT OUGHT NOT TO HAVE DIR ECTED THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF THE ASSESSEE U/S 40(A)(I) OF THE ACT. 4. WE HEARD DR. B. NISCHAL, LD. DEPARTMENTAL REPRESENT ATIVE ALSO. 5. THE CIT, WHILE EXERCISING HIS JURISDICTION U/S 263 OF THE ACT, BY A NOTICE DATED 18.2.2013, CALLED UPON THE ASSES SEE TO EXPLAIN WHY A SUM OF ` 19,54,363/- SHOULD NOT BE DISALLOWED FOR NON-DEDUC TION OF TAX AT THE TIME OF PAYMENT. THE ASSESSEE APPEARS TO HAVE EXPLAINED BEFORE THE CIT THAT THE ASSESSING OFFICER CALLED FO R ALL THE DETAILS AND THE ASSESSEE BY A LETTER DATED 10.11.2011 SUBMITTE D THE ENTIRE DETAILS REGARDING PAYMENT OF COMMISSION. THE ASSESSING OF FICER, AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE ALLOWE D THE CLAIM OF THE ASSESSEE. APPARENTLY, THE ASSESSING OFFICER HAS NO T DISCUSSED ANYTHING IN THE ASSESSMENT ORDER. WE HAVE ALSO GON E THROUGH THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 . THIS TRIBUNAL, BY FOLLOWING THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN FAIZAN SHOES PVT. LTD. (SUPRA) DISMISSED THE REVENUES APPEAL. THIS TRIBUNAL FOUND THAT THE AS SESSEE EXPORTED LEATHER GOODS AND PAID A SUM OF ` 24,18,270/- TOWARDS COMMISSION TO THE FOREIGN AGENTS FOR PROCURING ORDERS ON BEHALF O F THE ASSESSEE. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL, BY FOLLOWING TH E JUDGMENT OF THE ITA NO.530/14 :- 4 -: HON'BLE MADRAS HIGH COURT IN FAIZAN SHOES PVT. LTD (SUPRA), CONFIRMED THE ORDER OF THE LOWER AUTHORITY. IN THE CASE BEFO RE US, IT IS NOT KNOWN THE NATURE OF THE PAYMENT MADE BY THE ASSESSEE. I S IT FOR PROCURING ORDERS OR FOR ANY OTHER PURPOSE IS NOT CLEAR FROM T HE ORDER OF THE LOWER AUTHORITY. MOREOVER, THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER WITH REGARD TO PAYMENT OF FOREIGN COMMISSION. THE ONLY CONTENTION OF THE LD. COUNSEL IS THAT THE ASSESSING OFFICER CALLE D FOR THE DETAILS AND ALLOWED THE CLAIM. THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE ASSESSING OFFICER BEING A QUASI-JUDICIAL AUTHORITY, THE APPLICATION OF MIND SHALL BE REFLECTED IN THE IMPUGNED ASSESSMENT ORDER ITSELF. IN THIS CASE, EVEN THOUGH THE ASSESSING OFFICER CALLED FOR THE DETAILS, THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER REGA RDING THE PAYMENT OF COMMISSION AND APPLICATION OF MIND DOES NOT REFL ECT FROM THE ASSESSMENT ORDER. 6. THE APPLICATION OF MIND AND THE REASONS FOR REACHIN G A CONCLUSION SHALL CONTAIN IN THE ASSESSMENT ORDER IT SELF. REASONS FOR ARRIVING AT A CONCLUSION ARE THE LIVE LINK TO THE M IND OF THE DECISION MAKER AND THE MATERIALS AVAILABLE ON RECORD. THERE FORE, FOR THE PURPOSE OF EFFECTIVELY PROSECUTING THE APPEAL/REVIS IONAL REMEDY BEFORE THE HIGHER AUTHORITIES, THE ASSESSING OFFICER IS BO UND TO RECORD THE REASONS FOR THE CONCLUSION REACHED IN THE ASSESSMEN T ORDER. UNLESS AND UNTIL THE REASONS ARE RECORDED IN THE ASSESSMEN T ORDER, THE ITA NO.530/14 :- 5 -: APPELLATE/JUDICIAL AUTHORITIES MAY NOT BE IN A POSI TION TO APPRECIATE THE ORDER OF THE ASSESSING OFFICER. 7. WE FIND THAT THE HON'BLE P&H HIGH COURT HAD AN OCC ASION TO EXAMINE THIS ISSUE IN CIT VS SUNIL KUMAR GOEL [2005 ] 274 ITR 53. THE P&H HIGH COURT, AFTER CONSIDERING THE JUDGMENT OF T HE CONSTITUTIONAL BENCH OF THE APEX COURT IN S.N.MUKHERJEE VS UNION O F 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, 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 (PA GE 1995) : 'THE DECISIONS OF THIS COURT REFERRED TO ABOVE INDI CATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASO NS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THA T OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHI CH 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 OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPERVISORY JURISDICTIO N OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTITUTION AND THAT THE REASONS, IF RECORDED, WOULD ENABLE THI S COURT OR THE HIGH COURTS TO EFFECTIVELY EXERCISE 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 REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTE E CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLAR ITY IN THE DECISIONS; AND (III) MINIMISE CHANCES OF ARBITR ARINESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HA S BEEN ITA NO.530/14 :- 6 -: DRAWN BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIES EXERCISING JUDICIAL FUNCTIONS ON THE GRO UND THAT A JUDGE IS TRAINED TO LOOK AT THINGS OBJECTIVE LY UNINFLUENCED BY CONSIDERATIONS OF POLICY OR EXPEDIEN CY WHEREAS AN EXECUTIVE OFFICER GENERALLY LOOKS AT THIN GS FROM THE STAND POINT OF POLICY AND EXPEDIENCY. 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 AUTHORITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN H OLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECORD REASON S 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 ENS URES 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 ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECI SION 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 O F A COURT OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE AUTHORITY HAS GI VEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLAT E 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.' ITA NO.530/14 :- 7 -: 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 E XTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT AND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN THA T DECISION. 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 ON E OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-U P. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUD ICIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXPEDIENCY. THEY MUST DECIDE THE MATTER SO LELY ON THE FACTS OF THE PARTICULAR CASE, SOLELY ON THE MAT ERIAL BEFORE THEM AND APART FROM ANY EXTRANEOUS CONSIDERAT IONS BY APPLYING PRE-EXISTING LEGAL NORMS TO FACTUAL SITU ATIONS. NOW THE NECESSITY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHECKS THE INTRO DUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND EXCLUDES OR, AT ANY RATE, MINIMISES ARBITRARINESS IN THE DECISION-M AKING 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 HA VE THE POWER UNDER THE SAID PROVISIONS TO QUASH BY CERTIOR ARI 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 COURTS CANNOT EXAMINE THE CORRECTNESS OF THE ORDER UNDER REVIEW. THE HIGH COURT AND THE SUPREME COURT WOULD BE POWERLESS TO INTERFERE SO AS TO KEEP THE ADMINIS TRATIVE OFFICER WITHIN THE LIMITS OF THE LAW. THE RESULT WO ULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFI ED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THERE WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRICE. IF THIS REQUIREMENT IS INSISTED UPON, THEN , THEY WILL BE SUBJECT TO JUDICIAL SCRUTINY AND CORRECTION.' ITA NO.530/14 :- 8 -: IF THE ORDER PASSED BY THE TRIBUNAL IS SCRUTINISED 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 LANGUA GE USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF THE RESPO NDENT'S PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR A FFIRMATION. IN OUR OPINION, THE TRIBUNAL WAS DUTY BOUND TO RECO RD TANGIBLE AND COGENT REASONS FOR UPSETTING WELL REASONED ORDE RS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF IN COME-TAX (APPEALS). IT SHOULD HAVE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTIONS 271D AND 271E OF THE ACT IN CONJUN CTION WITH OTHER PROVISIONS OF THE SAME FAMILY AND THEN D ECIDED BY A REASONED ORDER WHETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOULD HAVE CLEARLY REFLECTED THE APPL ICATION OF MIND BY THE LEARNED MEMBERS. 8. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT IT IS INCUMBENT ON THE PART OF THE ASS ESSING OFFICER TO DISCLOSE THE REASONS IN THE ASSESSMENT ORDER FOR AL LOWING OR DISALLOWING A CLAIM OF THE ASSESSEE. THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE CIT HAS RIGHTLY EXERCISED HIS JURI SDICTION U/S 263 OF THE ACT. HOWEVER, THE CIT HAS DIRECTED THE ASSESSIN G OFFICER TO DISALLOW A SUM OF ` 19,54,363/- SAID TO BE PAID TO THE NON-RESIDENTS FOR NON-COMPLIANCE OF PROVISIONS OF SECTION 40(A)(I ) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AN OPPO RTUNITY SHALL BE GIVEN TO THE ASSESSEE TO EXPLAIN THE NATURE OF PAY MENT BEFORE THE ASSESSING OFFICER. ACCORDINGLY, THE ORDER OF THE C IT IS MODIFIED AND THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE PA YMENT OF ITA NO.530/14 :- 9 -: COMMISSION TO THE NON-RESIDENTS INDEPENDENTLY AND D ECIDE THE SAME IN ACCORDANCE WITH LAW. IT IS MADE CLEAR THAT THE ASS ESSING OFFICER SHALL EXAMINE THE ISSUE INDEPENDENTLY WITHOUT BEING INFLU ENCED BY THE OBSERVATION MADE BY THE CIT IN THE IMPUGNED ORDER O R BY THIS TRIBUNAL IN THIS ORDER AND DECIDE THE SAME IN ACCORDANCE WIT H LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 9. WITH THE ABOVE OBSERVATION, THE APPEAL OF THE ASS ESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OF AUGUST, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 21 ST AUGUST, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF