Commissioner Of Income (Central), Ludhiana v. M/S Mbd Printographics (P) Ltd. Jalandhar

-1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 122 of 2013 Date of Decision: 11.1.2017 Commissioner of Income (Central), Ludhiana ....Appellant. Versus M/s MBD Printographics (P) Ltd. Jalandhar ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Mr. Rajesh Katoch, Advocate for the appellant. Mr. Pankaj Jain, Senior Advocate with Mr. Divya Suri, Advocate and Mr. Sachin Bhardwaj, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of a bunch of Income Tax Appealsbearing ITA Nos. 117 to 122 of 2013 as according to learned counsel for theparties, similar issues arise for consideration in these appeals. For brevity,the facts are being extracted from ITA No. 122 of 2013. 2.This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 28.12.2012 (Annexure A-III) passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (hereinafter referred to as “theTribunal”) in ITA No. 506(ASR)/2011 for the assessment year 2005-06.The appeals were admitted by this Court vide order dated 18.9.2014 forGurbachan Singh2017.03.01 10:36I attest to the accuracy anddetermination of substantial question of law No.(i) and (ii) which are to theauthenticity of this documentHigh Court Chandigarh ITA No. 122 of 2013 following effect:- (i)Whether on the facts and in law, the Hon'ble ITATis justified in allowing deduction u/s 80IC of theIncome Tax Act, 1961, @ 100% of its profitwithout properly appreciating the findingsrecorded by the Assessing Officer, which werebased on evidences available on records aftersearch and survey action, that the assessee did nothave sufficient infrastructure and manpower and,therefore, was not manufacturing the entireproduce at its unit at Gagret in Himachal Pradeshbut was also getting job work done at Jalandharis justified in allowing deduction u/s 80IC of theIncome Tax Act, 1961, @ 100% of its profitwithout properly appreciating the findingsrecorded by the Assessing Officer, which werebased on evidences available on records aftersearch and survey action, that the assessee did nothave sufficient infrastructure and manpower and,therefore, was not manufacturing the entireproduce at its unit at Gagret in Himachal Pradeshbut was also getting job work done at Jalandhar (Punjab)? (ii)Whether on the facts and in law, the Hon'ble ITATis justified in allowing deduction u/s 80IC of theIncome Tax Act, 1961, @ 100% of its profitignoring the finding of the Assessing Officer thatsister concerns of the assessee, doing the samebusiness outside the State of Himachal Pradeshwere showing lesser profit?is justified in allowing deduction u/s 80IC of theIncome Tax Act, 1961, @ 100% of its profitignoring the finding of the Assessing Officer thatsister concerns of the assessee, doing the samebusiness outside the State of Himachal Pradeshwere showing lesser profit? 3.The facts, in brief, necessary for adjudication of the instantappeal as narrated therein are that the assessee derives income from printingbusiness. A search and seizure operation under Section 132 of the Act wasconducted in the MBD Group of cases on 22.1.2009. A notice underSection 153C of the Act was issued on 24.12.2009 and in response thereto,the assessee filed its return on 11.2.2010 declaring 'nil' income. The ITA No. 122 of 2013 -3- 3.The facts, in brief, necessary for adjudication of the instantappeal as narrated therein are that the assessee derives income from printingbusiness. A search and seizure operation under Section 132 of the Act wasconducted in the MBD Group of cases on 22.1.2009. A notice underSection 153C of the Act was issued on 24.12.2009 and in response thereto,the assessee filed its return on 11.2.2010 declaring 'nil' income. The ITA No. 122 of 2013 -3- assessee had claimed deduction under Section 80IC of the Act as it hadprinting facility at a unit in Gagret (Himachal Pradesh) and also got jobwork done from a sister concern at Focal Point, Jalandhar. The AssessingOfficer vide assessment order dated 29.12.2010 (Annexure A-I) assessedthe income at ` 4,76,35,910/- holding that the assessee was not entitled tothe deduction claimed under Section 80IC of the Act for the entire profitsand restricted the deduction under Section 80IC of the Act to 20% of thetotal profits. Feeling aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. TheCIT(A) vide order dated 29.7.2011 (Annexure A-II) partly allowed theappeal by directing the Assessing Officer to allow the deduction as claimedby the assessee subject to the additions confirmed in the case of the assesseefor the assessment year 2005-06 by the CIT(A). Against the order,Annexure A-II, the revenue filed an appeal before the Tribunal who videorder dated 28.12.2012 (Annexure A-III) dismissed the appeal holding thatthe CIT (A) was right in allowing deduction under Section 80IC of the Act@ 100% of the profit and gain from manufacturing including sale of Raddi.Hence, the present appeals by the revenue. 4.Learned counsel for the appellant submitted that the Tribunalwhile affirming the findings of the CIT(A) had not passed the reasonedspeaking order which is the mandate as laid down by the Apex Court. 5.On the other land, learned counsel for the assessee supportedthe order passed by the Tribunal. 6.After hearing learned counsel for the parties, we find merit inthe submission of learned counsel for the revenue. 7. The Apex Court in M/s Kranti Associates Pvt. Ltd. and ITA No. 122 of 2013 another v. Sh. Masood Ahmed Khan and others, (2010) 9 SCC 496while dealing with the requirement of passing a reasoned order by anauthority whether administrative, quasi judicial or judicial, had laid down asunder:- “17. The expression 'speaking order' was first coined byLord Chancellor Earl Cairns in a rather strange context.The Lord Chancellor, while explaining the ambit of Writof Certiorari, referred to orders with errors on the face ofthe record and pointed out that an order with errors on itsface, is a speaking order. (See 1878-97 Vol. 4 AppealCases 30 at 40 of the report). 18. This Court always opined that the face of an orderpassed by a quasi-judicial authority or even anadministrative authority affecting the rights of parties,must speak. It must not be like the 'inscrutable face of aSphinx'. 19 to 50XXXXXX 51. Summarizing the above discussion, this Court holds: (a) In India the judicial trend has always been torecord reasons, even in administrative decisions, if suchdecisions affect anyone prejudicially. (b)A quasi-judicial authority must record reasons insupport of its conclusions. (c)Insistence on recording of reasons is meant toserve the wider principle of justice that justice must notonly be done it must also appear to be done as well. -5- (d)Recording of reasons also operates as a validrestraint on any possible arbitrary exercise of judicial andquasi-judicial or even administrative power. (e)Reasons reassure that discretion has been exercisedby the decision maker on relevant grounds and bydisregarding extraneous considerations. 19 to 50XXXXXX 51. Summarizing the above discussion, this Court holds: (a) In India the judicial trend has always been torecord reasons, even in administrative decisions, if suchdecisions affect anyone prejudicially. (b)A quasi-judicial authority must record reasons insupport of its conclusions. (c)Insistence on recording of reasons is meant toserve the wider principle of justice that justice must notonly be done it must also appear to be done as well. -5- (d)Recording of reasons also operates as a validrestraint on any possible arbitrary exercise of judicial andquasi-judicial or even administrative power. (e)Reasons reassure that discretion has been exercisedby the decision maker on relevant grounds and bydisregarding extraneous considerations. (f)Reasons have virtually become as indispensablecomponent of a decision making process as observingprinciples of natural justice by judicial, quasi-judicial andeven by administrative bodies. (g)Reasons facilitate the process of judicial review bysuperior Courts. (h)The ongoing judicial trend in all countriescommitted to rule of law and constitutional governance isin favour of reasoned decisions based on relevant facts.This is virtually the life blood of judicial decision makingjustifying the principle that reason is the soul of justice. (i)Judicial or even quasi-judicial opinions these dayscan be as different as the judges and authorities whodeliver them. All these decisions serve one commonpurpose which is to demonstrate by reason that therelevant factors have been objectively considered. This isimportant for sustaining the litigants' faith in the justicedelivery system. (j)Insistence on reason is a requirement for bothjudicial accountability and transparency. -6- (k)If a Judge or a quasi-judicial authority is notcandid enough about his/her decision making processthen it is impossible to know whether the person decidingis faithful to the doctrine of precedent or to principles ofincrementalism. (l)Reasons in support of decisions must be cogent,clear and succinct. A pretence of reasons or 'rubber-stamp reasons' is not to be equated with a valid decisionmaking process. (m)It cannot be doubted that transparency is the sinequa non of restraint on abuse of judicial powers.Transparency in decision making not only makes thejudges and decision makers less prone to errors but alsomakes them subject to broader scrutiny. (See DavidShapiro in Defence of Judicial Candor (1987) 100Harward Law Review 731-737). (n)Since the requirement to record reasons emanatesfrom the broad doctrine of fairness in decision making,the said requirement is now virtually a component ofhuman rights and was considered part of StrasbourgJurisprudence. See (1994) 19EHRR 553, at 562 para 29and Anya vs. University of Oxford, 2001 EWCA Civ405, wherein the Court referred to Article 6 of EuropeanConvention of Human Rights which requires, "adequateand intelligent reasons must be given for judicialdecisions". ITA No. 122 of 2013 -7- (o)In all common law jurisdictions judgments play avital role in setting up precedents for the future.Therefore, for development of law, requirement of givingreasons for the decision is of the essence and is virtuallya part of "Due Process". (n)Since the requirement to record reasons emanatesfrom the broad doctrine of fairness in decision making,the said requirement is now virtually a component ofhuman rights and was considered part of StrasbourgJurisprudence. See (1994) 19EHRR 553, at 562 para 29and Anya vs. University of Oxford, 2001 EWCA Civ405, wherein the Court referred to Article 6 of EuropeanConvention of Human Rights which requires, "adequateand intelligent reasons must be given for judicialdecisions". ITA No. 122 of 2013 -7- (o)In all common law jurisdictions judgments play avital role in setting up precedents for the future.Therefore, for development of law, requirement of givingreasons for the decision is of the essence and is virtuallya part of "Due Process". 8. According to the revenue, there was a search on the assessee'spremises on 22.1.2009 and certain incriminating material was found. Onthe basis of the said material, the Assessing Officer had held that 100% ofthe work of the assessee had not been done at Gagret (Himachal Pradesh)and, therefore, allowed deduction under Section 80IC of the Act, @ 20% ofthe profit from manufacturing. However, the CIT(A) allowed deductionunder Section 80IC of the Act @ 100% of the profit and gain. The entiretyof the facts was required to be gone into to test the veracity of the plea takenby the assessee. The order dated 28.12.2012 (Annexure A-III) passed by theTribunal is not a speaking order giving the detailed reasons dismissing theappeal and affirming the findings of the CIT (A). The Tribunal being finalfact finding authority was required to deal with all aspects of factual matrixand then record its conclusions based thereon. Mere concurrence with theview expressed by the CIT(A) is not sufficient and the Tribunal wasrequired to record the reasons for dismissing the appeal. 9.In view of the above, the order dated 28.12.2012 (Annexure A-III) does not satisfy the requirements of being a reasoned order asenunciated by the Apex Court in M/s Kranti Associates Pvt. Ltd's case(supra), noticed herein above. Thus, the substantial question of law standsanswered accordingly. Consequently, after setting aside the order of theTribunal dated 28.12.2012 (Annexure A-III), the matter is remanded to the ITA No. 122 of 2013-8-Tribunal for fresh adjudication after affording an opportunity of hearing to the parties, in accordance with law.