The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S Tara Ripu Damanpal Trust, Kurukshetra

ITA-196-2016 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-196-2016 Date of Decision: 22.10.2018 The Commissioner of Income Tax (Exemptions), Chandigarh ...Appellant. Versus M/s Tara Ripu Damanpal Trust, Kurukshetra ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE AVNEESH JHINGAN. PRESENT: Mr. Denesh Goyal, Sr. Standing Counsel for the appellant.None for the respondent.None for the respondent. AJAY KUMAR MITTAL, J. 1. This appeal has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated7.1.2016 (Annexure A-2) passed by the Income Tax Appellate Tribunal,Chandigarh Bench, Chandigarh (hereinafter referred to as “the Tribunal”) inITA No. 309/Chd/2015, claiming the following substantial questions oflaw:- “(i) Whether on facts and circumstances of the caseand in law the ITAT had erred by failing toconsider the findings of the Commissioner ofIncome Tax who concluded that the expensesincurred by the trust are not in consonance with theobjects of the trust and without any essence ofrendering services, for which it was formed?and in law the ITAT had erred by failing toconsider the findings of the Commissioner ofIncome Tax who concluded that the expensesincurred by the trust are not in consonance with theobjects of the trust and without any essence ofrendering services, for which it was formed? ITA-196-2016 (ii)Whether on facts and circumstances of the caseand in law the ITAT has erred by placing relianceon the judgment of Hon'ble Apex Court in the caseof Kishinchand Chellaram Vs. CIT (1980) 125 ITR713 when the applicant-trust that was providedample opportunities by the ACIT, CircleKurukshetra and ITO (E), Ambala in difference tothe powers conferred upon CIT(E) to get enquiriesconducted, failed to discharge its onus to provethat its income was not exigible to taxation?and in law the ITAT has erred by placing relianceon the judgment of Hon'ble Apex Court in the caseof Kishinchand Chellaram Vs. CIT (1980) 125 ITR713 when the applicant-trust that was providedample opportunities by the ACIT, CircleKurukshetra and ITO (E), Ambala in difference tothe powers conferred upon CIT(E) to get enquiriesconducted, failed to discharge its onus to provethat its income was not exigible to taxation? (iii)Whether on the facts and circumstances of the caseand in law, the Hon'ble ITAT has erred by placingreliance on the judgment of Hon'ble RajasthanHigh Court in the case of CIT Vs. Vijay VargiyaVani Charitable Trust (2014) 369 ITR 360 whenthe applicant trust has applied for registration u/s12AA after the expir6y of one year and one monthsince its creation on 20.6.2013 and the trust is notin the nascent stage to prove its charitable intentbefore the CIT?and in law, the Hon'ble ITAT has erred by placingreliance on the judgment of Hon'ble RajasthanHigh Court in the case of CIT Vs. Vijay VargiyaVani Charitable Trust (2014) 369 ITR 360 whenthe applicant trust has applied for registration u/s12AA after the expir6y of one year and one monthsince its creation on 20.6.2013 and the trust is notin the nascent stage to prove its charitable intentbefore the CIT? (iv)Whether on the facts and circumstances of the caseand in law, the Hon'ble ITAT is right in directingthe CIT to grant registration to the assessee,instead of referring it back to the CIT for re-examination, even as it acknowledges that theresults of the enquiries got conducted by theand in law, the Hon'ble ITAT is right in directingthe CIT to grant registration to the assessee,instead of referring it back to the CIT for re-examination, even as it acknowledges that theresults of the enquiries got conducted by the ITA-196-2016-3- competent authority were not confronted to theapplicant? (iv)Whether on the facts and circumstances of the caseand in law, the Hon'ble ITAT is right in directingthe CIT to grant registration to the assessee,instead of referring it back to the CIT for re-examination, even as it acknowledges that theresults of the enquiries got conducted by theand in law, the Hon'ble ITAT is right in directingthe CIT to grant registration to the assessee,instead of referring it back to the CIT for re-examination, even as it acknowledges that theresults of the enquiries got conducted by the ITA-196-2016-3- competent authority were not confronted to theapplicant? (v)Whether in the facts and circumstances of the caseand in law the Hon'ble ITAT is right in grantingregistration to the society and setting aside theorder of Commissioner, hence the impugnedjudgment is perverse? 2. Put shortly, the facts necessary for disposal of the presentappeal as mentioned therein are that the assessee-Trust was created andregistered on 20.6.2013 vide Registration No. 2069 of 2013-14. Anapplication under Section 12AA of the Act in form No.10A for grant ofregistration was filed in the office of Commissioner of Income Tax, Karnalon 12.8.2014. The said application was transferred to the office ofCommissioner of Income Tax (Exemption), Chandigarh [for brevity 'theCIT(E)']. The CIT(E) vide order dated 16.2.2015 (Annexure A-1) rejectedthe said application by noticing that the Assessing Officer had notrecommended the case for grant of registration under Section 12AA of theAct as the Trust had failed to furnish information/documents as desired bythe Assessing Officer. Further, it was mentioned that no work of charity hasbeen done by the Trust and the gross receipts of the Trust are ` 97,508/- outof which ` 2582/- had been incurred towards office expenses and otherexpenses. Feeling aggrieved by the order, Annexure A-1, the assessee filedan appeal before the Tribunal who vide order dated 7.1.2016 (Annexure A-2) allowed the appeal holding that the CIT(E) had refused to grantregistration without disclosing the complete contents of the report andwithout confronting the same to the assessee. The Tribunal had directed the -4- CIT(E) to grant registration to the assessee under Section 12AA of the Act.Hence, the present appeal by the revenue. 3. Learned counsel for the appellant submitted that the impugnedorder dated 7.1.2016 (Annexure A-2) does not satisfy the test of being areasoned and speaking order and is, thus, liable to be quashed. It has furtherbeen urged that the impugned order has been passed in violation of theprinciples of natural justice. 4. After hearing learned counsel for the appellant, we find merit inthe submission of learned counsel for the revenue. 5.A perusal of the order, Annexure A-2 shows that it is neitherspeaking nor gives any cogent reasons for granting registration to theappellant under Section 12AA of the Act. The Tribunal while allowing theappeal of the assessee had noticed that the CIT(E) refused registrationwithout disclosing the complete contents of the report and withoutconfronting the same to the assessee. Further, we find that the CIT(E) aswell as the Tribunal had not passed the reasoned speaking order which isthe mandate as laid down by the Apex Court. 6.Delving into the issue relating to the passing of the speakingorder by an authority whether administrative, quasi judicial or judicial, itwas laid down by the Supreme Court in M/s Kranti Associates Pvt. Ltd.and another v. Sh. Masood Ahmed Khan and others, (2010) 9 SCC 496as under:- “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 of the 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). 6.Delving into the issue relating to the passing of the speakingorder by an authority whether administrative, quasi judicial or judicial, itwas laid down by the Supreme Court in M/s Kranti Associates Pvt. Ltd.and another v. Sh. Masood Ahmed Khan and others, (2010) 9 SCC 496as under:- “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 of the 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 50 XX XX XX 51. Summarizing the above discussion, this Court holds: a. In India the judicial trend has always been torecord reasons, even in administrative decisions, ifsuch decisions affect anyone prejudicially. record reasons, even in administrative decisions, ifsuch decisions affect anyone prejudicially. b. A quasi-judicial authority must recordreasons in support of its conclusions. reasons in support of its conclusions. c. Insistence on recording of reasons is meantto serve the wider principle of justice that justicemust not only be done it must also appear to bedone as well. d. Recording of reasons also operates as a validrestraint on any possible arbitrary exercise ofjudicial and quasi-judicial or even administrativepower. e. Reasons reassure that discretion has beenexercised by the decision maker on relevantgrounds and by disregarding extraneousexercised by the decision maker on relevantgrounds and by disregarding extraneous considerations. f. Reasons have virtually become asindispensable a component of a decision makingprocess as observing principles of natural justiceby judicial, quasi-judicial and even byadministrative bodies. g. Reasons facilitate the process of judicialreview by superior Courts. h. The ongoing judicial trend in all countriescommitted to rule of law and constitutionalgovernance is in favour of reasoned decisionsbased on relevant facts. This is virtually the lifeblood of judicial decision making justifying theprinciple that reason is the soul of justice. i. Judicial or even quasi-judicial opinions thesedays can be as different as the judges andauthorities who deliver them. All these decisionsserve one common purpose which is todemonstrate by reason that the relevant factorshave been objectively considered. This isimportant for sustaining the litigants' faith in thejustice delivery system. j. Insistence on reason is a requirement forboth judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is notcandid enough about his/her decision making -7- process then it is impossible to know whether theperson deciding is faithful to the doctrine ofprecedent or to principles of incrementalism. l. Reasons in support of decisions must becogent, clear and succinct. A pretence of reasonsor 'rubberstamp reasons' is not to be equated with avalid decision making process. m. It cannot be doubted that transparency is thesine qua non of restraint on abuse of judicialpowers. Transparency in decision making not onlymakes the judges and decision makers less prone toerrors but also makes them subject to broaderscrutiny. (See David Shapiro in Defence ofJudicial Candor (1987) 100 Harward LawReview 731-737). k. If a Judge or a quasi-judicial authority is notcandid enough about his/her decision making -7- process then it is impossible to know whether theperson deciding is faithful to the doctrine ofprecedent or to principles of incrementalism. l. Reasons in support of decisions must becogent, clear and succinct. A pretence of reasonsor 'rubberstamp reasons' is not to be equated with avalid decision making process. m. It cannot be doubted that transparency is thesine qua non of restraint on abuse of judicialpowers. Transparency in decision making not onlymakes the judges and decision makers less prone toerrors but also makes them subject to broaderscrutiny. (See David Shapiro in Defence ofJudicial Candor (1987) 100 Harward LawReview 731-737). n. Since the requirement to record reasonsemanates from the broad doctrine of fairness indecision making, the said requirement is nowvirtually a component of human rights and wasconsidered part of Strasbourg Jurisprudence. See(1994) 19 EHRR 553, at 562 para 29 and Anyavs. University of Oxford, 2001 EWCA Civ 405,wherein the Court referred to Article 6 of EuropeanConvention of Human Rights which requires,"adequate and intelligent reasons must be given forjudicial decisions". ITA-196-2016 -8- o. In all common law jurisdictions judgmentsplay a vital role in setting up precedents for thefuture. Therefore, for development of law,requirement of giving reasons for the decision is ofthe essence and is virtually a part of "DueProcess". 7. Further, the Apex Court in Canara Bank v. V.K. AwasthyAIR 2005 SC 2090 while dealing with the doctrine of principles of naturaljustice had noticed as under:- “8. Natural justice is another name for commonsensejustice. Rules of natural justice are not codified canons.But they are principles ingrained into the conscience ofman. Natural justice is the administration of justice in acommonsense liberal way. Justice is based substantiallyon natural ideals and human values. The administrationof justice is to be freed from the narrow and restrictedconsiderations which are usually associated with aformulated law involving linguistic technicalities andgrammatical niceties. It is the substance of justice whichhas to determine its form. 9. The expressions “natural justice'' and “legaljustice'' do not present a water-tight classification. It isthe substance of justice which is to be secured by both,and whenever legal justice fails to achieve this solemnpurpose, natural justice is called in aid of legal justice.Natural justice relieves legal justice from unnecessary technicality, grammatical pedantry or logicalprevarication. It supplies the omissions of a formulatedlaw. As Lord Buckmaster said, no form or procedureshould ever be permitted to exclude the presentation of alitigants' defence. 10. The adherence to principles of natural justice asrecognized by all civilized States is of supremeimportance when a quasi-judicial body embarks ondetermining disputes between the parties, or anyadministrative action involving civil consequences is inissue. These principles are well settled. The first andforemost principle is what is commonly known as audialteram partem rule. It says that no one should becondemned unheard. Notice is the first limb of thisprinciple. It must be precise and unambiguous. It shouldappraise the party determinatively the case he has tomeet. Time given for the purpose should be adequate soas to enable him to make his representation. In theabsence of a notice of the kind and such reasonableopportunity, the order passed becomes wholly vitiated.Thus, it is but essential that a party should be put onnotice of the case before any adverse order is passedagainst him. This is one of the most important principlesof natural justice. It is after all an approved rule of fairplay. The concept has gained significance and shadeswith time. When the historic document was made at Runnymede in 1215, the first statutory recognition of thisprinciple found its way into the “Magna Carta''. Theclassic exposition of Sir Edward Coke of natural justicerequires to “`vocate interrogate and adjudicate''. In thecelebrated case of Cooper v. Wandsworth Board ofWorks, (1963) 143 ER 414, the principle was thusstated: "Even God did not pass a sentence upon Adam,before he was called upon to make his defence. “Adam''says God, “where art thou has thou not eaten of the treewhereof I commanded thee that though should not eat''.Since then the principle has been chiselled, honed andrefined, enriching its content. Judicial treatment hasadded light and luminosity to the concept, like polishingof a diamond. 11. Principles of natural justice are those rules whichhave been laid down by the Courts as being the minimumprotection of the rights of the individual against thearbitrary procedure that may be adopted by a judicial,quasi-judicial and administrative authority while makingan order affecting those rights. These rules are intendedto prevent such authority from doing injustice.” 8. In view of the above, the orders dated 16.2.2015 (Annexure A-1) passed by the CIT(E) and dated 7.1.2016 (Annexure A-2) passed by theTribunal do not satisfy the requirements of being a reasoned order asenunciated by the Apex Court in M/s Kranti Associates Pvt. Ltd's case(supra) and is passed in violation of the principles of natural justice as per ITA-196-2016 law laid down by the Supreme Court in V.K. Awasthy's case (supra), asnoticed hereinabove. Accordingly, the appeal is allowed and the orders(Annexures A-1 and A-2, respectively) are quashed. The matter is remittedto the CIT(E) to pass a fresh speaking order after affording an opportunityof hearing to the assessee in accordance with law. Needless to say thatanything observed herein above shall not be taken to be an expression ofopinion on the merits of the controversy. (AJAY KUMAR MITTAL) JUDGE