The Commissioner Of Income Tax-Ii, Amritsar v. Sh. Indra Sen Aggarwal

ITA No. 40 of 2013 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 40 of 2013 (O&M) Date of Decision: 27.8.2015 The Commissioner of Income Tax-II, Amritsar ....Appellant. Versus Sh. Indra Sen Aggarwal ...Respondent. CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? PRESENT: Mr. Denesh Goyal, Advocate for the appellant. Mr. S.K. Mukhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 30.7.2012 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as“the Tribunal”) in ITA No. 186(Asr)/2012 for the assessment year 2007- 08, claiming the following substantial question of law:- On the facts and in the circumstances of the case,Hon'ble ITAT passed the order without considering thefacts available on the record that no enquiries were made to verify the genuineness of the deposits andwithdrawals made by the assessee in his bankaccounts. 2.The facts, in brief, necessary for adjudication of the instantappeal as narrated therein are that the assessee filed his return on6.11.2007 for the assessment year 2007-08 in the status of individualshowing loss of ` 1,23,39,833/-. The said return was processed underSection 143(1) of the Act on 30.3.2009. The Assessing Officer framed anassessment vide order dated 26.5.2009 (Annexure A-1). TheCommissioner of Income Tax-II (CIT), Amritsar vide order dated 9.3.2012(Annexure A-2) under Section 263 of the Act cancelled the assessmentholding the same to be erroneous and prejudicial to the interest of therevenue and directed the Assessing Officer to complete the assessmentde novo after affording fresh opportunity to the assessee. Feelingaggrieved, the assessee filed an appeal before the Tribunal who videorder dated 30.7.2012 (Annexure A-3) allowed the appeal and set asidethe order of the CIT passed under Section 263 of the Act. Hence, thepresent appeal by the revenue. 3.We have heard learned counsel for the parties. 4.Learned counsel for the revenue submitted that the Tribunalwhile reversing the findings of the CIT had not passed the reasonedspeaking order which is the mandate as laid down by the Hon'ble ApexCourt. It was further submitted that the Tribunal had failed to considerthe fact that no enquiries were made to verify the genuineness of thedeposits and withdrawals made by the assessee in his bank accounts.Support was gathered from the judgments of this Court in KandiFriends Educational Trust v. CIT-II, Chandigarh, ITA No. 191 of 2012 ITA No. 40 of 2013 -3- decided on 4.4.2013 and Commissioner of Income Tax v. RajaIndustries (2012) 340 ITR 344 (P&H). 5.On the other hand, learned counsel for the assesseesupported the order passed by the Tribunal and prayed for dismissal ofthe appeal. The learned counsel has placed reliance upon the followingjudgments:- I.Malabar Industrial Co. Ltd. v. Commissionerof Income Tax (2000) 243 ITR 83 (SC);of Income Tax (2000) 243 ITR 83 (SC); II.Commissioner of Income Tax v. Max IndiaLtd. (2007) 295 ITR 282 (SC);Ltd. (2007) 295 ITR 282 (SC); III.Commissioner of Income Tax v. MunjalCastings (2008) 2 DTR Judgments 20 (P&H);Castings (2008) 2 DTR Judgments 20 (P&H); IV.Commissioner of Income Tax v. UniqueAutofelts (P) Ltd. (2009) 30 DTR Judgments231 (P&H);Autofelts (P) Ltd. (2009) 30 DTR Judgments231 (P&H); V.Commissioner of Income Tax v. Ratlam CoalAsh Company (1988) 171 ITR 141 (MP);Ash Company (1988) 171 ITR 141 (MP); VI.Commissioner of Income-Tax v. Gabriel IndiaLtd. (1993) 203 ITR 108 (Bom.);Ltd. (1993) 203 ITR 108 (Bom.); I.Malabar Industrial Co. Ltd. v. Commissionerof Income Tax (2000) 243 ITR 83 (SC);of Income Tax (2000) 243 ITR 83 (SC); II.Commissioner of Income Tax v. Max IndiaLtd. (2007) 295 ITR 282 (SC);Ltd. (2007) 295 ITR 282 (SC); III.Commissioner of Income Tax v. MunjalCastings (2008) 2 DTR Judgments 20 (P&H);Castings (2008) 2 DTR Judgments 20 (P&H); IV.Commissioner of Income Tax v. UniqueAutofelts (P) Ltd. (2009) 30 DTR Judgments231 (P&H);Autofelts (P) Ltd. (2009) 30 DTR Judgments231 (P&H); V.Commissioner of Income Tax v. Ratlam CoalAsh Company (1988) 171 ITR 141 (MP);Ash Company (1988) 171 ITR 141 (MP); VI.Commissioner of Income-Tax v. Gabriel IndiaLtd. (1993) 203 ITR 108 (Bom.);Ltd. (1993) 203 ITR 108 (Bom.); VII.Commissioner of Income Tax v. R.K. MetalWorks (1978) 112 ITR 445 (P&H).Works (1978) 112 ITR 445 (P&H). 6. The Hon'ble Apex Court in M/s Kranti Associates Pvt. Ltd. and another v. Sh. Masood Ahmed Khan and others, (2010) 9 SCC496 while dealing with the requirement of passing a reasoned order byan authority whether administrative, quasi judicial or judicial, had laiddown as under:- “17. The expression 'speaking order' was first coinedby Lord Chancellor Earl Cairns in a rather strangecontext. The Lord Chancellor, while explaining theambit of Writ of Certiorari, referred to orders witherrors on the face of the record and pointed outthat an order with errors on its face, is a speakingorder. (See 1878-97 Vol. 4 Appeal Cases 30 at 40 ofthe report). 18. This Court always opined that the face of anorder passed 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 a Sphinx'. 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, ifsuch decisions affect anyone prejudicially. (b)A quasi-judicial authority must record reasons insupport of its conclusions. support of its conclusions. (c)Insistence on recording of reasons is meant toserve the wider principle of justice that justice mustnot only be done it must also appear to be done aswell. (d)Recording of reasons also operates as a validrestraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e)Reasons reassure that discretion has beenexercised by the decision maker on relevant groundsand by disregarding extraneous considerations. (f)Reasons have virtually become asindispensable component of a decision makingprocess as observing principles of natural justice byjudicial, quasi-judicial and even by administrativebodies. (g)Reasons facilitate the process of judicial reviewby superior Courts.by superior Courts. (h)The ongoing judicial trend in all countriescommitted to rule of law and constitutionalgovernance is in favour of reasoned decisions basedon relevant facts. This is virtually the life blood ofjudicial decision making justifying the principle thatreason is the soul of justice. (i)Judicial or even quasi-judicial opinions thesedays can be as different as the judges and authoritieswho deliver them. All these decisions serve onecommon purpose which is to demonstrate by reasonthat the relevant factors have been objectivelyconsidered. This is important for sustaining thelitigants' faith in the justice delivery system. (j)Insistence on reason is a requirement for bothjudicial accountability and transparency. judicial accountability and transparency. (k)If a Judge or a quasi-judicial authority is not candid enough about his/her decision making processthen it is impossible to know whether the persondeciding is faithful to the doctrine of precedent or toprinciples of incrementalism. (l)Reasons in support of decisions must becogent, clear and succinct. A pretence of reasons or'rubber-stamp reasons' is not to be equated with avalid decision making process. (j)Insistence on reason is a requirement for bothjudicial accountability and transparency. judicial accountability and transparency. (k)If a Judge or a quasi-judicial authority is not candid enough about his/her decision making processthen it is impossible to know whether the persondeciding is faithful to the doctrine of precedent or toprinciples of incrementalism. (l)Reasons in support of decisions must becogent, clear and succinct. A pretence of reasons or'rubber-stamp 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 judicial powers.Transparency in decision making not only makes thejudges and decision makers less prone to errors butalso makes them subject to broader scrutiny. (SeeDavid Shapiro in Defence of Judicial Candor (1987)100 Harward Law Review 731-737). (n)Since the requirement to record reasonsemanates from the broad doctrine of fairness indecision making, the said requirement is now virtuallya component of human rights and was consideredpart of Strasbourg Jurisprudence. See (1994)19EHRR 553, at 562 para 29 and Anya vs. Universityof Oxford, 2001 EWCA Civ 405, wherein the Courtreferred to Article 6 of European Convention ofHuman Rights which requires, "adequate andintelligent reasons must be given forjudicialdecisions". (o)In all common law jurisdictions judgments play a vital role in setting up precedents for the future.Therefore, for development of law, requirement ofgiving reasons for the decision is of the essence andis virtually a part of "Due Process". 7. According to the revenue, the assessee had declared shortterm capital loss of ` 1,83,68,197/- on the sale of equity shares and longterm capital loss amounting to ` 22,77,400/- on sale of long terminvestment in equity shares. The assessee had made deposits to thetune of ` 97.50 lacs and withdrawals amounting to ` 94,96,560/- fromaccount No. 006601508908 on different dates. The source of creditentries in the bank account was not explained by the assessee and noenquiry whatsoever was made by the Assessing Officer to find out thegenuineness of the deposits. The CIT held the assessment proceedingsto be prejudicial and erroneous to the interest of the revenue andcancelled the same by directing the Assessing Officer to complete theassessment de novo after affording fresh opportunity to the assessee.The Tribunal set aside the order of the CIT by observing that he was notjustified in cancelling the assessment made by the Assessing Officerunder Section 143(3) of the Act. The entirety of the facts were requiredto be gone before upsetting the order of the CIT by the Tribunal.Further, the order dated 30.7.2012 (Annexure A-3) passed by theTribunal is not a speaking order giving detailed reasons allowing theappeal of the assessee except mentioning that once having examinedthe source of deposits, the CIT cannot be given power to give his opinionand direct the Assessing Officer to write the order as per the desires ofthe CIT. It was also noticed that even if inadequate examination orenquiry had been conducted by the Assessing Officer, the CIT cannot ITA No. 40 of 2013 direct the Assessing Officer to re-write the order or to make the enquiryagain. The Tribunal being final fact finding authority was required to dealwith all aspects of factual matrix and then record its conclusions basedthereon. 8.Suffice it to notice that the judgments relied upon by thelearned counsel for the assessee, the principle of law enunciatedtherein, is well recognized. Since, we are remitting the matter back tothe Tribunal for fresh adjudication, they would be of no help to the caseof the assessee at this stage. ITA No. 40 of 2013 direct the Assessing Officer to re-write the order or to make the enquiryagain. The Tribunal being final fact finding authority was required to dealwith all aspects of factual matrix and then record its conclusions basedthereon. 8.Suffice it to notice that the judgments relied upon by thelearned counsel for the assessee, the principle of law enunciatedtherein, is well recognized. Since, we are remitting the matter back tothe Tribunal for fresh adjudication, they would be of no help to the caseof the assessee at this stage. 9.In view of the above, the order dated 30.7.2012 (AnnexureA-3) 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 lawstands answered accordingly. Consequently, after setting aside theorder of the Tribunal dated 30.7.2012 (Annexure A-3), the matter isremanded to the Tribunal for fresh adjudication after affording anopportunity of hearing to the parties, in accordance with law. The appealstands disposed of. (AJAY KUMAR MITTAL) JUDGE August 27, 2015gbs (RAMENDRA JAIN) JUDGE