COMMISSIONER OF INCOME TAX II AMRITSAR vs. JAGJIT SINGH CHAHAL

This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 27.9.2012 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) for the assessment year 2008-09, claiming the following substantial questions of law:- “A. Whether the Hon'ble ITAT Amritsar Bench, Amritsar was justified in accepting the reason for withdrawal and subsequently deposit of in the Saving Bank Account pertains to purchase of some property which ultimately not materialized without any documentary evidence? B. Whether the ITAT was justified in deleting the addition of Rs.43,01,000/- in the case wherein the assessee has failed to furnish the sources Singh Gurbachan 2014.03.05 16:38 integrity of this document High Court Chandigarh -2- of deposits of Rs.43,01,000/- in the Saving Bank Accounts before the A.O. and even before the Ld. CIT(Appeals) in violation of the decision of Hon'ble Supreme Court in the case of M/s satisfactorily explained by the assessee?”

Put shortly, the facts necessary for disposal of the present appeal as mentioned therein are that the assessee filed his return of income on 15.4.2009 declaring a total income of ` 3,67,300/- and agriculture income at ` 7,00,000/-. The said return was processed under Section 143(1) of the Act on 23.3.2010 and the case was selected for scrutiny. During the course of assessment proceedings, the assessee was asked to explain the sources of investment amounting to ` 43,01,000/- in his Bank accounts. The assessee having failed to furnish satisfactory explanation, the said amount was added in the total income of the assessee. Accordingly, the Assessing Officer vide order dated 29.12.2010 (Annexure A-1) framed assessment on total taxable income at ` 53,99,610/- including the agricultural income of ` 7,00,000/- treating the same as income from undisclosed sources. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity, “the CIT(A)”]. The CIT(A) vide order dated 2.1.2012 (Annexure A-2) confirmed the addition of ` 43,01,000/- made by the Assessing Officer. Further, the CIT(A) while confirming the agricultural income as income from undisclosed sources upto ` 50,000/- Singh Gurbachan 2014.03.05 16:38 integrity of this document High Court Chandigarh -3- directed the Assessing Officer to assess ` 6,50,000/- as the agricultural income for rate purposes only. Still dissatisfied, the assessee filed an appeal before the Tribunal, who vide order dated 27.9.2012 (Annexure A-3) deleted the addition of ` 43,01,000/- made by the Assessing Officer and confirmed by the CIT(A). Hence, the present appeal by the revenue.

Learned counsel for the appellant submitted that the Tribunal while reversing the findings of the Assessing Officer and the CIT (A) had not passed the reasoned speaking order which is the mandate as laid down by the Hon'ble Apex Court.

As per office report, respondent has been served, but no one has chosen to appear and defend the order passed by the Tribunal.

After hearing learned counsel for the appellant, we find merit in the submission of learned counsel for the revenue.

The Hon'ble Apex Court in M/s Kranti Associates Pvt. Ltd. and another v. Sh. Masood Ahmed Khan and others, (2010) 9 SCC 496 while dealing with the requirement of passing a reasoned order by an authority whether administrative, quasi judicial or judicial, had laid down as under:- “51. Summarizing the above discussion, this Court holds: (a) In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. (b) A quasi-judicial authority must record reasons in support of its conclusions. (c) Insistence on recording of reasons is meant to Singh Gurbachan 2014.03.05 16:38 integrity of this document High Court Chandigarh -4- serve the wider principle of justice that justice must not only be done it must also appear to be done as well. (d) Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. (e) Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. (f) Reasons have virtually become as indispensable component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. (g) Reasons facilitate the process of judicial review by superior Courts. (h) The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively Singh Gurbachan 2014.03.05 16:38 integrity of this document High Court Chandigarh -5- considered. This is important for sustaining the litigants' faith in the justice delivery system. (j) Insistence on reason is a requirement for both judicial accountability and transparency. (k) If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. (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 decision making process. (m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). (n) 2014.03.05 16:38 integrity of this document High Court Chandigarh -6- referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". (o) In all common law juri ictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".

It would be apposite to refer to the order of the Tribunal dated 27.9.2012 which would show that the Tribunal has in para 7 thereof noticed the contentions of the parties and accepted the appeal of the assessee without giving any cogent and convincing reasons. It reads thus:- “We have heard the rival contentions and perused the facts of the case. We are convinced with the explanation given by the assessee before the authorities below that the assessee had declared all the income earned from salary, rent and other sources and agricultural income. There is no dispute to such credits. The assessee had been filing returns of income for the last many years and the copies of acknowledgments since 2001-02 are placed on record. As regards the cash deposits found in the three different bank accounts, the assessee had submitted cash flow statement which has not been considered by either of the authorities below. The Singh Gurbachan 2014.03.05 16:38 integrity of this document High Court Chandigarh -7- assessee had submitted the explanation that the cash has been withdrawn for purchase of some property which ultimately had not been materialized and the cash was deposited back as per requirement in the bank account. There is nothing on record brought out by either of the lower authorities that cash has been invested elsewhere. Therefore, in the facts and circumstances of the case, the AO is not justified in treating the cash deposits as unexplained and the same cannot be added to the income of the assessee. The AO is directed to delete the additions so made and the order of the Ld. CIT(A) is accordingly reversed. Thus, all the grounds of the appeal of the assessee are allowed.”

Therefore, the order dated 27.9.20012 does not satisfy the requirements of being a reasoned order as enunciated by the Apex Court noticed herein above. Thus, the substantial questions of law stand answered accordingly. Consequently, after setting aside the order of the Tribunal dated 27.9.2012 which is passed in violation of the principles of natural justice as per the law laid down by the Apex Court as mentioned above, the matter is remanded to the Tribunal to decide afresh after affording an opportunity of hearing to the parties in accordance with law. As a result, the appeal is allowed. (AJAY KUMAR MITTAL) JUDGE January 28, 2014 (ANITA CHAUDHRY) gbs JUDGE Singh Gurbachan 2014.03.05 16:38 integrity of this document High Court Chandigarh