KDH INVESTMENTS PVT. LTD.,MUMBAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Principal Commissioner of Income Tax, Chennai-4, Chennai, dated 09.03.2017 and pertains to assessment year 2012-13.

Shri G.P. Mehta, the Ld. representative for the assessee, submitted that the assessee claimed non-operational income of ₹2,47,500/- and the expenditure of ₹1,88,33,946/-. The Assessing Officer, in fact, allowed the claim of the assessee after verifying all the material available on record. According to the Ld. representative, the Principal Commissioner in the guise of exercising his power under Section 263 of the Income-tax Act, 1961 (in short "the Act"), found that the assessee has no trading activity or any business transaction, which was not considered by the Assessing Officer. According to the Ld. representative, the Assessing Officer has considered all the material available on record and allowed the claim of the assessee, therefore, the Principal Commissioner is not justified in revising the order of the Assessing Officer under Section 263 of the Act.

We heard Shri D. Prabhu Mukunth Arun Kumar, Jr. Standing Cousel also. According to the Ld. Jr. Standing Counsel, the Assessing Officer has simply accepted the return filed by the assessee without any discussion in the assessment order. The Principal Commissioner after examining the assessment order, found that there was no trading activity during the year under consideration. Therefore, according to the Ld. Jr.Standing Cousel, the claim of expenditure cannot be allowed. The only objection of the Ld. representative for the assessee is that the Assessing Officer called for all the details. However, the Assessing Officer has not considered the details said to be filed by the assessee. According to the Ld. Jr.Standing Cousel, there is no error much less prima facie error in the order of the Principal Commissioner.

Having heard the Ld. representative for the assessee and the Ld. Jr.Standing Cousel for the Revenue, we find from a bare reading of the assessment order that the Assessing Officer has not applied his mind to the material available on record. Merely because the Assessing Officer called for details, there is no presumption that the Assessing Officer has considered all the materials filed by the assessee. The assessment proceeding before the Assessing Officer is a judicial proceeding under Section 136 of the Act. Therefore, the Assessing Officer has to apply his mind to the material available on record and pass a speaking order by recording his own reasoning for allowing or disallowing the claim of the assessee. Unfortunately, the Assessing Officer has not recorded any reasoning.

Whether the proceeding is administrative proceeding or judicial proceeding, it is imperative on the part of the Assessing Officer to give reasons for the conclusion reached in the assessment order. The reasoning for the conclusion reached in the assessment order either way has to be reflected in the assessment order itself. The Assessing Officer cannot substitute the reason for conclusion by way of additional evidence or material in the course of appellate or revisional proceeding. Unless the Assessing Officer records the reasons for conclusion reached in the assessment order, the appellate or revisional authority may not be able to appreciate the assessment order.

Moreover, recording of reasons would remain as live link between the material available on record and the mind of the decision maker. This will definitely enable the appellate authority or revisional authority to appreciate the assessment order when it was challenged before them. Moreover, recording of reasoning would avoid arbitrary decision on the part of the decision maker. Since the Assessing Officer has not applied his mind and has not passed a speaking order, this Tribunal is of the considered opinion that the Principal Commissioner has rightly exercised his power under Section 263 of the Act. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

In the result, the appeal filed by the assessee is dismissed.