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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF JANUARY 2020
PRESENT
THE HON’BLE MR. JUSTICE ALOK ARADHE
AND
THE HON’BLE MR. JUSTICE RAVI V.HOSMANI
I.T.A. NO.179 OF 2010
BETWEEN:
M/S SREE LAKSHMI SILKS REP. BY ITS PARTNER: SRI. SURYANARAYANA SWAMY NO.30, RAMANNAPET J.M. ROAD CROSS, BANGALORE-560002. ... APPELLANT (By Sri. A. SHANKAR, SENIOR COUNSEL FOR Sri. M. LAVA, ADV.)
AND:
THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 5(1) UNIT BUILDING ANNEXE MISSION ROAD, BANGALORE-560027. ... RESPONDENT (By Sri. K.V. ARAVIND, ADV.) - - -
THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 26-2-2010 PASSED IN ITA NO.945/BNG/2009, FOR THE ASSESSMENT YEAR 2001-02, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.945/BNG/2009, DATED 26-2-2010, IN THE INTEREST OF JUSTICE AND EQUITY.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the assessee, which was admitted by a Bench of this Court by order dated 04.11.2010 on the following substantial questions of law:
(i) Whether the Tribunal was justified in not recording any finding on the evidence that were placed before it in relation to cash credit entries in the books of the appellant on the facts and circumstances of the case?
(ii) Whether the Tribunal was justified in law in holding that the appellant has not proved the credits as appearing in the books of the appellants?
(iii) Whether the tribunal was justified in law in rejecting the genuineness of the trade creditors when the amounts paid
to the same creditors in the same financial year has been accepted by the Department?
After hearing the learned counsel for the parties, in our opinion, the following substantial question of law also arises for consideration:
(iv) Whether the order passed by the Tribunal is cryptic and suffers from the vice of non application of mind and therefore, the matter deserves to be remitted?
Facts giving rise to the filing of the appeal briefly stated are that the appellant is a partnership firm engaged in the business of trading of silk sarees. The appellant for the assessment year 2001-02 filed its return on income and declared the income of Rs.24,04,600/-. The return filed by the appellant was processed under Section 143(1) of the Act. The Assessing Officer by order dated 23.03.2004 assessed the total income of the appellant at Rs.58,88,494/- as
against Rs.24,04,600/- but the Assessing Officer recorded a finding that five of the creditors viz., R Shivappa, V Lokeshmurthy, P Narasimha Swamy, R Kiran and BS Manjunath were not genuine creditors and addition was made to the income of the appellant. Being aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 22.04.2004 partly allowed the appeal of the appellant and confirmed the findings with regard to the Assessing Officer in relation to five credits mentioned above and confirmed the addition. Being aggrieved by the order passed by the Commissioner of Income Tax (Appeals), the appellant filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as ‘the tribunal’ for short). The tribunal vide order dated 16.02.2010 partly allowed the appeal of the appellant and upheld the findings of the Assessing Officer and the first appellate authority in relation to the addition made against five credit entries
as mentioned above.
In the aforesaid factual background, this appeal has been filed. 4. Learned Senior counsel for the appellant has submitted that several documents were filed before the Assessing Officer as well as Commissioner of Income Tax (Appeals) and the tribunal. However, the aforesaid documents have not been considered by the authorities. It is further submitted that the tribunal has failed to appreciate the material placed before it in support of the purchase of material and payment made for the same and the tribunal has not given any finding in respect of the material which were produced before it. It was further submitted that the Assessing Officer has accepted the purchase of Rs.30,38,705/- in the books and the payments made during the year for a sum of Rs.16,88,305/- was also accepted. It is further submitted that there was no material before the Assessing Officer to record a finding that the creditors were the bogus creditors. It is further submitted that the tribunal has failed to take note of the documents in particular the
ledger copy of the sundry creditors and the bank statement of the appellant for the period 01.04.2001 to 31.03.2002 in respect of the aforesaid creditors. It is also submitted that the order passed by the tribunal is cryptic and suffers from the vice of non application of mind. Learned Senior counsel for the appellant has also invited the attention of this Court to Section 40A(3) of the Act and has submitted that under the Section as it stood in relation to the assessment year 2001-2002, there was requirement of making payment of the amount by account payee cheque and the payment could be made through the crossed cheque.
On the other hand, learned counsel for the revenue while opposing the submissions made by learned Senior counsel for the assessee submitted that the notice were sent to the weavers, which were returned on account of insufficient address. It is further submitted that sufficient opportunity was provided to the assessee, however, the assessee did not appear before the
Assessing Officer and did not produce any material. It is further submitted that the assessee has produced self- serving documents from which no inference can be drawn that the transactions in question are genuine. It is further submitted that three ingredients are required to be satisfied viz., the identity of the creditor, the genuineness of the credit and the credit worthiness of the creditors. In the instant case, the assessee has failed to prove the identity of the creditors. In support of the aforesaid submissions, reliance has been placed on the decision of the Supreme Court in the case of ‘COMMISSIONER OF INCOME-TAX V. P.MOHANANKALA’, 291 ITR 278 (SC) AND ‘COMMISSIONER OF INCOME-TAX V. P.R.GANAPATHY’, (2012) 210 TAXMAN 572 (SC).
We have considered the submissions made by learned counsel for the parties and have perused the record.
From perusal of opening paragraph of assessment order, it is evident that several opportunities
were granted to the appellant to appear, however, nobody appeared on behalf of the assessee. However, before proceeding further, it is apposite to take note of Section 250(4) of the Act, which provides that the Commissioner of Income Tax (Appeals) may before disposing of the appeal may make such further enquiry as he thinks fit and or direct the assessing officer to make enquiry and report the result of the same to the Commissioner of Income Tax (Appeals). Thus, the aforesaid provision enables the Commissioner of Income Tax (Appeals) to make such further enquiry as he thinks fit. The aforesaid provision also enables the assessee to file the material before the Assessing Authority in order to enable him to conduct further enquiry. Admittedly, the appellant had filed certain documents before the Assessing Officer. Thereafter, admittedly, the appellant has filed several documents, the details of which have been produced before us. From perusal of the aforesaid documents, it is evident that the assessee had filed the written statement as well as the ledger copy of the
sundry creditors and bank accounts of the assessee for the period from 01.04.2001 till 31.03.2003. The bank statements pertain to Sri.R.Shivappa, Lokeshmurthy, P Narasimha Swamy, R.Kiran and Manjunath B.S.
In view of the documents filed before the Commissioner of Income Tax (Appeals), the assessment report was also sought for by the Commissioner of Income Tax (Appeals) dated 11.10.2004. It is also not in dispute that the assessee had filed the aforesaid documents before the tribunal. However, the tribunal instead of recording the reasons has recorded the conclusions.
It is well settled law that Supreme Court in the case of ‘S.N. MUKHERJEE V. UNION OF INDIA’, (1990) 4 SCC 594 has held that the decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an
administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power.
It is trite law that even a quasi-judicial authority is required to assign reasons for passing the order. In view of the decision laid down by the Supreme court in ‘VICTORIA MEMORIAL HALL vs. HOWRAH GANATANTRIK NAGRIK’, 2010 (3) SCC 732, reasons were held to be the heartbeat of every conclusion, apart from being an essential feature of the principles of natural justice, that ensure transparency and fairness, in the decision making process. [SEE: ‘MAYA DEVI VS. RAJ KUMARI BATRA AND
OTHERS’, (2010) 9 SCC 486, ‘SANT LAL GUPTA AND OTHERS VS. MODERN CO-OPERATIVE GROUP HOUSING SOCIETY LIMITED AND OTHERS’, (2010) 13 SCC 336, ‘UNION OF INDIA AND ANOTHER VS. TALWINDER SINGH’, (2012) 5 SCC 480, and ‘UNION OF INDIA VS. RAVINDER KUMAR’, (2015) 12 SCC 291.] 10. In view of the aforesaid enunciation of law and in particular from perusal of paragraph Nos.7 & 8 of the order passed by the tribunal, we find that the tribunal has merely recorded the conclusions and has not assigned the reasons. We may reproduce para 8 of the order passed by the tribunal, which reads as under:
“In the present case, in spite of a lot of argumentative materials placed by the learned representative before us, we are of the considered view that the credit balances objected to by the Assessing Officer still stand unproved. In the circumstances of the case, we do not have any option, but to
confirm the order of the Commissioner of Income Tax (Appeals) on this point.”
From perusal of the order passed by the tribunal, it is evident that the order is cryptic and suffers from the vice of non application of mind. The tribunal has neither considered the material placed by the assessee before the Commissioner of Income Tax (Appeals) nor has considered the material placed before it and in a cryptic and cavalier manner has dismissed the appeal preferred by the assessee. Therefore, in the fact situation of the case, we have no option but to remit the matter.
Since, we have arrived at the conclusion that the instant case is a fit case for remand. Therefore, it is not necessary for us to answer the substantial question of law which have been framed in this appeal. In the result, the order passed by the tribunal dated 26.02.2010 as well as the order passed by the Commissioner of Income Tax (Appeals) dated 22.04.2004 are hereby quashed. The matter is remitted to the tribunal to decide
the matter afresh in the light of the observations made in this appeal by a speaking order. Let the aforesaid exercise be carried out within a period of four months from today. It is made clear that this court has not expressed any opinion with regard to merits of the case of the parties.
Accordingly, the appeal is disposed of.
Sd/- JUDGE
Sd/- JUDGE