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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI CHANDRA POOJARI
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax – 10, Chennai, dated 17.03.2015, and pertains to assessment year 2009-10.
Shri Anil Nair, the Ld. representative for the assessee, submitted that the assessee claimed depreciation in respect of the rate of depreciation at 40%. Since the film equipments were installed on the vehicle, which was let out on hire, according to the Ld. representative, the film equipments as well as vehicle is entitled for higher depreciation. However, the CIT found that the higher rate of depreciation is applicable only in respect of the vehicle “which was running on hire”, therefore, the film equipments which were installed on the vehicle is not entitled for higher depreciation.
Referring to the assessment order, the Ld. representative submitted that even though the Assessing Officer disallowed a sum of `2,78,641/- towards depreciation with regard to variation in the opening Written Down Value on plant and machinery, he allowed the entire claim of the assessee at the rate of 40% in respect of the vehicle along with film equipments. Therefore, the CIT ought not have exercised his power under Section 263 of the Income-tax Act, 1961 (in short "the Act"). Placing reliance on the order of the CIT(Appeals) for assessment year 1996-97, a copy of which is available at Annexure 1 of written submission, the Ld. representative submitted that for the assessment year 1996-97, a similar depreciation was allowed in respect of film equipments, which was installed on the vehicle. Even for assessment year allowed the claim of the assessee in a proceeding under Section 154 of the Act, a copy of which is available at Annexure 2 of written submission. Placing reliance on the judgement of Apex Court in Malabar Industrial Co. Ltd. v. CIT (243 ITR 83) and the judgement of Bombay High Court in CIT v. Gabriel India Ltd. (203 ITR 108), the Ld. representative submitted that when two views are possible, the CIT ought not have exercised his power under Section 263 of the Act. The Assessing Officer, according to the Ld. representative, took one of the possible views and allowed the claim of depreciation at the rate of 40%, therefore, according to the Ld. representative, the Administrative Commissioner is not justified in exercising his power under Section 263 of the Act.
On the contrary, Shri Maurya M.N., the Ld. Departmental Representative, submitted that during the assessment proceeding, the Assessing Officer has not examined the nature of the vehicle let out by the assessee. According to the Ld. D.R., higher rate of depreciation is allowable only in respect of the vehicle which was let out on hire. In the case in our hand, according to the Ld. D.R., no vehicle was let out. What was let out is only a generator for film production. In respect of the generator, which was let out by the cannot be allowed merely because the generator was installed on the vehicle. The intention of the assessee is only to let out the generator and not the vehicle, therefore, according to the Ld. D.R., the rental income received by the assessee cannot be construed as if the same was received for letting out the vehicle. Hence, according to the Ld. D.R., the assessee is not eligible for higher rate of depreciation.
Moreover, the Assessing Officer has not discussed anything about depreciation for the vehicle on which generator was mounted.
The Assessing Officer refers only to variation in the Written Down Value on the plant and machinery. Since the Assessing Officer has not discussed anything with regard to depreciation of vehicle in the impugned assessment order, according to the Ld. D.R., it cannot be said that the Assessing Officer has taken one of the possible view.
In fact, the Assessing Officer has not taken any view at all.
Therefore, there is no application of mind to the facts of the case and there is no discussion in the assessment order. Therefore, according to the Ld. D.R., at any stretch of imagination it cannot be said that the Assessing Officer has taken one of the possible view as held by the Apex Court in Malabar Industrial Company Ltd. year 1996-97 and the Assessing Officer for assessment year 1990- 91, the Ld. D.R. submitted that each assessment year is separate and distinct. The Assessing Officer found that there was a variance in the plant and machinery. Therefore, it is not known whether the same asset was continued for the year under consideration.
Referring to the order of the Commissioner, the Ld. D.R. submitted that the Commissioner directed the Assessing Officer to redo the assessment de novo after conducting enquiries on the vital aspects. Therefore, according to the Ld. D.R., the assessee cannot have any grievance on the direction of the Commissioner.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer has not discussed anything in the assessment order about the depreciation for vehicle and generator said to be installed on the vehicle. Admittedly, the assessee let out the vehicle along with the generator installed on the vehicle. Therefore, the question arises for consideration is – when the assessee let out the generator along with the vehicle on which it was mounted, whether the assessee is entitled for higher depreciation or not? This aspect or question was silent. Therefore, as submitted by the Ld. D.R., the Assessing Officer has not taken any view at all.
The proceeding before the Assessing Officer is a judicial proceeding under Section136 of the Act. The Assessing Officer is expected to apply his mind to the material available on record and discuss the matter in the assessment order. The reasons recorded for the conclusion reached in the assessment order shall be the live link to the material available on record and the mind of the decision maker. The Assessing Officer is expected to pass a speaking order by recording his own reasons for the conclusion reached in the order. In the case before us, the Assessing Officer admittedly has not discussed anything in the assessment order. The application of mind to the material available on record is not reflected in the impugned order of the Assessing Officer. Even though for the earlier assessment year, the claim of the assessee was said to be allowed, the Assessing Officer has to examine the same and if the facts are identical, it is for the Assessing Officer to allow the claim of the assessee. It is a well settled principle of law that each assessment year is separate and distinct. Therefore, the Assessing Officer has to ascertain the facts of every assessment year reached in the assessment order. The proceeding before the Assessing Officer being judicial proceeding, there cannot be any presumption that the Assessing Officer has applied his mind to the material available on record. Furthermore, the order of the Assessing Officer is subjected to revision/appeal before the higher forums. Therefore, in order to appreciate the order of the Assessing Officer by the revisional/appellate authorities, the Assessing Officer has to record his own reasons for the conclusion reached therein.
Otherwise, the very object of providing revisional / appellate remedies under the scheme of the Income-tax Act would be defeated. Moreover, the reasons recorded by the Assessing Officer would eliminate arbitrariness in the decision making process. In the latest judgment of Punjab & Haryana High Court in CIT v. Sunil Kumar Goel [2005] 274 ITR 53, the High Court, after considering the judgment of the Constitutional Bench of the Apex Court in S.N.Mukherjee v. Union of India, AIR 1990 SC 1984, has observed as follows:
“ In S.N.Mukherjee v. Union of India, AIR 1990 SC 1984, a Constitution Bench of the Supreme Court discussed the development of law on this subject in India, Australia, Canada, England and the United States of America and after making reference to a large number of judicial precedents, their Lordships culled out the following propositions (page 1995) :
"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. But this is not the sole consideration. The other considerations which have also weighed with the court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the stand point of policy and expediency.
Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this court in holding that an administrative authority must record reasons for its decision, are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge." In Testeels Ltd. v. N. M. Desai [1970] 37 FJR 7; AIR 1970 Guj 1, a Full Bench of the Gujarat High Court has made an extremely lucid enunciation of law on the subject and we can do no better than to extract some of the observations made in that decision. The same are (headnote of AIR 1970 (Guj):
"The necessity of giving reasons flows as a necessary corollary from the rule of law which constitutes one of the basic principles of the Indian Constitutional set-up. The administrative authorities having a duty to act judicially cannot therefore decide on considerations of policy or expediency. They must decide the matter solely on the facts of the particular case, solely on the material before them and apart from any extraneous considerations by applying pre-existing legal norms to factual situations. Now the necessity of giving reasons is an important safeguard to ensure observance of the duty to act judicially. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and excludes or, at any rate, minimises arbitrariness in the decision-making process.
Another reason which compels making of such an order is based on the power of judicial review which is possessed by the High Court under article 226 and the Supreme Court under article 32 of the Constitution. These courts have the power under the said provisions to quash by certiorari a quasi-judicial order made by an administrative officer and this power of review can be effectively exercised only if the order is a speaking order. In the absence of any reasons in support of the order, the said courts cannot examine the correctness of the order under review. The High Court and the Supreme Court would be powerless to interfere so as to keep the administrative officer within the limits of the law. The result would be that the power of judicial review would be stultified and no redress being available to the citizen, there would be insidious encouragement to arbitrariness and caprice. If this requirement is insisted upon, then, they will be subject to judicial scrutiny and correction."
If the order passed by the Tribunal is scrutinised in the light of the aforementioned proposition of law, we do not find any difficulty in setting aside the same on the ground of violation of the rules of natural justice. The flowery language used by the Tribunal to justify its acceptance of the respondent's plea that he did not know the law does not warrant our affirmation. In our opinion, the Tribunal was duty bound to record tangible and cogent reasons for upsetting well reasoned orders passed by the Assessing Officer and the Commissioner of Income-tax (Appeals). It should have directed its attention to the language of sections 271D and 271E of the Act in conjunction with other provisions of the same family and then decided by a reasoned order whether the respondent had been able to make out a case for deleting the penalty. The order passed by the Tribunal should have clearly reflected the application of mind by the learned members.”
In view of the above, this Tribunal is of the considered opinion that the Assessing Officer is expected to record his own reasons for the conclusion reached, in the assessment order. Unfortunately, the Assessing Officer has not discussed anything in the assessment order and the facts are not coming out in the assessment order.
The Assessing Officer has not applied his mind to the material available on record, therefore, this Tribunal is of the considered
11 opinion that the CIT(Appeals) has rightly exercised his revisional jurisdiction 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.
Order pronounced on 1st September, 2016 at Chennai.