ASIANET COMMUNICATIONS LIMITED,CHENNAI vs. JCIT, CHENNAI

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 – IV, Chennai, dated 28.03.2014,

passed under Section 263 of the Income-tax Act, 1961 (in short 'the

Act') and pertains to assessment year 2009-10.

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submitted that the Assessing Officer completed the assessment by

calling the assessee to furnish necessary material with regard to

demerger of the company. According to the Ld. counsel, all the

assets and liabilities of the undertaking were transferred to the

resulting company due to demerger. The secured loans were used

by demerged company. According to the Ld. counsel, the assets

and liabilities were transferred pursuant to the demerger approved

by the Bombay High Court. The Ld.counsel further submitted that

the secured loans borrowed by the company were used for the

purpose of film and programme inventory. The inventory schedule

pertains to only film and programme inventory, which was retained

by the demerged company. After demerger, the accounting

principles of company were changed that cannot be considered as

violation of Section 2(19AA) of the Act. The change in accounting

policy in connection with depreciation relates to writing off of the film

business which has been retained by the demerged company.

Therefore, it will not affect / violate the provisions of Section

2(19AA) of the Act.

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Ld.counsel submitted that this cannot be considered as violation of

Section 2(19AA) of the Act. On a query from the Bench whether the

Assessing Officer considered the violation of Section 2(19AA) of the

Act? The Ld.counsel submitted that there is no discussion in the

assessment order. However, it is not necessary to discuss each

and everything in the assessment order. Referring to the

judgement of Delhi High Court in CIT v. Vikas Polymers (2012) 341

ITR 537, the Ld.counsel for the assessee submitted that when an

Assessing Officer raised a query during the course of assessment

proceeding, which was answered by the assessee, and if the query

or the reason was not reflected in the assessment order that would

not lead to the conclusion that the order of the Assessing Officer is

erroneous and prejudicial to the interests of Revenue. In view of the

judgment of the Delhi High Court, according to the Ld. counsel, it

may not be necessary to discuss each and everything in the

assessment order.

Admittedly, the assessment proceeding before the Assessing

Officer is a judicial proceeding. The order of the Assessing Officer

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is subjected to revision by the Principal Commissioner /

Commissioner and on appeal before the CIT(Appeals). Further

appeal also provided to this Tribunal and High Court and Supreme

Court. Therefore, the revisional / appellate authorities could know

the reasons provided the Assessing Officer discusses the same in

the assessment order. For any reason, if the Ld.counsel thinks that

it is not necessary for the Assessing Officer to record the reasons in

the assessment order for allowing the claim of the assessee, the

very same stand would be applicable when the Assessing Officer

disallows the claim of the assessee. Therefore, if the Assessing

Officer, after calling for details and information from the assessee,

simply disallowed the claim of the assessee without recording any

reasons, can the assessee again contend before this Tribunal that

the Assessing Officer has called for details that would be sufficient

enough? In that case, the assessee naturally would come and

contend before the appellate authorities that the Assessing Officer

has not passed any speaking order. This Tribunal is of the

considered opinion that whether it is administrative order or judicial

order, the reasons for conclusion shall be contained in the

assessment order itself so as to enable the appellate / revisional

authorities to appreciate the reasons for conclusion reached therein.

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If the Assessing Officer has not recorded any reason in the

assessment order for the conclusion reached therein in respect of

the issue arose for consideration, then the appellate / revisional

remedies provided under the scheme of the Income-tax Act would

be meaningless. In fact, the Punjab &Haryana High Court had an

occasion to examine this issue in CIT v. Sunil Kumar Goel [2005]

274 ITR 53. The Punjab &Haryana 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

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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."

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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

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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.”

opinion that it is obligatory on the part of the Assessing Officer to

record his own reasons for the conclusion reached therein. In this

case, the Assessing Officer has not recorded any reason with

regard to assessment of capital gain. Therefore, the appellate /

revisional authorities could not appreciate the reasons for allowing

the claim of the assessee. In view of the above judgment of the

Supreme Court referred by Punjab & Haryana High Court in Sunil

Kumar Goel (supra), this Tribunal is of the considered opinion that

the judgment of Delhi High Court in Vikas Polymers (supra) is not

applicable to the facts of the case. The reasons for the conclusion

reached in the judicial / administrative order cannot be dispensed

with at any circumstance. The reasons recorded in the assessment

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order would be the link to the material available on record and the

mind of the decision maker. Transparency is more important in the

judicial and administrative matters. The reasons recorded in the

order would eliminate arbitrariness in the decision making process.

Therefore, this Tribunal is of the considered opinion that the

reasons need to be recorded by the Assessing Officer even though

the details were filed by the assessee. In the case before us,

admittedly, the Assessing Officer has not recorded any reason. The

Assessing Officer also has not examined the provisions of Section

2(19AA) of the Act which would be prejudicial to the interests of

Revenue. Moreover, the order of the Assessing Officer is also

erroneous.

opinion that the Commissioner has rightly exercised his jurisdiction

under Section 263 of the Act. Accordingly, the same is confirmed.

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Order pronounced on 7th April, 2016 at Chennai.

sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 7th April, 2016.

Kri. आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त/CIT-IV, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.