2013 (10) TMI 1401 - AT - Income Tax

Revision u/s 263 - Held that - The non application of mind by the assessing officer to the material available on record with regard to the amount recovered by the police amounts to an error which is prejudicial to the interest of the revenue. No doubt the addition made in the hands of Shri Abdul Rasheed was deleted by the CIT(A). But this fact has to be examined by the assessing officer and whether the assessee has explained the source for the above said money or not has to be verified and reasons recorded in the assessment order itself. Since the assessing officer has not verified the source for the above said amount this Tribunal is of the considered opinion that the Administrative Commissioner has rightly exercised his jurisdiction u/s 263 of the Act

Summary

Issues Involved:
1. Validity of the Administrative Commissioner's exercise of jurisdiction under section 263 of the Income Tax Act.
2. Requirement for the Assessing Officer to provide reasoning and discussion in the assessment order.
3. Examination of judicial precedents regarding the necessity of recording reasons in quasi-judicial orders.

Issue-wise Detailed Analysis:

1. Validity of the Administrative Commissioner's Exercise of Jurisdiction under Section 263:
The appeal was directed against the Administrative Commissioner's order passed under section 263 for the assessment year 2007-08. The appellant argued that the Assessing Officer (AO) had conducted a proper inquiry and concluded that the amount of Rs. 15,51,400 recovered by Mahe police was not the income of the assessee. The appellant further contended that the same amount was added to another individual's income, which was later deleted on appeal. However, the Tribunal noted that the assessment order did not reflect the application of mind or reasoning by the AO. The Tribunal emphasized that the AO must discuss and decide the issue in the assessment order, recording reasons for any conclusions. The Tribunal concluded that the non-application of mind by the AO amounted to an error prejudicial to the revenue's interest, justifying the Administrative Commissioner's exercise of jurisdiction under section 263.

2. Requirement for the Assessing Officer to Provide Reasoning and Discussion in the Assessment Order:
The Tribunal highlighted that the assessment order is a quasi-judicial order, requiring the AO to discuss every issue involved in the assessment and record reasons for any conclusions. Mere calling for details by the AO was deemed insufficient. The Tribunal cited judicial precedents, including the Punjab & Haryana High Court's decision in Commissioner of Income-tax vs Sunil Kumar Goel and the Supreme Court's decision in Toyota Motor Corporation vs Commissioner of Income-tax, emphasizing the necessity of recording reasons to ensure clarity, fairness, and to minimize arbitrariness in decision-making. The Tribunal stressed that the AO's failure to record reasons in the assessment order justified the Administrative Commissioner's intervention under section 263.

3. Examination of Judicial Precedents Regarding the Necessity of Recording Reasons in Quasi-Judicial Orders:
The Tribunal referred to several judicial precedents to support its decision. The Punjab & Haryana High Court in Commissioner of Income-tax vs Sunil Kumar Goel and the Supreme Court in S.N. Mukherjee vs Union of India underscored the importance of recording reasons in quasi-judicial orders to facilitate appellate or supervisory jurisdiction and to ensure fairness and transparency. The Tribunal also cited the Gujarat High Court's decision in Testeels Ltd v. N.M. Desai, which emphasized that the necessity of giving reasons flows from the rule of law and ensures observance of the duty to act judicially. Additionally, the Tribunal referred to the Allahabad High Court's recent unreported judgment expressing shock and anguish over the lack of reasoning in assessment orders, reinforcing the need for clarity and accountability in administrative decisions.

Conclusion:
The Tribunal concluded that the AO's failure to verify the source of the amount recovered by the police and the lack of reasoning in the assessment order justified the Administrative Commissioner's exercise of jurisdiction under section 263. The appeal of the assessee was dismissed, and the impugned order of the Administrative Commissioner was confirmed. The Tribunal reiterated the necessity for the AO to record reasons in the assessment order to ensure fairness, transparency, and accountability in the decision-making process.