2013 (8) TMI 1010 - AT - Income Tax

Revision u/s 263 - allowance of penal charges on belated payment of employees provident fund - Held that - The Administrative Commissioner in exercise of his revisional jurisdiction found that the assessing officer without examination allowed the claim of the assessee towards penal charges on belated payment of employees provident fund even though in the tax audit report this amount was shown as disputed penal charges on belated payment of dues . The Commissioner also found that every year the amount was debited in the profit and loss account. However this was disputed by the ld.representative for the assessee. The fact remains that the assessing officer has not applied his mind to the claim made by the assessee. There is no discussion in the assessment order with regard to the penal damages paid by the assessee on the belated payment of employees provident fund. The assessing officer without any discussion allowed the claim of the assessee. The assessing officer being a quasi judicial authority is expected to apply his mind to the claim made by the assessee and by a speaking order. An assessment order shall speak for itself. The application of mind shall be reflected in the assessment order. It is well settled principles of law that reasons for the conclusion arrived at in a quasi judicial order / judicial order shall be in the order itself. The reason for the conclusion cannot be substituted by way of an affidavit or additional material before the appellate / revisional proceedings. - Decided against assessee

Summary

Issues Involved:
1. Validity of the Administrative Commissioner's exercise of revisional jurisdiction under Section 263 of the Income Tax Act.
2. Assessment Officer's failure to apply mind and record reasons in the assessment order.
3. Obligation to record reasons in quasi-judicial orders.
4. Independent examination of the assessee's claim by the Assessment Officer.

Issue-Wise Detailed Analysis:

1. Validity of the Administrative Commissioner's exercise of revisional jurisdiction under Section 263 of the Income Tax Act:
The appeals were directed against the orders of the Administrative Commissioner passed under Section 263 for the assessment years 2007-08, 2008-09, and 2009-10. The Administrative Commissioner found that the assessee had debited disputed penal charges on belated payments of employees' provident fund. The Commissioner noted that the assessing officer allowed the claim without examination, despite the tax audit report showing the amount as disputed penal charges. The Tribunal upheld the Commissioner's exercise of revisional jurisdiction, emphasizing the need for the assessing officer to apply his mind and record reasons for his conclusions.

2. Assessment Officer's failure to apply mind and record reasons in the assessment order:
The Tribunal found that the assessing officer, being a quasi-judicial authority, is expected to apply his mind to the claims made by the assessee and provide a speaking order. The assessment order lacked any discussion regarding the penal damages paid by the assessee on the belated payment of employees' provident fund. The Tribunal underscored that the reasons for the conclusion must be in the order itself and cannot be substituted by affidavits or additional material in appellate or revisional proceedings.

3. Obligation to record reasons in quasi-judicial orders:
Citing judgments from the Punjab & Haryana High Court, the Apex Court, and the Allahabad High Court, the Tribunal reiterated the necessity for recording reasons in quasi-judicial orders. The reasons guarantee consideration, introduce clarity, and minimize arbitrariness in decision-making. The Tribunal emphasized that the requirement for recording reasons applies to all decisions, whether subject to appeal, revision, or judicial review. This ensures fairness in the decision-making process and facilitates effective exercise of appellate or supervisory powers by higher authorities.

4. Independent examination of the assessee's claim by the Assessment Officer:
The Tribunal directed that the assessing officer should independently examine the assessee's claim that the disputed amount was not debited in the profit and loss account. This examination should be conducted without being influenced by the observations made by the Administrative Commissioner. The assessing officer is required to apply his mind and decide in accordance with the law, providing a reasonable opportunity of hearing to the assessee.

Conclusion:
The Tribunal dismissed all the appeals of the assessee, affirming the necessity for the assessing officer to record reasons in the assessment order and independently examine the claims made by the assessee. The order was pronounced in the open court on 16th August 2013.