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2013 (6) TMI 834 - AT - Income TaxRevision by Commissioner u/s 263 - Assessing officer to record the reasons for decisions - Deduction of interest expenses u/s 36(1)(iii) - For the earlier period, Assessee filed an appeal against the order of the Administrative Commissioner of redoing the assessment for the assessment year 2007-08. He referred his own case for the assessment year 2008-09, where the Tribunal had an occasion to examine the issue and found that a similar interest paid was allowable u/s 36(1), thus the order of the assessing officer should not be erroneous. - HELD THAT - The assessment order does not contain any reasoning. It is well settled principles of law that administrative orders shall speak for themselves. Each assessment year is separate and independent. Therefore, merely because this Tribunal allowed the claim of the assessee for the assessment year 2008-09 it does not mean that the assessing officer need not pass a speaking order. In view of the Decisions in COMMISSIONER OF INCOME-TAX VERSUS SUNIL KUMAR GOEL. 2005 (1) TMI 34 - PUNJAB AND HARYANA HIGH COURT and M/S FATEH CHAND CHARITABLE TRUST VERSUS COMMISSIONER OF INCOME TAX AND ANOTHER 2013 (6) TMI 67 - ALLAHABAD HIGH COURT and Apex Court, it is obligatory on the part of the assessing officer to record reasons in the assessment order. Recording of reason would not only enable the revisional / appellate authorities to discharge their function effectively but also repose confidence in the system. The appeal of Assessee thus was rejected.
Issues Involved:
1. Invocation of jurisdiction under Section 263 of the Income-tax Act. 2. Validity of notice issued under Section 263. 3. Requirement for a speaking order by the assessing officer. 4. Applicability of previous Tribunal decisions to the current assessment year. Detailed Analysis: 1. Invocation of Jurisdiction under Section 263 of the Income-tax Act: The ld. senior counsel for the assessee argued that for the Administrative Commissioner to invoke jurisdiction under Section 263, the order must be both erroneous and prejudicial to the interest of the revenue. The counsel cited the Supreme Court judgment in Malabar Industrial Co Ltd vs CIT, which established this principle. However, the Tribunal found that the assessment order lacked reasoning and did not demonstrate the application of mind by the assessing officer. The Tribunal emphasized that judicial and administrative orders must be self-explanatory and contain reasons for conclusions. Therefore, the Tribunal concluded that the assessment order was both erroneous and prejudicial to the revenue, justifying the invocation of Section 263. 2. Validity of Notice Issued under Section 263: The ld. senior counsel contended that the notice issued under Section 263 was invalid as it was signed by the Income-tax Officer and not by the Administrative Commissioner. The Tribunal referred to the Supreme Court judgment in CIT vs Electro House, which stated that Section 263 does not mandate a notice but requires that an opportunity be given to the assessee. The Tribunal found that the assessee was given an opportunity to be heard, fulfilling the requirement of Section 263. Therefore, the notice was deemed valid. 3. Requirement for a Speaking Order by the Assessing Officer: The Tribunal stressed that the assessment order must be a speaking order, containing clear and explicit reasons for the conclusions reached. This requirement ensures that the appellate or revisional authorities can effectively exercise their jurisdiction. The Tribunal cited various judgments, including those from the Supreme Court and High Courts, which emphasized the necessity of recording reasons to avoid arbitrariness and to ensure fairness in decision-making. The Tribunal found that the assessing officer failed to record reasons in the assessment order, making it a non-speaking order. This failure rendered the order erroneous and prejudicial to the revenue. 4. Applicability of Previous Tribunal Decisions to the Current Assessment Year: The ld. senior counsel argued that the Tribunal had allowed a similar interest payment as a deduction under Section 36(1)(iii) for the assessment year 2008-09, and hence, the current assessment order should not be considered erroneous. The Tribunal clarified that each assessment year is separate and independent. The assessing officer must verify whether the same borrowed funds continued for the current year or if new loans were taken. The Tribunal concluded that the previous decision does not absolve the assessing officer from the duty to pass a speaking order for the current assessment year. Conclusion: The Tribunal dismissed the appeal of the assessee, affirming the Administrative Commissioner's order to redo the assessment. The Tribunal held that the assessment order was erroneous and prejudicial to the revenue due to the lack of reasoning and application of mind. The notice issued under Section 263 was deemed valid as the assessee was given an opportunity to be heard. The Tribunal emphasized the necessity for the assessing officer to pass a speaking order, recording reasons for the conclusions reached. The previous Tribunal decision for a different assessment year did not absolve the assessing officer from this requirement. The appeal was dismissed, and the order was pronounced in the open court on June 28, 2013.
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