2013 (10) TMI 780 - AT - Income Tax

Revision u/s 263 - Disallowance of expenditure - Carried forward loss and depreciation - Held that - issue with regard to carried forward losses and depreciation was not discussed by the assessing officer in the assessment orders. In fact the application of mind by the assessing officer to the issue of carried forward losses and depreciation is not reflected in the assessment order. The only contention of the assessee before this Tribunal is that the assessing officer has called for all the details and allowed the claim after satisfaction. This Tribunal is of the considered opinion that assessment order is a quasi judicial order and the proceedings before the assessing officer are judicial proceedings. Therefore, the conclusion reached by the assessing officer with regard to carried forward losses and depreciation has to be supported by his own reasoning in the assessment order itself. Mere calling for explanation / details is not sufficient. If the assessing officer expressed his reasoning one way or the other for the conclusion reached, then it would enable the appellate / revisional authority to appreciate the reasons for the conclusion reached. If the assessing officer does not express any reason in the assessment orders, the very purpose of providing appellate / revisional remedy in the Income-tax Act would be defeated. Therefore, an assessment shall speak for itself. In other words, it shall contain all the reasons for the conclusion reached therein - assessing officer has not applied his mind to the issue raised by the assessee; therefore, the non application of mind to the issue raised by the assessee with regard to carried forward losses and depreciation is an error within the meaning of section 263 of the Act - Decided against assessee.

Issues Involved:
1. Invocation of revisional jurisdiction under Section 263 of the Income-tax Act by the Administrative Commissioner.
2. Non-consideration of carried forward losses and depreciation by the assessing officer in the assessment orders.
3. Requirement for the assessing officer to record reasons for decisions in quasi-judicial proceedings.

Issue-wise Detailed Analysis:

1. Invocation of Revisional Jurisdiction under Section 263 of the Income-tax Act:
The appeals of the assessee were directed against the orders of the Administrative Commissioner passed under Section 263 of the Income-tax Act for the assessment years 2007-08 and 2008-09. The Administrative Commissioner invoked his revisional jurisdiction on the ground that the assessing officer had not considered carried forward loss and depreciation. The Tribunal noted that the Administrative Commissioner's observation that no appeal or rectification application was filed against the order dated 25-06-2007 was incorrect, as the assessee had indeed filed an appeal against this order.

2. Non-consideration of Carried Forward Losses and Depreciation:
The assessee contended that although the assessing officer did not discuss carried forward losses and depreciation in the assessment orders, he had called for all necessary details and was satisfied with them. However, the Tribunal observed that the application of mind by the assessing officer to the issue of carried forward losses and depreciation was not reflected in the assessment orders. The Tribunal emphasized that an assessment order, being a quasi-judicial order, must contain the reasons for the conclusions reached to enable appellate or revisional authorities to appreciate those reasons.

3. Requirement for the Assessing Officer to Record Reasons:
The Tribunal referred to several 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 S.N. Mukherjee vs UOI, which underscored the necessity for administrative authorities exercising quasi-judicial functions to record reasons for their decisions. This requirement ensures that decisions are subject to effective appellate or supervisory review, guarantees consideration by the authority, introduces clarity, and minimizes arbitrariness. The Tribunal also cited the Supreme Court's decision in Toyota Motor Corporation vs Commissioner of Income-tax, which held that the assessing officer must pass a reasoned order, especially when disposing of penalty proceedings.

The Tribunal further noted the Allahabad High Court's recent judgment expressing shock and anguish at the manner in which assessment and revisional orders were being passed without proper reasoning. The High Court emphasized that reasons are the heartbeat of every conclusion and are essential for ensuring transparency and fairness in decision-making.

Conclusion:
In the present case, the Tribunal found that the assessing officer had not applied his mind to the issue of carried forward losses and depreciation, constituting an error under Section 263 of the Act. Therefore, the Tribunal confirmed the orders of the Administrative Commissioner and dismissed the appeals of the assessee. The judgment highlights the critical importance of recording reasons in quasi-judicial proceedings to ensure accountability, transparency, and fairness in the decision-making process.

Order Pronouncement:
The order was pronounced in the open court on 11th October 2013.

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