2015 (12) TMI 917 - HC - VAT and Sales Tax

Jurisdiction under Section 9(2) of the Central Sales Tax Act, 1956 - violation of the principles of natural justice - Held that - Unless the Tribunal makes findings on disputes as to fact, explains the exercise of discretion (by indicating the considerations that it has taken into account and relevant weightage assigned to them and give its answers to any questions of law, there can be no assurance that the Tribunal discharged its obligations to base its decision upon the material presented at the hearing rather than on extraneous considerations. It was further observed that decision is irrational in the strict sense of that term if it is unreasoned, if it is lacking ostensible logic or comprehensible justification. Absurd or perverse decision may be presumed when no reasons are assigned. Irrational decision to say is in the absence of logical connection between evidence and ostensible reasons for the decision, reasons must be adequate and notably intelligible. - when an applicant can show substantial prejudice resulting from failure on the part of the decision maker to demonstrate how issues of law had been resolved or disputed issue of fact decided or by demonstrating some other lack of reasoning which raised substantial doubt over the decision making process. - on one hand the Tribunal must not surmise conjecture or guess but on the other hand it may draw an inference from proved facts so long as it is legitimate inference. - Decided in favour of assessee.

Summary

Issues:
Violation of principles of natural justice in not assigning reasons and findings in the orders of the Assistant Commissioner of Commercial Taxes.

Analysis:
The petitioner challenged the orders of the Assistant Commissioner of Commercial Taxes, alleging a violation of natural justice due to the lack of reasons and findings in the decisions. The petitioner's counsel argued that the assessing officer failed to provide reasons for accepting or rejecting information, leading to unfair conclusions. On the other hand, the revenue's counsel acknowledged the grounds presented by the petitioner but could not point out specific reasons and findings in the orders.

The High Court emphasized the importance of recording reasons in decision-making processes, stating that reasons bridge the gap between the decision-maker's mind and the final decision. Failure to provide reasons was considered a denial of justice, as observed in previous cases like Alexander Machinery (Dudley) Ltd. v. Crabtree and M/s. Mangalore Ganesh Beedi Works v. Commissioner of Income Tax. The court highlighted that reasons ensure objectivity and prevent unconscious bias or arbitrariness in conclusions.

The court referred to various legal precedents to underscore the significance of giving reasons in judicial and quasi-judicial decisions. It was noted that public orders by authorities must be construed objectively based on the language used in the order itself. The Apex Court's observation that "reason is the heartbeat of every conclusion" further emphasized the critical role of reasons in decision-making processes.

The judgment highlighted that providing reasons encourages a thorough examination of relevant issues, prevents the influence of extraneous considerations, and ensures consistency in decision-making. Without reasons, the right to be heard loses its significance, and decisions may lack logical justification. The court emphasized that decisions must be rational, reasoned, and based on the material presented during the hearing to avoid being deemed absurd or perverse.

Ultimately, the High Court allowed the petitions, quashed the impugned orders, and remitted the proceedings for fresh consideration. The Assessing Officer was directed to reevaluate the matters, provide a reasonable opportunity for the petitioner to be heard, and issue orders strictly in accordance with the law and the court's observations. The demand notices issued before the assessment orders were also declared quashed in light of the judgment.