2016 (1) TMI 1382 - AT - Income Tax

Revision u/s 263 - non application of mind by AO - Held that - AO has not discussed anything in the assessment order with regard to issues arising for consideration. The contention of the Ld.counsel for the assessee is that the Assessing Officer called for details and the same were filed before him. Therefore, there was presumption that the Assessing Officer applied his mind to the facts of the case and accepted the case of the assessee. This Tribunal is of the considered opinion that the proceeding before the Assessing Officer being a judicial proceeding, the Assessing Officer is expected to record his own reasons for the conclusion reached. Whether it is an administrative order or judicial order, the reasons for conclusion or decision taken has to be recorded in the order itself. The reason for the conclusion reached in the order cannot be substituted by way of filing an affidavit or document in a proceeding that may take place at a later stage. By placing reliance on the judgment of Apex Court in S.N.Mukherjee 1990 (8) TMI 345 - SUPREME COURT no reason to interfere with the order of the Principal Commissioner. However, the Assessing Officer is expected to make an independent enquiry. Therefore, we direct the Assessing Officer to conduct an independent enquiry and pass a speaking order by recording his own reasons without being influenced by any of the observation made by the Principal Commissioner in his impugned order. - decided against assessee

Summary

Issues involved:
Assessment order lacking discussion on issues, Revisional jurisdiction under Section 263 of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Assessment order lacking discussion on issues
The appeal was against the order of the Principal Commissioner of Income Tax, Chennai-4, pertaining to the assessment year 2010-11. The Assessing Officer completed the assessment without discussing the details pertaining to various claims made by the assessee, such as business loss, payments, depreciation on goodwill, and operational expenses. The Ld. counsel for the assessee argued that the Assessing Officer had called for details and accepted the claims, implying application of mind. However, the Tribunal held that the Assessing Officer, being a quasi-judicial authority, should have recorded reasons for the conclusion reached in the assessment order. The Tribunal referred to judicial precedents emphasizing the importance of recording reasons to ensure fairness, clarity, and to prevent arbitrariness in decision-making. The Punjab & Haryana High Court's observations were cited to support the requirement of recording reasons in quasi-judicial functions. The Tribunal concluded that the Assessing Officer's failure to discuss the issues in the assessment order necessitated an independent inquiry and a speaking order.

Issue 2: Revisional jurisdiction under Section 263 of the Income-tax Act, 1961
The Principal Commissioner exercised revisional power under Section 263 of the Income-tax Act, 1961, after finding the Assessing Officer's order to be erroneous and prejudicial to the interests of Revenue due to lack of discussion on the claims made by the assessee. The Ld. Departmental Representative argued that the Assessing Officer's failure to discuss in the assessment order justified the exercise of revisional jurisdiction. The Tribunal, however, held that the Assessing Officer's failure to record reasons in the assessment order was a violation of the rules of natural justice. By citing the judgment of the Apex Court in S.N. Mukherjee, the Tribunal emphasized the necessity of recording reasons in quasi-judicial functions. The Tribunal dismissed the appeal of the assessee but directed the Assessing Officer to conduct an independent enquiry and pass a speaking order with recorded reasons, without being influenced by the observations made by the Principal Commissioner in the impugned order.

In conclusion, the Tribunal upheld the Principal Commissioner's exercise of revisional jurisdiction due to the Assessing Officer's failure to discuss the issues in the assessment order, emphasizing the importance of recording reasons in quasi-judicial functions to ensure fairness and prevent arbitrariness. The Tribunal directed the Assessing Officer to conduct an independent enquiry and pass a speaking order with recorded reasons, without influence from previous observations.