Practice support:Non-application of mind by authorities- need scrutiny of procedure and documentation at each stage. Non-application of mind, if proved, can be good ground of contesting proceeding as void , devoid of merits, irregular, unsustainable, liable to quashed etc. depending on nature of proceeding and seriousness of issues.

[DEVKUMAR KOTHARI]

Non-application of mind by authorities- need scrutiny of procedure and documentation at each stage. Non-application of mind, if proved, can be good ground of contesting proceeding as void , devoid of merits,  irregular, unsustainable, liable to quashed etc. depending on nature of proceeding and seriousness of issues.

Search with ‘non application of mind’ on this website:

With Supreme Court, Income tax found 243 results.

With Supreme Court – orders / highlights, Income tax found 7 results.

With High Courts / income tax found 4223 results.

With Supreme Court,  GST  found 7 results.

With Supreme Court Securities/ SEBI found 12 results.

With  High Courts  Securities / SEBI found 27 results.

With Supreme Court Insolvency & Bankruptcy found 60 results.

This shows importance of contest for reason of non-application of mind by authorities.

Careful challenge is desirable:

Challenge on ground of non-application of mind must be very carefully reasoned after careful analysis of all related documents and at all stages of proceeding and authorities involved. If a junior authority had acted without application of mind but higher authority in subsequent steps has applied his mind, then it need to be considered as to contesting non-application of mind by junior authority because effect of non-application of mind by junior authority is nullified if senior authority has applied mind and there is no point of grievance.

However, when lower authority as well as senior authority / authorities have not applied mind, it will be good case to take plea of non-application of mind.

If there are sufficient reasons to take plea of non-application of mind, it is good tool to contest proceedings for this reason.

However, if there are not enough reasons to show non application of mind, then taking such a plea may be a reason of annoying/ displeasing higher authority and or Courts.

In some judgments of the Supreme Court read with related judgment of High Court we find winning the case when non-application of mind was established.

For example:

INCOME TAX OFFICER WARD-19 (2) 4, MUMBAI & ORS. VERSUS NIKHIL CHANDRAKANT DHARIA - 2024 (10) TMI 713 - SUPREME COURT

In this case validity of reopening of assessment u/s 147 was challenged. Assessee argued non application of mind in granting approval u/s 151 . This was found  evident in the process of  approval by P. CIT. In  [2023 (11) TMI 343 - BOMBAY HIGH COURT]  it was observed by High Court that if only the PCIT had read the form for approval carefully with the order that was prepared by the AO under Section 148A(d) of the Act, the PCIT would not have come to the conclusion that there is any material to treat it as a fit case to issue notice under Section 148 or pass order under Section 148A(d).

UNITECH LTD. & ANOTHER VERSUS UNION OF INDIA & ANOTHER - 2015 (11) TMI 306 - SUPREME COURT

In paragraph 8 it was observed as follows:

8. Moreover, as rightly contended by Shri Mohta the authorities have treated the consideration for subject land, which is an industrial plot, as understated by more than 15% on the basis of a sale instance of a land which is in a residential locality. More importantly, it is obvious that the area of the sale instance is of a much smaller plot i.e. 736 sq mtrs whereas the subject land which is said to have been undervalued is 2,024 sq mtrs. It is well known that the price of a small residential plot would be more than a large industrial plot. The show cause notice which has subsequently been confirmed is vitiated by a gross non-application of mind.

 

UNION OF INDIA & OTHERS VERSUS M/S. AGARWAL IRON INDUSTRIES - 2014 (11) TMI 854 - SUPREME COURT

From paragraph 2

It is further urged that the warrant of authorization was issued mechanically, arbitrarily and there was total non- application of mind and moreover there was no formation of opinion about the existence of undisclosed assets as contemplated under Section 132(1) of the Act. On this foundation, the search and seizure were sought to be quashed.

From paragraph 4

“At this stage it is relevant to refer to Para 40 of the writ petition, which is quoted below:

“40. That in the facts and circumstances the Petitioner bonafidely believes that there was no information in possession of the officer issuing the warrant of authorization for search which could lead any reasonable person to form an opinion about existence of undisclosed assets with the Petitioner. The warrant of authorization, even if assumed that there was any, was issued mechanically arbitrarily and without application of mind and without forming the opinion about existence of undisclosed assets, as contemplated by Sub-Section (1) of Section 132.”

The reply of the said paragraph has been given by the Respondents in Para 33 of the counter affidavit, which reads as under:

“33. That in reply to Paragraph 40 of the writ petition, it is denied that the warrant of authorization was issued mechanically, arbitrarily and without application of mind.”

Paragrpah 9 and 10 of the judgment:

9. In our considered opinion, the High Court would have been well advised to peruse the file to see whether reasons have been recorded or not and whether the same meet the requirement of law.

10. In view of our foregoing analysis, we allow the appeals, set aside the impugned order passed by the High Court and remand the matter to the High Court for fresh disposal in accordance with law. The revenue shall produce the file before the High Court, where after the High Court shall proceed to adjudicate the lis. There shall be no order as to costs.

 Unquote:

We find that the High Court  allowed petition and quashed proceeding  for  reason of non application of mind, however, this was asset aside and the matter was remanded to the  High Court for fresh disposal in accordance with law. And revenue was to produce filed before the High Court to show reasoning and application of mind etc.

From : AJMERA HOUSING CORPORATION & ANR. ETC. VERSUS COMMISSIONER OF INCOME TAX - 2010 (8) TMI 35 - SUPREME COURT

From paragraph 8

It would be useful to extract the relevant observations in the judgment: 

"In the instant case, if we look at the facts in the light of the legal canvass, in our opinion, the Commission at the very inception ought to have addressed itself on the question as to whether the application was in compliance with the first and foremost requirement of Section 245-C(1). The Commission ought to have noticed that in the application made under Section 245-C(1) disclosure was to the extent of Rs. 1.94 crores. The report of the Commissioner as envisaged under Section 245-D(1) was called for and submitted and thereafter just before the order could be passed under Section 245-D(1) the assessee respondent No. 2 declared additional income of Rs. 11.41 crores. At this stage itself, it was obligatory on the part of the Settlement Commission to apply his mind to the issue as to whether full and true disclosure of the income and the manner in which it was derived, has been made or not. We find no material in the order dated 17.11.1994 in this behalf. Had the Settlement Commission applied its mind to the said facts and had addressed itself on this aspect of the matter regarding subsequent disclosure of Rs. 11.41 crores and had it dealt with the question of maintainability of application under Section 245C(1), then it would not have been open for this Court to sit in appeal over the finding recorded by the Settlement Commission in this behalf.  

..........

On the fact of the record, we find fault with decision taken by the Settlement Commission to allow the application to be proceeded with without determining the basic facts on which further jurisdiction of the Tribunal depended. We, therefore, find that the said order of the Settlement Commission suffers from non-application of mind of the facts available on record." 

...... Finally declaring order dated 17th November, 1994 as ab-initio void and quashing order dated 29th January, 1999, the High Court remitted the proceedings back to the Settlement Commission, keeping all the questions open, with a direction to decide the application afresh in accordance with law. 

Concluding and order part of the Supreme Court is found in para 34 and 35 which are reproduced with highlights added by author:

34. We may now evaluate the submission of learned counsel for the assessee that since the Commissioner was not entitled to receive a copy of the annexure to the application before the Settlement Commission had decided to proceed with the application, no prejudice was caused to the Commissioner because of the alleged non-supply of the revised annexure at a stage anterior to the making of order under Section 245D(1) of the Act. It is true that details of the "full and true" disclosure of income and "the manner" in which such income is derived is to be given in the form of an annexure to the application, which is treated as confidential and is not to be forwarded to Commissioner for the purpose of his report under sub-section (1) of Section 245D of the Act and therefore, apparently there is substance in the contention. But when the argument is tested on the anvil of the scheme of Chapter XIX-A, the revision of the annexure by itself was prejudicial to the interest of the revenue. Apart from the fact, as explained above, revision of the annexure is tantamount to revision of the application, not contemplated in the scheme, withholding of the information regarding filing of revised annexure, disclosing undisclosed income of Rs.11.41 crores as against the income of Rs.1.94 crores, disclosed in the annexure forming part of the application, deprived the Commissioner of his right to object to the maintainability of assessee's application on the ground that the assessee had not made true and full disclosure of their income in the previous application, the foundational requirement of a valid application under Section 245C(1) of the Act. Accordingly, we have no hesitation in rejecting the argument. 

35. For all the reasons aforesaid, we do not find any merit in these appeals, which are dismissed accordingly. The Commissioner will be entitled to costs, quantified at Rs.50,000/-.

Judgment in context of penalty notices/ other forms without striking non-applicable clauses shows non-application of mind:

PR. COMMISSIONER OF INCOME TAX – 04 VERSUS M/S GRAGERIOUS PROJECTS PVT. LTD., SARA SAE PVT LTD, VIRTUAL SOFTWARE AND TRAINING PVT. LTD. - 2024 (11) TMI 1108 - DELHI HIGH COURT

This case concerns penalty levied without giving proper specific notice. Without striking clauses which was not applicable and not invoked by the authority in prescribed printed form. After detailed discussion on precedence the Court held in favor of assesse and confirmed order of ITAT holding no substantial question of law arose.

Regarding non-application of mind we find  references  and observations of the Court and other Courts including the Supreme Court in the judgment.

Therefore, application of own mind is very important before challenging non-application of mind by other party or authority.

The article is intended to share some knowledge and ideas and one has to explore possibility to use ‘non-application of mind’ and make grounds to establish that in fact there was non application of mind. Otherwise, a wrongly raised contention as such can cause prejudice and displeasure in minds of senior / appellate authority / Court.