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TMI Blog2013 (1) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... e Managing Director of the assessee company. He and other directors of the assessee company promoted another company by name M/s.Hastalloy Holdings Limited (hereinafter referred to as "HHL") with the objective of carrying on business of finance. 3. The Income Tax Department carried out search operations under Section 132 of the Income Tax Act, 1961 on 28-11-1996 in the business premises of the assessee company as well as the residential premises of the Managing Director, Sri G.V.K.Rao. The office of the assessee company and the residence of the Managing Director were in the same building. The office of the associate company HHL was also situated at the same office premises of the assessee company. In the course of the search operations, the Income Tax Department obtained books of account of the assessee company as well as a number of other documents and materials evidencing transactions and activities of the assessee company, its associate company HHL, its Managing Director and other firms in which the Managing Director or the Directors of the appellant company were substantially interested. Apart from the books of account, documents, materials etc., the officers also found fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal filed by the assessee holding that only Rs.7,50,000/- can be construed as undisclosed income of the assessee and deleted Rs.21,60,000/- from out of Rs.29,10,000/- held to be the undisclosed income by the assessment officer in regard to the F.D.Rs found in the search of the premises of the assessee, the associate company and the Managing Director on 28-11-1996. 6. Challenging the same, the assessee filed I.T.T.A.No.22 of 2000 insofar as the I.T.A.T. had held that Rs.7,50,000/-constituted the undisclosed income of the assessee. The Revenue filed I.T.T.A.No.24 of 2000 insofar as the I.T.A.T. had deleted Rs.21,60,000/- from the undisclosed income of Rs.29,10,000/- assessed by the assessing officer in regard to the F.D.Rs. 7. The ITTA no.22/2000 filed by the assessee was admitted on 14.8.2000 to consider the following substantial questions of law: a) Whether, in the face of the categorical statements made by the employees of the assessee-company, the Tribunal is correct in applying Section 69 of the Income Tax Act and treat the F.D.Rs. as undisclosed income of the assessee? b) Whether the appellate Tribunal is justified in sustaining the addition without considering the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some general statements that the depositors are agriculturists, that they would not have ventured to appear before the assessing officer, much less own up deposits of substantial value inviting risks of being proceeded against, just to accommodate the convenience of the Managing Director of the assessee. He also contended that there was no basis for the Tribunal to hold that the credit worthiness of the depositors was established and its findings that such deposits cannot be treated as undisclosed income is erroneous and perverse. 12. Sri C.Kodanda Ram, however contended that when the order of the assessing authority merged with that of the Tribunal, this Court cannot look into the order of the assessing authority in determining the correctness of the order passed by the Tribunal. He relied on the decision reported in KUNHAYAMMED AND OTHERS v. STATE OF KERALA AND ANOTHER 2000 (6) S.C.C. 359. He also contended that the finding of the Tribunal is based on consideration of the material before it insofar as deletion of Rs.21,60,000/- is concerned and cannot be said to be a finding on the basis of no evidence or improper rejection of material and relevant evidence and in any event, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an interpretation of law not worthy of acceptance but that does not also clothe the superior courts within jurisdiction to intervene and interfere in any and every matter - it is only in very exceptional cases and on extreme perversity that the authority to examine the same in extenso stands permissible - it is a rarity rather than a regularity and thus in fine it can be safely concluded that while there is no prohibition as such, but the power to scrutiny can only be had in very exceptional circumstances and upon proper circumspection. This is, however, without expression of any opinion pertaining to Section 100 of the Code of Civil Procedure." He also relied on a decision reported in VIJAY KUMAR TALWAR v. COMMISIONER OF INCOME TAX, DELHI 2011 (1) S.C.C. 673 wherein the Supreme Court observed at paras 23 as follows: "23. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e believed and also gave reasons for his conclusion that the assessee is the owner of these F.D.Rs. He held that the said depositors had lent their names to the assessee only to help the Managing Director. He therefore concluded that the aggregate amount of Rs.29,10,000/- covered by the F.D.Rs. standing both in the name of the workers/employees of the assessee as well as in the names of the assessee's relatives and friends has to be treated as undisclosed income in the hands of the assessee. 16. In the impugned order passed by the I.T.A.T., it is noticed that the appellate Tribunal agreed with the assessing officer in disbelieving the creditworthiness of the employees to make the deposits attributed to them and the genuineness of those deposits amounting to Rs.6,10,000/- and five friends and relatives of the Managing Director in respect of a sum of Rs.1,40,000/- deposited by them in HHL and held that Rs.6,10,000/- + Rs.1,40,000/- = Rs.7,50,000/- was the undisclosed income of the assessee. 17. But in respect of the deposits made by the relatives and friends of the Managing Director in HHL amounting to Rs.21,60,000/, which was spoken to by 35 persons before the assessing officer, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate court must, therefore, reflect its conscious application of mind and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate court. The task of an appellate court affirming the findings of the trial court is an easier one. The appellate court agreeing with the view of the trial court need not restate the effect of the evidence or reiterate the reasons given by the trial court; expression of general agreement with reasons given by the court, decision of which is under appeal, would ordinarily suffice (See Girijanandini Devi v. Bijendra Narain Choudhary9). ....... While reversing a finding of fact the appellate court must come into close quarters with the reasoning assigned by the trial court and then assign its own reasons for arriving at a different finding. This would satisfy the court hearing a further appeal that the first appellate court had discharged the duty expected of it...." 19. In H.Siddiqui V. A.Ramalingam7, the Supreme Court held: ".....it must be evident from the judgment of the appellate Court that the court has properly appreciated the facts/evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi- judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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