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TMI Blog2013 (9) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of the assessee straight away. In other words, the Administrative Commissioner ought to have directed the assessing officer to examine the books of account in the light of provisions of section 40(a)(ia) and 40A(3) of the Act. Accordingly, the assessing officer is directed to examine the books of account in the light of provisions of sections 40(a)(ia) and 40A(3) of the Act and thereafter decide the issue in accordance with law without being influenced by any of the observations made by the Commissioner of Income-tax in the impugned order. The order of the Administrative Commissioner is modified to this extent - Decided against assessee. - I.T.A No. 245 to 250/Coch/2013 - - - Dated:- 30-8-2013 - Shri N. R. S. Ganesan (JM) And Shri B. R. Baskaran (AM),JJ. For the Appellant : Shri CBM Warrier For the Respondent : Shri M. Anil Kumar, CIT Smt. S. Vijayaprabha ORDER Per N.R.S. Ganesan (JM) All the appeals of the assessee are directed against the respective orders passed by the Administrative Commissioner u/s 263 of the Act for the assessment year 2003-04 to 2008-09. Since common issue arises for consideration, all the appeals were heard together and are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Act at the time of completion of the assessments makes the assessments erroneous and prejudicial to the interest of the revenue. Therefore, according to the ld.DR, the Commissioner of Income-tax has rightly exercised his powers u/s 263 of the Act. When the appeals of the assessee were considered by this Tribunal, this Tribunal confirmed the orders of the CIT(A) with regard to commission expenditure. This Tribunal found that in the absence of any bills or voucher, the CIT(A) has rightly restricted the disallowance to 5%. Accordingly, the orders of CIT(A) were confirmed. This Tribunal had no occasion to examine the application of section 40(a)(ia) of the Act. Therefore, according to the ld.DR, the Administrative Commissioner has rightly exercised his jurisdiction u/s 263 of the Act. 4. We have considered the rival submissions on either side and also perused the material available on record. With regard to commission payment for the assessment years 2006-07 and 2007-08, the matter was subject matter of appeals before CIT(A) as well as before this Tribunal. The assessing officer disallowed the claim of the assessee to the extent of 40%. However, the CIT(A) restricted the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudicial to the interest of the revenue. 8. In fact the Punjab Haryana High Court had an occasion to examine this issue in Commissioner of Income-tax vs Sunil Kumar Goel (2005) 274 ITR 53 (P H) and after considering the judgment of the Apex Court in Mukherjee (S.N.) vs UOI (1990) AIR 1990 SC 1984 has observed as follows: " In S.N. Mukherjee v. Union of India, AIR 1990 SC 1984, a Constitution Bench of the Supreme Court discussed the development of law on this subject in India, Australia, Canada, England and the United States of America and after making reference to a large number of judicial precedents, their Lordships culled out the following propositions (page 1995): "The decisions of this court referred to above indicate that with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge." In Testeels Ltd v. N.M. Desai (1970) 37 FJR 7; AIR 1970 Guj 1, a Full Bench of the Gujarat High Court has made an extremely lucid enunciation of law on the subject and we can do no better than to extract some of the observations made in the decision. The same are (headnote of AIR 1970 (Guj)): "The necessity of giving reasons flows as a necessary corollary from the rule of law which constitutes one of the basic principles of the Indian Constitutional set- up. The administrative authorities having a duty to act judicially cannot therefore decide on considerations of policy or expediency. They must decide the matter solely on the facts of the particular case, solely on the material before them and apart from any extraneous considerations by applying pre-existing legal norms to factual situations. Now the necessity of giving reasons is an important safeguard to ensure observance of the duty to act judicially. It introduces clarit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court has held that the Assessing Officer had disposed of the proceedings stating the penalty proceedings initiated in this case under section 271C read with section 274 of the Income-tax Act, 1961 are hereby dropped. Accordingly to the High Court, there was no basis indicated for dropping the proceedings. The Tribunal referred to certain aspects and held that the initiation of proceedings under section 263 of the Income-tax Act, 1961 (in short, "the I.T. Act") was impermissible when considered in the background of the materials purportedly placed by the assessee before the Assessing Officer. What the High Court has done is to require the Assessing Officer to pass a reasoned order. The High Court was of the view that the Tribunal could not have substituted its own reasonings which were required to be recorded by the Assessing Officer. According to the assessee, all relevant aspects were placed for consideration and if the officer did not record reasons, the assessee cannot be faulted. We do not think it necessary to interfere at this stage. It goes without saying that when the matter be taken up by the Assessing Officer on remand, it shall be his duty to take into account al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or exercise the power of judicial review on adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out. The "inscrutable face of the sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance." A feeble argument was advanced that the Commissioner of Income Tax being higher in hierarchy than Additional Commissioner of Income Tax, the initiation of the proceedings at the instance of Additional Commissioner of Income Tax is bad. In view of our above conclusion that the order dropping the proceeding under section 12A was not a valid action on the part of the Commissioner of Income Tax, the said argument is rejected. Having regard to what has been said above. We find that it is a case where the then Assessing Officer (Shri Bhopal Singh), the Additional Commissioner of Income Tax, Range-II, Muzaffarnagar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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