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TMI Blog2014 (3) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 following substantial questions of law were framed by the Court: Substantial question of law in DB ITA No.117/2004: "Whether in the facts and circumstances of the case the appellate tribunal and the learned Commissioner (Appeals) were justified in deleting the additions exorbitantly without stating any logic reason or arguments despite the fact that the application of Section 145(2) of the Act was not disputed and whether the finding of the Tribunal is perverse?" Substantial question of law in DB ITA No.244/2005: "1.Whether in the facts and circumstances of the case the ITAT and CIT(A) were justified in law in restricting the additions without assigning any reasons when the invoking of the provisions of section 145 of the Act has been upheld? 2.Whether in the facts and circumstances of the case, the ITAT & CIT(A) has not acted perversely in reducing and restricting the trading additions without assigning any reasons and making estimation over estimation?" Substantial question of law in DB ITA No.254/2005: "Whether it is implicit under the provisions of Section 145(2) of the Act, 1961 to necessarily make some additions upon rejection of accounts when there is no material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural, industrial and commercial point of view, there is likelihood to be more consumption of all kinds of liquor. If it is urban area, then there will be more consumption of IMFL and Beer. 6. According to the terms of license, a liquor contractor is required to lift liquor from the Government of Rajasthan for a specified value with the stipulation that if the contractor does not take delivery for the specified value, it is liable to make good the deficiency at the end of the year to the State Government called as "shortfall". The shortfall payments are directly linked with the profitability in the sense that when there is less demand of liquor, a contractor prefers to lift less quantity of liquor and prefers to pay "shortfall". As per the excise rules, the liquor contractor has to maintain complete stock register and record of all its employees as per "Nokarnama" approved by the District Excise Officer. No other person can be placed as an employee unless the details of the employees are provided to the District Excise Officer. The liquor contractor has to submit monthly account of receipt of liquor, sale thereof and balance stock at the end of the month to the Excise Inspector by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, even if the sale voucher is maintained, name of recipient, name of purchaser will have to be left blank. However, it was submitted that the purchases are entirely vouched and when purchases are entirely vouched, then the consequential sale version ought to have been accepted as the sale was out of the very goods purchased by the assessees. 9. It was also submitted by the assessees that all the details as desired by the Excise Department except sale vouchers had been maintained and all the books of accounts and supporting vouchers were generally produced and maintained in accordance with the Excise Rules. However, it was stated by the assessees that they did maintain sale register wherein day to day stock details are recorded and merely because the sale vouchers have not been maintained, there is no justification for rejecting books of accounts. 10. However, the AO rejected the books of account and trading results u/s 145 of the IT Act by holding that non-maintenance of the sale vouchers is a major defect since the sale is not open to verification. The assessing officer relied upon the judgment of the Apex Court in the case of CIT Vs. British Paints India Limited, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel for the revenue contended that when the AO gave well reasoned order after discussing the entire issue and also brought in material on record, the CIT(A) also by and large, in majority of the cases, gave detailed reasoning but the ITAT, being a final fact finding authority, was to address the issue in an appropriate manner and not in a summary or in perfunctory manner. 17. Learned counsel for revenue contends that the Tribunal searching for definite evidence to test the validity of the additions made by the AO has transgressed into the realm of indefiniteness from the realm of guesswork for computation of income where the books of account of assessee have been rejected by the AO holding that it is not possible to ascertain the true income of the assessee from such books of account and therefore, the finding of the Tribunal in holding that the results shown in the books of account by the assessee ought to be accepted is not sustainable. 18. Counsel for revenue further contends that ITAT is the final fact finding authority has not recorded any finding or reasoning in restricting, reducing, estimating lump sum ad hoc amount, at the same time, the Tribunal has not giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the estimation, if at all is to be fair and reasonable and when huge additions were made without any apparent basis or evidence, both the appellate authorities, after considering the similarly situated cases or/and other material, had allowed the appeals by giving certain relief. They contended that it is not that the entire addition has been knocked off by the CIT(A) or by the ITAT but additions by and large have been sustained and it cannot be said that the ITAT has not applied its mind. They also contended that once the CIT(A) had given cogent reasons, then the ITAT need not give its own reasons being a higher appellate authority. They also contended that a higher appellate authority can affirm the order of the lower appellate authority by following the same and even may mention "allowed" or "dismissed" without even giving facts and circumstances. They contended that the complete record except sale vouchers was there, and question of any addition does not arise and both the CIT(A) as well as ITAT have come to a reasonable conclusion of income which could have been earned by an assessee on the given facts and circumstances. They contended that the ITAT can always interfere wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not ordinarily be disturbed except under perversity. But the CIT (Appeals) or the ITAT as the case may be when taking decision for reversing either finding of fact recorded by the AO or by the CIT (Appeals) then it was obligatory upon the CIT (A) or the Tribunal to have discussed factual finding appreciated by the AO or CIT (A) and placed for consideration by the assessee or by the Revenue as the case may be in its proper perspective and is expected from the authority holding appellate jurisdiction to exercise its judicious discretion based on due appreciation of material on record and being fact finding authority, the finding of the AO or the CIT (Appeals), ordinarily will not be disturbed except on the ground of perversity. 27. Every law that provides for some form of adjudication also usually provides for appeal in one form or the other against orders passed by the lower authorities. This is based on the concept of equity and recognition that every authority is fallible. The mechanism of appeal provides safeguard against erroneous, unjust or invalid orders. The appeal proceedings ordinarily embrace all proceedings whereby an appellate authority is called upon to review, affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of estimate cannot be interfered with by this Court being a finding of fact and some amount of indefiniteness and application of rule of thumb is bound to be there but where the deduction itself being lump sum is not in the realm of guesswork and, therefore, this Court could not have interfered with and the matter would have rested at that. But unfortunately the Tribunal has not acted on estimates but has proceeded on books of accounts in arriving its own conclusion which is apparent manifest misconception about nature of best judgment assessment and end conclusion of the Tribunal is founded on premise which itself has been rejected as credible and in the end, the conclusion stands vitiated. 33. The ITAT enjoins special status under the income tax jurisdiction. The ITAT is a quasi-judicial body whose duties and functions are very vital in the enforcement of the direct tax laws. It is a final fact finding body and second appellate authority. 34. The ITAT is vested with all the powers of the Income Tax Authorities referred to under Sec. 131 by virtue of Sec.255(6). The same section further clarifies that any proceedings before the ITAT shall be deemed to be judicial proceedings w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition is still looking on higher side. Therefore, by modifying both the orders of the lower authorities we restrict the addition to Rs.75,000/- Thus, the assessee will get further relief of Rs.25,000/- on adhoc basis. Thus appeal filed by the assessee is partly allowed and the appeal filed by the department is dismissed." 36. In the case of CIT Vs. M/s. Amin Mohd. & Party (DB ITA 244/2005) the ITAT observed as under:- "By considering the rival submissions and considering the material available on record, we are of the view that in the liquor business the location, time, quality, quantity and turnover are relevant. In the instant case, we uphold the application of section 145 for the reasons mentioned in the order of the A.O. However, the addition made is looking on higher side. Therefore, by keeping in mind the doctrine of equity, justice and good conscious, we modify both the orders of the lower authorities and restrict the addition to Rs.2,00,000/- (Rs.Two Lakhs) only. 37. In the case of Bhanwar Ali Habib & Party Vs. CIT (DB ITA 293/2005) the ITAT observed as under:- "5.In the circumstances mentioned above, we modify the orders of lower authorities and by keeping in mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is in the very nature a guesswork, to an assessment in accordance with rejected books of account to a definiteness. The tribunal has failed to consider the undisputed and unquestionable fact on which the AO has proceeded to make the assessment, even the fact was not disputed by the assessee that cost price was verifiable for carrying the guesswork. Therefore, in our opinion, the decision of the Tribunal in deleting the additions made by the AO as reduced by the CIT (A) cannot be sustained in law.". 40. The principles fully hold the present case also. In the entire order the Tribunal has not recorded any finding of fact and no reasons are assigned as to why the Tribunal does not agree with the finding recorded by the AO or CIT (Appeals) as the case may be. 41. The Hon'ble Apex Court in the case of Kranti Associates (P) Ltd. Vs. Masood Ahmed Khan: (2010)9 SCC 496, while dealing with the requirement of passing reasoned order by an authority whether administrative, quasi-judicial or judicial, has laid down as under:- a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya v. University of Oxford 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process". 42. We have noticed following observations of the Karnataka High Court in CIT Vs. Gauthamchand Bhandari reported in (2012) 347 ITR 491, 499:- "We cannot avoid observing that of late the quality of orders that are come out from the Tribunal in exercise of its appellate power under section 256 of the Act are found to be wanting and in many respect and many a times the orders are very prefecture, even nonspeaking orders and has no correlation to the fact situation that prevails in a given case. We also notice that the members of the Tribunal have developed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20, failure to give reasons amounts to denial of justice and this is what was also abserved by the Apex Court in 2005 (2) SC 329 Mangalore Ganesh Beedi Works Vs. CIT & Anr. 45. We find the judgments of the ITAT being the stereo typed, nonspeaking, unreasoned, arbitrary and whimsical, and we have no option except to remand the matter back to the ITAT to re-visit the issue afresh de-novo in accordance with the guidelines, referred to herein above and as summarized herein above. 46. Resultantly, in our considered view, all the impugned orders passed by the ITAT, wherein appeals (Schedule-A) have been filed either by the revenue or by the assessees cannot be sustained in the eyes of law and are hereby quashed & set aside to be decided afresh and de-novo in accordance with law. The Cross Objection No.100/2011 filed in DB ITA No.372/2005 also stands disposed of in the above terms. We also direct the ITAT to decide all the matters expeditiously but in no case later than six months from the date parties are called upon to put their appearance before the ITAT. However, it is made clear that the ITAT may not be influenced/inhibited by any of the observations, referred to herein above and m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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