Case Law Details
Om Shiva Traders Pvt Ltd Vs ITO (Delhi High Court)
Introduction: The Delhi High Court recently set aside an order passed by the Income Tax Appellate Tribunal (ITAT) concerning Om Shiva Traders Pvt Ltd, directing the tribunal to explicitly state the reasons for its decisions. The matter revolved around a reversed deletion of addition on unexplained cash credits under Section 68 of the Income Tax Act, 1961, affecting the Assessment Year 2008-09.
Tribunal’s Decision Without Proper Justification: In the case, the Commissioner of Income Tax (Appeals) or CIT(A) had previously found the appellant/assessee, Om Shiva Traders Pvt Ltd, to have satisfied the criteria concerning the addition made by the Assessing Officer under Section 68 of the Income Tax Act. This meant the appellant had provided sufficient proof of the identity, genuineness, and creditworthiness of the investors involved. However, ITAT reversed this decision without offering substantial reasoning for doing so.
High Court Questions the Tribunal’s Decision: The Delhi High Court pointed out that the Tribunal had failed to provide specific reasons for reversing the decision of CIT(A). It noted that the Tribunal simply quoted the appellant/assessee and a part of CIT(A)’s order without delivering a reasoned judgment on why the CIT(A)’s findings were unsustainable.
Direction for Fresh Inquiry: The Tribunal’s decision was to remand the matter back to the Assessing Officer for a fresh inquiry. However, the Delhi High Court found this problematic because the Tribunal did not specify what aspects the Assessing Officer should examine anew. The court emphasized that if the Tribunal disagrees with the CIT(A)’s decision, it needs to provide clear reasoning.
Matter Remanded for De Novo Consideration: Given the gaps in reasoning and the lack of clarification, the Delhi High Court set aside the impugned order and remanded the case back to the Tribunal for a de novo (fresh) consideration. The Court expressed that any reversal of a reasoned decision must itself be backed by adequate reasoning.
Conclusion: The Delhi High Court’s judgment serves as an important reminder for judicial bodies to adhere to the principles of natural justice and offer clear, well-reasoned decisions. The case has now been sent back to the Tribunal for re-evaluation, with the Court expecting explicit reasoning if the Tribunal chooses to disagree with the CIT(A)’s findings. This outcome represents a win for procedural justice and offers hope that the reconsidered decision will be more transparent and well-founded.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Exemption allowed subject to just exceptions.
ITA 428/2023 & CM Nos.39610/2023
2. Issue notice.
3. Mr Shailendra Singh, learned senior standing counsel, accepts notice on behalf of the respondents/revenue.
4. We have heard the counsels for the parties.
5. We are of the view that the appeal should be admitted.
6. It is ordered accordingly.
7. The following question of law is framed for consideration of this Court:
(i) Whether the Tribunal misdirected itself in law in passing the impugned order, in view of the fact that it contains no reasons?
8. With the consent of the learned counsels for the parties, the writ petition is taken up for hearing and final disposal at this stage itself, based on the record presently made available to the Court.
9. This appeal concerns Assessment Year 2008-09.
10. Via this appeal, the appellant/assessee seeks to assail the order dated 01.03.2023 passed by the Income Tax Appellate Tribunal [in short, “The Act”].
11. A perusal of the impugned order shows that the respondent/revenue had preferred an appeal with the Tribunal, against the order of Commissioner of Income Tax (Appeals) [in short, “CIT(A)”] dated 31.03.2011.
12. The issue that the CIT(A), and thereafter the Tribunal, dealt with was, whether the addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961 [in short, “The Act”], was sustainable.
13. The AO had added Rs. 3 crores, to the appellant/assessee’s income.
14. The record shows that this amount was apparently received by the appellant/assessee, in the form of share capital and share premium.
15. According to the appellant/assessee, Rs. 2 crores was invested by an entity going by the name, Bhawani Portfolio Pvt. Limited, while Rs. 1 crore was invested by another entity going by the name, Thar Steels Pvt. Limited.
16. It appears that Rs. 2.50 crores was invested towards share capital. The balance amount, i.e. Rs. 50 lakhs, was received in the form of share premium.
17. According to the CIT(A), the appellant/assessee had satisfied the triple test, i.e., i.e., established the identity, genuineness and creditworthiness of the investors.
18. This conclusion was reversed by the Tribunal, with a direction to the AO to make a fresh enquiry.
19. A perusal of the order shows that the Tribunal has not provided any reason whatsoever, as to why it disagrees with the conclusion arrived at by the CIT(A).
20. The CIT(A) has rendered a reasoned decision.
21. Furthermore, the Tribunal has simply quoted in extenso, the assertions made by the appellant/assessee and extracted a portion of the CIT(A)’s order.
22. This aspect runs through the entire order.
23. The Tribunal, thereafter, in one paragraph, i.e paragraph 11, has simply stated the following, which according to us, is not satisfactory.
“Having heard arguments of both the parties and after going through the entire contents of the paper book and after perusing the facts on record, we do not find any strength in the ratio given by the ld. CIT(A), hence, owing to the absence of the pertinent facts, we deem it proper to remand the matter to file of the Assessing Officer to inquire into the issue afresh and pass a speaking order after affording due opportunity to the assessee”.
24. As would be evident on a perusal of the aforementioned paragraph, the reversal of the CIT(A)’s order has taken place, without the Tribunal discussing as to what part of the order was unsustainable.
25. Furthermore, a direction of remand has been issued, without indicating to the AO what exactly he is required to examine afresh.
26. We are of the view that the Tribunal will have to deliberate on the matter afresh and articulate in the order its reasoning, if it chooses not to agree with the order of the CIT(A).
27. Consequently, the impugned order is set-aside.
28. Accordingly, the question of law is answered in favour of appellant/assessee, and against the respondent/revenue. The matter is remanded to the Tribunal for a de novo
29. The above-captioned appeal is disposed of, in the aforesaid terms.
30. Pending interlocutory application shall stand disposed of.
