CA Sandeep Kanoi
Hon’ble Rajasthan HC has held in the case of CIT Vs. Ram Singh that the Judgment of ITAT in various cases passed by this case are stereo typed, non-speaking, unreasoned, arbitrary and whimsical andremand the matter back to the ITAT to re-visit the issue afresh de-novo in accordance with the guidelines framed by Hon’ble Apex Court in the case of Kranti Associates (P) Ltd. Vs. Masood Ahmed Khan: (2010)9 SCC 496. Hon’ble Rajasthan HC has asked asked ITAT to re-visit the issue afresh de-novo in 81 cases in which orders been passed by ITAT Jaipur in the past.
Issue – 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?
Relevant Extract from the Judgment
On perusal of the above, orders it as apparent and patent that the ITAT has not even recorded the arguments advanced by the parties nor has it come out with the discernible basis as to why adhoc stated addition has been sustained. There is no recording of facts and there is no discussion about any comparable cases or the past history or working for the adhoc addition and deletion. There is no reason assigned as to why Tribunal does not agree with the finding recorded by AO or CIT(A). We fail to understand as to how Tribunal has arrived to a conclusion in confirming, enhancing, reducing or deleting the estimation of income arrived at by CIT(A) & AO. The Tribunal is supposed to set out reasons in support of its decision by narrating full facts and discussing the issues in detail so that the person aggrieved knows why it has come to a particular conclusion.
Similar view has been considered by this Court in (2005) 199 CTR (Raj) 422 Commissioner of Income Tax Vs. Sunil Talwar Murlidhar & Party and followed in (2005) 199 CTR (Raj.) 427. In Sunil Talwar’s case supra, it has been observed which reads ad infra –
In our opinion, on the face of it, it is contradictory in terms that the very foundation on which the books of account rejected by the AO and which order has been affirmed by the Tribunal, should be taken to be the basis for accepting the assessee’s results because no material was produced by the AO. It is to set at naught the initial presumption which at least shifted the burden on the assessee to prove that results declared by his books of account are still correct. The burden of proving exact facts to sustain the additions made on best judgment with definiteness is to convert best judgment, 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-judicial authority must record reasons in support of its conclusions.
c. Insistence on recording of reasons is meant to serve the wider principle of justice, that justice must not only be done it must also appear to be done as well.
d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.
f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.
g. Reasons facilitate the process of judicial review by superior Courts.
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.
i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system.
j. Insistence on reason is a requirement for both judicial accountability and transparency.
k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons’ is not to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737).
n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision 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 non-speaking 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 an unhealthy habit of quoting totally unrelated judgments which are not applicable at all to the facts of the case, to pass orders not otherwise sustainable on facts or in law. We strongly deprecate such a tendency on the part of the members of the Tribunal, which is quite naturally a professional Tribunal comprised of expert members, one member from the Revenue side and another member from the accounting side, with considerable experience in their respective fields and to whom we can attribute expertise. We feel sorry that the confidence posed by the Legislature is not being justified by passing orders that are outcome from the Tribunal now-a-days. It is high time the method of recruitment to the Tribunal is also reviewed by the authority concerned and at least henceforth it is ensured that the members of some standing, integrity and competence are put in place as members of the Tribunal and not all and sundry.
The Legislature, particularly the Union Parliament may also take note of such tendency on the part of the Tribunal and ensure for suitable legislative measure so that the purpose and the object with which such Tribunals are constituted really subserve not only the interest of aggrieved assessee but also to ensure that the Revenue’s interest is not simply scarified or jeopardized by errant members.
Registrar General of this court is directed to send copies of this judgment to the Law Commission of India, Secretary to Department of Revenue, Ministry of Finance,. Government of India, Secretary to Government, Ministry of law and Parliamentary Affairs, Government of India and the Central Board of Direct Taxes, New Delhi.”
The impugned orders passed by the Tribunal do not satisfy the requirements enunciated by the Apex Court noticed here-in-above.
It is no doubt true that in an order of affirmation, repetition of the reasons elaborately may not be necessary but even then the arguments advanced/points urged deserves to be dealt with. Reasons for affirmation have to be indicated, though in appropriate cases they may be briefly stated. Recording of reasons is part of fair procedure and reasons are harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at and they always substitute subjectivity with objectivity and as observed in Alexander Machiniery (Dudley) Ltd. Crabtree, 1974 L.C.R. 120, 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.
We find the judgments of the ITAT being the stereo typed, non-speaking, 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.