The Commissioner of Income-tax Ahmedabad - I v. Premkumar B. Rathi
[Citation -2015-LL-0313-109]

Citation 2015-LL-0313-109
Appellant Name The Commissioner of Income-tax Ahmedabad - I
Respondent Name Premkumar B. Rathi
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 13/03/2015
Judgment View Judgment
Keyword Tags recording of reasons • fictitious purchases • unexplained purchase • estimate basis
Bot Summary: Making above submissions and relying upon the above decisions, it is requested to allow the present Tax Appeal and quash and set aside the impugned judgment and order passed by the learned ITAT and to restore the order passed by the learned CIT(A) by answering the substantial question of law raised in the present Tax Appeal in affirmative and in favour of the Revenue and against the assessee. Considering the aforesaid law laid down by the Honble Supreme Court and the requirement of passing a reasoned and speaking order, considering the facts of the case on hand and the impugned common judgment and order passed by the ITAT, the impugned judgment and order cannot be sustained. As stated hereinabove both, the Revenue as well as the assessee are aggrieved by the impugned judgment and order and a common grievance is made that the impugned order passed by the learned ITAT is a non speaking and non reasoned order and Page 15 of 19 HC-NIC Page 15 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT it is prayed to remand the matter to the ITAT for its fresh decision. Despite the above decisions of the Hon'be Supreme Court as well as this Court drawing the attention of the learned Appellate Tribunal that it is the duty to pass reasoned and speaking order on the issue; to consider the order passed by the learned CIT(A) and the reasoning given by the learned CIT against which the appeal is preferred before it and even while making estimate either on deletion and / or addition to pass speaking and reasoned order in respect of such estimation either on deletion and / or addition, it appears that massage has not reached to the Appellate Tribunal. Even in the case of estimation, though permissible, if the learned Commissioner of Income Tax has passed an order by giving cogent reasons, the Tribunal on an appeal either by the Revenue and / or assessee is required to apply its mind and consider the reasons given by the learned CIT(A) and is required opine where the learned CIT(A) had committed an error and whether the order passed by the learned CIT(A) is required to be to be interfered with or not. Once again the observations made by the Hon'ble Supreme Court as well as this Court in catena of decisions referred to herein above are reiterated and all the Income Tax Appellate Tribunal are hereby directed to consider the observations made in catena of decisions of the Hon'ble Supreme Court as well as Division Bench of this Court referred to herein above as well as observations made in the present order while deciding the appeals against the order passed by the learned Commissioner of Income Tax, in its true spirit, failing which the matter shall be viewed very seriously and it would tantamount to disobedience of the order / orders passed by the Higher Courts / Forum. Registry is directed to send the copy of this order to President, ITAT, Ahmedabad and the Vice President, ITAT, Ahmedabad Zone so as to enable to circulate this order to the learned Members of the Appellate Tribunal so that in future the learned Appellate Tribunal may take care in future while deciding the appeals against the order / orders passed by the learned Commissioner of Income Tax, we again hope and trust that while deciding the appeal and in future the learned Appellate Tribunal may consider the observations made by the Hon'ble Supreme Court as well as this Court in catena of decisions referred to herein above as well as the observations made in the present order.


O/TAXAP/1120/2007 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1120 of 2007 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH sd/ and HONOURABLE MR.JUSTICE S.H.VORA sd/ ============================================= 1. Whether Reporters of Local Papers may be YES allowed to see judgment ? 2. To be referred to Reporter or not ? YES 3. Whether their Lordships wish to see fair copy NO of judgment ? 4. Whether this case involves substantial question NO of law as to interpretation of constitution of India, 1950 or any order made thereunder ? ============================================= COMMISSIONER OF INCOME TAXAHMEDABAD I....Appellant(s) Versus PREMKUMAR B. RATHI....Opponent(s) ============================================= Appearance: MRS MAUNA M BHATT, ADVOCATE for Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for Opponent(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 13/03/2015 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. Feeling aggrieved and dissatisfied with impugned judgment and order passed by learned Income Tax Appellate Tribunal, Ahmedabad B Bench (hereinafter referred to as ITAT ) dated 2.2.2007 passed in ITA No.425/AHD/2004 for AY 1999 2000, by which, learned Tribunal has partly allowed said appeal reducing Page 1 of 19 HC-NIC Page 1 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT dis allowance to extent of 10% of unexplained purchases instead of 20% as disallowed by CIT(A), Revenue has preferred present Tax Appeal arising following substantial question of law. Whether Appellate Tribunal was right in law and on facts in substituting order passed by CIT(A) and directing estimate of addition as made by CIT(A) be further reduced to 10% of alleged purchases? 2.0. facts leading to present Tax Appeal in nutshell are as under: 2.1. That assessee is trader in edible oils on semi whole sale basis. Survey proceedings under Section 133 of Income Tax Act was carried out on 12.1.2000 in assessee's proprietorship concern, M/s. Mohta Agency. During course of service, it was found that assessee purchased edible oil to tune of Rs.2,48,28,174/ by purchase bills from 5 different parties M/s. Keshav Distributors and others. That statement of Manager Shri Rajesh Mohta was recorded. Subsequent to survey proceedings, said Manager was asked to produce above parties. However, he replied aforesaid parties from whom assessee is alleged to have purchased edible oil are not willing to appear before Assessing Officer and or hesitating in attending proceedings before Assessing Officer. That aforesaid Manager Shri Rajesh Mohta offered additional income of Rs. 7 lakhs in AY 1999 2000 on account of inability to produce above parties before AO in order to avoid litigation and buy peace. That books of account came to be impounded under Section 133(3) on 5.2.2000. That during course of assessment proceedings, AO asked further question and assessee finally agreed to surrender total additional income of Rs.8,50,000/ on account of failure to produce Page 2 of 19 HC-NIC Page 2 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT these parties and revised return was filed on 22.3.2000, offering aforesaid additional income of Rs. 8,50,000/ for AY 1999 2000. That assessee filed detailed reply on 26.3.2002 in course of assessment proceedings. AO further held that assessee failed to discharge its onus of proving genuineness of aforesaid purchases observing in para 10 as under: 10. It is pertinent to mention here findings given by honorable ITAT in case of Vijay Proteins Ltd. vs. ACIT in ITA No.5989/AHD/1994 dated 18.1.1996 55 ITJ(AHD) 76. In said case, issue of such fictitious purchases was considered by honorable ITAT and 25% of such fictitious purchases were disallowed and added to income of assessee. Keeping in view of circumstances and facts of case, it will meet end of justice if 25% of such purchases is disallowed in instant case respectfully following findings of Honorable ITAT, Ahmedabad Bench. However, since assessee has already made disclosure of Rs. 8,50,000/ included same in his name due to his inability to identity suppliers and produce them, same requires to be deducted before making addition in this regard. amount of Rs. 53,57,040/ being 25% of said purchases of Rs. 2,48,28,174/ as reduced by Rs.8,50,000/ (Rs.62,07,040/ ) minus Rs.8,50,000/ is therefore, added to assessee's total income. Since assessee has provided inaccurate particulars leading to concealment of income penalty and tried to evade tax willfully, proceedings u/s 271(10(c) of act are being initiated separately. 2.2. Feeling aggrieved and dissatisfied with assessment order passed by AO making addition at 25% of purchases i.e. Rs.53,57,040/ being 25% of said purchases of Rs.2,48,28,174/ as reduced by Rs.8,50,000/ ( Rs.62,07,040/ minus 8,50,000/ ), to assessee's total income, assessee preferred appeal before learned CIT(A). learned CIT(A) called remand report of AO on assessee's letter dated 26.3.2002. AO submitted report dated 17.11.2003. AO remand report was furnished to assessee to which, assessee vide letter dated 23.12.2003 commented on same. That by giving cogent reasons in para 3.2, learned CIT(A) partly allowed said appeal and reduced addition to 20% aforesaid Page 3 of 19 HC-NIC Page 3 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT purchases. By reducing addition and / or dis allowance at 20% of such unverifiable purchases of Rs.2,48,28,174/ from 25% has been made by AO, learned CIT(A) allowed said appeal partly and confirmed disallowance out unverifiable purchases to extent of Rs.41,15,635/ as against dis allowance of Rs.53,57,040/ made in assessment. 2.3. Feeling aggrieved and dissatisfied with order passed by learned CIT(A) confirming dis allowance out of unverifiable purchases to extent of Rs.41,15,635/ 20% of unverifiable purchases of Rs.2,48,28,174/ shown to have been made from aforesaid five parties, assessee preferred further appeal before learned ITAT and relying upon decision of learned ITAT in case of M/s. Vijay Proteins Ltd vs. ACIT in Appeal ITA No.5998/AHD/1994 delivered on 18.1.1996, learned ITAT has partly allowed said appeal and further reduced dis allowance to 10% of alleged purchases. 2.4. Feeling aggrieved and dissatisfied with impugned judgment and order passed by learned ITAT in further reducing dis allowance to 10% of alleged purchases, Revenue has preferred present Tax Appeal with aforesaid substantial question of law. 3.0. Shri Manish Bhatt, learned counsel appearing on behalf of Revenue has vehemently submitted that learned Tribunal has materially erred in restricting dis allowance to 10% of unexplained purchases. 3.1. It is further submitted by Shri Bhatt, learned counsel for Page 4 of 19 HC-NIC Page 4 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT revenue that as such by giving cogent reasons learned CIT(A) restricting dis allowance to 20% of unexplained purchases and without disturbing finding recorded by learned CIT(A) and / or without observing anything that learned CIT(A) has committed error in in restricting dis allowance to 20% of unexplained purchases, learned Tribunal has reduced / restricted dis allowances to 10% of unexplained purchases without passing any further reasoned order. 3.2. It is further submitted by Shri Manish Bhatt, learned counsel for Revenue that learned Tribunal has restricted to 10% of unexplained purchase solely relying upon decision of Appellate Tribunal in case of Vijay Proteins Ltd (supra). It is submitted that learned Tribunal has materially erred in reducing / restricting dis allowance to 10% solely relying upon decision in case of Vijay Proteins Ltd (supra). It is submitted that learned Tribunal has not properly appreciated fact that facts of Vijay Proteins Ltd (supra) cannot be applied to present case. It is submitted that as such decision of Appellate Tribunal in case of Vijay Proteins Ltd (supra)came to be considered by learned CIT(A) and only thereafter and considering distinguishing facts in case of Vijay Proteins Ltd (supra) only thereafter learned CIT(A) reduced/ restricted dis allowance to 20% of unexplained purchased. It is submitted that therefore, learned Tribunal has materially erred in mechanically applying decision of Appellate Tribunal in case of Vijay Proteins Ltd (supra). 3.3. It is submitted that as such impugned judgment and order passed by learned ITAT restricting dis allowance to 10% of unexplained purchases is absolutely non reasoned order, which Page 5 of 19 HC-NIC Page 5 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT cannot be sustained. It is submitted that even if it is conceded powers of learned Tribunal and it is conceded in such type of cases and while considering dis allowance on unexplained purchased i.e. always there might be discretion with authority and on basis of estimation, dis allowance may be permissible. It is submitted that however such discretion is required to be exercised judiciously and must be supported by some cogent reasons. It is submitted that otherwise dis allowance on unexplained purchases on basis of such estimation without supporting reasons would tantamount to give arbitrary exercise of power which is not permissible. 3.4. In support of his above submissions, Shri Bhatt, learned counsel for Revenue has relied upon following decisions. (1) Omar Salay Mohamed Sait vs. Commissioner of Income Tax, Madras reported in 1959(3&)ITR 151 (SC). (2) Board of Trustees of Martyrs Memorial Trust vs. Union of India reported in (2012) 10 SCC 734. (3) Real Estate Agencies vs. State of Goa reported in (2012) 12 SCC 170. (4) Director of Income Tax (Exemption) vs. Shia Dawoodi Bohra Jamat reported in 2012(344) ITR 653(Guj) (5) Rameshchandra M Luthra vs. Assistant Commissioner of Income Tax reported in 2002(297) ITR 460 (Guj) (6) Mercury Metals (P) Ltd vs. Assistant Commissioner of Income Tax reported in 2002(257) ITR 297 (Guj). (7) Rajesh Babubhai Damania vs. Commissioner of Income Tax reported in 2001(251) ITR 541 (Guj). (8) Mangalore Ganesh Beedi Works vs. Commissioner of Income Tax and Another reported in 2005(273) ITR 56(SC). Page 6 of 19 HC-NIC Page 6 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT (9). Gautam Harilal Gotecha vs. Deputy Commissioner of Income Tax (Investigation) reported in 2006(281) ITR 283(Guj). (10) S.J. And S.P. Family Trust vs. Deputy Commissioner of Income Tax (Assessment) reported in 2005(277) ITR 557 (Guj). (11) Commissioner of Income Tax II vs. Surat Beverages Ltd rendered in Tax Appeal No. 291 of 2013 with Tax Appeal No. 669 of 2013. 3.5. Making above submissions and relying upon above decisions, it is requested to allow present Tax Appeal and quash and set aside impugned judgment and order passed by learned ITAT and to restore order passed by learned CIT(A) by answering substantial question of law raised in present Tax Appeal in affirmative and in favour of Revenue and against assessee. 4.0. Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of assesee. He has submitted that there cannot be any dispute that while exercising appellate powers by learned ITAT, Tribunal is bound to consider legality and validity of order passed by learned CIT(A) and has to give elaborate reasons why Tribunal is not in agreement with view taken by learned CIT(A) and that learned Tribunal is bound to give reasons and is required to pass speaking order on issue involved in matter and in rejection and / or addition even on basis of estimation permitted must reflect due application of mind. Therefore, as such to aforesaid extent, Shri Soparkar, learned Senior Advocate for assessee is in agreement with submissions made by Shri Bhatt, learned counsel for revenue and decisions upon which reliance has been placed on behalf of revenue. Page 7 of 19 HC-NIC Page 7 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT 4.1. However, has submitted that in facts and circumstances of case, impugned judgment and order passed by learned ITAT reducing / restricting dis allowance to 10% of unexplained purchase may not be interfered with by this Court. He has submitted it is true that learned ITAT while reducing / restricting dis allowance to 10% of unexplained purchase has solely relied upon decision of Appellate Tribunal in case of Vijay Proteins Ltd (supra) and no independent reasonings have been assigned by learned Tribunal on order passed by learned CIT(A) and how decision of learned CIT(A) can be said to be erroneous. Shri Soparkar, learned Senior Advocate for assessee, however has requested to consider facts emerging from record and to consider dis allowance on unexplained purchase accordingly. Shri Soparkar, learned Senior advocate for assessee has vehemently submitted that in present case it has come on record that GP disclosed at rate of 1.11% by assessee was found to satisfactory as compared to AY 2000 01 where GP was of 0.98% and department by order under Section 143(3) of Act accepted said GP. It is submitted that therefore, in aforesaid peculiar facts and circumstances of case, learned Tribunal has not committed any error in sustaining addition to extent of 10%. In support of his above submissions, Shri Soparkar, learned Senior Advocate for assessee has relied upon decision of Division Bench of this Court in case of Commissioner of Income Tax vs. Simit P Sheth reported in (2013) 38 Taxmann.com 385 (Guj). Therefore, Shri Soparkar, learned Senior Advocate for assessee has requested to consider aforesaid facts emerging from record which is not disputed by revenue and to consider impugned judgment and order passed by learned Tribunal accordingly instead of remanding matter to learned Tribunal. Page 8 of 19 HC-NIC Page 8 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT 5.0. Heard learned advocates for respective parties at length. At outset, it is required to be noted that AO restricted dis allowance to 25% of unexplained purchases made from 5 different parties which were not produced before AO though ample opportunity was given to assessee. That learned CIT(A) on appeal restricted dis allowance to 20% of unexplained purchase by speaking and reasoned order and even distinguishing decision of Appellate Tribunal in case of Vijay Proteins Ltd (supra). Therefore, learned ITAT was required to consider legality and validity of order passed by learned CIT(A) restricting dis allowance to extent of 20% of unexplained purchase. That by impugned judgment and order, learned ITAT has mechanically following decision of Coordinate Bench / Appellate Tribunal in case of Vijay Proteins Ltd (supra) had restricted dis allowance to extent of 10% of unexplained purchase and without observing anything as to how learned CIT(A) has committed error in confirming dis allowance to extent of 20% of unexplained purchase. It also appears that learned ITAT has not made any observations how decision in case of Vijay Proteins Ltd (supra) would be applicable to facts of case on hand. At this juncture, it is required to be noted that as such learned CIT(A) did consider decision of Appellate Tribunal in case of Vijay Proteins Ltd (supra) and had observed that on facts decision in case of Vijay Proteins Ltd (supra) shall not be applicable. From impugned judgment and order passed by learned ITAT, it also appears that no reasons whatsoever have been assigned by learned ITAT restricting dis allowance to extent 10% of unexplained purchases. Thus, impugned judgment and order passed by learned ITAT restricting dis allowance to extent of 10% of unexplained purchase can said to be non speaking and unreasoned order. At this stage, it is required to be Page 9 of 19 HC-NIC Page 9 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT noted that as such learned ITAT was exercising appellate jurisdiction or considering legality and validity of order passed by learned CIT(A). 6.0. In case of Omar Salay Mohamed Sait (supra) as far as back in year 1959, Hon'ble Supreme Court had occasion to consider judgment of Tribunal Appellate Tribunal. In aforesaid decision, Hon'ble Supreme Court has specifically observed and held as under: We are aware that Income tax Appellate Tribunal is fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of evidence before it this court will not interfere. It is necessary, however, that every fact for and against assessee must have been considered with due care and Tribunal must have given its finding in manner which would clearly indicate what were questions which arose for determination, what was evidence pro and contra in regard to each one of them and what were was reached on evidence on record before it. conclusions reached by Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by assessee, assessee should be given opportunity of doing so. On no account whatever should Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of sort, its findings, even though on questions of fact, will be liable to be set aside by this court. 6.1. In case of Rameshchandra M Luthra (supra) Division Bench has observed that it is duty of Tribunal to consider all facts and give reasons for its decision. Relying upon decision of Hon'ble Supreme Court in case of Omar Salay Mohamed Sait (supra), in said decision Division Bench has further observed and held that while deciding appeal it is necessary, that every fact for and against assessee must have been considered with due care by Page 10 of 19 HC-NIC Page 10 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT Tribunal and it must have given its finding in manner which would clearly indicate what were questions which arose for determination, what was evidence pro and contra in regard to each one of them and what were was reached on evidence on record before it. It is further observed in said decision that it is incumbent on Tribunal before upsetting order of Commissioner of Income Tax (Appeal) to consider reasons given by that authority for its decision. 6.2. In case of Mercury Metals (P) Ltd (supra), Division Bench of this Court quashed and set aside order passed by learned Appellate Tribunal and remanded matter to learned Tribunal for reconsideration on ground that it had committed error in exercise of its jurisdiction by not drawing its attention to reasoning given by Commissioner of Income Tax against whose order appeal was preferred by revenue for its consideration. 6.3. In case of Rajesh Babubhai Damania (Supra), Division Bench has observed that it is duty of Tribunal to ascertain reasons given by Commissioner of Income Tax (Appeals) in whose order order of Assessing Officer had merged. 6.4. In case of Gautam Harilal Gotecha (Supra) Division Bench of this Court has observed and held that Appellate Tribunal is final fact finding body in hierarchy of appellate jurisdiction under Act and its order is supposed to reflect not only facts and contentions of rival parties before it, but issues which arise for its consideration and reasons for deciding issues. In said decision, non reasoned and non speaking, incoherent and vague order by Tribunal is considered to be frivolous order. In said decision, even Division Bench of this Court had shown in its strong Page 11 of 19 HC-NIC Page 11 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT disapproval of passing such order by learned Appellate Tribunal. In said decision, Division Bench had also observed that Court can only hope that Tribunal applies its mind and take care in future to ensure that approach of Tribunal undergoes change and it may regain its past glory. While remanding learned Tribunal to apply its mind Division Bench was constrained to observe as under: This Court has been constrained to remind Tribunal of its duties time and again, but one can only lament that Tribunal, it appears, is not amenable to constructive suggestions. Tribunal fails to appreciate basis fact that by making such slipshod orders, it only generates unwarranted litigation, apart from putting parties to unwarranted hardship, harassment and cost for no fault of theirs. 6.5. In case of S.J and S.P Family Trust (supra) Division Bench again emphasised duty of Appellate Tribunal to give reasons for its decision. In said decision, it is once again observed that procedure required to be adopted by Tribunal so as to ensure that order is appealable order, must be one which reflects not only its conclusion, but decision making process also. It is further observed that reasons however brief are soul and backbone of order and in absence of such reasons, which must be reflected on reading of order, it is not possible to state as to whether Tribunal was aware as to what controversy was before it and what were factors pro and con in relation to said issue and reasons which ultimately weighed with Tribunal for arriving at decision. 6.6. In case of Shiv Dawoodi Bohra Jamat (supra) Division Bench of this Court again considered judgment of Tribunal and remanded appeal to Tribunal by observing that Tribunal should give reasons for its decisions. Mere mention of Supreme Court or High Court cases without specifying how they are applicable to Page 12 of 19 HC-NIC Page 12 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT case is not sufficient. In said decision, it is again reiterated and emphasized that Tribunal is final fact finding authority, hence order of Tribunal should reflect findings of fact as well as reasons for arriving at its conclusion on basis of findings recorded by it. 6.07. In case of Surat Beverages Limited (supra), once again Division Bench of this Court reiterated and emphasized that order passed by learned Appellate Tribunal must be reasoned and speaking order on issue involved in matter. In said decision, Division Bench also noted that while taking up such appeal, we come across similar non speaking and non reasoned orders passed by learned ITAT and passing order on estimate basis by deleting and / or making addition by observing that to meet with ends of justice . In para 5, Division Bench has observed and held as under: [5.0] While taking up tax appeals, we have come across similar non speaking and non reasoned orders passed by ITAT and passing order on estimate basis by deleting and/or making addition by observing that to meet with ends of justice. It cannot be disputed that ITAT, while deciding appeals, is required to pass order judiciously and it should reflect that Tribunal has applied mind on particular issue. ITAT is judicial authority and it should exercise powers under section 254 of Act and as per sub section (4) of section 254 save as provided in section 256 or section 260A, orders passed by appellate tribunal on appeal shall be final. Therefore, great care should be taken by ITAT while exercising powers under section 254 of Act and while deciding appeals in exercise of powers under section 254 of Act. It is true that sub section (1) of section 254 provides that appellate tribunal may pass such orders as it thinks fit, but that does not mean that tribunal is not required to assign any reasons and/or Tribunal is not required to pass speaking order. In case of Ravi Yashwant Bhoir vs. Collector reported in (2012)4 SCC 407, Honble Supreme Court had occasion to consider rationale behind requirement of recording reasons in order. In said decision, it is observed and held by Honble Supreme Court that requirement of Page 13 of 19 HC-NIC Page 13 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT recording reasons is one of principles of natural justice. It is further observed and held by Honble Supreme Court that right to reasons is indispensable part of sound judicial system. In said decision Honble Supreme Court in paras 44 and 46 has observed as under: 44. This Court while deciding issue in Sant Lal Gupta and Ors. v. Modern Co operative Group Housing Society Ltd., placing reliance on its various earlier judgments held as under: (SCC pp.345 46, para 27) 27. It is settled legal proposition that not only administrative but also judicial orders must be supported by reasons recorded in it. Thus, while deciding issue, court is bound to give reasons for its conclusion. It is duty and obligation on part of Court to record reasons while disposing of case. hallmark of order and exercise of judicial power by judicial forum is for forum to disclose its reasons by itself and giving of reasons has always been insisted upon as one of fundamentals of sound administration of justice delivery system, to make it known that there had been proper and due application of mind to issue before court and also as essential requisite of principles of natural justice. 3... giving of reasons for decision is essential attribute of judicial and judicious disposal of matter before courts, and which is only indication to know about manner and quality of exercise undertaken, as also fact that court concerned had really applied its mind.* reason is heartbeat of every conclusion. It introduces clarity in order and without same, order becomes lifeless. Reasons substitute subjectivity with objectivity. absence of reasons renders order indefensible/unsustainable particularly when order is subject to further challenge before higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. person who is adversely affected must know why his application has been rejected." 46. emphasis on recording reason is that if decision reveals 'inscrutable face of sphinx', it can be its silence, render it virtually impossible for courts to perform their appellate function or exercise power of judicial review in adjudging validity of decision. Right to reason is indispensable part of sound judicial system, reasons at least sufficient to indicate application of mind of authority Page 14 of 19 HC-NIC Page 14 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT before court. Another rationale is that affected party can know why decision has gone against him. One of salutary requirements of natural justice is spelling out reasons for order made. In other words, speaking out, inscrutable face of sphinx is ordinarily incongruous with judicial or quasi judicial performance. In case of Board of Trustees of Martyrs Memorial Trust vs. Union of India reported in (2012)10 SCC 734, in para 22, Honble Supreme Court has held as under: 22. Brevity in judgment writing has not lost its virtue. All long judgments or orders are not great nor are brief orders always bad. What is required of any judicial decision is due application of mind, clarity of reasoning and focused consideration. slipshod consideration or cryptic order or decision without due reflection on issues raised in matter may render such decision unsustainable. Hasty adjudication must be avoided. Each and every matter that comes to court must be examined with seriousness it deserves. In case of Real Estate Agencies vs. State of Goa reported in (2012)12 SCC 170 while emphasizing necessity of giving reasons by Courts/Tribunals/Judiciary, it is held that, manner of reaching decision and reasons for reaching such decisions are sacrosanct to judicial process. While emphasizing need to pass reasoned order, Honble Supreme Court in case of Certified Area Committee vs. Additional Director, Consolidation reported in (2002)10 SCC 87, has held as under: reasons are flesh and blood of Judicial adjudication and such reasons must be shown in orders which are liable to be challenged in Superior Court. Considering aforesaid law laid down by Honble Supreme Court and requirement of passing reasoned and speaking order, considering facts of case on hand and impugned common judgment and order passed by ITAT, impugned judgment and order cannot be sustained. No reasons at all have been assigned by learned Tribunal while dismissing appeal preferred by Revenue and partly allowing appeal preferred by assessee and sustaining addition of Rs.30 lac. impugned order passed by learned Tribunal is absolutely on estimate basis without assigning any reasons and as such no reasons have been assigned at all while dismissing appeal preferred by Revenue. As stated hereinabove both, Revenue as well as assessee are aggrieved by impugned judgment and order and common grievance is made that impugned order passed by learned ITAT is non speaking and non reasoned order and Page 15 of 19 HC-NIC Page 15 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT it is prayed to remand matter to ITAT for its fresh decision. 6.8. In case of Mangalore Ganesh Beedi Works (supra) Hon'ble Supreme Court has observed and held that in appeal to High Court, even while affirming order, High Court will have to deal with point urged before it and reasons for affirmation are required to be given though not elaborately. In said decision, it is observed by Hon'ble Supreme Court that recording of reason is part of fair procedure. reasons are harbinger between mind of maker of decision in controversy and decision on conclusion arrived at. They substitute subjectivity with objectivity. Failure to give reasons amounts to denial of justice. 7.0. Despite above decisions of Hon'be Supreme Court as well as this Court drawing attention of learned Appellate Tribunal that it is duty to pass reasoned and speaking order on issue; to consider order passed by learned CIT(A) and reasoning given by learned CIT against which appeal is preferred before it and even while making estimate either on deletion and / or addition to pass speaking and reasoned order in respect of such estimation either on deletion and / or addition, it appears that massage has not reached to Appellate Tribunal. Despite above decisions and even hope and trust by Division Bench that in future Appellate Tribunal to take care and pass speaking and reasoned order, Appellate Tribunal had continued to pass such non speaking and non reasoned order. Appellate Tribunal is bound to obey decision of Hon'ble Supreme Court as well as High Court. They cannot ignore observations and decisions of Hon'ble Supreme Court as well as this Court. Despite specific observations and directions of Hon'ble Supreme Page 16 of 19 HC-NIC Page 16 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT Court as well as this Court in various decisions which are referred to and reproduced herein above, Appellate Tribunal has continued to pass non speaking, unreasoned order and are passing non speaking order on estimate without supportive reasons and grounds which as such would tantamount to disobedience to decisions of Hon'ble Supreme Court as well as High Court and same cannot be permitted to be continued and same deserves serious consideration. Even in case of estimation, though permissible, if learned Commissioner of Income Tax has passed order by giving cogent reasons, Tribunal on appeal either by Revenue and / or assessee is required to apply its mind and consider reasons given by learned CIT(A) and is required opine where learned CIT(A) had committed error and whether order passed by learned CIT(A) is required to be to be interfered with or not. Even if learned Tribunal is having discretion to pass any order of deletion and / or allowances on estimation, such discretion is required to be exercised judiciously and it must be supported by cogent reasons and it must reflect application of mind by learned Appellate Tribunal on issue. Therefore, once again observations made by Hon'ble Supreme Court as well as this Court in catena of decisions referred to herein above are reiterated and all Income Tax Appellate Tribunal are hereby directed to consider observations made in catena of decisions of Hon'ble Supreme Court as well as Division Bench of this Court referred to herein above as well as observations made in present order while deciding appeals against order passed by learned Commissioner of Income Tax (Appeals), in its true spirit, failing which matter shall be viewed very seriously and it would tantamount to disobedience of order / orders passed by Higher Courts / Forum. This Court is constrained to make above observations as despite specific observations made by Division Bench of this Court that this Court is Page 17 of 19 HC-NIC Page 17 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT constrained to remind Tribunal to its duty time and again, but one can only lament that Tribunal, it appears, is not amenable to constructive suggestions and Tribunal fails to appreciate basic fact that by making such slipshod orders, it only generates unwarranted litigation, apart from putting parties to unwarranted hardship, harassment and cost for no fault of their and despite reminder to Appellate Tribunal with hope that Tribunal applies its mind and take care in future to ensure that approach of Tribunal undergoes change and it may regain its past glory, things have not much improved and Appellate Tribunals have continued to pass such non speaking and non reasoned order and has continued to pass orders on estimation without any supporting reasons. 8. Now, coming to facts of case on hand, considering impugned order passed by learned Tribunal, it appears that it is non speaking and non reasoned order and as such no reasons have assigned while restricting dis allowance to 10% of unexplained purchases. Therefore, as such matter is required to be remanded. However, instead of remanding matter to learned ITAT considering request made by learned counsel for respective parties, on merits we ourselves have considered matter on merits and on basis of admitted facts. It has come on record and it is not disputed by Revenue that in case of assessee GP rate was higher compared to subsequent assessment year. GP disclosed at rate of 1.11% by assessee is satisfactory as compared to AY 2000 01 where GP was of 0.98%. Under circumstance, in peculiar facts and circumstance and considering decision of Division Bench of this Court in case of Simit P Sheth (Supra) where this Court confirmed final order passed by learned ITAT restricting dis allowance to 10% of unexplained purchases, though not approving Page 18 of 19 HC-NIC Page 18 of 19 Created On Sat Feb 13 12:16:10 IST 2016 O/TAXAP/1120/2007 JUDGMENT method and manner in which learned Tribunal has decided appeal, however on merits and in peculiar facts and circumstances narrated herein above, we confirm ultimate final order passing by ITAT. Consequently, present Tax Appeal is dismissed. Registry is directed to send copy of this order to President, ITAT, Ahmedabad and Vice President, ITAT, Ahmedabad Zone so as to enable to circulate this order to learned Members of Appellate Tribunal so that in future learned Appellate Tribunal may take care in future while deciding appeals against order / orders passed by learned Commissioner of Income Tax (Appeal), we again hope and trust that while deciding appeal and in future learned Appellate Tribunal may consider observations made by Hon'ble Supreme Court as well as this Court in catena of decisions referred to herein above as well as observations made in present order. sd/ (M.R.SHAH, J.) sd/ (S.H.VORA, J.) Kaushik Page 19 of 19 HC-NIC Page 19 of 19 Created On Sat Feb 13 12:16:10 IST 2016 Commissioner of Income-tax Ahmedabad - I v. Premkumar B. Rathi
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