IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 29TH DAY OF JANUARY 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE RAVI V.HOSMANI I.T.A. NO.179 OF 2010 BETWEEN: M/S SREE LAKSHMI SILKS REP. BY ITS PARTNER: SRI. SURYANARAYANA SWAMY NO.30, RAMANNAPET J.M. ROAD CROSS, BANGALORE-560002. APPELLANT (By Sri. A. SHANKAR, SENIOR COUNSEL FOR Sri. M. LAVA, ADV.) AND: ASST. COMMISSIONER OF INCOME TAX, CIRCLE 5(1) UNIT BUILDING ANNEXE MISSION ROAD, BANGALORE-560027. RESPONDENT (By Sri. K.V. ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 26-2-2010 PASSED IN ITA NO.945/BNG/2009, FOR ASSESSMENT YEAR 2001-02, PRAYING TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. ALLOW APPEAL AND SET ASIDE ORDER PASSED BY ITAT BANGALORE IN ITA NO.945/BNG/2009, DATED 26-2-2010, IN INTEREST OF JUSTICE AND EQUITY. 2 THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act , for short) has been filed by assessee, which was admitted by Bench of this Court by order dated 04.11.2010 on following substantial questions of law: (i) Whether Tribunal was justified in not recording any finding on evidence that were placed before it in relation to cash credit entries in books of appellant on facts and circumstances of case? (ii) Whether Tribunal was justified in law in holding that appellant has not proved credits as appearing in books of appellants? (iii) Whether tribunal was justified in law in rejecting genuineness of trade creditors when amounts paid 3 to same creditors in same financial year has been accepted by Department? 2. After hearing learned counsel for parties, in our opinion, following substantial question of law also arises for consideration: (iv) Whether order passed by Tribunal is cryptic and suffers from vice of non application of mind and therefore, matter deserves to be remitted? 3. Facts giving rise to filing of appeal briefly stated are that appellant is partnership firm engaged in business of trading of silk sarees. appellant for assessment year 2001-02 filed its return on income and declared income of Rs.24,04,600/-. return filed by appellant was processed under Section 143(1) of Act. Assessing Officer by order dated 23.03.2004 assessed total income of appellant at Rs.58,88,494/- as 4 against Rs.24,04,600/- but Assessing Officer recorded finding that five of creditors viz., R Shivappa, V Lokeshmurthy, P Narasimha Swamy, R Kiran and BS Manjunath were not genuine creditors and addition was made to income of appellant. Being aggrieved by order of Assessing Officer, assessee preferred appeal before Commissioner of Income Tax (Appeals) who by order dated 22.04.2004 partly allowed appeal of appellant and confirmed findings with regard to Assessing Officer in relation to five credits mentioned above and confirmed addition. Being aggrieved by order passed by Commissioner of Income Tax (Appeals), appellant filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as tribunal for short). tribunal vide order dated 16.02.2010 partly allowed appeal of appellant and upheld findings of Assessing Officer and first appellate authority in relation to addition made against five credit entries 5 as mentioned above. In aforesaid factual background, this appeal has been filed. 4. Learned Senior counsel for appellant has submitted that several documents were filed before Assessing Officer as well as Commissioner of Income Tax (Appeals) and tribunal. However, aforesaid documents have not been considered by authorities. It is further submitted that tribunal has failed to appreciate material placed before it in support of purchase of material and payment made for same and tribunal has not given any finding in respect of material which were produced before it. It was further submitted that Assessing Officer has accepted purchase of Rs.30,38,705/- in books and payments made during year for sum of Rs.16,88,305/- was also accepted. It is further submitted that there was no material before Assessing Officer to record finding that creditors were bogus creditors. It is further submitted that tribunal has failed to take note of documents in particular 6 ledger copy of sundry creditors and bank statement of appellant for period 01.04.2001 to 31.03.2002 in respect of aforesaid creditors. It is also submitted that order passed by tribunal is cryptic and suffers from vice of non application of mind. Learned Senior counsel for appellant has also invited attention of this Court to Section 40A(3) of Act and has submitted that under Section as it stood in relation to assessment year 2001-2002, there was requirement of making payment of amount by account payee cheque and payment could be made through crossed cheque. 5. On other hand, learned counsel for revenue while opposing submissions made by learned Senior counsel for assessee submitted that notice were sent to weavers, which were returned on account of insufficient address. It is further submitted that sufficient opportunity was provided to assessee, however, assessee did not appear before 7 Assessing Officer and did not produce any material. It is further submitted that assessee has produced self- serving documents from which no inference can be drawn that transactions in question are genuine. It is further submitted that three ingredients are required to be satisfied viz., identity of creditor, genuineness of credit and credit worthiness of creditors. In instant case, assessee has failed to prove identity of creditors. In support of aforesaid submissions, reliance has been placed on decision of Supreme Court in case of COMMISSIONER OF INCOME-TAX V. P.MOHANANKALA , 291 ITR 278 (SC) AND COMMISSIONER OF INCOME-TAX V. P.R.GANAPATHY , (2012) 210 TAXMAN 572 (SC). 6. We have considered submissions made by learned counsel for parties and have perused record. From perusal of opening paragraph of assessment order, it is evident that several opportunities 8 were granted to appellant to appear, however, nobody appeared on behalf of assessee. However, before proceeding further, it is apposite to take note of Section 250(4) of Act, which provides that Commissioner of Income Tax (Appeals) may before disposing of appeal may make such further enquiry as he thinks fit and or direct assessing officer to make enquiry and report result of same to Commissioner of Income Tax (Appeals). Thus, aforesaid provision enables Commissioner of Income Tax (Appeals) to make such further enquiry as he thinks fit. aforesaid provision also enables assessee to file material before Assessing Authority in order to enable him to conduct further enquiry. Admittedly, appellant had filed certain documents before Assessing Officer. Thereafter, admittedly, appellant has filed several documents, details of which have been produced before us. From perusal of aforesaid documents, it is evident that assessee had filed written statement as well as ledger copy of 9 sundry creditors and bank accounts of assessee for period from 01.04.2001 till 31.03.2003. bank statements pertain to Sri.R.Shivappa, Lokeshmurthy, P Narasimha Swamy, R.Kiran and Manjunath B.S. 7. In view of documents filed before Commissioner of Income Tax (Appeals), assessment report was also sought for by Commissioner of Income Tax (Appeals) dated 11.10.2004. It is also not in dispute that assessee had filed aforesaid documents before tribunal. However, tribunal instead of recording reasons has recorded conclusions. 8. It is well settled law that Supreme Court in case of S.N. MUKHERJEE V. UNION OF INDIA , (1990) 4 SCC 594 has held that decisions of this Court referred to above indicate that with regard to requirement to record reasons approach of this Court is more in line with that of American courts. important consideration which has weighed with court for holding that 10 administrative authority exercising quasi-judicial functions must record reasons for its decision, is that such decision is subject to appellate jurisdiction of this Court under Article 136 of Constitution as well as supervisory jurisdiction of High Courts under Article 227 of Constitution and that reasons, if recorded, would enable this Court or High Courts to effectively exercise appellate or supervisory power. 9. It is trite law that even quasi-judicial authority is required to assign reasons for passing order. In view of decision laid down by Supreme court in VICTORIA MEMORIAL HALL vs. HOWRAH GANATANTRIK NAGRIK , 2010 (3) SCC 732, reasons were held to be heartbeat of every conclusion, apart from being essential feature of principles of natural justice, that ensure transparency and fairness, in decision making process. [SEE: MAYA DEVI VS. RAJ KUMARI BATRA AND 11 OTHERS , (2010) 9 SCC 486, SANT LAL GUPTA AND OTHERS VS. MODERN CO-OPERATIVE GROUP HOUSING SOCIETY LIMITED AND OTHERS , (2010) 13 SCC 336, UNION OF INDIA AND ANOTHER VS. TALWINDER SINGH , (2012) 5 SCC 480, and UNION OF INDIA VS. RAVINDER KUMAR , (2015) 12 SCC 291.] 10. In view of aforesaid enunciation of law and in particular from perusal of paragraph Nos.7 & 8 of order passed by tribunal, we find that tribunal has merely recorded conclusions and has not assigned reasons. We may reproduce para 8 of order passed by tribunal, which reads as under: In present case, in spite of lot of argumentative materials placed by learned representative before us, we are of considered view that credit balances objected to by Assessing Officer still stand unproved. In circumstances of case, we do not have any option, but to 12 confirm order of Commissioner of Income Tax (Appeals) on this point. 11. From perusal of order passed by tribunal, it is evident that order is cryptic and suffers from vice of non application of mind. tribunal has neither considered material placed by assessee before Commissioner of Income Tax (Appeals) nor has considered material placed before it and in cryptic and cavalier manner has dismissed appeal preferred by assessee. Therefore, in fact situation of case, we have no option but to remit matter. 12. Since, we have arrived at conclusion that instant case is fit case for remand. Therefore, it is not necessary for us to answer substantial question of law which have been framed in this appeal. In result, order passed by tribunal dated 26.02.2010 as well as order passed by Commissioner of Income Tax (Appeals) dated 22.04.2004 are hereby quashed. matter is remitted to tribunal to decide 13 matter afresh in light of observations made in this appeal by speaking order. Let aforesaid exercise be carried out within period of four months from today. It is made clear that this court has not expressed any opinion with regard to merits of case of parties. Accordingly, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE SS Sree Lakshmi Silks v. Asst. Commissioner of Income-tax, Circle-5(1), Bangalore