2005 JTR(SC) 159
2005 27 AIC 614 ; 2005 AIR(Kar)(R) 756 ; 2005 AIR(SC) 1308 ; 2005 AIR(SCW) 1074 ; 2005 4 CompLJ 29 ; 2005 193 CTR 590 ; 2005 273 ITR 56 ; 2005 2 JT 442 ; 2005 1 Scale 642 ; 2005 2 SCC 329 ; 2005 1 SCR 882 ; 2005 TaxLR 297 ; 2005 142 Taxman 720 ; 2005 KHC 397 ; 2005 3 Supreme 319
2005(3) Supreme 319
Supreme Court of India
(From Karnataka High Court)
Mrs. Ruma Pal, Arijit Pasayat and C.K. Thakker, JJ.
M/s. Mangalore Ganesh Beedi Works —Appellant
versus
The Commissioner of Income Tax, Mysore and Anr. —Respondents
Civil Appeal Nos. 767-768 of 2005
(Arising out of SLP (C) Nos. 6486-6487 of 2003)
Decided on 28-1-2005
Counsel for the Parties :
For the Appellant : Harish N. Salve, Joseph Vellapally, Sr. Advocates, Manu Nair, and Dhruv Dewan, Advocates for M/s. Suresh A. Shroff and Co., Advocates.
For the Respondents : M.L. Verma, Sr. Advocate, Pritesh Kapur, Satya Mitra, and B.V. Balram Das, Advocates.
Important Point
Reasons for an order of affirmation have to be indicated, though in appropriate cases they may be briefly stated as recording of reasons is a part of fair procedure.
Act Referred :INCOME TAX ACT : S.260(a)
(A) The appeals pertain to the assessment year 1995-96 and challenge the judgment of a Karnataka High Court Division Bench that reviewed conclusions of the Income-Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961. The Act provides the statutory framework for appeals to the High Court against orders of the Tribunal and vests the High Court with powers to examine questions of law and fact afresh, including the duty to record reasons when setting aside or affirming findings of the Tribunal. The revenue had preferred appeals questioning the Tribunals conclusions, and the High Court allowed those appeals in part while addressing specific questions numbered (iii), (v) and (vii). The assessee was characterized as an Association of Persons (A.O.P.) in the assessment proceedings.
(B) Recording reasons is an essential part of fair procedure and a prerequisite for delivering justice; failure to indicate reasons amounts to denial of justice. When an appellate authority affirms the views of the first appellate tribunal, reasons must still be recorded, albeit they may be brief where appropriate. The High Court must consider each question afresh and provide adequate reasoning for its conclusions, particularly when intervening between the Tribunals findings and the final order.
Facts of the case:
The assessee was assessed under the Income Tax Act for the assessment year 1995-96 and was described as an A.O.P. by the revenue authorities. Revenue appealed to the Karnataka High Court against certain conclusions of the Income-Tax Appellate Tribunal. The High Court allowed the revenue appeals in part, holding that the Tribunals views on specific questions were not in order, without providing detailed reasons. The assessee challenged the High Courts reasoning, arguing that no reasons were recorded to justify the findings.
Findings of Court:
The High Court erred in not recording reasons for its conclusions when affirming the Tribunals order. Recording reasons is a mandatory component of fair procedure and is necessary to substitute subjectivity with objectivity and to ensure that the decision-makers mind is communicated to the parties. The appeals are remitted to the High Court to reconsider questions (iii), (v) and (vii) along with other matters disposed of in the earlier judgment, with a direction to record adequate reasons.
Issues:
Whether the High Court was required to record reasons for affirming the Tribunals findings; whether failure to record reasons constitutes denial of justice; and whether the matter should be remitted to reconsider specific questions afresh.
Ratio Decidendi:
The court held that recording reasons is an integral part of fair procedure under Section 260A of the Income Tax Act, and appellate courts must provide reasoned orders, particularly when modifying or affirming findings of the Tribunal. The absence of reasons undermines the principle of justice and requires the matter to be decided afresh with proper reasoning.
Result:
The appeals are disposed of with no order as to costs, and the matter is remitted to the Karnataka High Court to reconsider questions (iii), (v) and (vii) along with other relevant issues, with a mandate to record reasons.
(A) The appeals pertain to the assessment year 1995-96 and challenge the judgment of a Karnataka High Court Division Bench that reviewed conclusions of the Income-Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961. The Act provides the statutory framework for appeals to the High Court against orders of the Tribunal and vests the High Court with powers to examine questions of law and fact afresh, including the duty to record reasons when setting aside or affirming findings of the Tribunal. The revenue had preferred appeals questioning the Tribunals conclusions, and the High Court allowed those appeals in part while addressing specific questions numbered (iii), (v) and (vii). The assessee was characterized as an Association of Persons (A.O.P.) in the assessment proceedings.
(B) Recording reasons is an essential part of fair procedure and a prerequisite for delivering justice; failure to indicate reasons amounts to denial of justice. When an appellate authority affirms the views of the first appellate tribunal, reasons must still be recorded, albeit they may be brief where appropriate. The High Court must consider each question afresh and provide adequate reasoning for its conclusions, particularly when intervening between the Tribunals findings and the final order.
Facts of the case:
The assessee was assessed under the Income Tax Act for the assessment year 1995-96 and was described as an A.O.P. by the revenue authorities. Revenue appealed to the Karnataka High Court against certain conclusions of the Income-Tax Appellate Tribunal. The High Court allowed the revenue appeals in part, holding that the Tribunals views on specific questions were not in order, without providing detailed reasons. The assessee challenged the High Courts reasoning, arguing that no reasons were recorded to justify the findings.
Findings of Court:
The High Court erred in not recording reasons for its conclusions when affirming the Tribunals order. Recording reasons is a mandatory component of fair procedure and is necessary to substitute subjectivity with objectivity and to ensure that the decision-makers mind is communicated to the parties. The appeals are remitted to the High Court to reconsider questions (iii), (v) and (vii) along with other matters disposed of in the earlier judgment, with a direction to record adequate reasons.
Issues:
Whether the High Court was required to record reasons for affirming the Tribunals findings; whether failure to record reasons constitutes denial of justice; and whether the matter should be remitted to reconsider specific questions afresh.
Ratio Decidendi:
The court held that recording reasons is an integral part of fair procedure under Section 260A of the Income Tax Act, and appellate courts must provide reasoned orders, particularly when modifying or affirming findings of the Tribunal. The absence of reasons undermines the principle of justice and requires the matter to be decided afresh with proper reasoning.
Result:
The appeals are disposed of with no order as to costs, and the matter is remitted to the Karnataka High Court to reconsider questions (iii), (v) and (vii) along with other relevant issues, with a mandate to record reasons.
JUDGMENT
Arijit Pasayat, J.—Leave granted.
2. These appeals by the assessee are directed against the judgment rendered by a Division Bench of the Karnataka High Court in appeals purported to be under Section 260A of the Income Tax Act, 1961 (in short the ‘Act’). The appeals were filed by the revenue questioning correctness of certain conclusions arrived at by the Income-Tax Appellate Tribunal, Bangalore Bench (in short the ‘Tribunal’) in appeals filed by the assessee as well as the revenue.
3. The dispute relates to the assessment year 1995-96. The relevant factual details have been noted in Civil Appeal No. 4232 of 2003 and other cases (M. Janardhan Rao v. Joint Commissioner of Income Tax etc. etc.) disposed of today, and are not repeated here. The assessee was described as A.O.P. 3 by the revenue authorities in the concerned assessment proceedings.
4. Questioning correctness of certain conclusions by the Tribunal, revenue had preferred appeals before the High Court. The High Court has held that the Tribunal’s views in respect of Question Nos. (iii), (v) and (vii) as formulated were not in order, and accordingly allowed the appeals filed by the revenue in part. The basic issues which form the core dispute have been dealt with in the appeals filed by the assessees and disposed of, as noted supra, today.
5. Learned counsel for the appellant submitted that the conclusions of the High Court have been arrived at without any discussion and reasons have not been indicated as to why seal of approval was being put on the findings recorded by the Tribunal.
6. Per contra, learned counsel for the revenue supported judgment of the High Court. According to him, when views of Tribunal and first appellate authority were being affirmed, there was no need to record reasons separately.
7. So far as the issues covered by judgment in C.A. No. 4232 of 2003 etc. etc. as noted above, are concerned, the order shall cover these appeals also.
8. In addition, question Nos. (iii), (v) and (vii) as noted in High Court’s judgment are concerned, need to be adjudicated afresh. It is true in an order of affirmation, repetition of reasons elaborately may not be necessary. But even then the arguments advanced, points urged have to be dealt with. Reasons for affirmation have to be indicated, though in appropriate cases they may be briefly stated.
9. Recording of reasons is a part of fair procedure. Reasons are harbinger between the mind of maker of the decision in the controversy and the decision or conclusion arrived at. They substitute subjectivity with objectivity. As observed in Alexander Machinery (Dudley) Ltd. v. Crabtree (1974 L.C.R. 120), failure to give reasons amounts to denial of justice.
10. In the aforesaid background, we remit the matter to High Court to consider question Nos. (iii), (v) and (vii) afresh along with other matters covered by judgment in C.A. No. 4232 of 2003 etc. etc. disposed of today.
11. Appeals are accordingly disposed of with no order as to costs.
Appeals disposed of accordingly.
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