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| DATE: | March 26, 2014 (Date of publication) |
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| Click here to download the judgement (ram_singh_ITAT_strictures.pdf) |
Strictures passed regarding poor quality of orders of the ITAT. Government urged to ensure that only competent persons are appointed Members of the ITAT
The department filed an appeal in the High Court contending that the Tribunal had disposed off the appeals filed before it (relating to rejection of books of account u/s 145 and estimation of gross profit) without giving any reasons. HELD by the High Court:
(i) We find the judgments of the ITAT being the stereo typed, non-speaking, unreasoned, arbitrary and whimsical. 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);
(ii) We have noticed following observations in CIT vs. Gauthamchand Bhandari 347 ITR 491, 499 (Kar):
(a) 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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
Undoubtedly, Their Lordships of Hon’ble Rajasthan High Court have remarked on the orders impugned before the Hon’ble Court, termed them as “stereo typed, non-speaking, unreasoned, arbitrary and whimsical” and sent them back to the ITAT for adjudication de novo, but as for your summary, or head notes- whatever you call it, of this decision at point (ii) to (vi) above, it does not seem to be the direction of Hon’ble Rajasthan High Court. You may correct me if I am wrong but let me explain why I think so.
These points in your headnotes are word by word replica of paragraphs 25 to 28 of Hon’ble Karantaka High Court’s judgment in the case of CIT Gautamchand Bhandari (347 ITR 491). Their Lordships of Rajasthan High Court did refer to these observations by Hon’ble Karnataka High Court but it does not seem to be correct, as is the impression given by the summary, that these observations at para (ii) to (vi) above are given by Hon’ble Rajasthan High Court and in the context of working of a specific bench of the ITAT i.e. Jaipur bench.
These observations are actually made in the context of a Bangalore bench decision in the case of Gautamchand Bhandari Vs DCIT (95 TTJ 228). As to what was held by the Tribunal in this case, the head notes of the decision state as follows:
“Held :
The amount was advanced during the financial year relevant to asst. yr. 1999-2000. The search was conducted on 19th July, 1999. Thus the due date for filing return of income for asst. yr. 1999-2000 has not expired. Prior to search, during the course of survey under s. 133A itself the assessee has declared certain income as undisclosed income and already offered to pay tax thereof. It is not the case that the assessee has retracted his statement. On the contrary the assessee has included the said undisclosed income declared during the survey in his return for asst. yr. 1999-2000. Thus in the present case it is to be seen whether the income declared during the survey operation under s. 133A can be considered as undisclosed income in the search conducted subsequent to survey. Once the assessee admits any income as undisclosed income during survey it does not retain the character of undisclosed income in the search under s. 132. To compute the undisclosed income under s. 158BC, the same is to be based on material found during search conducted under s. 132 only and not survey conducted under s. 133A. The material should be found during search. The confirmation of undisclosed income declared during survey loses its character as ‘undisclosed income’ during search, as it is no longer undisclosed thereafter. Once the assessee has unequivocally disclosed certain income during survey under s. 133A and so long as it is not retracted, it cannot be said that the same income is found during search conducted under s. 132. What remains after the declaration during survey under s. 133A is appropriately taxing the same only. This was done by the AO in regular assessment for asst. yr. 1999-2000. Since there is no material to hold that the amount declared during survey would not have been disclosed in the return of income, the same cannot be considered as undisclosed income under s. 158BB and accordingly taxed under s. 158BC. Addition of Rs. 50 lakhs is required to be deleted.—Smt. Sivabala Devi vs. Asstt. CIT (2004) 88 TTJ (Mad) 955 : (2004) 88 ITD 333 (Mad) and CIT vs. Tarsem Kumar (1986) 58 CTR (SC) 129 : (1986) 161 ITR 505 (SC) relied on; L.R. Gupta & Ors. vs. Union of India & Ors. (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del) distinguished.”
Hon’ble Karnataka High Court did not approve this school of thought. Their Lordships were of the view that it is only when assessee is maintaining the books of accounts that such a benefit can be given and that, by implication, even if income is already declared in survey proceedings before the search, it can be treated as undisclosed income. Justice DV Shylendra Kumar, speaking for the bench, observed as follows:
“As per the statutory provision, the exclusion of the income from assessment of block period, if it is attributable to the part of the accounting period of the year in which the search has been conducted, it is possible only of and only when the assessee has produced before the assessing officer such of his books of accounts which are maintained in the normal course of business activity of the assessee, wherein is recorded the entries indicating the generation of income to the part of the accounting period and then only to exclude that part of the income from that segment of accounting period and allow the assessee to file a return excluding the income in the later assessment and not otherwise. ……….. Therefore, this appeal is to be allowed against the order of the appellate tribunal being without any rhyme or reason and not in consonance with the statutory provisions and not even in consonance with the material on record, but being one passed more in confusion and misunderstanding of the facts and law ………”
In effect thus an income which was already declared in survey under section 133A, immediately preceding the search operation, was held to be ‘undisclosed income’. Justice Shylendra Kumar did not stop there. He found the decision of the itat so perverse that he proceeded to make the observations that you have reproduced in the summary of Rajasthan High Court decision on your website.
Hon’ble Rajasthan High Court just took note of the above observations, reproduced the same and just left it at that. No directions to the Government, no directions to the Registrar General and not even an endorsement of the views of Hon’ble Karnataka High Court.
Your readers are very seasoned people. Let all these facts be before them and let them also think how to take the words of Justice Shylendra Kumar (Retired) in the context in which the comments were made. Incidentally, many of his famous judgments, including in the cases of CIT Vs Samsung Electronics Ltd (320 ITR 209) and CIT Vs Sonata Information Technology Ltd (232 CTR 20), were later reversed by Hon’ble Supreme Court, such as in GE India Technology Centre Pvt Ltd (327 ITR 456), but without any personal comments.
Let me make my point once again. The remarks quoted by you are not in the context of Jaipur bench, nor even in the context of a non-speaking order but in the context of a well thought out decision, in favour of the assessee, which many tax experts would have believed to be, until the time Hon’ble Karnataka High Court’s judgment in the case of Gautamchand Bhandari (supra) and many such experts outside the jurisdiction of Hon’be Karnataka High Court would believe even today, a reasonable, even if technically incorrect- in the light of Hon’ble Karnataka High Court’s view of the matter. After all, an income, which is already in the knowledge of the income tax department before the search operation had commenced, may not be viewed by many subject experts as ‘undisclosed income’ for the purposes of block assessment. The Tribunal may have erred in coming to this conclusion but few would be takers for the proposition that the error was such a Himalayan blunder so as to invite strictures of this nature but then Justice Shylendra Kumar was known to be a tough judge with radical thinking and unsparing attitude for all. Let us treat the remarks in this context.
ITAT may not be perfect, it may not even the best, you may have grievances against certain individuals, but as an institution, it has done a reasonable job and its best is certainly not behind it. Your grievance is not against what ITAT is doing but it is against, what you think, ITAT could have done even better. Well, everyone traverses through tough patches in its life and ITAT is traversing through one of its toughest patch. In this moment of crises, itatonline should contribute to strengthening the ITAT and instead of exposing what is wrong with the ITAT, concentrate on what is right with it and how ITAT can do its work even better. As Germans say, ‘you must empty-out the bathing-tub, but not the baby along with it.’ The way itatonline has espoused the cause of the Tribunal bashing, I am afraid, this is precisely want you may end up doing.
Thanks for pointing that out. It has been corrected now.
Why not recognize good work done by the Members ? There are several oustanding Judicial Members and your portal could have played crucial role in their overdue elevations. However, we have a situation that even President ITAT may have to be imported from the hiigher judicary. That could demoraliize the ITAT as a whole. Ideally, ITAT President from the existing Members only. This cause needs to be taken up.
WHILE READING COMMENTS AND THE JUSTICE SHYLENDRA KUMAR VIEWS AS JUDGE TO BE WEIGHED; ITAT NEEDS TO BE WITH VERY COMPETENT MEMBERS UNLIKE CITs(A);
IT IS NOT BASHING BUT IT IS PULLING UP, AS ALWAYS LEGISLATURE WANTS SOCIALLY RELEVANT JUSTICE BE DONE AS IT IS SAID ‘JUSTICE IS BEING DONE’ AND THAT IS A MUST UNDER ARTICLE 14 OF THE CONSTITUTION OF INDIA;
ERR IS HUMAN BUT REPENT IS DIVINE WHAT BENJAMIN FRANKLIN SAID MEANING WHEN WELL REPENTED THEN ERR BECOMES HUMAN IS THE BALANCE OF LOGIC;
YOU CANNOT QUOTE QUOTABLE QUOTES WITHOUT RELEVANCE, THEN IT IS A MISQUOTE UNDER PRINCIPLES OF QUOTING; ELSE EVERY ERROR MAY GET PASSED OF AS OKAY THAT IS NOT THE “IDEATION – DECODING’ PRINCIPLE AFTER ALL DECODING IS THE MOST IMPORTANT ROLE IN LIFE;
SEE WHEN IS MADE IT IS AN IDEATION BUT WHEN INERPRETED, IT ISCALLED DECODING, INDEED MOST DIFFICULT TASK FOR EVERY ONE ON EARTH; SO ERR IS COMMON AND THAT ERROR NEED TO BE NOTED AND AS SOON AS NOTED OR BROUGHT TO NOTICE IT HAS TO BE CORRECTED BY AN APOLOGY THEN IT IS REPENTENCE IS THE CONCEPT OF ALL LAWS;
SHYLENDRAKUMAR J.(RETD) HAS INDEED DID A CORRECT PULL UP THAT IS INDEED WITHOUT MALICE, SO IT IS GREAT;
ONE NEED NOT TAKE EXCEPTION TO HIS REMARKS;
WHY DO WE HAVE SEVERAL STEPS OF JUDICIARY ? THAT IS FOR VERY CAREFUL UNDERSTANDING OF VERY SECTIONS OF ANY LAW OR PROCEDURE;
ITAT INDEED DID A LOT OF GOOD WORK THAT DOES NOT MEAN ANY ERR COMMITTED NED NOT BE ADMONISHED IS A VERY WRONG THOUGHT GERMINATION;
EDITOR MEANS HE HAS TO REPORT AL FACTS AND ALL ADMONITIONS PROPERLY HERE; NOTHING WRONG HE IS BRINGING ALL HOLES IN JUSTICE DELIVERY SYSTEM TO THE PUBLIC NOTICE AND HE IS NOT SOME CBI TO PROTECT ALL WRONGS AS IT DID IN COAL GATE N LIKE; HE IS AN EDITOR;
IT IS ALSO NOTHING WRONG TO CORRECT OR CARRYOUT CORRECTIONS BUT ALL PROS N CONS NEED TO BE IN PUBLISHING ISSUES;
AFTER ALL ALL ASSESSES ARE NOT VETERANS IN LAW BUT JUST LAYMEN ONLY – IGNORANCE OF LAW DOES NOT APPLY ON ASSESSES BUT IT CERTAINLY APPLIES ON CAs/ADVOCATES/JUDGES/MEMBERS N LIKE;
I DO NOT FIND ANYTHING WRONG IN PUBLISHING THE HOLES IN ITAT TOO; INFACT ANY HOLE WHEN REPORTED ONLY GETS CORRECTED PROMPTLY;
WHAT IS WRONG CORRECTING ONESELF IF ONE IS CARELESS;
MAY BE SELECTION COMMITTEES OF MEMBERS OUGHT TO BE REALLY VIGILANT; ELSE FAITH REPOSED BY LEGISLATURE DENOTING MEANING REPRESENTING ‘PEOPLE AT LARGE’ WOULD LOSE FAITH ON HON TRIBUNAL FORMED UNDER 1985 ADMINISTRATIVE TRIBUNALS ACT IS JUST TO LESSEN THE HIGH COURTS BURDEN BUT IF IT INCREASES WHAT USE IS THE TRIBUNAL, BETTER SCRAP IT OFF WOULD BE THE VIEW OF PEOPLE;
INDEED VERY HIGH CARE IS VITAL AT EVERY END THAT WAY ‘RED TAPE’ SYSTEM BRITISH BROUGHT JUST BECAUSE EYES MISTAKES OF ONE OFFICE IS CORRECTED BY ANOTHER EYE;
SO WE SAY JUSTICE CAN BE DELAYED BUT BE REALLY VERY LOGICALLY DELIVERED AND THAT IS VITAL FOR JUDICIARY AS SUCH AS IT IS NO LONGER SOME CARELESS EXECUTIVE OF DEPARTMENTS;
EVEN BRITISH APPOINTED ICS MEN AS JUDGES OF HIGH COURTS JUST BECAUSE SUCH PERSONS ARE KNOWN FOR FOR SOUND LOGIC, PRECISION AND SO THEY ARE NOT ALL N SUNDRY;
TODAY WITH A LOT OF LAW DEGREES IN ONE’S BAG HE IS PERIPHERAL, WHAT EARTHLY USE HIS DEGREES TO THE COMMUNITY;
LAW N JUSTICE IS VERY JEALOUS MISTRESS SIRS!
SHE WOULD NOT SPARE ANY, SO CLOSES HER EYE BUT PUT ALL EYE LIGHT ONLY MEANINGFUL LOGIC AND LAW APPRECIATION SIRS
I INDEED APPRECIATE THE COMMENTATOR AS ALSO JUDGES DEFINITELY SO TOO ITAT MEMBERS; ITAT NON JUDICIAL MEMBERS MUST EARN ART OF PROPER REASONING MAY BE FEOM THEIR OWN COLLEAGUE JUDICIAL MEMBERS. LEARNING IS INDEED A LIFE LONG PROCESS, NONE CAN DENY!
THANKS N REGARDS
As one can see it, from reading text of the order, it is an old order. The Tribunal order is written by a person other than Shri B R Jain. It would not, therefore, proper to link it with the Member presently posted at Jaipur or the current controversy. Perhaps it would have been fair on your part to clarify this aspect and to publish the ITAT order as well.