Speaking appellate orders are mandatory; failure to give reasons on lease income classification justified remand.

An appellate authority under the Income-tax Act must pass a speaking order stating the points for determination, its decision and the reasons for that decision. Where the first appellate order does not examine the controversy on the material before it or record clear reasons on whether lease receipts are business income or income from ownership exploitation, it fails the requirement of section 250(6) and offends fair procedure. The appellate order was therefore set aside and the matter restored to the CIT(A) for fresh adjudication after hearing both sides.

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Issues: Whether the appellate order sustaining assessment of lease rental income under a different head, without adequate reasons, could stand and whether the matter required restoration for fresh decision.

Analysis: The assessment and first appellate orders proceeded on the view that the lease receipts were not business income, but the appellate order did not examine the controversy in the light of the material placed before it or record clear reasons on the core question whether the property was exploited as a commercial asset or as ownership property. The requirement under section 250(6) of the Income-tax Act, 1961 is that the appellate authority must state the points for determination, the decision thereon, and the reasons for the decision. A quasi-judicial order must disclose application of mind and be a reasoned order; otherwise, it offends the rule of fair procedure.

Conclusion: The appellate order was set aside and the matter was restored to the CIT(A) for fresh adjudication in accordance with law after giving both sides an opportunity of hearing.

Ratio Decidendi: An appellate authority under the Income-tax Act must pass a speaking order giving reasons on the issues for determination, and failure to do so justifies remand for fresh consideration.

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