TaxTMI 
TaxTMI 
2024 (10) TMI 88
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....ated 27th March, 2024, order under Section 148A(d) and the notice under Section 148 dated 19th April, 2024 of the Income Tax Act, 1961 (for short 'the Act') for the A.Y. 2017-18. 4. The brief facts of the case are as under. 4.1 The Petitioner had not filed return of income for the A.Y. 2017-18 assuming that it has no taxable income in India. 4.2 During the Financial Year 2016-17, the Petitioner has advanced Interest Free ECB loan of Rs.165,97,94,188/- to its subsidiary, an Indian Company, namely M/s.Hazira Port Pvt. Ltd. The case of the said company was taken up for scrutiny and order under Section 92CA(3) of the Act came to be passed on 31st January, 2021 in which the Transfer Pricing Officer made downward revision of income of Hazira Port Pvt. Ltd of Rs.08,69,73,215/- for the interest that was not paid by it to the petitioner on the interest free loan given by the petitioner. A draft assessment order was passed on 22nd July, 2021 proposing the addition in the income of Hazira Port Pvt. Ltd. which was challenged before the Dispute Resolution Panel (DRP). 4.3 The DRP vide order dated 28th April, 2022 partly allowed the contentions of Hazira Port Pvt. L....
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....ised by the petitioner comprising nine different issues. It was, therefore, submitted that the impugned order is liable to be quashed and set aside and as such the initiation of re-assessment proceedings be also quashed along with notice under Section 148 of the Act. 5.1 It was submitted that the petitioner has raised various issues on merits with regard to assumption of jurisdiction by the respondent to initiate the re-assessment proceedings inasmuch as the impugned notice is the third notice under for reopening under Section 148A(b) of the Act whereas there was no action taken pursuant to the earlier two notices, one being in old regime issued in the year 2021 and the second show-cause notice under Section 148A(b) of the Act issued in the year 2023. 5.2 It was, therefore, submitted that the Assessing Officer could not have assumed jurisdiction on the same issue which was earlier not considered as fit to reopen the assessment. 6. On the other hand, learned senior standing counsel Mr. Patel for the respondent could not controvert the main contention of the assessee-petitioner that the impugned order under Section 148A(d) of the Act does not deal with the conten....
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....ent. 4. On the basis of above information which suggests that income chargeable to tax of Rs.8,69,73,215/-have escaped assessment in your hand, you are requested to show me the cause as to why order u/s 148A(d) may not be passed and notice u/s. 148 of the IT Act may not be issued. On the basis of the above information that income chargeable to tax has escaped assessment in this case." 8.2.1 As compared to the aforesaid contents, the conclusion arrived at by the Assessing Officer in the impugned order under Section 148A(d) of the Act reads as under. "5(c) The amount of such interest is taxable in the hands of the assessee as per DTAA as well as provisions of the IT Act. The TPO has mentioned detailed reasoning as to why such interest should be taxable in the hands of the assessee. As per the information available, the assessee had advanced ECB loan to an Indian Company namely M/s Hazira Port Pvt. Ltd., Gujarat, a subsidiary of assessee company. However, the assessee has not charged any interest on the borrower. The Addl. CIT(TPO), Ahmedabad has, during the TP proceedings in the case of M/s. Hazira Port Pvt. Ltd., had recommended, after detailed discussion,....
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....transfer of shares, has held that there was no proper trial of the appeals before the Central Government since no reasons had been given in support of the order passed by the Deputy Secretary who heard the appeals. In that case it has been observed : (SCR p. 357) "If the Central Government acts as a tribunal exercising judicial powers and the exercise of that power is subject to the jurisdiction of this Court under Article 136 of the Constitution, we fail to see how the power of this Court can be effectively exercised if reasons are not given by the Central Government in support of its order." 24. In Madhya Pradesh Industries Ltd. v. Union of India [(1966) 1 SCR 466 : AIR 1966 SC 671] the order passed by the Central Government dismissing the revision petition under Rule 55 of the Mineral Concession Rules, 1960, was challenged before this Court on the ground that it did not contain reasons. Bachawat, J., speaking for himself and Mudholkar, J., rejected this contention on the view that the reason for rejecting the revision application appeared on the face of the order because the Central Government had agreed with the reasons given by the State Government in its ord....
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....rations, will be subject to judicial scrutiny and correction. A speaking order will at its best be a reasonable and at its worst be at least a plausible one. The public should not be deprived of this only safeguard." "...There is an essential distinction between a court and an administrative tribunal. A Judge is trained to look at things objectively, uninfluenced by considerations of policy or expediency; but, an executive officer generally looks at things from the standpoint of policy and expediency. The habit of mind of an executive officer so formed cannot be expected to change from function to function or from act to act. So it is essential that some restrictions shall be imposed on tribunals in the matter of passing orders affecting the rights of parties; and the least they should do is to give reasons for their orders. Even in the case of appellate courts invariably reasons are given, except when they dismiss an appeal or revision in limine and that is because the appellate or revisional court agrees with the reasoned judgment of the subordinate court or there are no legally permissible grounds to interfere with it. But the same reasoning cannot apply to an appellate....
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.... principle or any rule of natural justice that a statutory tribunal should always and in every case give reasons in support of its decision. In that case the court was primarily concerned with the interpretation of the provisions of Act and the Army Rules, 1954. There is no reference to the earlier decisions in Harinagar Sugar Mills case [(1962) 2 SCR 339 : AIR 1961 SC 1669 : (1961) 31 Comp Cas 387] and Bhagat Raja case [(1967) 3 SCR 302 : AIR 1967 SC 1606] wherein the duty to record reasons was imposed in view of the appellate jurisdiction of this Court and the supervisory jurisdiction of the High Court under Articles 136 and 227 of the Constitution of India respectively. 29. In Travancore Rayon Ltd. v. Union of India [(1969) 3 SCC 868 : (1970) 3 SCR 40] this Court has observed: (SCR p. 46 : SCC p. 874, para 11) "The court insists upon disclosure of reasons in support of the order on two grounds : one, that the party aggrieved in a proceeding before the High Court or this Court has the opportunity to demonstrate that the reasons which persuaded the authority to reject his case were erroneous; the other, that the obligation to record reasons operates as a deterren....
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....ce should not only be done but should also appear to be done. Unreasoned conclusions may be just but they may not appear to be just to those who read them. Reasoned conclusions, on the other hand, will have also the appearance of justice. Third, it should be remembered that an appeal generally lies from the decision of judicial and quasi-judicial authorities to this Court by special leave granted under Article 136. A judgment which does not disclose the reasons, will be of little assistance to the court." 32. In Siemens Engineering & Manufacturing Co. of India Limited case [(1976) 2 SCC 981 : 1976 Supp SCR 489] this Court was dealing with an appeal against the order of the Central Government on a revision application under the Sea Customs Act, 1878. This Court has laid down : (SCR pp. 495-96 : SCC pp. 986-87, para 6) "It is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons... If courts of law are to be replaced by administrative authorities and tribunals, as indeed, in some kinds of cases, with the prol....
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....was placed on the decisions in Bhagat Raja case [(1967) 3 SCR 302 : AIR 1967 SC 1606] and Siemens Engineering Co. case [(1976) 2 SCC 981 : 1976 Supp SCR 489] . The said contention was rejected by this Court. After referring to the decisions in Bhagat Raja case [(1967) 3 SCR 302 : AIR 1967 SC 1606], Som Datt Datta case [(1969) 2 SCR 177 : AIR 1969 SC 414 : 1969 Cri LJ 663] and Siemens Engineering Co. case [(1976) 2 SCC 981 : 1976 Supp SCR 489] this Court has observed : (SCC pp. 751-52, para 35) "It is no doubt true that in the decisions pertaining to administrative law, this Court in some cases has observed that the giving of reasons in an administrative decision is a rule of natural justice by an extension of the prevailing rules. It would be in the interest of the world of commerce that the said rule is confined to the area of administrative law... But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes." 35. The decisi....
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....e of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge. 37. Having considered the rationale for the requirement to record the reasons for the decision of an administrative authority exercising quasi-judicial functions we may now examine the legal basis for imposing this obligation. While considering this aspect the Donoughmore Committee observed that it may well be argued that there is a third principle of natural justice, namely, that a party is entitled to know the reason f....
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....is discernible in the decisions of English courts wherein it has been held that natural justice demands that the decision should be based on some evidence of probative value. (See: R. v. Deputy Industrial Injuries Commissioner ex p. Moore [(1965) 1 QB 456 : (1965) 1 All ER 81]; Mahon v. Air New Zealand Ltd.[1984 AC 648 : (1984) 3 All ER 201]) 39. The object underlying the rules of natural justice "is to prevent miscarriage of justice" and secure "fair play in action". As pointed out earlier the requirement about recording of reasons for its decision by an administrative authority exercising quasi- judicial functions achieves this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decision-making. Keeping in view the expanding horizon of the principles of natural justice, we are of the opinion, that the requirement to record reason can be regarded as one of the principles of natural justice which govern exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on t....