Where impugned order was not a self-speaking one and the Appellate Assistant Commissioner wanted to adopt the same reasons which the assessing officer adopted, the same was liable to be set aside being not in compliance with the mandatory provisions of section 250(6).
Appeal (AAC)--PROCEDURE TO BE FOLLOWED BY APPELLATE AUTHORITY--Ex parte order.
Passing of an ex parte order without serving on the assessee a notice under section 250(1) is not good at law.
Under section 250(1), the service of notice on the assessee is imperative on the part of the Appellate Assistant Commissioner before proceeding to decide the appeal.
Appeal (AAC)--PROCEDURE TO BE FOLLOWED BY APPELLATE AUTHORITY--Ex parte order.
Where Appellate Assistant Commissioner decided appeal ex parte without serving notice under section 250(1) and passed a non-speaking order without giving reason of his own, his order was not sustainable.
Under section 250(1), the service of notice on the assessee is imperative on the part of the Appellate Assistant Commissioner before proceeding to decide the appeal. Further, the impugned order was not a self-speaking order and the Appellate Assistant Commissioner wanted to adopt the same reasons which the Income Tax Officer adopted and this was not in compliance with the mandatory provisions of section 250(6).
Accordingly, the AAC's order was wrong.
1. This is an assessee's appeal against the order of the AAC, A-Range, New Delhi dated 15-9-1980 passed in appeal No. 84/77-78 whereby he had decided the appeal ex parte.
2. The following are the few facts leading to the present appeal: The assessee is a HUF. We are concerned with the assessment year 1973-74 for which the previous year ended on 31-3-1973. The assessee-HUF filed its return on 1-1-1974 declaring an income of Rs. 15,716. It had revised its return on 30-3-1976 wherein Rs. 44,483.10 was claimed as exempt from tax on the ground that it represents agricultural income from Collective Farm, Hyderabad. The ITO by his assessment orders dated 22-3-1977 computed the taxable income of the assessee-HUF at Rs. 45,640. Aggrieved by the said assessment, the assessee preferred an appeal before the AAC, A-Range, New Delhi. The AAC fixed the date of hearing of the appeal before him on 9-9-1980. In the impugned orders, he simply observes that none appeared before him on that day and hence the appeal is decided ex pane. He further found that the ITO, after discussing the elaborate reasons in his assessment orders, included the share as income of the appellant from undisclosed sources at Rs. 29,928. Now in this appeal, it is urged before us that the notice of hearing dated 9-9-1980 was never received by the assessee and that there was no default on his part. Secondly, it is contended that when there was no proper service of notice, the AAC could not determine the appeal ex parte.
3. We have heard Smt. Kusum Chadha, learned counsel for the appellant, and Shri V.U. Eradi for the department. The learned departmental representative did not dispute the correctness of the contention of the appellant that notice for the date of hearing dated 9-9-1980 was not served upon the assessee. The notice that was issued for 9-9-1980 was also produced before us to know for ourselves as to how it was sent to the assessee. Therefore, we feel we are right in proceeding on the basis that no service of notice at all was effected on the assessee for the date of hearing, i.e., 9-9-1980. Section 250(1) of the Income-tax Act, 1961 is as follows : (1) The Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals) shall fix a day and place for hearing of the appeal and shall give notice of the same to the appellant and to the Income-tax Officer against whose order the appeal is preferred.
The above would clearly prove that service of notice on the assessee is imperative on the part of the AAC before proceeding to decide the appeal. In Mangat Ram Kuthiala v. CIT  38 ITR 1, the Punjab and Haryana High Court was pleased to hold as follows : ...The hearing of the parties is a statutory imperative and if a party can prove it as a fact that it was never properly served of the notice given by the Appellate Tribunal and therefore was not able to present its case at hearing of the appeal, surely it cannot be said that such a party has had an opportunity of being heard within the meaning and scope of the said sub-section.... (p. 10) It is no doubt true that the above ratio was laid down with reference to Section 33(4) of the Indian Income-tax Act, 1922, while dealing with the procedure that was to be followed by the Appellate Tribunal while disposing of the appeal. However, the above said ratio is clearly applicable as the language of Section 250 of the 1961 Act is also in pari materia with the erstwhile Section 33(4) of the 1922 Act. Further, the functions of the AAC as well as the Tribunal are both quasi-judicial while disposing of the appeals before them. Therefore, in this case, we have to hold that reasonable opportunity to represent the case of the appellant is denied to the appellant and, hence, the said irregularity vitiates the impugned order passed by the AAC.4. Further, the impugned order is not a speaking order. It appears that the AAC wanted to adopt the same reasons which the ITO adopted while treating the amount of Rs. 29,928 as income from undisclosed sources.
Even then, in our opinion, it is not sufficient compliance with the mandatory provisions of Section 250(6) which is as follows : (6) The order of the Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.
The learned departmental representative advanced an argument that when the AAC wanted to adopt the ITO's order, no specific reasons need be given by him separately and the impugned order does not become vitiated for want of reasons being recorded in it. We find that this type of argument: is repelled by the Delhi High Court in Bharat Nidhi Ltd. v.Union of India  92 ITR 1. The Hon'ble Delhi High Court held in the above case as follows : Mr. Aiyar has attempted to support the order on the ground that the Director of Inspection had, after discussion with the representatives of the petitioner, thoroughly examined the matter and the Board had adopted his report. In my opinion, the statutory authority is required to apply its own mind to the case and its examination by any other officers and mechanical acceptance of his report by the statutory authority does not satisfy the rule of law.
Again, the knowledge and, for that matter, conjectures of the petitioner in respect of the reasons, is no substitute for the formal incorporation of the reasons in the impugned order. The petitioner may be entirely mistaken in its assessment of the reasons and nobody will hear (sic) it to say what the reasons were which weighted with the statutory authorities in passing the order. See the observations in Associated Tubewells Ltd. v. R.B. Gujarmal Modi AIR 1957 SC 742. As pointed out by the Supreme Court in the abovementioned judgment, incorporation of the reasons is necessary to demonstrate that the authority has considered the matter according to law and that its order may be subjected to judicial review. The contention of Mr. Aiyar fails. (P. 5) Therefore, in our opinion, the order of the AAC is vitiated both by the reason that the appellant was denied a fair opportunity of representing its case and also for the reason that it is not a speaking order.
5. Therefore, the appeal is allowed and the matter is restored to the file of the AAC. He should give due opportunity to the assessee-HUF to represent its case before him and he should decide the appeal before him on merits according to law. The impugned order is hereby set aside.