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TMI Blog2014 (5) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... s and history: 2. Effective Ground of appeal pertains to disallowance of interest expenditure of Rs. 9, 23, 148/-. Assessee-company, had filed its return of income declaring net loss of Rs. 30, 05, 061/-. Assessing officer(AO)finalised the assessment order u/s. 143(3) of the Act, on 15. 03. 2000. During the assessment proceedings, AO found that the assessee had claimed deduction under the heads interest expenditure and discounting charges. It was argued before him that rent receivable from the sub tenants was discounted upfront by the payment of the discounting charges and advancing interest-free loan to the holding company i. e. Indian Express Newspapers Ltd. (IENL). He disallowed the discounting charges on the basis that interest bearing funds were utilised for the purpose of advancing interest-freeloans which were totally unconnected with assessee's business, that expenditure was not incurred wholly and exclusively for the purpose of the business, that same was not allowable either under section 37(1) or under section 36(1 )(iii) of the Act. Against the order of the AO, assessee preferred an appeal before the First Appeal Authority (FAA). After considering the submissions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of the directions given in this behalf by the ITAT. In the proceedings before the AO assessee made detailed submissions. After perusing the same, the AO held that interest free loans were advanced to IENB were not in the ambit of commercial expediency, that the lease agreement entered by the assessee company with IENB was a business agreement , that all the commitments as per the lease agreement were fulfilled by the assessee-company and after having done so it went on reducing the interest burden of IENB, that interest amount paid over and above the lease agreement was not allowable, that the entire money borrowed from HDFC was directly provided to IENB by HDFC, that as per the loan agreement IENB was the borrower and the assessee was the confirming party, that the amount was not advanced by the assessee company from its own fund, that issue of non interest bearing fund and interest bearing find had no relevance to decide the tax liability of the assessee. 2. 1. Order of the AO was challenged before the FAA. Deciding the appeal against the assessee, he held that AO had considered the submissions of the assessee and had also examined the applicability of the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, before the FAA, it was specifically mentioned that AO had not adhered to directions of the Tribiunal, that disallowance out of interest payment and discounting charges was not warranted. Deciding the appeal against the assessee, FAA had held that he agreed with the observations and conclusions made by the AO in the assessment order. We find that he has not given any finding on commercial expediency as well as issue of interest bearing/non-interest bearing funds. Whin specific grounds against the order of the AO were taken before him, it was the duty of the FAA to pass a speaking order. 2. 3. a. It is said reason is the soul of law and when reason of any particular law ceases, so does the law. In State of West Bengal v. Atul Krishna Shaw, AIR 1990 SC 2205, the Apex court has held that that giving of reasons is an essential element of administration of justice. A right to reason is, therefore, considered an indispensable part of sound system of judicial review. The principles of natural justice has twin ingredients ;firstly, the person who is likely to be adversely affected by the action of the authorities can be given notice to show cause thereof and granted an opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , clear and succinct. A pretence of reasons or 'rubber-stamp reasons' is not to be equated with a valid decision-making process. (m)It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny (n)Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights. (o)In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of 'due process'. In view of the above discussion we are of the opinion that an order without reasons is as good as no order. Order of the FAA, challenged before us, is an order that falls in the category of non speaking order i. e. the order not mentioning the reasons for arriving at a conclusion. By endorsing the view of the AO;that the issue of non interest bearing fund and interest bearing ..... 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