Dharampal Singh Pall Vs Central Board of Direct Taxes and Others

S.P. Khare, J.@mdashThis is a petition under Article 226 of the Constitution of India challenging the letter No. CCIT/MP/119(2 )(b)/T/R-357/96-97/7244(2), dated February 14, 1997 (annexure-P/4) of the Chief Commissioner of Income Tax which has been communicated to the petitioner by letter dated February 20, 1997 of the Commissioner of Income Tax, Jabalpur, by which the application for condonation of delay in claiming the refund of Income Tax u/s 119(2)(b) of the Income Tax Act, 1961, has been rejected.

2. The petitioner is a contractor. Income Tax has been deducted at source from his income as a contractor. He claims that the amounts of Rs. 75,623, Rs. 76,417 and Rs. 66,024 for the years 1991-92, 1992-93 and 1993-94, respectively, are refundable to him. He has filed the returns in the year 1996. He applied for condonation of delay. That application has been rejected by respondent No. 1--Central Board of Direct Taxes, New Delhi, as communicated to the petitioner by the impugned orders. Notices have been served on the respondents. Their standing counsel took time to file the return but it has not been filed. The arguments of both sides were heard.

3. The main ground on which the impugned orders have been attacked is that no reasons have been disclosed for rejecting the application of the petitioner for condonation of delay. It is mentioned in the letter dated February 14, 1997, that "after careful consideration the Board has rejected the request of Shri Dharam Pal Singh Pall for condonation of delay". It is argued that the amount of Income Tax recovered from the petitioner cannot be retained by the respondents if it was not legally payable even if the claim for the refund is delayed. He relied upon the Circular No. 670, dated October 26, 1993 (see Commissioner of Income Tax Vs. Kesoram Industries and Cotton Mills Ltd., ), of respondent No. 1 by which it has been directed that belated refund claims can be entertained if the conditions mentioned in the circular are satisfied.

4. The impugned order does not contain any reasons for rejecting the claim of the petitioner. The Board was exercising quasi-judicial power while dealing with the application of the petitioner for condonation of delay in claiming the refund and therefore it was necessary for the Board or the competent authority to pass a speaking order, that has been recognised as one of the principles of natural justice. In the absence of the reasons the petitioner cannot have the satisfaction that his claim has been rightly rejected and he cannot properly challenge it and thus his right to subject the impugned order to judicial review is taken away. The contention of the petitioner is legally well founded.

5. The giving of reasons in support of an order is considered to be the third principle of natural justice. A speaking order is necessary if the judicial review is to be effective. Lord Denning said in Breen v. Amalgamated Engineering Union [1971] 1 All ER 1148: "The giving of reasons is one of the fundamentals of good administration". The reasons introduce clarity and exclude arbitrariness and satisfy the party concerned against whom the order is passed. Even if the statute does not impose an obligation to record reasons, it is necessary for the quasi-judicial authority to record reasons as that is the only visible safeguard against possible injustice and arbitrariness and affords protection to the person adversely affected. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial. They would reveal a rational nexus between the facts considered and the conclusions reached. H. W. R. Wade in his book on Administrative Law, seventh edition, page 542 has stated : "Unless the citizen can discover the reasoning behind the decision, he may be unable to tell whether it is reviewable or not, and so he may be deprived of the protection of the law. A right to reasons is therefore an indispensable part of a sound system of judicial review. Natural justice may provide the best rubric for it, since the giving of reasons is required by the ordinary man''s sense of justice".

6. In Mrs. Maneka Gandhi Vs. Union of India (UOI) and Another, , the Supreme Court has held that the courts insist upon disclosure of reasons on three grounds (a) the party aggrieved has the opportunity to demonstrate before the appellate or revisional court that the reasons which persuaded the authority to reject his case were erroneous ; (b) the obligation to record reasons operates as a deterrent against possible arbitrary action by executive authority invested with judicial power ; and (c) it gives satisfaction to the party against whom the order is made. In Siemens Engineering and Manufacturing Company of India Ltd. v. Union of India MR 1976 SC 1785, it has been held that the rule requiring reasons to be recorded by quasi-judicial authorities in support of the orders passed by them is a basic principle of natural justice. In Commissioner of Income Tax, Bombay Vs. Walchand and Co. Private Ltd., also it was observed that the practice of recording a decision without reasons in support cannot but be deprecated.

7. Again in Maharashtra State Board of Secondary and Higher Secondary Education Vs. K.S. Gandhi and Others, , it has been reiterated that the reasons are the harbinger between the mind of the maker of the order to the controversy in question and the decision or conclusion arrived at. They also exclude the chances of reaching an arbitrary, whimsical or capricious decision or conclusion. The reasons assure an inbuilt support to the conclusion/decision reached. When an order affects the right of a citizen or a person, irrespective of the fact whether it is a quasi-judicial or administrative order, and unless the rule expressly or by necessary implication excludes the recording of reasons, it is implicit that principles of natural justice and fair play require recording of germane and precise relevant reasons as a part of fair procedure. In M.J. Sivani and Others Vs. State of Karnataka and Others, also it has been observed that appropriate brief reasons, though not like a judgment, are a necessary concomitant for a valid order in support of the action or decision taken by the authority.

8. In the present case no reason has been assigned for rejecting the application of the petitioner for condonation of delay in claiming the refund. It was all the more necessary in view of the circular referred above. The impugned orders are quashed and the respondents are directed to consider the application of the petitioner afresh on the merits uninfluenced by the earlier order rejecting it and pass a speaking order. It is not that the reasons are to be given only for rejecting it but if on its fair consideration dispassionately a case for condonation of delay is made out on the criteria laid down by the Department, then appropriate relief should be given to the petitioner without the need of his resorting to this court again by way of judicial review.