Gujarat High Court
Shell Gas Bv vs Assistant Commissioner Of Income Tax ... on 25 June, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/7906/2024 ORDER DATED: 25/06/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 7906 of 2024
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SHELL GAS BV
Versus
ASSISTANT COMMISSIONER OF INCOME TAX INTERNATIONAL
TAXATION 1 AHMEDABAD
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Appearance:
MS SN SOPARKAR, SR. ADVOCATE WITH MR B S SOPARKAR(6851) for
the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 25/06/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned senior advocate Mr.S.N. Soparkar with learned advocate Mr.B.S. Soparkar for the petitioner and learned senior standing counsel Mr.Varun Patel for the respondent appearing on advance copy.
2. Rule, returnable forthwith. Learned advocate Mr.Varun Patel waives service of notice of Rule on behalf of the respondent.
2.1 Having regard to the controversy in narrow compass, with the consent of the learned Page 1 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined advocates appearing for both the sides, the matter is taken up for final hearing.
3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice under Section 148A(b) dated 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 Page 2 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 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. Ltd. and directed the Assessing Officer to frame final assessment order. In fact, the Assessing officer had on 15th September, 2021, under mistaken belief that Hazira Port Pvt. Ltd.
has not challenged the draft order of 22nd July, 2021 before the DRP, passed the final assessment order.
Page 3 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 4.4 Subsequent to the directions issued by the DRP, the Assessing Officer once again passed the final assessment order on 31st May, 2022 following the directions of the DRP. The Hazira Port Pvt. Ltd. assailed both the orders before the Commissioner of Income Tax (appeal) and before the Income Tax Appellate Tribunal respectively.
4.5 In the meanwhile, a notice under Section 148 of the Act was served upon the petitioner on 31st March, 2021 and the reasons for reopening were supplied vide notice on 11th May, 2021. The said notice was issued alleging escapement of income on the issue of the non-charging of interest to M/s.Hazira Port Pvt. Ltd. The Petitioner, therefore, filed a detailed response to the said notice on 13th September, 2021. It appears that no further proceedings are carried out and no order under Section 143(3) read with Section 147 of the Act is passed.
Page 4 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 4.6 Surprisingly, again the notice under Section 148A(b) of the Act on the very same issue was issued to the petitioner on 06th February, 2023. The petitioner filed its detailed response to the said notice on 15th February, 2023. This time also no further proceedings are carried out and no order under Section 148A(d) of the Act is received by the petitioner.
4.7 It is the case of the petitioner that the petitioner received the impugned show-cause notice under Section 148A(b) on 27th March, 2024 which was responded by the petitioner on 15th April, 2024 conveying the past correspondence on the above issues as well as filing detailed objections on merits as well.
4.8 Subsequently, the respondent passed the impugned order under Section 148A(d) on 19th April, 2024 alleging escapement of income to the tune of Rs.08,69,73,215/- and the consequential impugned notice under Section 148 of the even Page 5 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined date is also issued requesting the petitioner to file return of income.
5. Learned senior advocate Mr. Soparkar for the petitioner submitted that the respondent, while passing the order under Section 148A(d) of the Act has not assigned any reason dealing with the detailed contentions raised 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 Page 6 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 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 contentions of the assessee and the same is without assigning reasons.
7. Having considered the submissions made by both the sides, it appears that the impugned order passed by the Assessing Officer has recorded the contents of the notice issued under Page 7 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined Section 148A(b) of the Act and thereafter reproduced the entire submissions made by the petitioner and again reiterated the contents of the notice under Section 148A(b) of the Act to come to prima facie conclusion that it is a fit case to reopen the assessment.
8. Reasons are required to be given by any quasi judicial authority dealing with the contentions raised more particularly in the Scheme of the Act when it stipulates statutory opportunity to the assessee to file reply to the notice issued under Section 148A(b) of the Act and thereafter on consideration of the reply and materials on record, the Assessing Officer is required to come to the prima facie conclusion that it is a fit case to reopen the assessment.
8.1 It appears from the impugned order that the Assessing Officer has materially complied with the formalities of consideration "of reply"
by reproducing the reply without dealing with the Page 8 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined issues raised in the said reply. Merely reproduction of the reply filed by the assessee cannot be said to be compliance of provisions of Section 148A(d) of the Act.
8.2 It is worthwhile to consider the contents of the notice issued under Section 148A(b) of the Act which reads as under.
"2. As per information in possession of the undersigned, as reported in Insight Portal, you have advanced interest free ECB loan of Rs.165,97,94,188/- to an Indian Company namely, M/s. Hazira Port P Ltd (AAACH9142D), Gujarat which is your subsidiary. By not charging interest on this loan, you have suppressed your corresponding income resulting in escapement of that income. In this regard it is relevant to mention that the Addl CIT (TPO) has also during the TP proceedings in the case of M/s. Hazira Port Pvt. Ltd, after detailed discussion and analysis, worked out interest of Rs.8,69,73,215/- pertaining to loan given by you to your subsidiary viz. Hazira Port Pvt Ltd.
3. As a corollary, the said amount is chargeable to tax in your hand for the previous year relevant to AY 2017-18. As you had not filed return of income u/s. 139(1) of the IT Act, income to the tune of Rs.8,69,73,215/-has escaped Page 9 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined assessment.
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, downward adjustment of Rs.8,69,73,215/- (being assessee's portion) on account of Page 10 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined ALP interest on loan taken. It is stated in the order u/s 92CA page 46 that M/s. Hazira Port Pvt. Ltd was claiming 100% deduction u/s 801A. It had also claimed that it was running into losses. Thus if any interest is debited in the company, it will only reduce the working of profit and consequent claim of deduction u/s 801A. Thus the arrangement of interest free loan of Rs 165,97,94,188/- is only for avoiding tax in the hands of the non resident assessee company and also claiming deduction u/s 801A being 100% profit into the hands of Indian Company M/s. Hazira Port Pvt. Ltd.
Hence as per provisions of section 148 explanation 1(i) and 149(1)(b)(iii) as well as discussed above, the amount of Rs.8,69,73,215/- was chargeable to tax as interest income on loan, and has escaped assessment."
8.3 Therefore, on comparison of the contents of the notice and the conclusion arrived at after reproduction of the reply of the assessee, it is apparent that the respondent-Assessing Officer has not applied his mind while passing the impugned order under Section 148A(d) of the Act and has not stated as to why the submissions filed by the assessee are not acceptable and without dealing with it which is a pre-requisite Page 11 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined passed the impugned order under Section 148A(d) of the Act. Thus failure on part of the respondent to give reasons dealing with the contentions of the assessee has resulted into the entire purpose of introduction of the Scheme for reopening under Section 148A as futile exercise.
9. The Apex Court in the case of S.N. Mukherjee v. Union of India, (1990) 4 SCC 594 has emphasised importance of reasons to be given in the order, whether it may be passed by a quasi judicial authority or it may be an administrative order as under:
"22. The question as to whether an administrative authority should record the reasons for its decision has come up for consideration before this Court in a number of cases.
23. In Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala [(1962) 2 SCR 339 : AIR 1961 SC 1669 : (1961) 31 Comp Cas 387] a Constitution Bench of this Court, while dealing with an order passed by the Central Government in exercise of its appellate powers Page 12 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined under Section 111(3) of the Companies Act, 1956 in the matter of refusal by a company to register the 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 order. The learned Judges did not agree with the submission that omission to give reasons for the decision is of itself a sufficient ground for quashing it and held that for the purpose of an appeal under Article 136 orders of courts and tribunals stand on the same footing. The learned Judges pointed out that an order of court dismissing a revision application often Page 13 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined gives no reasons but this is not a sufficient ground for quashing it and likewise an order of an administrative tribunal rejecting a revision application cannot be pronounced to be invalid on the sole ground that it does not give reasons for the rejection. The decision in Harinagar Sugar Mills case [(1962) 2 SCR 339 : AIR 1961 SC 1669 : (1961) 31 Comp Cas 387] was distinguished on the ground that in that case the Central Government had reversed the decision appealed against without giving any reasons and the record did not disclose any apparent ground for the reversal. According to the learned Judges there is a vital difference between an order of reversal and an order of affirmance. Subba Rao, J., as he then was, did not concur with this view and found that the order of the Central Government was vitiated as it did not disclose any reasons for rejecting the revision application. The learned Judge has observed :
(SCR pp. 472-73) "In the context of a welfare State, administrative tribunals have come to stay. Indeed, they are the necessary concomitants of a welfare State. But arbitrariness in their functioning destroys the concept of a welfare State itself. Self-discipline and supervision exclude or at any rate minimize arbitrariness. The least a tribunal can do is to disclose its mind. The compulsion of disclosure guarantees consideration. The condition to give reasons introduces clarity and excludes or at any rate minimizes arbitrariness; it gives satisfaction to the party against whom the order is made; and it also enables an appellate or supervisory court to keep the tribunals within bounds. A reasoned order is a desirable condition of judicial disposal."Page 14 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024
NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined "...If tribunals can make orders without giving reasons, the said power in the hands of unscrupulous or dishonest officers may turn out to be a potent weapon for abuses of power. But, if reasons for an order are given, it will be an effective restraint on such abuse, as the order, if it discloses extraneous or irrelevant considerations, 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 tribunal, for as often as not the order of the first tribunal is laconic and does not give any reasons."
25. With reference to an order of affirmance the learned Judge observed that where the original tribunal gives reasons, the appellate Page 15 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined tribunal may dismiss the appeal or the revision, as the case may be, agreeing with those reasons and that what is essential is that reasons shall be given by an appellate or revisional tribunal expressly or by reference to those given by the original tribunal.
26. This matter was considered by a Constitution Bench of this Court in Bhagat Raja case [(1967) 3 SCR 302 : AIR 1967 SC 1606] where also the order under challenge had been passed by the Central Government in exercise of its revisional powers under Section 30 of the Mines and Minerals (Regulation and Development) Act, 1957 read with Rules 54 and 55 of the Mineral Concession Rules, 1960. Dealing with the question as to whether it was incumbent on the Central Government to give any reasons for its decision on review this Court has observed :
(SCR p. 309) "The decisions of tribunals in India are subject to the supervisory powers of the High Courts under Article 227 of the Constitution and of appellate powers of this Court under Article 136. It goes without saying that both the High Court and this Court are placed under a great disadvantage if no reasons are given and the revision is dismissed curtly by the use of the single word "rejected", or "dismissed". In such a case, this Court can probably only exercise its appellate jurisdiction satisfactorily by examining the entire records of the case and after giving a hearing come to its conclusion on the merits of the appeal. This will certainly be a very unsatisfactory method of dealing with the appeal."
28. Reference has already been made to Som Datt Datta case [(1969) 2 SCR 177 : AIR 1969 Page 16 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined SC 414 : 1969 Cri LJ 663] wherein a Constitution Bench of this Court has held that the confirming authority, while confirming the findings and sentence of a court martial, and the Central Government, while dealing with an appeal under Section 165 of the Act, are not required to record the reasons for their decision and it has been observed that apart from any requirement imposed by the statute or statutory rule either expressly or by necessary implication, it could not be said that there is any general 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 Page 17 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power."
30. In Mahabir Prasad Santosh Kumar v. State of U.P. [(1970) 1 SCC 764 : (1971) 1 SCR 201] the District Magistrate had cancelled the licence granted under the U.P. Sugar Dealers' Licensing Order, 1962 without giving any reason and the State Government had dismissed the appeal against the said order of the District Magistrate without recording the reasons. This Court has held: (SCR pp. 204- 05 : SCC p. 768, paras 6 and 7) "The practice of the executive authority dismissing statutory appeals against orders which prima facie seriously prejudice the rights of the aggrieved party without giving reasons is a negation of the rule of law.
"Recording of reasons in support of a decision on a disputed claim by a quasi- judicial authority ensures that the decision is reached according to law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency. A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim. If the order is subject to appeal, the necessity to record reasons is greater, for without recorded reasons the appellate authority has no material on which it may determine whether the facts were properly ascertained, the relevant law was correctly applied and the decision was just."
31. In Woolcombers of India Ltd. case [(1974) 3 SCC 318 : 1974 SCC (L&S) 551 :
(1974) 1 SCR 504] this Court was dealing with an award of an Industrial Tribunal. It was Page 18 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined found that the award stated only the conclusions and it did not give the supporting reasons. This Court has observed: (SCR p. 507:
SCC pp. 320-21, para 5) "The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimise the chances of unconscious infiltration of personal bias or unfairness in the conclusion. The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations. Second, it is a well known principle that justice 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) Page 19 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined "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 proliferation of administrative law, they may have to be so replaced, it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals exercising quasi- judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law."
33. Tara Chand Khatri v. Municipal Corporation of Delhi [(1977) 1 SCC 472 : 1977 SCC (L&S) 151 : (1972) 2 SCR 198] was a case where an inquiry was conducted into charges of misconduct and the disciplinary authority, agreeing with the findings of the Inquiry Officer, had imposed the penalty of dismissal. The said order of dismissal was challenged on the ground that the disciplinary authority had not given its reasons for passing the order. The said contention was negatived by this Court and distinction was drawn between an order of affirmance and an order of reversal.
Page 20 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined It was observed : (SCR p. 208 : SCC p. 480, para 19) "....while it may be necessary for a disciplinary or administrative authority exercising quasi-judicial functions to state the reasons in support of its order if it differs from the conclusions arrived at and the recommendations made by the enquiring officer in view of the scheme of a particular enactment or the rules made thereunder, it would be laying down the proposition too broadly to say that even an ordinary concurrence must be supported by reasons."
34. In Raipur Development Authority v. Chokhamal Contractors [(1989) 2 SCC 721] a Constitution Bench of this Court was considering the question whether it is obligatory for an arbitrator under the Arbitration Act, 1940 to give reasons for the award. It was argued that the requirement of giving reasons for the decision is a part of the rules of natural justice which are also applicable to the award of an arbitrator and reliance 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 Page 21 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 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 decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision- making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively Page 22 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the standpoint of policy and expediency.
36. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision, are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective 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 Page 23 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 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 for the decision, be it judicial or quasi-judicial. The Committee expressed the opinion that "there are some cases where the refusal to give grounds for a decision may be plainly unfair; and this may be so, even when the decision is final and no further proceedings are open to the disappointed party by way of appeal or otherwise" and that "where further proceedings are open to a disappointed party, it is contrary to natural justice that the silence of the Minister or the Ministerial Tribunal should deprive them of the opportunity". (p.
80) Prof. H.W.R. Wade has also expressed the view that "natural justice may provide the best rubric for it, since the giving of reasons is required by the ordinary man's sense of justice". (See Wade, Administrative Law, 6th edn. p. 548.) In Siemens Engineering Co. case [(1976) 2 SCC 981 : 1976 Supp SCR 489] this Court has taken the same view when it observed that "the rule requiring reasons to be given in support of an order is, like the principles of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process". This decision Page 24 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined proceeds on the basis that the two well known principles of natural justice, namely (i) that no man should be a judge in his own cause, and
(ii) that no person should be judged without a hearing, are not exhaustive and that in addition to these two principles there may be rules which seek to ensure fairness in the process of decision-making and can be regarded as part of the principles of natural justice. This view is in consonance with the law laid down by this Court in A.K. Kraipak v. Union of India [(1969) 2 SCC 262 : (1970) 1 SCR 457] wherein it has been held : (SCR pp. 468-69 :
SCC p. 272, para 20) "The concept of natural justice has undergone a great deal of change in recent years. In the past it was thought that it included just two rules namely : (i) no one shall be a judge in his own cause (nemo debet esse judex propria causa), and (ii) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem). Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must he held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice."
38. A similar trend 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 Page 25 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined 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 the administrative authority. With regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi-judicial functions the legislature, while conferring the said power, may feel that it would not be in the larger public interest that the reasons for the order passed by the administrative authority be recorded in the order and be communicated to the aggrieved party and it may dispense with such a requirement. It may do so by making an express provision to that effect as those contained in the Administrative Procedure Act, 1946 of U.S.A. and the Administrative Decisions (Judicial Review) Act, 1977 of Australia whereby the orders passed by certain specified authorities are excluded from the ambit of the enactment. Such an exclusion can also arise by necessary implication from the nature of the subject matter, the scheme and the provisions of the enactment. The public interest underlying such a provision would Page 26 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined outweigh the salutary purpose served by the requirement to record the reasons. The said requirement cannot, therefore, be insisted upon in such a case.
40. For the reasons aforesaid, it must be concluded that except in cases where the requirement has been dispensed with expressly or by necessary implication, an administrative authority exercising judicial or quasi- judicial functions is required to record the reasons for its decision."
10. In view of the above conspectus of law, the impugned order under Section 148A(d) of the Act is not tenable as it is bereft of any reason and consequently, notice under Section 148 of the Act is also liable to be quashed and set aside.
11. Therefore, without entering into the merits of the matter, keeping all the contentions of both the sides open, the impugned order dated 19th April, 2024 passed by the respondent under Section 148A(d) of the Act and the notice under Section 148 of the even date are hereby quashed and set aside.
11.1 The respondent-Assessing Officer is at Page 27 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024 NEUTRAL CITATION C/SCA/7906/2024 ORDER DATED: 25/06/2024 undefined liberty to proceed from the stage of issuance of notice under Section 148A(b) of the Act and after considering the reply filed and after giving opportunity of hearing to the petitioner-
assessee, pass a de novo fresh order under section 148A(d) of the Act in accordance with law.Such exercise shall be completed within a period of twelve weeks from the date of receipt of this order.
12. Rule is made absolute to the aforesaid extent. No order as to cost.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) ANUP Page 28 of 28 Downloaded on : Fri Jul 12 21:27:08 IST 2024