High Court Of Madras
Precot Mills Ltd. vs. Central Board Of Direct Taxes & Ors.
Section 119(2)(a), 234C
Asst. Year 1990-91
D. Murugesan & P.P.S. Janarthana Raja, JJ.
Writ Appeal No. 981 of 1999
18th January, 2010
Counsel Appeared : Srinath Sridevan, for the Appellant : J. Naresh Kumar, for the Respondents JUDGMENT
D. MURUGESAN, J. :
This writ appeal raises a common question as to whether in exercise of the power under s. 119(2) (a) of the IT Act, the CBDT would be entitled to entertain application from an individual assessee against the order of the AO declining the waiver of interest chargeable under s. 234C of the IT Act and if so, whether the Board should give reasons while considering and passing orders on such application ? The facts giving rise to the above two issues are as follows. The appellant is a public limited company and it filed the return of income on 31st Dec., 1990 for the asst. yr. 1990-91. As the company did not have any taxable income for the said year under the normal provisions of the IT Act, by virtue of s. 115J of the Act, the book profit was disclosed in the return of income. The assessee has also paid advance tax for the financial year 1990-91 in the following manner, namely, a sum of Rs. 16,00,000 on 14th Sept., 1989, a sum of Rs. 60,00,000 on 14th Dec., 1989 and a sum of Rs. 23,00,000 on 30th March, 1990. At a later point of time, the assessee claimed the waiver of interest. We are not elaborating in detail the above subsequent events, as our consideration is very limited in this petition.
The assessee filed an application on 12th Dec., 1991 before the Central Board of Direct Taxes (for short, “the Board”) seeking for waiver of interest. That application was rejected by the following communication : “Annexure ‘C’ F.No. 400/21/1992-IT(B) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes To New Delhi, the 7th Jan., 1993 The Vice President (Finance) Precot Mills Ltd., Suprem, P.B. No. 3888 Race Course, Coimbatore 641 018 Sub : Request for waiver of interest chargeable under s. 234C of the IT Act, 1961. Sir, I am directed to refer to your letter No. CO/P/VPF, dt. 12th Dec., 1991, regarding waiver of interest chargeable under s. 234C of the IT Act and to state that the Board regrets its inability to intervene in the matter. Yours faithfully, Sd/(Rajesh Chandra) Under Secretary to the Government of India” The said communication was questioned by the assessee in the writ petition primarily on the ground that the said communication did not contain any reason whatsoever. The challenge to the said communication before the learned Single Judge did not find favour with the assessee. According to the learned Judge, the provisions of s. 119(2)(a) relate to the power of the Board to issue from time to time general or special orders in respect of any class of income or class of cases by way of relaxation of any of the provisions mentioned thereunder including ss. 234A, 234B and 234C for the purpose of proper and efficient management of the work relating to assessment or collection of revenue. According to the learned Judge, in contrast to cls. (b) and (c) of s. 119(2) of the Act, the Board need not give any reasons while dealing with an application made by the assessee under s. 119(2)(a) of the Act. Mr. Srinath Sridevan, learned counsel appearing for the appellant-assessee would submit that while the application is entertained by the Board and it is considered and disposed of the Board acts as a quasi-judicial functionary. If that be so, the Board should certainly give reasons for rejecting the application. In support of the said submission, the learned counsel would rely upon an unreported judgment of a learned Single Judge of this Court made in a batch of writ petitions in Writ Petn. No. 2528 of 1993 etc., dt. 13th Dec., 1993, Sivanandha Steels Ltd. vs. CBDT & Ors. [reported at (1999) 151 CTR (Mad) 569—Ed.]. The learned counsel would submit that though the said judgment was cited before the learned Single Judge, it was distinguished on the ground that the difference between the provisions of s. 119(2)(a) and s. 119(2)(b) and (c) of the Act was not at all considered thereunder. Hence, the learned counsel would submit that as the issues raised in this appeal are squarely covered by the said judgment, the order under appeal is liable to be interfered with. On the other hand, Mr. J. Naresh Kumar, learned senior standing counsel for the Revenue would submit that there is no obligation cast on the Board to entertain any application from the individual assessee for its consideration. However, the Board, as a matter of practice, entertains the application filed by the assessee and in exercise of the power under s. 119(2)(a) passes orders and in that process, the Board is not expected to give any reasons. Hence the learned standing counsel would submit that the order under appeal need not be interfered with. We have considered the rival submissions.
The provisions of s. 119(2)(a), (b) and (c) read as under : “119(1)….. (2) Without prejudice to the generality of the foregoing power— (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of ss. 115P, 115S, 115WD, 115WE, 115WF, 115WG, 115WH, 115WJ, 115WK, 139, 143, 144, 147, 148, 154, 155, 158BFA, sub-s. (1A) of s. 201, ss. 210, 211, 234A, 234B, 234C, 271 and 273 or otherwise, general or special orders in respect of any class of incomes (or fringe benefits) or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other IT authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information; (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any IT authority, not being a CIT (A) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; (c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely : (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and (ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed : Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament.”
8. As far as the provisions of s. 119(2)(b) and (c) are concerned, the finding in the order under appeal itself is that the Board, under those provisions, acts as quasi-judicial functionary. To this extent, there is no dispute. The controversy is only in respect of s. 119(2)(a) of the Act as to whether an application can be made by the assessee as a matter of right to the Board and that if such application is entertained, the Board is obligated to consider the same and pass orders giving its reasons. While exercising the power under s. 119(2)(a), the Board, by issuance of guidelines, is also entitled to consider the principles or procedures to be followed by the other IT authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties, etc. That power of the Board conferred under the said provision includes the power to issue guidelines, principles and procedures to be followed in matters of initiation of proceedings for imposition of penalties, will necessarily include the waiver of interest as well. When a grievance is made before the Board by way of an application and when once that application is entertained, certainly, the Board should consider whether the request was for either against imposition of penalty or waiver of interest and pass orders giving its reasons. In the judgment relied upon by the learned counsel for the appellant in Writ Petn. No. 2528 of 1993, dt. 13th Dec., 1993 (supra), the learned Single Judge had also relied upon a Division Bench judgment of the Karnataka High Court in H.S. Anantharamaiah vs. CBDT & Ors. (1993) 109 CTR (Kar) 353 : (1993) 201 ITR 526 (Kar), where the Division Bench has held that while an application is considered anddisposed of by the Board under s. 119(2), the Board acts as quasi-judicial authority. We are entirely in agreement with the finding rendered in the saidjudgment. It is not in dispute that such applications from individual assessees are also entertained by the Board and disposed of. In our opinion, no difference could be seen from either of the cls. (a), (b) and (c) of s. 119(2) of the Act for the reason that even though s. 119(2) only relates to the power of the Board to issue certain guidelines and principles on specific matters, while it entertains the application and disposes of the same, it acts as quasi- judicial authority and if that be so, a quasi-judicial authority is expected in law to give reasons on consideration of the materials available before it. A statutory discretion or power, whether it be administrative or quasi-judicial, is subject to certain implied conditions or limitations. Any violation of these conditions or limitations can give rise to judicial review.
The conditions are based on the solemn principle that the person on whom the power is conferred must exercise the same in good faith for furtherance of the object of the statute and the decision should not amount to arbitrariness, unfairness and summary disposal. In Ridge vs. Baldmin (1963) 2 All ER 66 (HL), it has been held that conferment of quasi-judicial power further implies that the person concerned must follow the rule of natural justice. In Wireman vs. Boreman (1963) 3 All ER 275 (HL), it has been held that quasi-judicial authority, while discharging his functions as such, must give reasons for making the order which he is empowered to make. The apex Court has also laid down the above principles in the judgment in Menaka Gandhi vs. Union of India AIR 1978 SC 597. We may also observe 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, as this requirement can be regarded as one of the principles of natural justice. The duty to give reasons is the function of due process and therefore of justice. It encompasses itself two principal aspects, namely, fairness and the application of mind by the authorities. To support the above, we may refer to the judgments of the apex Court in Vasudeo Vishwanath Saraf vs. New Education Institute & Ors. (1986) 57 CTR (SC) 100 : AIR 1985 SC 2105 and in S.N. Mukherjee vs. Union of India AIR 1990 SC 1984. As we have held that the Board while disposing of an application under s. 119(2)(a) is acting as quasi-judicial authority, it should certainly give reasons even though the provision does not explicitly refer to the provision of such reasoning in the order.
Of course, the learned senior standing counsel for the Revenue would rely upon a judgment of the apex Court in Carborundum Universal Ltd. vs. CBDT (1989) 80 CTR (SC) 85 : (1989) 180 ITR 171 (SC). In our opinion, that judgment relates to a claim for personal hearing before an application that has been entertained by the Board is disposed of. In the absence of any provision for personal hearing, the apex Court has held that no personal hearing could be asked as a matter of right. Nevertheless, we are of the considered view that from the very same judgment we could gather that when an application is entertained, it should be disposed of by giving reasons and to this extent, the aforesaid judgment of the apex Court could be relied upon in favour of the appellant-assessee. For all the above reasons, the order under appeal is liable to be set aside. Accordingly, the order is set aside and the appeal is allowed. It is now represented by the learned counsel on either side that the power to entertain and dispose of the application has been now entrusted to the Chief CIT. In view of the above, the matter is remitted back to the Chief CIT for fresh consideration of the application filed by the appellant-assessee regarding the waiver of interest for the asst. yr. 1990-91 and the Chief CIT is expected to dispose of the application as expeditiously as possible after the receipt of the copy of the order from the appellant. No costs.
[Citation : 321 ITR 293 ]
