High Court Of Patna (Full Bench)
Commissioner Of Wealth Tax vs. Jagdish Prasad Choudhary
Sections WT 18(1)(a), WT 18(2), WT 39 proviso
Asst. Year 1968-69, 1969-70, 1970-71
K.S. Paripoornan, C.J.; Naresh Kumar Sinha & Ashok Kumar Ganguly, JJ.
Taxation Cases Nos. 243 to 245 of 1980
19th May, 1994
Counsel Appeared
K.K. Vidyarthi & S.K. Sharan, for the Revenue : L.K. Bajla, P.K. Sinha & R.R. Tiwari, for the Assessee
ASHOK KUMAR GANGULY, J.:
This is a reference at the instance of the Revenue. The question which has been referred to this Court under s. 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as “the said Act”), is set out below :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalties imposed under s. 18(1)(a) of the WT Act, 1957, on the ground that no reasonable opportunity of being heard was given by the successor WTO before passing the order imposing penalties under s. 18(1)(a) of the aforesaid Act to the assessee for the asst. yrs. 1968-69 to 197071 ?”
2.The facts of this case, which are not very much in dispute, are stated as follows : For the late filing of the WT returns, penalty proceedings were initiated against the assessee for the asst. yr. 1968-69, 1969-70, 1970-71. On or about 14th March, 1973, three similar show cause notices were issued by Mr. N. Dubey, the concerned WTO in respect of the aforesaid three assessment years calling upon the assessee to show cause on or before 8th May, 1973, why penalty should not be levied. The assessee did not respond to those show cause notices. Pursuant to those show cause notices, no penalty was, however, imposed by Shri Dubey either on 8th May, 1973, or thereafter. Mr. Dubey was thereafter succeeded by another WTO, namely, Smt. C. Merwar. The matter was thus kept pending. It is an admitted position that no notice or intimation was ever given to the assessee of the fact that the original officer, who issued the show cause notices, has been succeeded by another officer. Thereafter, on or about 26th March, 1975, Smt. C. Merwar levied a penalty of Rs. 481 in respect of the asst. yr. 1968-69, a penalty of Rs. 14,399 for the asst. yr. 1969-70 and a penalty Rs. 4,185 for the asst. yr. 1970-71. All these orders of levy of penalty have been passed under s. 18(1)(a) of the said Act. These three penalty orders were challenged in appeal by the assessee before the AAC unsuccessfully. Thereafter, the assessee filed WTA Nos. 118 to 120 (Patna) of 1978-79 before the Tribunal and contended, inter alia, that after the issuance of show cause notice, the case remained pending for about two years and the WTO, who issued the show cause notices, was succeeded by another and the assessee was not put on notice of the fact that the original officer has been succeeded by another officer. It was also contended that the assessee was not given a reasonable opportunity of being heard by the succeeding officer, Smt. C. Merwar, who imposed the penalty. As such the penalty orders are bad. These contentions found favour with the Tribunal and it came to the finding that the assessee was not granted a reasonable opportunity of hearing before levy of the penalty and as such the penalty orders were annulled. Thereafter, at the instance of the Revenue, the aforesaid question was referred to the High Court for its decision. The matter was taken up by the High Court for hearing on 4th March, 1994. On that date, a Division Bench of this Court consisting of the Hon’ble the Chief Justice and Hon’ble Mr. Justice Naresh Kumar Sinha referred the matter to a larger Bench in view of the divergence of judicial opinion of different High Courts on the interpretation of s. 18(1) r/w s. 39 of the said Act and in view of the fact that a substantial question of law is involved in such interpretation. Accordingly, the matter was heard before this larger Bench.
The question involved in this reference relates to the interpretation of the scope of ss. 18(1)(a), 18(1)(b), 18(2) and 39 of the said Act. For a proper appreciation of the points involved, those sections of the said Act are set out below : “18 (1) If the WTO, AAC, CWT(A) or Tribunal in the course of any proceedings under this Act is satisfied that any person— (a) has without reasonable cause failed to furnish the return which he is required to furnish under sub-s. (1) of s. 14 or by notice given under sub-s. (2) of s. 14 or s. 17, or has without reasonable cause failed to furnish within the time allowed and in the manner required by sub-s. (1) of s. 14 or by such notice, as the case may be; or (b) has without reasonable cause failed to comply with a notice under sub-s. (2) or sub-s. (4) of s. 16; or …. (2) No order shall be made under sub-s. (1) unless the person concerned has been given a reasonable opportunity of being heard. 39. Whenever in respect of any proceedings under this Act any WT authority ceases to exercise jurisdiction and is succeeded by another who has and exercises such jurisdiction, the authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor : Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.” Almost similar provisions relating to levy of penalty including the procedural safeguards against such levy are found in other taxation laws, namely, ss. 274 and 129 of the IT Act, ss. 17, 17(2), 17A and 17A(4) of the GT Act as also s. 10A(i) of the Central ST Act, 1956.
On a glance at the provisions of s. 18(1)(a) and 18(1)(b) of the said Act, it is clear that the levy of penalty contemplated under those sections does not by way of a legislative mandate fasten an absolute liability on the assessee concerned. The imposition of penalty is at the discretion of the officer concerned on a relevant consideration of various factors. In other words, even in case of a default contemplated under ss. 18(1)(a) and 18(1)(b) of the said Act, levy of penalty is not a must, inasmuch as, it is clear from the wording of those sections that no penalty shall be imposable if the assessee concerned shows that there was a reasonable cause for the failure referred to in those sections. About the existence or otherwise of a reasonable cause, the concerned assessee is, therefore, entitled to offer a factual explanation and it is incumbent upon the officer concerned to be satisfied about the existence or the absence of the reasonable cause in the context of the explanation offered. It goes without saying that the concerned officer in arriving at his satisfaction in such a situation is acting in a quasi- judicial capacity and the proceeding being one for imposition of penalty is a quasi-criminal one. Therefore, the satisfaction has to be reached by the concerned officer objectively and on consideration of relevant and germane materials only and to the total exclusion of extraneous and irrelevant considerations. Today this position in law is far too well settled to require reiteration of any authority and this Court proceeds to decide the questions involved in this case on the aforesaid basic assumption of the legal position.
It is in the background of the statutory exercise of power of the officer concerned, the Court has to consider and examine the scope, content and the gist of the right given to the person concerned under s. 18(2) of the said Act. The right given is a very valuable one, namely, the right of getting a reasonable opportunity of being heard. The said right is a facet of one of the well known principles of natural justice, namely, audi alteram partem. Now, the controversy here is over the exact connotation of the word “heard” occurring in s. 18(2) of the said Act—whether it means to be heard “orally” and through ears or whether hearing in the present context means a mere consideration of the case as made out in written representation. Inextricably mixed up with the consideration of the above question is an incidental query, namely, whether such an oral hearing can be given only on the request of the person concerned or whether under the scheme of the said Act it is an implied obligation of the concerned authority to offer an opportunity of an oral hearing to the person affected. In this context, the interpretation of s. 39 of the said Act assumes very great significance. Sec. 39 of the said Act deals with the effect of transfer of authorities during the pendency of a proceeding. It provides that in such a case, when an authority initiating the proceeding is succeeded by another, the authority so succeeding may continue the proceeding from the stage at which the proceeding was left by the predecessor but the succeeding officer can do so subject to certain rights given to the assessee. The proviso gives a right to the assessee to demand that before the proceeding is so continued by the succeeding officer, the previous proceeding or part thereof may be reopened or that before any order is passed against him, he may be reheard. This condition obviously implies and postulates that before the assessee can demand the right given to him under the proviso, he must necessarily have a right to be put on notice of the two facts, namely : (a) that the previous authority who was so long continuing the proceeding has been succeeded by another officer; and (b) that the officer so succeeding wants to continue the proceeding from the stage at which the proceeding was left by his predecessor.
It is upon his being informed of the aforesaid two facts, that the assessee can make an effective exercise of his right to demand that the previous proceeding or part thereof may be reopened or that he may be reheard before a final order is passed in the proceeding. This is an opportunity of hearing at a pre-decisional stage.
It is faintly argued on behalf of the Revenue that it may not be convenient for the Department to inform the assessee in such cases. It may be so. But we know that often justice and convenience are not on speaking terms. Therefore, this plea of the Revenue cannot be accepted in view of the statutory provision now under consideration. I am compelled to take this view that the obligation of the concerned authority to inform the assessee of the facts stated at (a) and (b) above is inbuilt in s. 39 of the said Act. I am of this view primarily for the reason that transfer of officers, while a proceeding is pending, is an official act of which the assessee can have no clue unless he is informed. Therefore, in a given case the valuable safeguard and right given to the assessee will be defeated if he is not informed of the facts pointed out at (a) and (b) above. Such a valuable right given to the assessee under the proviso to s. 39 of the said Act cannot be made to depend on the mere chance of his being informed. Therefore, the obligation of the Revenue to inform the assessee is inherent in the very scheme of s. 39 of the said Act.
Apart from that, the other compelling reason which weighs with me in taking this view is the well-known principle of statutory construction that while construing a provision which creates a right, the Court will always lean in favour of a construction which saves the right rather than the one which defeats it. Francis Bennion in his treatise “Statutory Interpretation”—Second edition (Butterworths), at page 411 and s. 198 stated this principle in the following words : “It is a rule of law that the legislator intends the interpreter of an enactment to observe the maxim ut res magis valeat quam pareat; so that he must construe the enactment in such a way as to implement, rather than defeat, the legislative purpose.” I am further emboldened to take this view having regard to the fact that s. 39 of the said Act provides a salutary safeguard which is attracted even in case of levy of penalty. Here again, I quote the following passage at page 573, s. 271 from Bennion’s treatise (supra), to illustrate the principle of construction of safeguards in a penal statute : “It sometimes happens that a penal enactment contains provisions giving relief from the imposed penalty in specified cases. It may be clear that a particular detriment is imposed, unless the case can be brought within a problematical exception. Here the presumption against doubtful penalization requires that the exception be construed liberally (that is in favour of the subject). If it is doubtful whether an exception to a penalty applies, it is doubtful whether the penalty itself applies.” Keeping those principles in mind, I am of the view that reasonable opportunity of hearing mentioned in s. 18(2) of the said Act means a reasonable opportunity of oral hearing and similarly “reheard” mentioned in s. 39 of the said Act would mean reasonable opportunity of “reheard”. This construction would obviously flow from a combined reading of the safeguards given in s. 18(2) with s. 39 of the said Act. In other words, if the legislative intent of giving a reasonable opportunity of hearing is confined merely to a consideration of the written representation without an oral hearing, in that case there is no meaning in giving an opportunity of reopening of the case or an opportunity of being reheard before the succeeding officer. To put it differently, if the legislative intent behind the expression “hearing” in s. 18(2) of the said Act does not mean a personal and an oral hearing, in that case, the succeeding officer can continue with the proceeding on the basis of the materials on record and there is no purpose in giving a right to the assessee to demand a reopening of the proceedings or demand a rehearing. The legislative intent behind giving to the assessee a right of reopening of the proceeding or a right of rehearing in it becomes meaningful only if the right of hearing given in s. 18(2) of the said Act is construed as a right of oral and personal hearing. Therefore, what was implicit in s. 18(2) of the said Act becomes explicit on a combined reading of s. 18(2) with s. 39 of the said Act. Any other construction, in my view, will dilute and water down the procedural safeguard given to an assessee in the penal provision of a taxing law and such a construction which has the effect of weakening and diffusing the protection given to a subject in a penal provision must be avoided.
7. In the view which I am taking, I am supported by the decision of the Andhra Pradesh High Court in the case of Anantha Naganna Chetty vs. CIT (1970) 78 ITR 743 (AP). That was a case of penalty proceeding under s. 28(3) of the Indian IT Act, 1922 r/w s. 5(7C) of the said Act. Those were the corresponding provisions of ss. 274 and 129 of the IT Act, 1961. The Division Bench of the Andhra Pradesh High Court in that case while construing thprovisions of s. 5(7C) held as follows : “It is not disputed that in very many cases the penalty proceedings are kept in abeyance awaiting the final result of the assessment proceedings and, although notice under s. 28(3) is served upon the assessee and he filed a written explanation, for months and sometimes years together the penalty proceedings are kept in abeyance and the assessee has no knowledge as to what has happened or is happening except when he gets the final order made in the proceedings served upon him. In such a case, if the assessee, due to a long lapse of time, assumes that his explanation perhaps was found to be satisfactory and proceedings were dropped, he cannot be said to be altogether wrong in such assumption. If officer after officer succeed when proceedings are thus pending and the assessee does not even know about such transfers then how is he to exercise his right to demand reopening or rehearing if he has no notice that the succeeding officer proposes to continue the proceedings. The assessee must, therefore, be told about the intention of the succeeding officer to continue the proceedings and who can tell him so, except the succeeding officer who proposes to continue the proceedings and who also knows that he cannot continue the proceedings if he is told by the assessee that he wants him to reopen the case or give him a rehearing. It is thus inherent in the situation that the succeeding officer should give notice to the assessee not under s. 28(3) but under s. 5(7C) itself intimating him that the succeeding officer proposes to continue the proceedings. This intimation alone would provide the assessee with an opportunity to exercise or decline to exercise the right given to him by the first proviso to s. 5(7C). The second proviso lends considerable support to such a construction. The notice is thus necessarily implied in the provisions of s. 5(7C) as the right to continue the proceedings is made dependent upon the assessee’s right of demanding reopening or rehearing of the case. It cannot be assumed that the Legislature has given with one hand right to the assessee to demand reopening or rehearing and has taken away that right with the other by not intending to inform him about the opportunity to exercise such a right by not expecting any notice to be given to the assessee by the succeeding officer of his intention to continue the proceedings. Any such interpretation would mean that the enactment has conferred on the assessee a mere illusory right.
In this connection, it is well to remember that the proceedings under the Act, which can be said to fall within the purview of s. 5(7C), are of quasi-judicial character. The penalty proceedings in any case are of a quasi-criminal nature. It can, therefore, safely be presumed that the Legislature while conferring the power on the succeeding officer to continue the proceedings from the stage where it was left by his predecessor thought it proper to provide an opportunity to the assessee to demand the reopening or rehearing of the case and that is why the power to continue the proceedings is made subject to such a right. The notice, therefore, for the exercise of such right becomes necessary.”
The learned Judges in Anantha Naganna Chetty’s case (supra), after considering the famous treatise of Maxwell and Craies on the Interpretation of statutes came to the following conclusion at page 751 : “We are, therefore, satisfied that even though s. 5(7C) does not in terms of expressly provide for any notice by the succeeding officer to the assessee informing him of his intention to continue the proceedings from the stage at which his predecessor has left, by necessary implication it provides for such an intimation. We must, we think infer from the power given to the succeeding officer that such a notice was intended by the Legislature. When the Legislature has directed something to be done, it must be considered to have empowered something ancillary to be done which is necessary in order to accomplish the ultimate object of s. 5(7C). What must follow is that the succeeding officer must give notice to the assessee before he decides to continue the proceedings from the stage where it was left by his predecessor.”
I am in respectful agreement with the aforesaid statement of law and they apply also to the interpretation of s. 39 of the said Act. There is a still more recent judgment of the Calcutta High Court in the case of CIT vs. Smt. Chitra Mukherjee (1981) 21 CTR (Cal) 254 : (1981) 127 ITR 252 (Cal). The Hon’ble Judges of the Division Bench, relying on the aforesaid decision of the Andhra Pradesh High Court in Anantha Naganna Chetty’s case (supra), came to the conclusion that penalty proceedings under s. 271(1)(a) of the IT Act, 1961, were not only quasi- judicial but also quasi-criminal and the Revenue in order to impose penalty has to discharge its onus in strict compliance with the law. The learned Judges of the Division Bench in the case of Smt. Chitra Mukherjee (supra) had gone to the extent of holding that even in a case where there is no response from the assessee to the notice under s. 274 of the IT Act issued by the predecessor ITO, which is similar to the factual position in this case, the successor ITO has no authority to pass an order of penalty under s. 271(1)(a) of the IT Act without giving the assessee a fresh opportunity of being heard. I follow the ratio of the said judgment in Chitra Mukherjee’s case (supra).
In another decision of a Division Bench of the Punjab & Haryana High Court in the case of Ram Saran Das Kapur vs. CIT (1970) 77 ITR 298 (P&H), the learned Judges of the Division Bench on a construction of ss. 28 and 5(7C) of the Indian IT Act, 1922, came to the conclusion that the hearing contemplated under s. 28 of the Act is a personal hearing. At page 303, the said Division Bench held as follows : “It is well-known that no amount of written representation, howsoever detailed, can, in all cases, be treated as an equally effective substitute of a personal hearing. It is easier for an assessee to persuade an assessing authority to his point of view by removing his doubts and by answering his questions at a personal hearing, then by merely availing of the cold effect of a written representation.” Then again in the same page, their Lordships were of the view that : “So far as personal hearing is concerned, it seems to us to be plain that such a hearing can have some meaning only if it is given by the very person who has to ultimately decide the matter. Oral hearing by one officer cannot possibly be of any advantage to his successor in deciding a case. To hold otherwise would amount to saying that the force of a hearing is equal to a real, genuine and effective hearing.” In coming to the aforesaid conclusion their Lordships relied on the judgment of the Supreme Court in Gullapalli Nageswara Rao vs. Andhra Pradesh State Road Transport Corporation AIR 1959 SC 308, where a similar question arose relating to the duty of the State Government to give a personal hearing to objectors against the scheme framed under Chapter IV-A of the Motor Vehicles Act (4 of 1939). The procedure which had been prescribed by the State of Andhra Pradesh for the hearing of such objections was that the Secretary to the Government had to give personal hearing, but the decision had to be given by the Chief Minister. Their Lordships of the Supreme Court in that case held that— “Personal hearing enables the party appearing at such hearing to persuade the authority concerned by reasoned arguments to accept his point of view. Therefore, in the fitness of things, it is the same authority which has to decide which must hear.”
In the context, the learned Judge of the Supreme Court was pleased to observe as follows : “If one person hears and another decides, then personal hearing becomes an empty formality.” On the same parity of reasoning, I am of the view that the hearing contemplated under s. 18(2) of the said Act is a personal hearing. In order that such a personal hearing does not become “an empty formality”, the assessee has been given under s. 39 of the said Act a right of rehearing before the succeeding officer inasmuch as the succeeding officer has not heard him at the stage of hearing under s. 18(2) of the said Act. Any other construction would defeat the purpose of hearing which is an oral hearing meant under s. 18(2) as also under s. 39 of the said Act.
It is well known that principles of natural justice are not, in the inimitable words of Lord Bridge, “engraved on tablets of stone”. What are the requirements of the principles of natural justice have been very succinctly expressed by Lord Bridge in the case of Lloyd vs. McMahon, a decision of the House of Lords reported in (1987) 1 All ER 1118. At page 1161, of the said report Lord Bridge has equated the requirements of natural justice with those of fairness and has been pleased to observe as follows : “What the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision making body, the kind of decision it has to make and the statutory or other framework in which it operates. In particular, it is well established that when a statute has conferred on any body the power to make decisions affecting individuals, the Courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedural safeguards as will ensure the attainment of fairness.” Francis Bennion in his famous treatise “Statutory Interpretation”—Second edition (Butterworths), has also expressed the same view on page 739 (s. 329) which is set out below : “Procedural propriety is of more practical importance in relation to implied rather than express requirements. Here, it is linked to the concept of fairness or natural justice which in relation to any statutory requirement is, as Lord Denning put it, `implicit in the Act,” [Emphasis, italicised in print, supplied].
In the decision of Wiseman vs. Borneman (1971) AC 297 (HL), at pages 308-309, Lord Morris of Borth-y-Gest explained the principle in the following words : “….. that the conception of natural justice should at all stages guide those who discharge judicial functions is not merely an acceptable but is an essential part of the philosophy of law….Natural justice, it has been said, is only `fair play in action’.”
8. Under our Constitution, the apex Court has reiterated time and again that the principles of natural justice are a facet of Art. 14 of the Constitution of India. Therefore, in construing the provisions of ss. 18(2) and 39 of the said Act, I must be guided by the constitutional principles emanating from Art. 14 of the Constitution of India. The Supreme Court has also equated the principles of natural justice with fairness in action and it has been consistently held that “fairness in action” is an inbuilt content of Art. 14 of the Constitution of India. Reference, in this connection, is made to the Constitution Bench judgment of the Supreme Court in the case of Delhi Transport Corpn. vs. DTC Mazdoor Congress AIR 1991 SC 101 At paragraph 260, at page 195, of the majority judgment of the said case, the learned Judges of the Supreme Court came to this conclusion : “Maneka Gandhi’s case AIR 1978 SC 597, is also an authority for the proposition that the principles of natural justice are an integral part of the guarantee of equality assured by Art. 14 of the Constitution. In Union of India vs. Tulsiram Patel (1985) Suppl. 2 SCR 131, at page 233 : AIR 1985 SC 1416, at page 1460, this Court held that the principles of natural justice have thus come to be recognised as being a part of the guarantee contained in Art. 14 because of the new and dynamic interpretation given by this Court to the concept of equality which is the subject-matter of that article. Shortly put, the syllogism runs thus :….. The principles of natural justice, however, apply not only to the legislation and State action but also where any Tribunal, authority or body of men, not coming within the definition of `State’ in Art.
12, is charged with the duty of deciding a matter. In such a case, the principles of natural justice require that it must decide such a matter fairly and impartially”. A similar view has been echoed in a still more recent judgment of the Supreme Court in D.K. Yadav vs. J.M.A. Industries Ltd. (1993) 3 SCC 259, at page 267, paragraph 8, the learned Judges have come to this conclusion : “The cardinal point that has to be borne in mind, in every case, is whether the person concerned should have a reasonable opportunity of presenting his case and the authority should act fairly, justly, reasonably and impartially. It is not so much to act judicially but to act fairly, namely, the procedure adopted must be just, fair and reasonable in the particular circumstances of the case. In other words, application of the principles of natural justice that no man should be condemned unheard intends to prevent the authority from acting arbitrarily affecting the rights of the concerned person.”
9. In the instant case, fairness in action in the context of the penalty proceedings would demand that the assessee who is charged with the levy of penalty is given a reasonable opportunity of oral hearing. It is only by means of an oral hearing that the assessee can have an opportunity of persuading the officer concerned that he has a reasonable cause for the default. Having regard to the provisions for levy of penalty, as has been discussed earlier, the assessee can plead reasonable cause as the justification for late furnishing of return. The word “reasonable cause” has not been defined under the Act but it could receive the same interpretation which is given to the expression “sufficient cause”. Therefore, in the context of the penalty provisions, the word “reasonable cause” would mean a cause which is beyond the control of the assessee. “Reasonable cause” obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides, from furnishing the return in time. It is, however, made clear that I am not giving any exhaustive definition of the phrase ? reasonable cause” occurring in ss. 18(1)(a) and 18(1)(b) of the said Act. In other words, such an attempt is unnecessary and futile. The reasonableness of a cause will depend upon the facts and circumstances of each penalty case. All that I want to emphasise is that for convincing the officer concerned about the reasonableness of the cause which prevented the assessee from furnishing the return in time, an oral hearing is a must. An oral hearing is necessary not only on grounds of fairness but also for enabling the assessee concerned to record his case which has been described as to “blow off steam”. Such an oral hearing is necessary on grounds of public policy and in public interest also as has been described by Professor H.W.R. Wade in his article. “The Twilight of Natural Justice” published in 1951 in Law Quarterly Review, Vol. 67, at page 103. Professor Wade observed that such an oral hearing is required in order to clear well-meaning ignorance or carelessness of the officer concerned. Professor Wade stated at page 106 of that article : “the rule is a safeguard not against perversity but against well-meaning ignorance or carelessness—a much more likely danger. The official endowed with power, is kept in the light leading strings of fundamental justice. If he is only made to look fairly at the facts, that is the best security against an unreasonable decision.”
In the said article Professor Wade has quoted with approval the observation of Lord Loreburn L.C., in the case of Board of Education vs. Rice (1911) AC 179 (HL). At page 182, of the said decision, Lord Loreburn summarised the requirement of fairness which must be observed by any decision-making authority : “It will, I suppose, usually be of an administrative kind; but sometimes it will involve matter of law as well as matter of fact, or even depend upon matter of law alone. In such cases, the Board of Education will have to ascertain the law and also to ascertain the facts. I need not add that in doing either they must act in good faith and fairly listen to both sides, for that is a duty lying upon every one who decides anything.” Therefore, the requirement of oral hearing must be insisted upon as a matter of public policy, namely, to prevent not only a perverse decision but also to secure a decision which is not vitiated by well-meaning ignorance or carelessness due to absence of oral hearing.
10. It is well-known that in modern times increasingly greater powers have been conferred upon the statutory authorities in administrative or quasi-judicial functioning. With the exercise of such functioning they are taking decisions which largely affect citizens in every sphere of their life. Therefore, in taking such a decision and for that matter, in taking a fair decision, it becomes all the more necessary to give an oral hearing to the party affected by the decision in question and as such a requirement of oral hearing is implicit with the concept of fairness in quasi-judicial functioning and even administrative. The same is also the opinion of Professor de Smith in his famous treatise in Judicial Review of Administrative Action (Fourth edition), 1980. At page 201 of the said treatise Professor S.A. de Smith pointed out : “it must be pointed out, however, that when the words `hearing’ or `opportunity to be heard’ are used in legislation, they nearly always denote a hearing at which oral submissions and evidence may be tendered”. Professor S.A. de Smith was pleased to further add at page 201 of the same treatise that “In the absence of clear statutory guidance on the matter, one who is entitled to the protection of the audi alteram partem rule is now prima facie entitled to put his case orally.” Reference, in this connection, may be made to the decision in R. vs. Immigration Appeal Tribunal (1977) 2 All ER 602 (QBD). In that case a deportation order was set aside by Queen’s Bench Division consisting of Lord Widgery C.J, Forbes and Slynn JJ., on the ground that there was no oral hearing given to the person affected. Their Lordships gave their conclusion at page 608 of the said report in the following words : “On the other hand, it is possible that if the applicant had an oral hearing before the Tribunal, on the hearing of his appeal, further matters could have been advanced on his behalf. In our judgment, he has been deprived of that opportunity. Whether anything new will emerge or whether he can persuade the Tribunal, of course remains to be seen and nothing in this judgment is intended to have any bearing on the question whether this is a case in which the power given under regulation 11(4) should be exercised. We do, however, consider that the right course is that the decision of the Tribunal should be quashed and the matter should go back for the Tribunal to hear the appeal.” In this connection, further reference may be made to the decision of the U.S. Supreme Court in Goldberg vs. Kelly (1970) 397 US 254. At page 269 of the report, the law has been so stated : “The opportunity to be heard must be tailored to the capacities and circumstances of those who are to be heard. Written submissions are an unrealistic option for most recipients who lack the educational attainment necessary to write effectively and who cannot obtain professional assistance. Moreover, written submissions do not afford the flexibility of oral presentations; they do not permit the recipients to mould his arguments to the issues the decision makers appear to regard as important. Particularly where credibility and veracity are at issue, as they must be, in many termination proceedings, written submissions are a wholly unsatisfactory basis for decision”. [Emphasis, italicised in print, supplied] I am, with great respect, accepting the said statement of law as correctly summarising the requirement of the opportunity of being heard contemplated under ss. 18(2) and 39 of the said Act.
11. The phrase “reasonable opportunity of being heard” has not been defined either in the Constitution or under the provisions of the said Act but the said expression has been construed by a Constitution Bench judgment of the Supreme Court in the celebrated decision of Khem Chand vs. Union of India AIR 1958 SC 300. The same phrase, namely, “reasonable opportunity of being heard” occurs in Art. 311(2) of the Constitution of India. The said procedural safeguards have also been engrafted in the Constitution in connection with the imposition of penalty on a member of the civil services. In other words, the said safeguard under the Constitution also occurs in connection with the provision relating to imposition of penalties. Therefore, the elucidation and judicial interpretation which the said phrase has received by the Supreme Court, in my view, is applicable in connection with the penal provisions which are now being considered in this judgment. While construing the ambit and scope of “reasonable opportunity of being heard”, the Constitution Bench of the Supreme Court in Khem Chand’s case has been pleased to observe as follows at page 307 : “(a) an opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based; (b) an opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witnesses in support of his defence; and finally (c) an opportunity to make his representation as to why the proposed punishment should not be inflicted on him, which he can only do if the competent authority, after the enquiry is over and after applying his mind to the gravity or otherwise of the charges proved against the Government servant tentatively proposes to inflict one of the three punishments, and communicates the same to the Government servant.”
Though there are some vital contextual differences between the grant of reasonable opportunity of being heard to a member of the civil services and to an assessee under the said Act, substantially and on principle it is the same, namely, grant of reasonable opportunity of hearing against imposition of penalty. In such a context, the Supreme Court has by the word “hearing” obviously meant an oral hearing. I respectfully adopt the said elucidation of the scope of hearing in respect of the legislative intent behind the expression “reasonable opportunity of being heard” occurring in s. 18(2) of the said Act r/w s. 39 thereof.
I am adopting the aforesaid interpretation in view of the fact that the word “reasonable opportunity of being heard” must be construed in the background that penalty cannot be imposed by the authorities concerned where an assessee can satisfy the concerned officer that he had reasonable cause for the delayed furnishing of the return. It has been observed by the Supreme Court in Hindustan Steel Ltd. vs. State of Orissa AIR 1970 SC 253 in the following words : “Penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.” I hold that before levying penalty under s. 18(1)(a) of the said Act, the same conditions must be fulfilled. Therefore, the officer concerned must address himself to the aforesaid questions and these questions can be decided satisfactorily only upon an oral hearing being given to the assessee and not otherwise. A decision of the above questions without an oral hearing whether such hearing is demanded or not, will be an unfair decision. Any decision which is unfair and arbitrary falls foul of the principles of Art. 14 of the Constitution of India which envelops within itself the requirement of fairness which, in turn, in these days is a requirement of the principles of natural justice. Therefore, having regard to the developments of the principles of natural justice as well as the dynamic interpretation of Art. 14 of the Constitution by the apex Court in a series of decisions, it is no longer open to the WT authorities acting under s. 18(1)(a) r/w s. 18(2) of the said Act to decide the liability to penalty of an assessee merely on the basis of consideration of a written representation given by the assessee. In my opinion, he must offer the assessee an opportunity of oral hearing and if that opportunity is not availed of by the assessee, that is of course a different matter but without offering the assessee an opportunity of oral hearing, the decision made on the basis of consideration of the written representation only, is bound to be an unfair one and, in my view, such a decision does not satisfy the mandatory requirement of s. 18(2) of the said Act. In view of the fact that I have taken the aforesaid view about the obligation of the WTO where he is acting in discharge of his statutory power under s. 18(1)(a) r/w s. 18(2) and s. 39 of the said Act, it is not possible for me to approve the contrary view taken in the three decisions of the Patna High Court in Murlidhar Tejpal vs. CIT (1961) 42 ITR 129 (Pat), CWT vs. Gilliram Suggiram (1990) 89 CTR (Pat) 188 : (1990) 186 ITR 445 (Pat) and CIT vs. Laljidas Agarwalla (1991) 98 CTR (Pat) 278 : (1991) 190 ITR 429 (Pat). I, on the other hand, approve the ratio of the decision of the Andhra Pradesh High Court in Anantha Naganna Chetty vs. CIT (supra) and the decision of the Calcutta High Court in the case of CIT vs. Chitra Mukherjee (supra) and the decision of the Kerala High Court in CIT vs. M. Sreedharan (1991) 190 ITR 604 (Ker).
12. In view of the discussions made above, this Court answers the question in the affirmative and in favour of the assessee and against the Revenue.
K.S. PARIPOORNAN, C.J. :
I agree.
NARESH KUMAR SINHA, J. :
I agree.
[Citation : 211 ITR 472]
