COMMISSIONER OF INCOME TAX Vs. SUNIL KUMAR GOEL

JUDGEMENT

(1.) IN this appeal filed under Section 260A of the IT Act, 1961 (for short, 'the Act'), the CIT, Rohtak, has prayed for determination of the following question of law : 'Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal was justified in deleting the penalties imposed under Sections 271D and 271E of the IT Act, 1961, amounting to Rs. 1,45,000 and Rs. 95,000, respectively, by holding that the assessee has made transactions of cash bona -fidely and under ignorance of the provisions of income -tax law, ignoring the fact that 'ignorantia legis non excusat' (ignorance of law is no excuse) ?'

(2.) THE respondent (hereinafter described as the assessee) filed return for the asst. yr. 1991 -92 on 23rd July, 1992 declaring an income of Rs. 23,880. The AO finalised the assessment under Section 143(3) of the Act at a total income of Rs. 73,590. During the course of the assessment proceedings, it was noticed that the assessee had received cash deposits amounting to Rs. 1,45,000 from Shri Rajesh Goel, proprietor of M/s Rajesh Enterprises between 26th April, 1990 and 12th Sept,, 1990. It was also noticed that the assessee had repaid the loans of Rs. 95,000 to one Shri Rajesh Kumar Goel on different dates. These transactions were treated to be violative of Sections 269SS and 269T of the Act. Therefore, penalty proceedings were initiated by the AO and vide two separate orders passed on 11th Oct., 1993, he imposed penalty of Rs. 1,45,000 and Rs. 95,000 under Sections 271D and 271E, respectively, Commissioner of Income -tax (Appeals), Faridabad [for short, 'CIT(A)'], dismissed the appeals filed by the assessee and confirmed the penalty. However, in the further appeal, the Income -tax Appellate Tribunal, Delhi Bench, 'C', New Delhi (for short, 'the Tribunal'), accepted the plea of the assessee and directed the AO to delete the penalties by making the following observations : 'We have considered the facts and circumstances of the case presented before us. We have also perused the decision of the Tribunal, rendered in the case of Vir Sales Corporation. The decision is direct on the point. No contrary decision was brought before us. In the instant case, a transaction was between the sister -concerns. It was with a view to meet the business exigencies. It was under the bona fide belief and under the ignorance of relevant provision of law. We hope that it constitutes a valid excuse and reasonable cause within the meaning of Section 273B r/w Sections 271D, 271E of the IT Act, 1961. Accordingly, we direct the AO to delete the penalties.'

(3.) THE principles of natural justice are multi -dimensional and the Courts have applied different facets of these principles in different cases. In the recent past, a new dimension has been added to the principles of natural justice, namely, that every quasi -judicial authority/Tribunal must not only record reasons in support of the order they make, but such reasons should also be communicated to the affected party. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The necessity of giving reasons flows from the concept of rule of law which constitutes one of the cornerstones of our constitutional set up. The administrative authorities charged with the duty to act judicially cannot decide the matters on considerations of policy or expediency. The requirement of recording of reasons by such authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimises arbitrariness in the decision making process. Another reason which makes it imperative for the quasi -judicial authorities to give reasons is that their orders are not only subject to the right of the aggrieved persons to challenge the same by filing statutory appeal and revision but also by filing writ petition under Article 226 of the Constitution. Such decisions can also be challenged by way of appeal under Article 136 of the Constitution of India. The High Courts have the power to issue writ of certiorari to quash the orders passed by a quasi -judicial authority/Tribunal. Likewise, in appeal, the apex Court can nullify such order/decision, These powers can be effectively exercised by the superior Courts only if the order under challenge contains reasons. If such order is cryptic and devoid of reasons, the Courts cannot effectively exercise the power of judicial review and we cannot countenance a situation in which the administrative authorities vested with the power to decide the rights of the parties may stultify the power of the Court simply by not recording reasons in support of their decisions and/or by refraining from communicating such reasons to the affected person. This is the reason why the Courts have insisted on rigorous compliance of the requirement of recording of reasons and communication thereof by every quasi -judicial authority. Some of the judicial precedents, which can appropriately be cited to support the abovementioned proposition are : 1. Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala AIR 1961 SC 1669; 2. Bhagat Raja v. Union of India and Ors. AIR 1967 SC 1606; 3. Travancore Rayon Ltd. v. Union of India AIR 1971 SC 862; 4. Mahabir Prasad Santosh Kumar v. State of UP AIR 1970 SC 1302;