V.C Daga, J.:— This petition is directed against the order dated September 4, 1986 (exhibit E), passed by the Commissioner of Income-tax, Central-II, Mumbai, under section 273A of the Income-tax Act, 1961 (“the Act” for short), read with section 18B of the Wealth-tax Act, 1957 (“the W.T Act” for short) as being arbitrary, perverse and self-contradictory.
The facts:
2. The facts necessary to appreciate the rival contentions may be stated briefly are as under:
The petitioner is the karta of Maneklal D. Shah, Hindu undivided family (HUF), which is carrying on proprietary business of dealing in polyester yarn in the name of M/s. Amsons Export Corporation. Some time in the month of November, 1978, a search operation was carried out in the office as well as residential premises of the assessee and its karta, Mr. M.D Shah. The petitioner contended that nothing incriminating was found during the search operation carried out under section 132 of the Act.
3. The petitioner submitted that at no point of time any material much less legally acceptable material was brought on record by the tax authorities/tax department to establish that the assessee had earned any income over and above those shown in the return prior to settlement. However, the petitioner claimed to have moved an application for settlement on January 20, 1981, under section 273A of the Act in good faith to avoid tax litigation and sought settlement of its assessment for the accounting years 1972-73 to 1979-80. Accordingly, the petitioner filed a statement wherein it offered for assessment a sum of Rs. 3,74,756 spread over the period from the assessment years 1973-74 to 1979-80 and prayed for permission to capitalise the income disclosed and that the assessment be completed on the above agreed basis. This application was moved by the petitioner without prejudice to its legal rights and remedies. It was specifically pleaded that in case the settlement fell through no adverse inference should be drawn while making regular assessments for any of the assessment years and it would be made on its own merits. The petitioner in the said application had also sought waiver of penalty and/or interest leviable in respect of such income.
4. The petitioner, on July 21, 1981, moved another application under section 18B of the Wealth-tax Act for waiver of penalty leviable under the said Act. A similar plea, similar to the plea raised in the application referred to hereinabove, filed under section 273A of the Act, was also made by the petitioner in this application. The petitioner submitted that pursuant to the above two applications extensive discussions had taken place between the petitioner and the first respondent on the amount of income. Ultimately, in the month of July, 1981, a settlement was reached between the petitioner and the Department. In the settlement, it was settled that an amount of Rs. 15.50 lakhs be added to the income of the petitioner for the assessment years 1972-73 to 1979-80, the backdrop thereof is not necessary for the decision of this petition.
5. Being aggrieved by the order dated September 4, 1986 (exhibit E), the petitioner invoked the writ jurisdiction of this court under article 226 of the Constitution of India, challenging the said order on various grounds set out in the petition. No affidavit-in-opposition is filed on record in spite of lapse of more than 16 years from the date of presentation of this petition.
Findings:
6. Learned counsel for the petitioner took us through various grounds raised in the petition and tried to substantiate the same by various precedents. Since this case is being remanded back to the Commissioner of Income-tax for consideration afresh, we do not propose to dwell on various contentions raised in the petition and keep all the said questions open for reconsideration by the above authority.
7. It is brought to our notice that while considering the waiver of the penalty under section 273A of the Act, the Commissioner of Income-tax has not taken into consideration, the agreed understanding/settlement, arrived at by and between the parties. The fact that there was a settlement between the parties is not in dispute. Xerox copy of settlement dated July 24, 1981, is placed on record along with the affidavit dated February 8, 2002. In the writ petition filed in the year 1986, specific allegations and positive statement in this behalf were made by the petitioner. No counter-affidavit, to controvert the allegations made in the petition, has been filed, nor is any material placed on record to deny the said settlement dated July 24, 1981. We specifically asked learned counsel for the respondent whether they desire to file any reply to controvert or deny the existence of such settlement. The answer was in the negative. In this view of the matter, the settlement between the parties stands proved. The same can very well be read in support of the contentions raised by the petitioner. The said settlement has been signed by three officers of the income-tax Department, namely, Income-tax Officers, Central Circle XIX, Inspecting Assistant Commissioner, Central Range-IV, Commissioner of Income-tax, Central-II.
8. As assured in the settlement, it was obligatory on the part of the first respondent to move the Board for their approval but it appears that no steps were taken in this behalf or at any rate no material is produced before us to show that any approach in this behalf was made to the Board. No explanation for this inaction on the part of the first respondent is forthcoming. Thus, in spite of the settlement arrived at the petition under section 273 A has been rejected. The second aspect of the submission is based on the impugned order passed on the application under section 18B of the Wealth-tax Act. A perusal of the said order would show that for some of the years, penalty has been sustained for 18 per cent, and for other years penalty has not been waived. No reasons are to be found in the order as to why penalty for some years was sustained totally and for some years was reduced to 18 per cent., while exercising power, under the Act. Giving reasons is an essential element of administration of justice. A right to reasons is, therefore, an indispensable part of a sound system of judicial review. A reasoned decision is not only for the purpose of showing that the citizen is receiving justice, but also a valid discipline for the authority itself. Therefore, stating of reasons is one of the essentials of justice. The appellate authority is enjoined and it is incumbent upon it to appreciate the evidence consider the reasoning of the primary authority and assign its own reasons as to why it disagrees with the reasons and findings of the primary authority. Unless adequate reasons are given, merely because it is an appellate authority, it cannot brush aside the reasoning or findings recorded by the primary authority. The order should be self-explanatory and should not keep the higher court guessing for reasons. The reasons provide a live link between the conclusion and the evidence. That vital link is the safeguard against arbitrariness. It gives an opportunity to the higher court to see whether or not the subordinate court or authority or the Tribunal considered the relevant material. Since no reasons are found in the order, we are left with no other alternative but to quash and set aside the impugned order to the extent it is challenged and to remit the proceedings back to the Commissioner of Income-tax, Central-II, Mumbai, for hearing and consideration afresh on the merits.
9. In this view of the matter, rule is made absolute in terms of prayer (a) of the petition and the matter is remanded to the Commissioner of Income-tax for fresh decision in accordance with law. In the facts of this case, there will be no order as to costs.