9911796707
|
Home
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were: (i) Whether the power exercisable by the Central Board of Direct Taxes ("the Board") under section 119(2)(b) of the Income-tax Act, 1961 ("the Act") is an administrative power or a quasi-judicial power? (ii) Whether it was incumbent upon the Board to afford an opportunity of hearing to the assessee before passing an order under section 119(2)(b) of the Act? 2. ISSUE-WISE DETAILED ANALYSIS Issue (i) and (ii): Nature of Power under Section 119(2)(b) of the Act and Requirement of Hearing Relevant Legal Framework and Precedents: Section 119 of the Income-tax Act empowers the Board to issue orders, instructions, and directions to other income-tax authorities for proper administration of the Act. Sub-section (1) limits the Board from directing any income-tax authority to make a particular assessment or interfere with appellate discretion. However, sub-section (2) carves out exceptions, allowing the Board, by general or special order, to authorize any income-tax authority (excluding Deputy Commissioner (Appeals) or Commissioner (Appeals)) to admit applications or claims for exemptions, deductions, refunds, or other reliefs after the prescribed period, to avoid genuine hardship. Clause (b) of sub-section (2) specifically empowers the Board to condone delay in filing returns or claims beyond the statutory period, on merits and in accordance with law. The Court referred to a prior decision in John Shalex Paints (P.) Ltd., where the issue of the nature of power under section 119(2)(b) was not directly considered. However, that case acknowledged that the Board applied its mind on merits and afforded oral and written hearings before rejecting the application. Court's Interpretation and Reasoning: The Court emphasized that when the Board exercises power under section 119(2)(b) affecting an assessee's right-such as condoning delay in filing a return-the power cannot be regarded as purely administrative. Instead, it possesses all the characteristics of judicial power, requiring the Board to exercise discretion based on relevant facts and circumstances. The Court held that such power is quasi-judicial in nature, necessitating that the Board's order be reasoned and not arbitrary. Since the Board's decision under this provision affects the assessee's right to have his return considered, the Court held that principles of natural justice apply. Consequently, the Board must afford the assessee an opportunity of hearing, which may be oral or through written submissions, particularly to respond to points raised against granting relief. Key Evidence and Findings: The factual matrix revealed that the assessee filed a delayed return for the assessment year 1985-86 and applied under section 119(2)(b) for condonation of delay. The Board forwarded the application to the Chief Commissioner of Income-tax with a request for a report, which was received and considered. However, the assessee was neither furnished a copy of the report nor informed of its contents. The Board then rejected the application by a communication dated July 17, 1990, without affording any hearing or opportunity to the assessee. Application of Law to Facts: Given the quasi-judicial nature of the Board's power under section 119(2)(b), the Court found that the Board failed to comply with the principles of natural justice by not affording any hearing or opportunity to the assessee to respond to adverse material. The rejection of the application based solely on information obtained from the Income-tax Officer, without notifying the assessee or allowing him to present his case, was held to be improper. Treatment of Competing Arguments: The Department contended that due to the volume of such applications, personal hearings to each applicant would be impractical. It argued that principles of natural justice would be satisfied if the points against the applicant were communicated and written submissions obtained. The Court accepted this procedural alternative as just and expedient, provided the applicant is made aware of the adverse points and given an opportunity to respond. However, in the instant case, no such opportunity was afforded. Conclusions: The Court concluded that the power under section 119(2)(b) is quasi-judicial and requires the Board to apply its mind with reasons and to afford an opportunity of hearing to the affected assessee. The failure to do so invalidated the Board's order rejecting the condonation application. 3. SIGNIFICANT HOLDINGS The Court held: "When an authority under the Act, namely, the Board, is required to exercise its power under the provisions of the Act affecting the right of an assessee, such exercise of power cannot at all be considered to be an administrative power... The order must be informed by reasons. It is not an arbitrary exercise of power. This power has all the traits of judicial power. Therefore, we are of the view that the power exercisable by the Board under clause (b) of sub-section (2) of section 119 of the Act is quasi-judicial in nature." Further, the Court emphasized: "When an authority discharges its quasi-judicial function, it goes without saying that it has to conform to the principles of natural justice. It has to afford an opportunity to the party who is going to be affected by the decision of the Board... the Board is required to afford an opportunity of hearing to the assessee, either oral hearing or through submission of written arguments with reference to the points made against the assessee for not granting the relief sought for by him." On procedural flexibility, the Court stated: "As long as the point held against the applicant is made known to him, and his say is obtained and the same is taken into consideration, the principles of natural justice are complied with." Finally, the Court quashed the impugned order and directed the Board to reconsider the application afresh in accordance with law and the observations made.
|
