Case Law Details
Dongfang Electric Corporation Ltd. Vs CIT (Telangana High Court)
The Telangana High Court decided a batch of writ petitions by common order, taking facts from WP No.35796 of 2024. The petitioner was assessed for Assessment Year 2013–2014, and an assessment order dated 18.05.2022 determined attributable income in India at 10%. Subsequently, a notice dated 16.06.2023 under Section 263 of the Income Tax Act, 1961 proposed revision of the percentage to 25%.
Earlier writ petitions challenging the Section 263 notice were withdrawn with liberty to avail the Direct Tax Vivad Se Vishwas Scheme, 2024 (“Scheme of 2024”). The petitioner filed an online application under Section 91 of the Scheme of 2024 after paying the requisite amount. According to Part-F of the application, an auto-generated amount of ₹2,07,58,934/- was refundable. However, the petitioner received a rejection order titled “rejection remarks,” stating that the disputes and taxes had been settled under the DTVSV 2020 scheme and that DTVSV 2024 does not override DTVSV 2020, hence Form-1 was rejected.
The petitioner contended that the rejection remarks were not properly worded and were cryptic. It was argued that Section 90 of the Scheme of 2024 contains a non-obstante clause giving it overriding effect over the Income Tax Act and any other law in force, including the Scheme of 2020. Reliance was placed on Section 94(2) to contend that tax is refundable if conditions are satisfied. The petitioner further argued that the counter-affidavit filed by the department sought to supplement the rejection order with new reasons, which is impermissible in view of the Constitution Bench decision in Mohinder Singh Gill.
The Revenue supported the rejection, contending that it was in accordance with law.
The Court held that, as per Mohinder Singh Gill, the validity of a statutory order must be judged on the reasons contained in the order itself and cannot be supplemented by fresh reasons in a counter-affidavit. Therefore, the Court confined its examination to the “rejection remarks.”
The Court observed that the first line of the rejection remarks was incomprehensible and not happily worded. The second reason stated that the Scheme of 2024 does not override the Scheme of 2020. The Court examined Section 90 of the Scheme of 2024, which contains a non-obstante clause and provides that, notwithstanding anything contained in the Income Tax Act or any other law for the time being in force, the amount payable shall be as specified.
The Court found the impugned rejection order to be “too sketchy, too short and too cryptic.” It emphasized that reasons are the “heartbeat” of conclusions and that, in their absence, conclusions cannot withstand judicial scrutiny. Relying on the Supreme Court decision in Kranti Associates (P) Ltd. v. Masood Ahmed Khan, the Court reiterated that administrative, quasi-judicial, and judicial authorities must record clear and cogent reasons. Reasoned decisions are essential for fairness, transparency, and effective judicial review.
Applying these principles, the Court held that the rejection remarks failed to disclose adequate reasons and therefore could not sustain judicial scrutiny. The rejection remarks in all the matters were set aside. The cases were remitted to respondent No.1 with a direction to grant personal hearing and pass a fresh order in accordance with law, without being mechanically influenced by the previous order or the counter-affidavit.
The Court declined to enter into issues relating to calculation or refund, noting that under Article 226, judicial review is concerned primarily with the decision-making process and reasons assigned in the impugned order. It disposed of the writ petitions without expressing any opinion on the merits and without costs.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Sri C.V.Narasimham, learned Senior Counsel appears for Sri Mohd Mukhairuddin, learned counsel for the petitioner and Sri Vijhay K Punna, learned Senior Standing Counsel for Income Tax Department appears for respondent Nos.1 and 2.
2. With the consent finally heard.
3. Regard being had to the similitude of the questions involved, these matters were analogously heard and decided by this common order.
4. The facts are taken from WP.No.35796 of 2024. The petitioner was subjected to assessment for the Assessment Year 2013-2014 and assessment order (Annexure P.4) was passed on 18.05.2022 determining the attributable income in India to the tune of 10%. The petitioner received a notice dated 16.06.2023 under Section 263 of the Income Tax Act, 1961 proposing revision of percentage to the tune of 25%.
5. Learned counsel for the petitioner informed that against the said notice, WP.No.33230 of 2023 and batch were filed, which were subsequently withdrawn with liberty to avail the remedy under the Direct Tax Vivad Se Vishwas Scheme, 2024 ( Scheme of 2024). Learned counsel further submits that the petitioner preferred an application online in prescribed form under Section 91 of the said scheme. The petitioner has paid the requisite amount before filing the application under Section 91 of the scheme, which can be gathered from part-E of the application (Annexure P.3). By taking this Court to part-F of said application, which as per contention of petitioner is an auto generated amount determined by the Department, an amount of Rs.-2,07,58,934/-was refundable. The petitioner was shocked to receive the rejection order captioned as “rejection remarks”. Learned counsel for the petitioner submits that “rejection remarks” are not properly worded. It gives an impression as if the Scheme of 2024 does not override the Scheme DTVSV of 2020 (Scheme of 2020), whereas, a plain reading of Section 90 of Scheme of 2024 makes it clear that it is pregnant with a non-obstante clause, which has an overriding effect not only on income tax, but, also on any other law which was in force. Thus, it has over riding effect even on the Scheme of 2020. Section 94(2) was heavily relied upon to submit that tax is very much refundable, if conditions are satisfied. Thus, the impugned order is bad in law.
6. It is submitted that the impugned order is sought to be supported by assigning different and supplementary reasons in the counter, which cannot be taken into account in view of the Constitution Bench Judgment of Supreme Court in Mohindhr Singh Gill and Another Chief Election Commissioner, New Delhi and others’.
7. Learned Senior Standing Counsel for Income Tax supported the impugned order and submits that the counter shows the decision taken by “rejection remarks” is in consonance with law.
8. The parties have confined their arguments o the extent indicated above.
9. We have heard the parties at length and perused the record.
The impugned order reads thus:
“Rejection remarks:
The assessee’s Issues related to disputes and taxes settled in DTVsV 2020, but violates conditions of the same including no refund of taxes paid. DTVsV 2024 does not override the DTVsV 2020 and has to be read harmoniously with it. Hence, the form 1 is rejected.
Rejection date:
05-Dec-2024″
10. Before dealing with the contents of the “rejection remarks”, we deem it proper to deal with the argument of learned Senior Standing Counsel for Income Tax based on the counter filed in this matter. In Mohindhr Singh Gill’s case supra, the Constitution Bench made it clear that validity of an order of a statutory authority must be judged on the basis of reasons assigned in the order and new reasons cannot be provided by filing counter affidavit in the Court. The relevant portion reads thus:
“8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose, J. in Gordhandas Bhanji:
“Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.”
Orders are not like old wine becoming better as they grow older.”
(Emphasis Supplied)
11. The law laid down by Constitution Bench in Mohindhr Singh Gill’s case supra is still a good law. Thus, the reasons assigned in the counter, which does not form part of rejection order will not instill life or improve the rejection order. Thus, we are not inclined to enter on those reasons and deem it proper to examine the reasons given in the “rejection remarks”.
12. We may hasten to add that first line of “rejection remarks” is not happily worded. It is difficult to gather exact meaning of the first line. It is incomprehensible. However, the first line gives an impression as if something is settled pursuant to Scheme of 2020 cannot result into refund of taxes paid. Assuming that this is the meaning arising therein, this needs to be examined in view of Section 90 of the Scheme which reads thus:
“90. Subject to the provisions of this Scheme, where a declarant files under the provisions of this Scheme on or before the last date, a declaration to the designated authority in accordance with the provisions of section 91 in respect of tax arrear, then, notwithstanding anything contained in the Income-tax Act or any other law for the time being in force, the amount payable by the declarant under this Scheme shall be as mentioned in the Table below…”
(Emphasis Supplied)
13. The second reason in the “rejection remarks” is that the Scheme of 2024 does not override the Scheme of 2020. This reason is also required to be relooked in the light of language employed in Section 90 reproduced hereinabove. In the considered opinion of this Court, the impugned order is too sketchy, too short and too cryptic in nature. The ‘reasons’ are held to be heart beat of the ‘conclusions’. In the absence of reasons, conclusions cannot sustain judicial scrutiny. The Supreme Court in Kranti Associates (P) Ltd. v. Masood Ahmed Khan2 emphasized the need of assigning reasons in administrative, quasi judicial and judicial orders. Relevant para reads thus:
“47. Summarising the above discussion, this Court holds:
a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.
b. A quasi-judicial authority must record reasons in support of its conclusions.
c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.
d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.
e. Reasons reassure that discretion has been exercised by the decision-maker on relevant grounds and by disregarding extraneous considerations.
f. Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.
g. Reasons facilitate the process of judicial review by superior courts.
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the lifeblood of judicial decision-making justifying the principle that reason is the soul of justice.
i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system.
j. Insistence on reason is a requirement for both judicial accountability and transparency.
k. If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.
l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or “rubber-stamp reasons” is not to be equated with a valid decision-making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision-making not only makes the judges and decision-makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor [(1987) 100 Harvard Law Review 731-371 .)
n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision-making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See Ruiz Torija v. Spain [(1994) 19 EHRR 553] EHRR, at 562 para 29 and Anya v. University of Oxford [2001 EWCA Civ 405 (CA)] , wherein the Court referred to Article 6 of the European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions”.
(o) In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “due process.”
14. If the impugned order is tested on the anvil of principles laid down in Kranti Associates (P) Ltd. (supra), it cannot sustain judicial scrutiny because of its cryptic nature and non-disclosure of reasons. Thus “rejection remarks” in all the matters are set aside. The matters are restored back in the file of respondent No.1, who, shall give personal hearing to the petitioner and pass a fresh order, in accordance with law, without getting mechanically influenced by previous order and counter filed.
15. Learned Senior Counsel for the petitioner intended to take us to the calculation part and the refund part and the related provision. We are not inclined to enter into this aspect in these proceedings. It may be remembered that the scope of judicial review under Article 226 of the Constitution is basically on the decision making process and relating to the reasons assigned in the impugned order. If impugned order suffers from non application of mind and does not contain adequate reasons, the proper course is to set aside the order by directing the authority concerned to rehear the party and pass a fresh order. Thus we are not inclined to undertake the aforesaid exercise suggested by learned counsel for the petitioner (see Kalinga Mining Corpn. v. Union of India3).
16. Accordingly, the Writ Petitions are disposed of, without expressing any opinion on the merits of the case. No order as to costs.
Miscellaneous petitions pending, if any, shall stand closed.
Notes:
1 (1978) 1 Supreme Court Cases 405
2 (2010) 9 SCC 496
Author Bio
