Date Of Decision: 14.05.2025 v. Pr. Commissioner Of Income Tax & Anr

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No. 3681 of 2024 Date of decision: 14.05.2025 Neena Singh Thakur…Petitioner Versus Pr. Commissioner of Income Tax & Anr. …Respondents Coram The Hon’ble Mr. Justice Tarlok Singh Chauhan, Judge. The Hon’ble Mr. Justice Sushil Kukreja, Judge. Whether approved for reporting? Yes. For the Petitioner: Mr. Vishal Mohan, Sr. Advocate with Mr.Praveen Sharma and Mr. AbhinavBazwaria, Advocates. For the Respondents: Mr. Neeraj Sharma, Advocate. Tarlok Singh Chauhan, Judge (Oral) The instant petition has been filed for grant of the following substantive reliefs:- “(i) That this Hon’ble Court may be pleased to issue a writin the nature of certiorari and quash the orders dated29.02.2024 passed under Section 148A(d) (Annexure P-6)of the Income Tax Act, 1961 holding the same to be illegal,arbitrary and contrary to the provisions of law. (ii) This Hon’ble Court may further be pleased to issue awrit in the nature of certiorari and quash the notice underSection 148 of the Income Tax Act, 1961 (Annexure P-7)holding the same to be illegal and not sustainable in theeyes of law.” 2.Normally, the Courts are vary to interfere with thenotice of the instant kind, however, the peculiar facts andcircumstances of this case warrants interference given the fact that the petitioner was served with the notice under Section148A(d), the relevant portion whereof reads as under:- “ToNeena Singh ThakurC/O Naveen Tanwar, AdvocateGompa road Manali, Model Town,Manali,Kullu-175131India Notice under Clause (b) of Section 148A of the IncomeTax, Act, 1961 Sir, Madam/M/s Whereas I have information which suggests that incomechargeable to tax for the Assessment Year 2017-18 hasescaped assessment within the meaning of Section 147 ofthe Income tax Act, 1961. the details of theinformation/enquiry conducted on which reliance is beingplaced, alongwith the supporting documents, are enclosedwith this notice. 2. You are required to show cause as to why, in view of thedetails contained in enclosures mentioned in point number1 above, a notice under Section 148 of the Income TaxAct, 1961 should not be issued. 3. You may submit your reply to this notice alongwithsupporting documents (if any) on the above mentionedissues on or before 25/01/2024 electronically atwww.incometax. Gov. in. Annexure Smt. Neena Singh ThakurPAN:-ACAPT9245J A.Y. 2017-18 As per the information available with this office it isnoticed that during the Financial Year 2016-17 relevant tothe Assessment Year 2017-18, you have purchasedimmovable property worth Rs. 1,21,00,000/-. In addition,you have also made payment of Rs. 1,21,00,000/- forpurchase of immovable property and also earned interest income worth Rs. 35,109/- from Axis Bank Ltd. The detailsof which is as under:- 2. However, as per the record, no such transactionsrelated to purchase of immovable properties (asmentioned above) appears to be declared in the IncomeTax Return which has been filed by you manually on22.09.2017 for the Assessment Year 2017-18. therefore, inthe absence of proper record, the transactions related topurchase of immovable properties (as mentioned above)remained undisclosed and unexplained on your part. Inthis regard, to verify the above transactions you arerequestedtopleasefurnishthefollowinginformation/documents:- i)Please provide/mention the details of youroccupation/nature or business/source of income forthe Financial Year 2016-17 relevant to theAssessment Year 2017-18.occupation/nature or business/source of income forthe Financial Year 2016-17 relevant to theAssessment Year 2017-18. i)Please provide/mention the details of youroccupation/nature or business/source of income forthe Financial Year 2016-17 relevant to theAssessment Year 2017-18.occupation/nature or business/source of income forthe Financial Year 2016-17 relevant to theAssessment Year 2017-18. ii)Please furnish the details of all bank accounts(alongwith complete name and address of the bankbranch as well as type of account and accountnumber) maintained by you during the FinancialYear 2016-17 relevant to the Assessment Year 2017-18. Please also furnish the copies of all bank accountstatements for the period 01-04-2016 to 31.03.2017with narration of each credit and credit entries. (alongwith complete name and address of the bankbranch as well as type of account and accountnumber) maintained by you during the FinancialYear 2016-17 relevant to the Assessment Year 2017-18. Please also furnish the copies of all bank accountstatements for the period 01-04-2016 to 31.03.2017with narration of each credit and credit entries. iii)In respect of immovable properties purchase, pleaseexplain the source of investment with supportingevidence. Please also furnish the copies of purchasedeed. Please also furnish the complete detailsalongwith supporting documents consisting ofexplain the source of investment with supportingevidence. Please also furnish the copies of purchasedeed. Please also furnish the complete detailsalongwith supporting documents consisting of nature/type of property purchased, location ofproperties, total area involved, year and date ofpurchase/acquisition as well as mode and cost ofacquisition/purchase, complete name and address ofpersons/parties from whom properties in questionpurchased etc. iv)Please also provide your e-mail ID and contactnumber for record purchase and for futurecorrespondence. Further to communicate with thedepartment in an electronic manner, please firstlyregister yourself through e-filing portal (i.e. if notregistered)number for record purchase and for futurecorrespondence. Further to communicate with thedepartment in an electronic manner, please firstlyregister yourself through e-filing portal (i.e. if notregistered) 3. You are, therefore, requested to please furnish therequisite information along with supporting documents (ie.complete in all respects) on or before 25.01.2024 to thisoffice either through your e-filing portal or through e-mailat kullu.ito@incometax. Gov. In or through speed post sothat same may reach this office by the given time.” 3. The petitioner has not only replied to the show cause notice but submitted all the necessary documents in support ofits case and further pointed out that the immovable propertypurchased by her is not of the value of Rs. 1,21,00,000/- but ofRs. 1,31,63,935/-. The Assessing Officer though passed adetailed order running into almost 10 pages, however,unfortunately no reason whatsoever has been given in support ofthe conclusion that the escaped income is more than Rs.50,00,000/-. 4.What the Assessing Office has done is to simplyobserve that the case was at a preliminary stage and, therefore,the contention of the petitioner is not acceptable and the samerequires detailed examination. 5.There is no law which provides that an inquirycontemplated under Section 148A must essentially culminateinto a notice under Section 148. Rather, it was incumbent uponthe Assessing Officer to decide the case in terms of sub Section(d) of Section 148A on the basis of the material on recordincluding the reply of the assessee, whether or not it is a fit caseto issue a notice under Section 148 by passing an order with theprior approval of the specified authority. 4.What the Assessing Office has done is to simplyobserve that the case was at a preliminary stage and, therefore,the contention of the petitioner is not acceptable and the samerequires detailed examination. 5.There is no law which provides that an inquirycontemplated under Section 148A must essentially culminateinto a notice under Section 148. Rather, it was incumbent uponthe Assessing Officer to decide the case in terms of sub Section(d) of Section 148A on the basis of the material on recordincluding the reply of the assessee, whether or not it is a fit caseto issue a notice under Section 148 by passing an order with theprior approval of the specified authority. 6.The Assessing Officer cannot shirk away from hisresponsibility of deciding the case on the material available onrecord by simply observing that “at the preliminary stage, thecontention of the assessee is not acceptable and the samerequires a detailed examination”. 7.The Assessing Officer needs to realise that noticeunder Section 148 does have serious civil or evil consequencesand cannot be passed so lightly and reasons for the same haveto be recorded in the order itself. 8.Failure to give reasons amounts to denial of justice.Reasons are live links between the minds of the decision-taker tothe controversy in question and the decision or conclusionarrived at. Reasons substitute subjectivity by objectivity. Theemphasis on recording reasons is that if the decision reveals the"inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform the appellatefunction or exercise the power of judicial review in adjudging thevalidity of the decision. Right to reason is an indispensable partof a sound judicial system. 9. The necessity of assigning reason has been repeat-edly emphasized by the Hon'ble Supreme Court and reference inthis regard can conveniently be made to the judgment of theHon'ble Supreme Court in Kranti Associates Pvt. Ltd. and an- other versus Masood Ahmed Khan and Others (2010) 9SSC 496, wherein after taking into consideration the entire lawon the subject, the position of law was summarized as under:- (a) In India the judicial trend has always been to recordreasons, even in administrative decisions, if such decisionsaffect anyone prejudicially. (b) A quasi-judicial authority must record reasons in sup-port of its conclusions. (c) Insistence on recording of reasons is meant to servethe wider principle of justice that justice must not only bedone it must also appear to be done as well. (d) Recording of reasons also operates as a valid restrainton any possible arbitrary exercise of judicial and quasi-ju-dicial or even administrative power. (e)Reasons reassure that discretion has been exercisedby the decision maker on relevant grounds and by disre-garding extraneous considerations. (f)Reasons have virtually become as indispensable acomponent of a decision making process as observingprinciples of natural justice by judicial, quasi-judicial andeven by administrative bodies. (g) Reasons facilitate the process of judicial review by su-perior Courts. (h) The ongoing judicial trend in all countries committedto rule of law and constitutional governance is in favour ofreasoned decisions based on relevant facts. This is virtu-ally the life blood of judicial decision making justifying theprinciple that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days canbe as different as the judges and authorities who deliverthem. All these decisions serve one common purposewhich is to demonstrate by reason that the relevant fac-tors have been objectively considered. This is importantfor sustaining the litigants' faith in the justice delivery sys-tem. (j) Insistence on reason is a requirement for both judicialaccountability and transparency. (g) Reasons facilitate the process of judicial review by su-perior Courts. (h) The ongoing judicial trend in all countries committedto rule of law and constitutional governance is in favour ofreasoned decisions based on relevant facts. This is virtu-ally the life blood of judicial decision making justifying theprinciple that reason is the soul of justice. (i) Judicial or even quasi-judicial opinions these days canbe as different as the judges and authorities who deliverthem. All these decisions serve one common purposewhich is to demonstrate by reason that the relevant fac-tors have been objectively considered. This is importantfor sustaining the litigants' faith in the justice delivery sys-tem. (j) Insistence on reason is a requirement for both judicialaccountability and transparency. (k)If a Judge or a quasi-judicial authority is not candidenough about his/her decision making process then it isimpossible to know whether the person deciding is faithfulto the doctrine of precedent or to principles of incremen-talism. (l) Reasons in support of decisions must be cogent, clearand succinct. A pretence of reasons or "rubber stamp rea-sons" is not to be equated with a valid decision makingprocess.(m) It cannot be doubted that transparency is the sinequa non of restraint on abuse of judicial powers. Trans-parency in decision making not only makes the judges anddecision makers less prone to errors but also makes themsubject to broader scrutiny. (See David Shapiro in Defenceof Judicial Candor (1987) 100 Harward Law Review 731-37). (n) Since the requirement to record reasons emanatesfrom the broad doctrine of fairness in decision making, thesaid requirement is now virtually a component of humanrights and was considered part of Strasbourg Jurispru-dence. See Ruiz Torija v. Spain (1994) 19 EHRR 553, at562 para 29 and Anya vs. University of Oxford, 2001 EWCAC 405, wherein the Court referred to Article 6 of EuropeanConvention of Human Rights which requires. "adequateand intelligent reasons must be given for judicial decisions. (o) In all common law jurisdictions judgments play a vitalrole in setting up precedents for the future. Therefore, fordevelopment of law, requirement of giving reasons for thedecision is of the essence and is virtually a part of "DueProcess". 10. In Ravi Yashwant Bhoir Vs. District Collector,Raigad and others (2012) 4 SCC 407, the Hon'ble Supreme Court held as under:- 38. It is a settled proposition of law that even in adminis-trative matters, the reasons should be recorded as it is in-cumbent upon the authorities to pass a speaking and rea-soned order. 39. In Shrilekha Vidyarthi Vs. U.P. (1991) 1 SCC 212 thisCourt has observed as under: (SCC p. 243. para 36). "36......Every State action may be informed by reason andit follows that an act uninformed by reason, is arbitrary.The rule of law contemplates governance by laws and notby humour, whims or caprices of the men to whom thegovernance is entrusted for the time being. It is the tritelaw that 'be you ever so high, the laws are above you'.This is what men in power must remember, always." 40. In LIC Vs. Consumer Education and Research Centre(1995) 5 SCC 482 this Court observed that the State or itsinstrumentality must not take any irrelevant or irrationalfactor into consideration or appear arbitrary in its decision."Duty to act fairly is part of fair procedure erwisaged underArticles 14 and 21. Every activity of the public authority orthose under public duty must be received and guided bythe public interest. A similar view has been reiterated bythis Court in Union of India Vs. Mohan Lal Capoor (1973) 2SCC 836 and Mahesh Chandra Vs. U.P. Financial Corpn.(1993) 2 SCC 279. 41. In State of W.B. Vs. Atul Krishna Shaw 1991 Supp (1)SCC 414, this Court observed that: (SCC p. 421, para 7) 7....Giving of reasons is an essential element of adminis-tration of justice. A right to reason is, therefore, an indis-pensable part of sound system of judicial review." 41. In State of W.B. Vs. Atul Krishna Shaw 1991 Supp (1)SCC 414, this Court observed that: (SCC p. 421, para 7) 7....Giving of reasons is an essential element of adminis-tration of justice. A right to reason is, therefore, an indis-pensable part of sound system of judicial review." 42. In S.N, Mukherjee Vs. Union of India 1990) 4 SCC 594,it has been held that the object underlying the rules of nat-ural justice is to prevent miscarriage of justice and securefair play in action. The expanding horizon of the principlesof natural justice provides for requirement to record rea-sons as to it is now regarded as one of the principles ofnatural justice, and it was held in the above case that ex-cept in cases where the requirement to record reasons is expressly or by necessary implication dispensed with, theauthority must record reasons for its decision. 43. In Krishna Swami Vs. Union of India (1992) 4 SCC 605.this Court observed that the rule of law requires that anyaction or decision of a statutory or public authority mustbe founded on the reason stated in the order or borne outfrom the record. The Court further observed: (SCC p. 637,para 47). "47......Reasons are the links between the material, thefoundation for their erection and the actual conclusions.They would also demonstrate how the mind of the makerwas activated and actuated and their rational nexus andsynthesis with the facts considered and the conclusionsreached. Lest it would be arbitrary, unfair and unjust, vio-lating Article 14 or unfair procedure offending Article 21. 44. This Court while deciding the issue in Sant Lal GuptaVs. Modern Coop. Group Housing Society Ltd.(2010) 13SCC 336, placing reliance on its various earlier judgmentsheld as under: (SCC pp. 345-46, para 27). "27. It is a settled legal proposition that not only adminis-trative but also judicial orders must be supported by rea-sons recorded in it. Thus, while deciding an issue, thecourt is bound to give reasons for its conclusion. It is theduty and obligation on the part of the court to record rea-sons while disposing of the case. The hallmark of orderand exercise of judicial power by a judicial forum is for theforum to disclose its reasons by itself and giving of reasonshas always been insisted upon as one of the fundamentalsof sound administration of the justice delivery system, tomake it known that there had been proper and due appli-cation of mind to the issue before the court and also as anessential requisite of the principles of natural justice. 3....The giving of reasons for a decision is an essential at-tribute of judicial and judicious disposal of a matter beforecourts, and which is the only indication to know about themanner and quality of exercise undertaken, as also thefact that the court concerned had really applied its mind'. The reason is the heartbeat of every conclusion. It intro-duces clarity in an order and without the same, the orderbecomes lifeless. Reasons substitute subjectivity with ob-jectivity. The absence of reasons renders an order indefen-sible/unsustainable particularly when the order is subjectto further challenge before the higher forum. Recording ofreasons is the principle of natural justice and every judicialorder must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. Theperson who is adversely affected must know why his appli-cation has been rejected." 45. In Institute of Chartered Accountants of India Vs. L.K.Ratna (1986) 4 SCC 537, this Court held that on charge ofmisconduct the authority holding the inquiry must recordreasons for reaching its conclusion and record clear find-ings. The Court further held: (SCC p. 558, para 30). ensures transparency and fairness in decision making. Theperson who is adversely affected must know why his appli-cation has been rejected." 45. In Institute of Chartered Accountants of India Vs. L.K.Ratna (1986) 4 SCC 537, this Court held that on charge ofmisconduct the authority holding the inquiry must recordreasons for reaching its conclusion and record clear find-ings. The Court further held: (SCC p. 558, para 30). 30.....In fairness and justice, the member is entitled toknow why he has been found guilty. The case can be soserious that it can attract the harsh penalties provided bythe Act. Moreover, the member has been given a right ofappeal to the High Court under Section 22-A of the Act. Toexercise his right of appeal effectively he must know thebasis on which the Council has found him guilty. We havealready pointed out that a finding by the Council is the firstdeterminative finding on the guilty of the member. It is afinding by a Tribunal of first instance. The conclusion ofthe Disciplinary Committee does not enjoy the status of afinding. Moreover, the reasons contained in the report bythe Disciplinary Committee for its conclusion may or maynot constitute the basis of the finding rendered by theCouncil. The Council must, therefore, state the reasons forits finding." 46. The emphasis on recording reason is that if the deci-sion reveals the "inscrutable face of the sphinx", it can byits silence, render it virtually impossible for the courts toperform their appellate function or exercise the power ofjudicial review in adjudging the validity of the decision.Right to reason is an indispensable part of a sound judicialsystem, reasons at least sufficient to indicate an applica-tion of mind of the authority before the court. Another ra-tionale is that the affected party can know why the deci-sion has gone against him. One of the salutary require-ments of natural justice is spelling out the reasons for theorder made, in other words, a speaking out. The in-scrutable face of the sphinx is ordinarily incongruous witha judicial or quasi judicial performance." 11. Earlier to the aforesaid decisions, a Constitution Bench of the Hon'ble Supreme Court, in S. N. Mukherjee vs.Union of India. (1990) 4 SCC 594, after an exhaustive reviewof its earlier pronouncements as also the views expressed in other jurisdictions and by expert committees, summarized andexplained the law as under:- "The decisions of this Court referred to above indicate thatwith regard to the requirement to record reasons theapproach of this Court is more in line with that of theAmerican Courts. An important consideration which hasweighed with the Court for holding that an administrativeauthority exercising quest judicial functions must recordthe reasons for its decision is that such a decision is subjectto the appellate jurisdiction of this Court under Article 136of the Constitution as well as the supervisory jurisdiction ofthe High Courts under Article 227 of the Constitution andthat the reasons, if recorded would enable this Court or theHigh Courts to effectively exercise the appellate orsupervisory power. But this is not the sole consideration.The other considerations which have also weighed with theCourt in taking this view are that the requirement ofrecording reasons would (i) guarantee consideration by theauthority; (ii) introduce clarity at the decisions; and (iii)minimize chances of arbitrariness in decision making. Inthis regard a distinction has been drawn between ordinaryCourts of law and tribunals and authorities exercisingjudicial functions on the ground that a Judge is trained tolook at things objectively uninfluenced by considerations ofpolicy or expediency whereas an executive officer generallylooks at things from the standpoint of policy andexpediency. Reasons, when recorded by an administrative authority inan order passed by it while exercising quasi-judicialfunctions, would no doubt facilitate the exercise of itsjurisdiction by the appellate or supervisory authority. Butthe other considerations, referred to above, which havealso weighed with this Court in holding that anadministrative authority must record reasons for itsdecision, are of no less significance. These considerationsshow that the re- cording of reasons by an administrativeauthority serves a salutary purpose, namely, it excludeschances of arbitrariness and ensures a degree of fairness inthe process of decision-making. The said purpose wouldapply equally to all decisions and its application cannot beconfined to decisions which are subject to appeal, revisionor judicial review. In our opinion, therefore, the requirementthat reasons be recorded should govern the decisions of anadministrative authority exercising quast judicial functionsirrespective of the fact whether the decision is subject toappeal, revision or judicial review. It may, however, beadded that it is not required that the reasons should be as elaborate as in the decision of a Court of law. The extentand nature of the reasons would depend on particular factsand circumstances. What is necessary is that the reasonsare clear and explicit so as to indicate that the authorityhas given due consideration to the points in controversy.The need for recording of reasons is greater in a casewhere the order is passed at the original stage. Theappellate or revisional authority. If it affirms such an order,need not give separate reasons if the appellate orrevisional authority agrees with the reasons contained inthe order under challenge. Having considered the rationale for the requirement torecord the reasons for the decision of an administrative au-thority exercising quasi-judicial functions we may now ex-amine the legal basis for imposing this obligation. Whileconsidering this aspect the Donoughmore Committee ob-served that it may well be argued that there is a third prin-ciple of natural justice, namely, that a party is entitled toknow the reason for the decision, be it judicial or quasi-Judi-cial. The committee expressed the opinion that "there aresome cases where the refusal to give grounds for a decisionmay be plainly unfair; and this may be so, even when thedecision is final and no further proceedings are open to thedisappointed party by way of appeal or otherwise" and that"where further proceedings are open to a disappointedparty, it is contrary to natural justice that the silence of theMinister or the Ministerial Tribunal should deprive them ofthe opportunity." (P 80) Prof. H.W.R. Wade has also ex-pressed the view that "natural justice may provide the bestrubric for it, since the giving of reasons is required by theordinary man's sense of justice." (See Wade, AdministrativeLaw. 6th Edn. P. 548)." 12.In Pankaj Garg vs. Meenu Garg & Anr. (2013) 3 Supreme Court Cases 246, the Hon’ble Supreme Court reiter-ated the settled position of law holding that an order, which doesnot contained any reason, is no order in the eyes of law. 13.Since the order passed by the Assessing Officer isbereft of any cogent or plausible reasons, the same is set aside.The matter is remanded back to the Assessing Officer to decide the same afresh in accordance with law. If the Assessing Officerstill comes to the conclusion that notice under Section 148 isnecessary, then he shall record detailed reasons for arriving atsuch conclusion. The Assessing Officer is directed to decide thecase as expeditiously as possible and in no event later than31.08.2025. 14.The petition stands disposed of in the aforesaidterms, so also pending applications, if any. (Tarlok Singh Chauhan) Judge 14[th] May, 2025(sanjeev) (Sushil Kukreja) Judge