Holding

An order passed under section 220(2A) is a quasi‑judicial decision that must be supported by reasons and is open to judicial review.

Summary

Kishan Lal, an assessee, was levied interest under section 220(2) of the Income‑Tax Act for delayed payment of tax. He filed an application under section 220(2A) seeking reduction or waiver of the interest, but the Central Board of Direct Taxes (CBDT) rejected the application without recording any reasons. A writ petition under Article 226 challenged the CBDT order on the ground that a quasi‑judicial decision must be reasoned. The Supreme Court held that an order passed under section 220(2A) is a quasi‑judicial act, is amenable to judicial review, and must be supported by a speaking order in accordance with natural‑justice principles. Consequently, the Court set aside the High Court and CBDT orders and restored the application to the file of the Chief Commissioner for disposal with appropriate reasons. The appeal was allowed.

Issues considered

Whether a decision under section 220(2A) of the Income‑Tax Act is subject to judicial review.
Whether the authority must record reasons when rejecting an application under section 220(2A).
Whether the absence of reasons vitiates the CBDT's order.

Legislation cited

Income Tax Act, 1961s. 220(2), s. 220(2A)

Subjects

Income TaxInterest reductionSection 220(2A)Judicial reviewNatural justiceQuasi‑judicial orderWrit petitionArticle 226

Judgment

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A KISHAN LAL
v.
"-
UNION OF INDIA AND ANR

JANUARY 22, 1998

B --4or'
[B.N. K!RPAL AND S.P. KURDUKAR, JJ.]

Income Tax Act, 1961 :

S. 220(2A)-Application for reducing the interest levied for default in
c payment of tax within time-Decision on-Held, is subject to judicial review--
It would be imperative that reasons are given by authority concerned while
disposing of the application-Assessee 's application restored to file of Chief
Commissioner, Delhi for disposal in accordance with law.

The Siemens Engineering and Manufacturing Co. of India Ltd. v. Union ~
D of India & Anr., [1976) 2 SCC 981, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1386 (NT)
of 1987.

From the Judgment and Order dated 10.4.87 of the Delhi High Court in
>-
E C.W.P. No. 994 of I987.
H.N. Salve, Vineet Kumar, Bhaiyaji Gupta, Ms. Kiran Bhardhwaj, Ms.
Nina Gupta and Ms. Arpita Roy Chodhury for the appellant.

B.B. Ahuja, G. Venkatesh Rao, C. Radha Krishna, B.K. Prasad and Ms.
~
F A. Subhashini for the Respondents.
...
The following Order of the Court was delivered :

Heard learned counsel for the parties. In the instant case interest was
sought to be levied on the appellant under sec. 220(2) of the Income-Tax Act
G on account of default having been committed by the appellant in payment of
Income Tax within time. In order to avoid this levy, the appellant filed an --<'.
application under sub-section (2-A) of sec.220 before the Central Board. of
Direct Taxes, inter-alia, stating facts and reasons as to why the amount of
,.
~

interest which was payable should be reduced, if not waived altogether.
Reasons for seeking a favourable order were contained in the application.
H
320
Kl SHAN LAL v. U.0.1 321

The appellant received a letter dated 29th January, I 987 whereby this A
application was rejected. The said letter reads as follows:-

"Please refer to your petition dated nil and further petition dated 24.11.86
on the subject mentioned above. The matter has been examined by the Board.
After considering the application filed by you and the report of CJT in the
matter, the Board is of the view that the conditions as laid down in section B
220(2A) are not satisfied in your case and hence regrets its inability to
interfere in the matter."

A writ petition under Art. 226 of the Constitution was then filed in the
High Court of Delhi and it was contended that while rejecting the application
the Central Board of Direct Taxes had given no reasons. The High Court C
observed, while dismissing the Writ Petition, that the order of the CBDT could
not be said to be vitiated for this reason.

When an application is filed under sub-section (2A) of Sec. 220 the
authority concerned is called upon to take a quasi judicial decision. If it is
-~ satisfied that the reasons contained in the application would bring the case D
under Clauses (i) (ii) and (iii) of sec.220 (2A) then it has the power either to
reduce or waive the amount of interest. Even though in the said sub-section
it is not stated that any reasons are to be recorded in the order deciding such
an application, it appears to us that it is implicit in the said provision that
whenever such an application is filed the same should be decided by a
speaking order. Principles of natural justice in this regard would be clearly E
applicable. It will be seen that a decision which is taken by the authority.
under sec.220 (2A) can be subjected to judicial review, as was sought to be
done in the present case by filing a petition under Art. 226, this being so and
where the decision of the application may have repercussion with regard to
the amount of interest which an assessee is required to pay it would be p
imperative that some reasons are given by the authority while disposing of
the application. Mr. Salve, the learned senior counsel for the appellant has
strongly relied upon the observations of this Court in The Siemens Engineering
and Manufacturing Co. of India Ltd. v. Union of India & Anr., [ 1976] 2 SCC
981 where at page 986 it has been stated that where an authority makes an
order in exercise of its quasi judicial function it must .record its reasons in G
support of the order it makes. In other words, every quasi judicial order must
be supported by reasons. In our opinion, the observations in that case would
apply in the present case also.

We may here note the contention of Mr. Ahuja that in respect of the
assessment year in question sec.220(2A) was not applicable as this sub- H
322 SUPREME COURT REPORTS [1998] l S.C.R.

A section was inserted after the demand was raised. We express no opinion on
this question because this will be one of the matters which the authority
concerned may have to decide. With the amendment being made in sub-
section (2A) an application to waive of interest has now to be decided by the
Chief Commissioner or Commissioner, as the case may be. We, accordingly,
all~w this appeal, set aside the order of the High Court and of the Central
B Board of Direct Taxes and restore the appellant's application under sec.220
(2A) to the file of Chief Commissioner, Delhi and direct that the same should
be disposed of at an early date in accordance with Jaw. There will be no order
as to costs.

C R.P. Appeal allowed.