(Appeal from the judgment and order dated April 10, 1987, of the Delhi High Court in C.W.P. No.994 of 1987).

Income-tax---

----Recovery of tax---Default in payment of tax within time---Application to CBDT for reduction or waiver of interest under S.220(2-A)---Order of CBDT is quasi judicial order and must be supported by reasons---Indian Income Tax Act, 1961, S.220(2) & (2-A).

Interest under section 220(2) of the Income Tax Act, 1961, was levied on the appellant to default committed by him in payment of tax within time. The appellant filed an application under subsection (2-A) of section 220 before the Central Board of Direct Taxes for reduction or waiver of interest. The Central Board of Direct Taxes rejected the application on the ground that the conditions laid down in section 220(2-A) were not satisfied by the appellant. The appellant filed a writ petition in the High Court and contended that while rejecting the application the Central Board of Direct Taxes had not given reasons. The High Court dismissed the writ petition holding that the order of the Central Board of Direct Taxes could not be said to be vitiated for not giving reasons. On appeal to the Supreme Court

Held, allowing the appeal, that when an application is filed under subsection (2-A) of section 220 of the Act, 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 under clause (i), (ii) and (iii) of section 220(2-A) then it has the power either to reduce or waive the amount of interest. Even though in the said subsection it is not stated that any reasons are to be recorded in the order deciding such an application, it is implicit in the said provision that whenever such an application is filed the same should be decided by a speaking order. The principles of natural justice in this regard would be clearly applicable. A decision which is taken by the authority under section 220(2-A) can be subjected to judicial review, by filing a petition under Article 226 of the Constitution. 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 imperative that some reasons are given by the authoi3y while disposing of the application.

Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India AIR 1976 SC 1785 ; (1976) 2 SCC 981 rel.

H.N. Salve, Senior Advocate (Vineet Kumar, Bhaiyaji Gupta, Ms. Kiran Bhardhwaj, Ms. Nina Gupta and Ms. Arpita Roy Choudhury, Advocates with him) for Appellant.

B.B. Ahuja, Senior Advocate (G. Venkatesh Rao, C. Radha Krishna, B.K. Prasad and A. Subhashini, Advocates with him) for Respondents.

JUDGMENT

Heard learned counsel for the parties. In the instant case interest was sought to be levied on the appellant under section 220(2) of the Income Tax Act 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 subsection (2-A) of section 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.

The appellant received a letter dated January 29, 1987, whereby this application was rejected. This said letter reads as follows:

"Please refer to your petition dated nil and further petition dated November 24, 1986, on the subject mentioned above. The matter has been examined by the Board. After considering the application filed by you and the report, of the Commissioner of Income tax in the matter, the Board is of the view that the conditions as laid down in section 220(2-A) are not satisfied in your case and hence regrets its inability to interfere in the matter. "

A writ petition under Article 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 observed, while dismissing the writ petition, that the order of the Central Board of Direct Taxes could not be said to be vitiated for this reason.

When an application is filed under subsection (2-A) of section 23,0 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 under clauses (i), (ii) and (iii) of section 220(2-A) then it has the power either to reduce or waive the amount of interest. Even though in the said subsection 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 applicable. It will be seen chat a decision which is taken by the authority under section 220(2-A) can be subjected to judicial review, as was sought to be done in the present case by tiling a petition under Article 226; this being, so and where the decision of the application may have repercussions with regard to the amount of interest which an assessee is required to pay it would be imperative that some reasons are given by the authority while disposing of the application. Mr. Salve, learned senior counsel for the appellant, has strongly relied upon the observations of this Court in Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India (1976) AIR 1976 SC 1785; (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 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 section 220(2-A) was not applicable as this subsection 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 subsection (2-A) an application for waiver of interest has now to be decided by the Chief Commissioner or Commissioner, as the case may be. We, accordingly, allow this appeal, set aside the order of the High Court and of the Central Board of Direct Taxes and restore the appellant's application under section 220(2-A) to the file of the Chief Commissioner. Delhi, and direct that the same should be disposed of at an early date in accordance with law. There will be no order as to costs.

M.B.A./1816/FC ??????????????????????????????????????????????????????????????????????????????? Order accordingly.