Natural justice and speaking orders are required for tax clarifications that directly affect an assessee's liability.

A tax clarification that directly affects an assessee's liability cannot be sustained unless principles of natural justice are observed. Because the clarification bound subordinate officers and altered valuable rights, an opportunity of hearing was impliedly required even though the statute was silent. The clarification also had to contain reasons and operate as a speaking order; a bare, unreasoned clarification was invalid. The impugned clarifications were therefore unsustainable and were set aside, leaving the authority free to issue fresh orders after following the required procedure.

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Issues: Whether the impugned tax clarifications could be sustained when they were issued without hearing the assessee and without recording reasons.

Analysis: The clarification adversely affected the assessee's tax liability and, therefore, affected valuable rights. A hearing was impliedly required before issuing an adverse clarification of this nature, even though the statute did not expressly provide for one. The clarification was also required to be supported by reasons because it bound subordinate officers and determined the assessee's liability. The impugned clarification contained no reasons and was not a speaking order.

Conclusion: The clarifications were unsustainable and liable to be quashed.

Final Conclusion: The writ petition succeeded, the impugned clarifications were set aside, and the authority was left free to pass fresh orders after following the required procedure.

Ratio Decidendi: Where a statutory clarification directly affects an assessee's tax liability, principles of natural justice require an opportunity of hearing, and such a clarification must disclose reasons as a speaking order.

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