High Court Quashes Order, Emphasizes Reason Requirement in Income Tax Act

The High Court allowed the writ application, quashed the order declining the petitioner's request, and remanded the matter for fresh adjudication. The court emphasized the mandatory requirement of recording reasons under Section 127(1) of the Income Tax Act, highlighting the importance of communicating reasons to the assessee for effective challenge of orders. The court found the non-communication of reasons to be a violation of legal obligations, distinguishing a contrary view and emphasizing the significance of disclosing reasons to affected parties.

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Issues:
Challenge to impugned order dated 27th September, 2018 for declining petitioner's request based on inadequate reasoning.

Analysis:
The High Court considered a writ application challenging an order dated 27th September, 2018, where the Principal, Commissioner of Income Tax-2, Jaipur, declined the petitioner's request without providing adequate reasoning. The court observed that the authority did not apply its mind to the petitioner's reasons or the reasons opposing the prayer. Reference was made to the case of Ajantha Industries & Ors. Vs. Central Board of Direct Taxes & Ors, where it was highlighted that under Section 127 of the Income Tax Act, 1961, reasons must be recorded prior to passing a transfer order. The court emphasized the importance of communicating reasons to the assessee to enable them to challenge the order if necessary.

The court noted that the requirement of recording reasons under Section 127(1) is mandatory, and non-communication of reasons to the assessee does not fulfill the legal obligation. A contrary view taken by the Delhi High Court was distinguished, emphasizing the necessity of disclosing reasons to the affected parties. The court also referred to a decision regarding the exercise of revisional power by the Central Government, highlighting the significance of recording and communicating reasons. The argument that orders under Section 127(1) are administrative in nature was dismissed, emphasizing that when the law mandates reasons to be recorded in an order affecting someone's interests, it ceases to be merely administrative.

In light of the principles established by the Apex Court and the legal requirements under Section 127(1), the High Court found the impugned order to be in violation of mandatory recording of reasons. Consequently, the writ application was allowed, the order dated 27th September, 2018, was quashed, and the matter was remanded back to the Principal, Commissioner of Income Tax-2, Jaipur, for fresh adjudication in compliance with the law.

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