1. The Commissioner of Wealth-tax, for short 'the Commissioner', in exercise of his powers under Section 18(2A) of the W.T. Act, 1957, by a common order dated August 26, 1974, restricted the penalties imposed on the petitioner-assessee to 25% for the assessment years 1966-67 to 1969-70. The assessee-petitioner has filed four writ applications questioning the validity of the order. As all the cases raise common questions of law and are based on similar facts we propose to dispose of them by a common order.
2. The petitioner contends that, (a) the impugned order has no backing or reasons and suffers from infirmity of non-application of the mind by. the authority to the requirements of the provisions of Section 18(2A) of 'the Act', (b) the impugned order is violative of the principles of natural justice, and (c) his claim for waiver was turned down mechanically without due application of mind.
3. For late submissions of the returns the WTO imposed penalties on the assessee under Section 18(1) of the Act for the assessment years. The assessee filed four separate applications under Section 18(2A) of 'the Act' before the Commissioner. The Commissioner held that the disclosures of the wealth had been made by the assessee voluntarily before the issue of any notice under Section 14(2), the disclosures were full and complete, the assessee had extended all co-operation in the matter of completion of the assessments and further held that '...the applications under Section 18(2A)...are well founded. The assessee-family is, therefore, entitled to claim relief as provided under the said provision of law '. Having held so, the learned Commissioner proceeded to cogitate about the causes for late submissions of the returns and held that the explanations offered were bona fide, though they might not constitute conclusive defence and reasonable cause under Section 18(1)(a) for non-levy of any penalty but thereafter concluded thus:
'On considering all the pleas of the assessee and particularly the fact that the assessee had voluntarily submitted the return and extended all co-operation to the WTO which were substantially accepted by the WTO and there was no concealment whatever noticed and that the assessee-family Has paid all the tax demands, I am of the view that the penalties imposed actually by the WTO under Section 18(1)(a) be now restricted to 25% (twenty-five per cent.) thereof which will meet the ends of justice in this case.'
4. The learned Commissioner not only held that all the pre-conditions of Section 18(2A) were present in the cases but went so far as to hold that the explanations for late submission of the returns were bona fide, yet, he did not waive the penalties because the explanations did not constitute conclusive defence and reasonable cause contemplated under Section 18(1)(a). It is apparent that the learned Commissioner overlooked the respective scope, ambit and contours of Section 18(1)(a) and Section 18(2A). The question of reasonable cause crops up for consideration under Section 18(1)(a) and if the authority concerned is satisfied that there is a reasonable cause for the delay then there cannot be any occasion to levy penalty and the question of invoking Section 18(2A) never arises. Such order may be corrected by the Commissioner in exercise of powers of revision under the Act. When there is a reasonable cause for the delay no occasion arises to levy penalty, and the assessee is entitled to be exonerated. Section 18(1)(a) operates in the field where the question of levy of any penalty arises whereas Section 18(2A) empowers the Commissioner to 'reduce or waive the amount of minimum penalty imposable'. The power to 'waive' penalty under Section 18(2A) is quite distinct and different from the power to 'impose penalty' contemplated under Section 18(1) of the Act. Section 18(2A) can come into play only when penalty has been imposed under Section 18(1). The power to reduce or waive is directly connected with 'the amount of minimum penalty'--the order of imposition of penalty remains intact but the order merely reduces the quantum of penalty or the Revenue waives the right to collect the amount of penalty imposed.
5. The word 'waive' means 'to abandon, throw away, renounce, repudiate, or surrender a claim, privilege.....or wrong; to give up right
or claim voluntarily' as defined in Black's Law Dictionary (5th Edn.). The learned Commissioner has omitted to note the distinction between the respective scope of Sections 18(1) and 18(2A). Section 18(2A) clearly indicates that a party may obtain relief of waiver or reduction even when the penalty imposable under Section 18(1) is justified. While considering an application under Section 18(2A) some of the relevant factors which need be considered are as to, (a) the gravity of default; (b) whether the assessee had defaulted to make any wrongful gain for himself or to cause wrongful loss to the Revenue; (c) the nature of the conduct and behaviour of the assessee throughout the proceedings and therebefore. The Commissioner is to consider all such relevant factors to find out whether the assessee should be asked to pay the penalty for the wrong committed by him. The quality of the 'wrong or default is undoubtedly a relevant factor. However, the factors indicated above are only illustrative and not exhaustive. However, one thing is for sure that though the assessee is penalised for his default the Commissioner may waive the penalty imposable. In the
instant case, none of the relevant factors required to be considered by the learned Commissioner was taken note of but he considered the factor not germane to the decision, namely, whether the bona fide explanations of the assessee constituted a defence and a reasonable cause contemplated under Section 18(1)(a) for non-levy of any penalty. As such the impugned order cannot be sustained.
6. If we try to ferret out the reasons why the learned Commissioner restricted the penalties to 25% we find no reason as to why the penalty was not waived. There is also no reason why the penalties were restricted to 25% only. The power conferred under Section 18(2A) is undoubtedly a discretionary power but it has been conferred on a quasi-judicial authority whose orders must have some backing of reasons. True it is that the provisions of the statute do not provide any guidelines when and how the power to waive or reduce the penalty should be exercised ; there is no mechanism or methodology for waiving or reducing the penalty in Section 18(2A) yet the Commissioner is duty-bound to give reasons for not waiving or not reducing the penalty or reducing it to a certain point. The conferment of the power is undoubtedly coupled with a duty. We have noted that Section 18(2A) incorporates the expressions 'the Commissioner may in his discretion reduce or waive' the penalty but the discretion cannot be arbitrary ; it must be exercised on a consideration of the relevant or material facts and circumstances. Giving of reasons is now a part of natural justice. It is, accordingly, necessary for the quasi-judicial bodies to give reasons. There is a general obligation on adjudicatory bodies to give reasons for the decisions even when statutes do not impose such a condition. This obligation to give reasons forms a part of natural justice and springs from the constitutional provisions contained in Articles 32, 226, 136 and 227 of the Constitution. We rely on Mahabir Prasad v. State of UP : 1SCR201 ; State of a Gujarat v. Krishna Cinema : 2SCR110 , Chowgule & Co. v. Union of India : AIR1971SC2021 ; State of Punjab v. Bakhtawar Singh : AIR1972SC2083 ; Narayan Das v. State of Madhya Pradesh : 1972CriLJ1323 , Siemens Engg. & Mfg. Co. v. Union of India : AIR1976SC1785 . An adjudicatory authority cannot disarm the court by taking refuge in silence. The petitioners have pointed out that there is no reason ascribed why the penalties were not waived. We find nothing but silence. Giving of reasons by the Commissioner while exercising power under Section 18(2A) is necessary for the following reasons :
(a) The applications under Section 18(2A) contain the grounds for reduction or waiver ; the authority is bound to give reasons if it rejects the contentions, otherwise, it would be natural to conclude that the authority could not meet the challenges or had no reasons.
(b) The provision does not empower the authority to withhold reasons. Therefore, there is a general duty to give reasons by the authority. Reasons, howsoever brief, dispel all doubts about arbitrariness of the authority.
(c) The duty to give reasons is a safety-valve against arbitrary exercise of discretionary power. If such quasi-judicial authorities are permitted to render order without reason, apart from arbitrariness there might be potent danger of non-consideration of the application and would encourage mechanical exercise of the power.
(d) Observance of the principles of natural justice is implicit in the rule of law--the rule of law itself commands a reasoned decision. The minimum requirement of the rule of law is that one ought not to be deprived of his rights without the authority of law. It has been held in Mahabir Prasad v. State of U.P. : 1SCR201 , that the duty to give reasons is the minimum requirements of the rule of law.
(e) Section 18(2A) confers a statutory right on the assessee. The authority empowered must consider the claims of an assessee. It is required to pass an order on consideration of the assertions of the assessee and the exercise calls for a reasoned order.
(f) It is a general duty of the quasi-judicial authority to act fairly. Fairness founded on reasons is the essence of the guarantee epitomised in Article 14. We extract what their Lordships observed in Manager, Government Branch Press v. D. B. Belliappa : (1979)ILLJ156SC .
' 'The giving of reasons', as Lord Denning put it in Breen v. Amalgamated Engineering Union  1 All ER 1148, 'is one of the fundamentals of good administration' and, to recall the words of this court in Khudiram v. State of West Bengal : 2SCR832 , in a Government of laws 'there is nothing like unfettered discretion immune from judicial reviewability'. The executive no less than the judiciary, is under a general duty to act fairly. Indeed, fairness founded on reason is the essence of the guarantee epitomised in Articles 14 and 16(1).'
(g) The duty to give reasons is the elementary requirements for a quasi- judicial process as ruled by the Supreme Court in Govindrao v. State of UP : 1SCR678 and CIT v. Walchand and Co. P. Ltd. : 65ITR381(SC) .
(h) A party to the proceeding is entitled to know the reasons for the decision that deprives him of his statutory right. It is a branch of the principles of natural justice.
(i) Absence of reasons by the authority multiply writ proceedings in courts. Consitutional provisions for judicial review under Articles 226, 227
and 136 of the Constitution being open, such orders require reasons to be stated for the decisions rendered.
(j) Even discretionary power coupled with duty calls for reason to be stated, as the authority is under an obligation to decide an application under Section 18(2A) one way or the other. There is no unfettered discretion in public law--the notion of absolute unfettered discretion now stands rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely, that is to say, it can validly be used only in the right and appropriate way which the statute, when conferring it, is presumed to have intended. We extract an intrinsic observation of Lord Denning M. R. in Breen v. Amalgamated Engineering Union  2 QB 175.
'The discretion of a statutory body is never unfettered. It is a discretion which is to be exercised according to law. That means at least this : the statutory body must be guided by relevant considerations and not by irrelevant. If its decision is influenced by extraneous considerations which it ought not to have taken into account, then the decision cannot stand. No matter that the statutory body may have acted in good faith ; nevertheless the decision will be set aside. That as established by Padfield v. Minister of Agriculture, Fisheries and Food  AC 997, which is a landmark in modern administrative law.'
(k) When the concept of 'error of law' includes giving of inconsistent, unintelligible or inadequate reasons, it must take within its fold 'giving of no reasons' as well. A fortiori when application of wrong legal test to the facts found, taking irrelevant consideration or failure to take relevant consideration can be 'error of law', it stands to reason that 'giving no reasons' must come within the concept of 'error of law'.
(1) When there is a duty to decide the application under Section 18(2A) according to law on the basis of relevant considerations, it is imperative for the authority to state reasons for its decision. The authority must act fairly. It is a fundamental rule that justice should not only be done but should manifestly and undoubtedly seem to be done. The rule is applicable in a proceeding under Section 18(2A).
7. These are some of the reasons why giving of reasons is a must in a proceeding under Section 18(2A) of 'the Act'. We hold that the impugned order suffers from absence of any reason for the decision and as such the impugned order must be quashed which we hereby do.
8. In the result, therefore, the petitions are allowed and the matters are remitted to the learned Commissioner for due disposal of the applications according to law. There is no order as to costs.
9. Before parting, we would observe that we have derived considerable assistance from the judgment of Hansaria J. in Sardar Kartar Singh v. CWT ITR 379.