K. C. Agrawal, J.
1. Paras Bhan Sadh was carrying on business at Farrukhabad. He was assessed to tax since the assessment year 1957-58 on estimated income as he was representing to the department that he did not maintain regular books of account. After the petitioner was assessed for the assessment year 1971-72, the file of the petitioner's case was examined by the Inspecting Assistant Commissioner of Income-tax on August 17, 1972. After examination of the case, he directed the Income-tax Officer to reopen the assessment for the year 1971-72 under Section 143(2)(b) of the Income-tax Act and to ask the petitioner to submit the net wealth statement. Pursuant, to the aforesaid order, the Income-tax Officer on September 12, 1972, called upon the petitioner to file the list of debtors, creditors along with the personal net wealth statement. The petitioner was also required to give basis of sales and purchases made by him. Thereafter, on October 20, 1972, a notice under Section 143(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), was issued to the petitioner. After seeking some adjournments, the petitioner filed a written application on December 13, 1972, to the Commissioner of Income-tax making a disclosure of the net wealth at Rs. 1,39,000. By this application, the petitioner also made a prayer that the amount of money disclosed by him be spread over the assessment years 1964-65 to 1972-73. It was, thereafter, that the notices under Section 148 of the Act were issued for the assessment years 1964-65 to 1970-71. Thereafter, the petitioner filed another application on 13th January, 1975, stating the prayer that spreading over be confined to assessment years 1966-67 to 1972-73. It appears that soon thereafter the assessment orders were made on 27th February, 1975. On March 4, 1976, the petitioner-received a letter from the office of the Commissioner of Income-tax that as the provisions of the Income-tax Act had been amended by the Taxation Laws (Amendment) Act, 1975, the application filed by the petitioner earlier under Section 271(4A) of the Act had become infructuous and that the petitioner should, therefore, file, if so advised, a fresh application for waiver under the newly added Section of the Income-tax Act. Then the petitioner filed an application under Section 273A of the Act to the Commissioner of Income-tax making a prayer for the waiver of the penalty on the ground that as he had voluntarily and in good faith filed returns before the Income-tax Officer and got the assessment made on himself, the penalty imposed on him be waived. This application of the petitioner was rejected by the Commissioner of Income-tax on 18th May, 1977. The order rejecting the application reads as under :
'This order covers application made by the assessee under Section 273A of the I. T. Act, 1961, for a. ys. 1966-67 to 1972-73. After considering the circumstances of the case, I am satisfied that the application made by the assessee is not covered by the provision of Section 273A of the I. T. Act. I hereby reject the petition under Section 273A of the I. T, Act, 1961, for a. ys. 1966-67 to 1972-73.
A. R. Natarajan,
Commissioner of Income-tax, Agra.
2. Upon the rejection of the said application the petitioner filed the present writ in this court challenging the order of the Income-tax Commissioner, inter alia, on the grounds that the petitioner having not been given an opportunity of an oral hearing the order passed was invalid. Secondly, that the. order being not a speaking one was invalid. Thirdly, that the Commissioner of Income-tax wrongly held that the requirements of Section 273A of the Act were not fulfilled in the present case.
3. As we are in agreement with the learned counsel for the petitioner on the second point, we need not discuss the first and the third points raised on behalf of the petitioner, since, in our opinion, the decision on the second point would be sufficient for the purposes of disposing of the present writ petition.
4. The second argument, as already mentioned, was that the order impugned was bad inasmuch as the Commissioner of Income-tax did not record reasons in support of the order which he made. In this connection, the first aspect of the matter which may, briefly, be examined is about the nature of the proceedings. The learned counsel for the petitioner contended that the same was quasi-judicial. Now, what is involved in a judicial process is well settled and as pointed out by Shah J. in Jaswant Sugar Mills Ltd. v. Lakshmi Chand  24 FJR 53 ; AIR 1963 SC 677, a quasi-judicial decision involves the following three elements :
(1) It is in substance a determination upon investigation of a question by the application of objective standards to facts found in the light of preexisting legal rules ;
(2) it declares rights or imposes upon parties obligations affecting their civil rights;
(3) the investigation is subject to certain procedural attributes contemplating an opportunity of presenting its case (to a party).
5. In the instant case, it would be seen that under Section 273A of the Act the Commissioner of Income-tax is required to decide an application filed under that provision objectively by taking into account the factors mentioned therein. He, has to consider it on merits and if the conditions for the exercise of the power conferred by this sectionare made out, he is obliged to exercise the discretion in favour of an assessee making an application under this provision. Though the word used in Section 273A of the Act is 'discretion' it is obvious that it does not vest in the authority the power to act arbitrarily and to reject an application filed under this provision even if the circumstances calling for the exercise of such a power exist. In our opinion, therefore, the nature of the proceedings under Section 273A of the Act is quasi-judicial.
6. It is incontrovertible that where an authority makes an order in exercise of a quasi-judicial function it must record reasons in support of the order. If an authority is needed for the said proposition reference may be made to the cases ,of the Supreme Court in Express Newspapers P. Ltd. v. Union of India, AIR 1958 SC 578; 14 FJR 278 and Siemens Engineering and . v. Union of India, AIR 1976 SC 1785. In these two cases, the Supreme Court has clearly laid down that every quasi-judicial order must be supported by reasons and, therefore, it is now settled that such an order must be a speaking order.
7. The requirement of giving reasons for an order derives its authority from the principle that justice should not only be done but it also should seem to have been done. Moreover, the duty to act judicially excludes the possibility of arbitrary exercise of the power. If reasons are required to be given for an order the same would be an effective restraint or a potent weapon to check the abuse of power. It excludes from consideration extraneous or irrelevant matters. As observed by Subba Rao J., as he then was, in Madhya Pradesh Industries Ltd. v. Union of India, AIR 1966 SC 671, that 'a speaking order will at its best be a reasonable and at its worst at least a plausible one'. The insistance for giving reasons in an order introduces clarity and prohibits an authority from taking into consideration irrelevant and illegal matters while deciding a case before it. It further creates confidence in the public mind.
8. Another ground which is often advanced in taking the view for giving reasons is based on the power of judicial review conferred by the Constitution on the High Court under article 226 of the Constitution and the Supreme Court under article 32. Dealing with this aspect, the Supreme Court observed in Travancore Rayons Ltd. v. Union of India, AIR 1971 SC 862 at page 866 thus;
'The court insists upon disclosure of reasons in support of the order on two grounds--one, that the party aggrieved in a proceeding before the High Court or this court has the opportunity to demonstrate that the reasons which persuaded the authority to reject his case were erroneous : the other, that the obligation to record reasons operates as a deterrent against possible arbitrary action by the executive authority invested with the judicial power.'
9. In this connection reference may also be made to the decision of the Supreme Court in Siemens Engineering and . v. Union of India, AIR 1976 SC 1785, in which the Supreme Court observed at page 1789 thus:
'The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law.'
10. Having found that an order passed by a quasi-judicial tribunal or authority should be a speaking one, we now proceed to consider the facts of the present case. We have already quoted the letter dated 18th May, 1977, sent to the petitioner intimating him that his application filed under Section 273 has been rejected by the Commissioner of Income-tax. It simply mentions that as the application made by the petitioner was not covered by Section 273A of the Act the same had been rejected. It does not give any reason for its rejection. The learned counsel for revenue, however, produced the entire file relating to the case of the petitioner before us in his attempt to justify that the reasons had been recorded by the Commissioner in it. The learned counsel desired us to read the order of the Commissioner which is to the following effect :
'I agree. The requisite conditions for waiver/reduction are not satisfied,' along with the notings made by the officer on the file of the petitioner. We have seen the notings and are unable to find anything therein which could show any ground or motive for the order. In fact, out of the two notings made in the file, one of them recommends that, since the requirements of Section 273A of the Act had been made out, the prayer for the waiver of penalty could be accepted. Tn the second noting made after the first only the facts have been summarised. It does not mention any ground on which the application could be rejected or allowed. Towards the end, it mentions 'after calling for wealth statement, the disclosure of wealth is voluntary or not may kindly be considered by the CIT' and below this the only thing done by the Commissioner of Income-tax was to express his agreement by making a note to that effect. Neither the notings nor the order gives any clue with respect to the ground on which the application was rejected. It is not suggested that the Commissioner of Income-tax should give detailed or elaborate order in the manner like that of a court of law but one expects from an authority like the Commissioner of Income-tax to give explicit and clear reasons for not accepting a prayer made under Section 273A of the Act. An assessee who has filed an application under the aforesaid provision should be told the reason or the grounds on which his prayer for waiver or reduction could not be acceded to. Giving reasons would inspire confidence in the institution of the Commissioner of Income-tax. As mentioned above, had we found the reasons and circumstances having been set out in the notings of the office, we could consider it but even that is not there to sustain the order of the Commissioner of Income-tax. What we find is only the conclusion arrived by the Commissioner. There is a difference between reasons and conclusion. As observed by the Supreme Court in Union of India v. M.L. Capoor, AIR 1974 SC 87 at page 98 thus: 'Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable.'
11. We, accordingly, allow the writ petition and quash the order passed by the Commissioner of Income-tax. He is directed to reconsider the application filed by the petitioner on merits. The petitioner will be entitled to get costs of this petition from the respondents.