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Justice not only should be done, it should appear to have

been done is an old adage. The concept of natural justice
that one must be heard before he is condemned has its root
in ancient law. Though it is difficult to precisely define what
is meant by natural justice, the contents of principles of
natural justice are quite easy to enumerate. As it stands
today, the basic principles of Natural justice are:

1)           that the parties should be heard before deciding an

2)           the hearing must be before an impartial Judge, as
no man can be judge of his own cause. Therefore, the
hearing must be before an unbiased Judge;
3)           the Judge should decide in good faith. He should
have no bias, personal or pecuniary; and
4)           the decision given must be reasoned one and
therefore, the decision must be evidenced by a speaking
order which enumerates the reasons for coming to a
particular conclusion.

The American Due Process of Law postulates: (a) notice (b)

opportunity to be heard (c) an impartial tribunal and (d) an
orderly course of procedure. The concept of speaking order
as a part of principles of natural justice is a significant and
important contribution by Indian jurisprudence. While the
English Jurists and Judges have hesitated in adopting
speaking order as a part of the principles of natural justice,
the Indian courts, particularly the Hon’ble Supreme Court
has unequivocally accepted that speaking order is the third
important basic principle of natural justice. Therefore, as it
stands as far as the Indian law is concerned, the three basic
accepted principles of natural justice are

1)     that the dispute should be decided by an impartial

judge without any bias or interest against the parties and in
the subject-matter of dispute;
2)     ‘Audi alteram partem’ which means, no man should be
condemned unheard. Both parties must be heard before
passing any order;
3)     that the decisions must be reasoned one and the orders
containing the decision must be speaking orders.

Therefore, the third principle of natural justice is that a

party ought to know the result of the inquiry and the reasons
for the decision.

A ‘speaking order’ means an order speaking for itself by

giving reasons. Speaking orders are necessary if the judicial
review is to be effective. The party affected must know why
and on what grounds an order has been passed against him.
This is a new principle of natural justice which has been
recognised in India and USA, but, however, yet to be
recognised under English Law. There is no general rule of
English law, that reasons must be given for administrative
or even judicial decisions. In India also till very recently, it
was not accepted that the requirement of passing speaking
orders is one of the principles of natural justice. However,
now it is well established principle of natural justice. The
Courts have specifically held that passing of a speaking
order is a part and parcel of natural justice. As the Hon’ble
Supreme Court observed in M.P. Industries vs. Union
of India[1],“So it is essential that some restrictions shall be
imposed on Tribunals in the matter of passing orders
affecting the rights of parties and the least they should do is
to give reasons for their orders.”

The courts have justified the requirement for a speaking

order on three grounds:

1)     the party aggrieved has the opportunity to demonstrate

before the appellate or revisional court that the reasons
which persuaded the authority to reject his case were
2)     the obligation to record reasons operates as a deterrent
against possible arbitrary action by executive authority
invested with judicial power; and

3)     it gives satisfaction to the party against whom the order

is made. The power to refuse to disclose reasons in support
of the order is of an exceptional nature and it ought to be
exercised fairly, sparingly and only when fully justified by
the exigencies of an uncommon situation.

The Supreme Court observed in Siemens Engg. vs. Union of

India[2], “The rule requiring reasons to be given in support
of an order is like the principle of ‘audi alteram partem’, a
basis 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.”

In respect of the speaking order, the law may be

summarised as under:

1)           Where a statute requires recording of reasons in

support of the order, it imposes an obligation on the
adjudicating authority and the reasons must be recorded by
the authority.
2)           Even when the statute does not lay down expressly
the requirement of recording reasons, the same can be
inferred from the facts and circumstances of the case.

3)           Mere fact that the proceedings were treated as

confidential, does not dispense with the requirement of
recording reasons.

4)           If the order is subject to appeal or revision, the

necessity of recording reasons is greater as without reasons
the appellate or revisional authority cannot exercise its
power effectively inasmuch as it has no material on which it
may determine whether the facts were correctly ascertained,
law was properly applied and the decision was just and
based on legal, relevant and existent grounds. Failure to
disclose reason amounts to depriving the party of the right
of appeal or revision.

5)           There is no prescribed form and the reasons

recorded by the adjudicating authority need not be detailed
or elaborate and the requirements of recording reasons will
be satisfied if only relevant reasons are recorded.

6)           If the reasons recorded are totally irrelevant, the

exercise of power would be bad and the order is liable to be
set aside.
7)           It is not necessary to record reasons by the appellate
authority when it affirms the order passed by the lower
authority. (This proposition of law requires

8)           Where the lower authority does not record reasons

for making an order and the appellate authority merely
affirms the order without recording reasons, the order
passed by the appellate authority is bad.

9)           Where the appellate authority reverses the order

passed by the lower authority reasons must be recorded, as
there is a vital difference between an order of reversal and
an order of affirmation.

10)      The validity of the order passed by the statutory

authority must be judged by the reasons recorded therein
and cannot be construed in the light of subsequent
explanation given by the authority concerned or filing
affidavit. Orders are not like old wine becoming better as
they grow older.

11)      If the reasons are not recorded in the order, it does

not always vitiate the action.

12)      The duty to record reasons is a responsibility and

cannot be discharged by the use of vague general words.
13)      The reasons recorded by the statutory authority are
always subject to judicial scrutiny.

In taxation matters

Taxation laws are no exception to application of principles of

natural justice. As the courts have held; the principles of
natural justice are applicable in tax matters, particularly in
the case of assessment proceedings. Coming to the tax field
in CIT vs. Walchand, Justice Shah observed. “The practice of
recording a decision without reasons in support cannot, but
be deprecated.”

In Surajmal’s case, the Hon’ble Supreme Court observed:

“The assessment has to be made on relevant materials as
evidenced and the assessee ordinarily has the fullest rights
to inspect all records and materials that are to be used
against him. Under the provisions of section 37 of the Indian
Income-tax Act, 1922, the proceedings before the Income
Tax Officer are judicial proceedings and all the incidence of
such judicial proceedings are to be observed before the
result is arrived at. In other words, the assessee would have
a right to inspect the records and all relevant documents
before he is called upon to lead evidence in rebuttal. The
broad principles emerged in view of application of principles
of natural justice are the assessing officers exercising quasi-
judicial function would be governed in procedure by judicial
consideration and must conform to the rules of natural
justice.That is to say, he must proceed without bias and give
sufficient opportunity to the assessee to place his case before
the Department. He must conduct himself in accordance
with the principles of justice, equity and good
conscious. The assessing officer cannot rely on any evidence
or any fact in arriving in his conclusion without first
pointing out the same to the assessee and giving him a
reasonable opportunity of meeting the case which is
ultimately made out in the assessment order.

In the case of Dhakeswari Cotton Mills, where the principle

of natural justice were violated, the Supreme Court set aside
the assessment.”

Useful reference may be made to the following cases,

wherein the issue of operation of Principles of Natural
Justice was considered.

The Supreme Court in CIT vs. Electro House[3]  set aside

the order of the Commissioner u/s. 263 as the
Commissioner has not given a reasonable opportunity of
being heard to the assessee. However, the Hon’ble Supreme
Court held that the violation of Rule affected only the order
and not the jurisdiction of the Commissioner and as such, it
held that, the Commissioner could pass a fresh order after
hearing the assessee.

Similarly, the Hon’ble Andhra Pradesh High Court in Moh.

Begum vs. CIT[4]  held that the order passed in violation of
principles of natural justice, does not make the whole
proceedings invalid ab initio, but it only affects the order
passed in violation of these principles.

In Raja vs. CIT[5], the Hon’ble Madras High Court held that

any order passed in violation of principles of natural justice
is null and void. However, as long as the order so passed is
not set aside by the competent Court or Authority, it will
continue to operate.

The Hon’ble Supreme Court again in Supt. Excise vs. Pratap

Rai[6]  andCIT vs. National Taj Theatres[7]  held that the
order passed in violation of natural justice, though void, it
does not affect the jurisdiction otherwise vested in such
authority and in exercise of such authority, it can pass fresh
orders. The Hon’ble Court also held that the limitation to
pass the order within two years under section 263 would be
applicable only for passing the original order and not for
passing a fresh order in pursuance of the Appellate or other
order setting aside the original order.
The Courts have held that the Assessing Officer need not
hear the assessee before recording the reasons for re-
opening the completed assessment and before initiating
reassessment proceedings. Similarly, it has been held that
the Wealth Tax Officer need not hear the assessee before
referring the matter for valuation to the Valuation officer
u/s.16A of the Wealth-tax Act, 1957. However, the Courts
have held that the Valuation Officer must hear the assessee
before he makes his valuation report.

In Kapurchand vs. CIT[8]  the facts were that the

Commissioner had passed an order in violation of principles
of natural justice. In such cases, the Hon’ble Supreme Court
held that the Tribunal, while cancelling the order ought to
have directed the Commissioner to pass a fresh order.

In Ajanta Industries vs. CBDT[9], The Hon’ble Supreme

Court set aside an order u/s.127 of the Income-tax Act, 1961
for transferring the case of the assessee, because the reasons
recorded for his satisfaction were not conveyed to the
assessee, and as such, such order was passed in violation of
the principles of natural justice.

In Briharilal vs. CIT[10], the Hon’ble Supreme Court held

that a garnishee order passed without hearing the person
against whom it is passed in the course of recovery
proceedings, is void because the same had violated
principles of natural justice.

The rules of natural justice were fully applied in case of

exercise of jurisdiction of the Commissioner u/s. 273A for
waiver or reduction of penalty, interest etc. The
Commissioner must pass a speaking order while exercising
his jurisdiction u/s. 273A, giving reasons for his answer and
non speaking order is liable to be set aside. Similarly, while
passing the order, he should take into account all material
facts and should not take into account facts which are not

In case of the authorities exercising jurisdiction to grant

approval or exemption and the tax-payer has a right to claim
it on fulfillment of the statutory condition, the tax-payer
should be given a reasonable opportunity of being heard,
and the authority is bound to pass a speaking order and give
reasons in support of his finding that the tax-payer is not
entitled to the approval or exemption (Bharat Nidhi vs.
Union of India). Similarly, the assessing, appellate and
revisional authorities must pass speaking orders.