Discharge of quasi-judicial functions makes it mandatory for the authority concerned to record a reason-based satisfaction. The reasons should have a direct nexus that the order is passed to avoid detriment to the interest of the Revenue. The belief of the Officer should have nexus to the reason for such belief and both these features in turn should have nexus to the interest of the Revenue.

The belief, thus, should not be imaginary or unrelatable to any kind of cogent material on record of the Assessing Officer's file. Such material could relate to anything which comes to the notice of the Assessing Officer during the assessment proceedings or even thereafter.

Sub-section (1) grants a statutory right to an assessee to discharge the liability arising from a demand under Section 156 within 30 days and such right can be taken away under the proviso only if the essential features contained in the language of the section are satisfied. Reasonableness of "reason to believe" would be of pertinent importance while the court is considering the legality of the order passed by the Assessing Officer in exercise of his powers under the proviso to Section 220(1).

The expression "reason to believe" in common parlance would mean to have sufficient cause to believe. It is not synonymous with subjective satisfaction, as it would be open to the court to examine the matter whether "reason to believe" has a rational connection or a relevant bearing to the formation of the belief.

The belief must be held in good faith and cannot be merely pretence. It must be stronger than mere satisfaction. The belief entertained by the Assessing Officer must not be arbitrary or irrational but should be reasonable. In other words, it must be based on reasons which are relevant and material. In Dr. Partap Singh v. Director of Enforcement (155 I.T.R. 166), the Supreme Court held that it is open to the court to examine the question in relation to rational connection or a relevant bearing to the formation of the belief and not extraneous or irrelevant to the purpose of the Section. To that extent, it was held that the proceedings initiated by the Tax Officer under Section 34 would be open to challenge in a court of law. The reasons must have nexus to the requirements of law. The decision supported by no reasons or reasons without basis, would be inexplicable before the court and would offend the basic rule of law. Such order would be beyond the jurisdiction vested in the Assessing Officer under Section 220(1).

The other expression of significant use by the law framers in the proviso is "detrimental to Revenue". The dictionary meaning of the word "detriment" is any loss or harm suffered in person or property.

It could also be understood that the promisee has, in return of a promise, foregone some legal right which he otherwise would have been entitled to exercise, or that he has given up something which he had a right to keep.

"Legal detriment" again refers to giving up something which immediately prior thereto the person had the privilege to retain. This expression has been used simply to imply that there should be no loss or injury to the Revenue. Loss of revenue would normally refer to non-recovery of its dues or that a demand of tax may not become irrecoverable.

By his acts and deeds, the assessee may not be able to frustrate the recovery of tax. Intention on the part of the assessee to cause loss or injury to the Revenue should be evident from the reasons recorded by the Officer in support of his belief that grant of full period would be detrimental to the interest of the Revenue.In normal circumstances, an assessee would have 30 days to meet this demand and it is only after the expiry of such period that the assessee would entail the liabilities. The assessee would still have the right to pray to the Assessing Officer not to treat him as an "assessee in default" in respect of the demand under Section 220(6) of the Act. Where the assessee is deprived of seeking recourse to such remedy, he would be exposed to liability of interest and penalty immediately on the expiry of the reduced period.

To conclude, there has to be a definite cause or reason for the Assessing Officer to believe that if the full period of 30 days is granted, there will be detriment to the Revenue.

In other words, recovery of the demand raised by the Revenue is likely to be jeopardised if the prescribed period is granted to the assessee. The language of the Section does not suggest that the Legislature intended to arm the Assessing Officer with wide powers; therefore, the obligation to act judiciously. Invocation of such provision in a routine or a mechanical manner would not be permissible.

(The author, a Mumbai-based advocate specialising in tax laws, can be contacted at ranina@bom2.vsnl.net.in)

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