ORDER
V.K. Sinhal, J.
1. The petitioner is aggrieved by the order of the Joint Commissioner of Commercial Taxes (Appeals) dated May 18, 1998. The appellate authority directed the petitioner to deposit 50 per cent of the total amount of Rs. 11,64,578. It is stated by the learned counsel for the petitioner that the petitioner has already made the payment of Rs. 8,26,739 which should have been taken into consideration while passing the order on the stay application.
2. It is stated that no reasons have been assigned by the appellate authority and the order of the appellate authority is contrary to the decision of this Court in the case of B.M. Moidin Kunhi v. State of Mysore [1971] 27 STC 154 wherein it was observed :
“In the instant case, the assessee in his application for stay had submitted that he had no cash resources, that the amount involved in the three appeals was large and that he was offering security of immovable properties situated in two villages of Sullia Taluk in South Kanara District. The order made under the proviso to Sub-section (3) being an appealable order, the appellate authority ought to give reasons for the rejection of the offer of security made by the assessee. The order of the Deputy Commissioner does not make any reference to the offer of security of immovable properties made by the assessee. When the rule states that the appellate authority at its discretion may direct security in any one of the forms prescribed in the rule, it means that the discretion so vested has to be exercised in a judicial manner and not capriciously and arbitrarily. The appellate authority has to exercise its discretion taking into consideration the facts and circumstances of the case. It is seen from the assessment orders that the assessee is a resident of a village in Sullia Taluk of South Kanara District. The Deputy Commissioner has not considered the question whether the assessee is in a position to obtain the bank guarantee. In fact, it has to be inferred from his application that he is not in a position to obtain bank guarantee and therefore that he offers security of immovable property. If the appellate authority arbitrarily directs the furnishing of a bank guarantee which the appellant before it is not in a position to secure, he will be denied the right of pursuing his remedy of appeal. The stringency of the provisions of Sub-section (3) of Section 20 has now been considerably relaxed by the amendment made by Mysore Act No. 9 of 1970. By virtue of the said amendment, an assessee is entitled to appeal provided he furnishes proof of the payment of the tax and penalty not in dispute in appeal. Clause (b) of Sub-section (3) also provides for stay of the recovery of the disputed tax and penalty if the appellant furnishes sufficient security to the satisfaction of the appellate authority. The security to be furnished should he in any one of the forms prescribed in Rule 30-B. In exercise of the discretion of granting stay of recovery of disputed tax or penalty pending the appeal, the appellate authority should exercise the discretion in accordance with settled judicial principles. The question which the appellate authority should consider is whether the security offered by the assessee is sufficient. Where the assessee offers security of immovable property, the appellate authority should consider whether that property is unencumbered ; whether its title is clear and it is adequate to fully secure the payment. In the application for stay, the assessee should ordinarily furnish the form of security that he is offering. He should also mention, where the security offered is immovable property, whether it is unencumbered, the nature of the title and the value of the property. In order to consider whether the property offered is sufficient security, the appellate authority may direct the assessee to produce the following : (a) the encumbrance certificate of the property ; (b) its title deeds accompanied by a certificate of an Advocate that the title is clear, and also (c) the valuation report made by a valuer appointed under the Estate Duty Act and the Wealth Tax Act. On a consideration of the relevant materials so furnished, the appellate authority should decide whether the security is sufficient. If the assessee himself offers bank guarantee, the appellate authority may direct him to furnish bank guarantee and then the question of sufficiency of the security does not arise.”
3. Reliance is also placed on the decision given in the case of Dolton Printers Private Limited v. State of Tamil Nadu [1985] 58 STC 137 (Mad.) and the judgments of the apex Court as well as High Court reported in Income-tax Officer, Cannanore v. M.K. Mohammed Kunhi [1969] 71 ITR 815 (SC), First Gift-tax Officer, Tuticorin v. A.A. Annamalai Nadar , Income-tax Officer, “F” Ward, District IV(2) v. Murlidhar Sarda and Income-tax Officer, Lucknow v. S.B. Singar Singh & Sons . In the matter of Bhanwar Lal Jain v. State of Rajasthan [1980] 45 STC 92 (Raj), it was observed :
“Where the petitioner-dealer filed an application before the Commissioner for stay of recovery of the whole amount of the tax assessed under the Rajasthan Sales Tax Act, 1954, but the Additional Commissioner passed an order in a cyclostyled form staying only the recovery of a part of the tax assessed and stated therein that he had looked into the assessment order and the grounds of appeal as also the stay application :
Held, that under the third proviso to Section 11(3) of the Act, the Additional Commissioner must record reasons for rejecting an application for stay of recovery of the amount of tax. The filling of the blanks in a cyclostyled pro forma was not enough. The Additional Commissioner might have certain reasons in his mind while allowing the petitioner’s application for stay in part, but the mandate of law is that the reasons must be recorded. It was, therefore, obligatory for the Additional Commissioner to record reasons for rejecting the petitioner’s prayer for stay of recovery of the whole amount of tax.”
4. It is stated that the power should have been exercised in a bona fide and reasonable manner and it is a quasi-judicial function ; the discretion should have been exercised in accordance with law. Reliance is placed on the decision of V.N. Purushothaman v. Agrl. Income-tax Officer . Reliance is also placed on the decisions reported in Yusuf Jan Sahib v. Additional Income-tax Officer [1961] 42 ITR 637 (Ker) and N. Rajan Nair v. Income-tax Officer .
5. I have considered over the matter. In the case of Income-tax Officer v. M.K. Mohammed Kunhi [1969] 71 ITR 815 (SC) it was observed that in the matter of grant of stay, the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory. It was also observed that if the Appellate Tribunal proceed to stay recovery of taxes or penalties payable by or imposed on the assessees as a matter of course, the revenue will be put to great loss because of the inordinate delay in the disposal of appeals by the Appellate Tribunal. It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It will only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions, and the stay will be granted in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal.
6. In the matter of V.N. Purushothaman v. Agrl. Income-tax Officer [1984] 149 ITR 120, the Kerala High Court considered the appellate authority as a quasijudicial-authority and observed that “he should exercise the discretion vested in him in accordance with law. The order passed by him should show that he has applied his mind and taken into consideration the basic requirements germane to the issue. The difficulties involved in the issues raised in the case and the prospects of the appeal being successful is one such aspect. The position and economic circumstances of the assessee is another. If the officer feels that the stay would put the realisation of the amount in jeopardy, that would be a cogent factor to be taken into consideration. The amount involved is also a relevant factor”. In the case of H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority, Karnal v. Gopi Nath & Sons [1990] 77 STC 1 (SC), it was observed :
“Judicial review, it is trite, is not directed against the decision but is confined to the decision-making process. Judicial review cannot extend to the examination of the correctness or reasonableness of a decision as a matter of fact. The purpose of judicial review is to ensure that the individual receives fair treatment and not to ensure that the authority after according fair treatment reaches, on a matter which it is authorised by law to decide, a conclusion which is correct in law. Judicial review is not an appeal from a decision but a review of the manner in which the decision is made. It will be erroneous to think that the court sits in judgment not only on the correctness of the decision-making process but also on the correctness of the decision itself.”
7. In the matter of Kishan Lal v. Union of India [1998] 230 ITR 85 (SC) where the matter was involved with regard to Section 220(2A) of the Income-tax Act, 1961, for reduction/waiver of interest, it was observed :
“…………..Even though in the said sub-section it is not stated that any reasons are to be recorded in the order deciding such an application, it appears to us that it is implicit in the said provision that whenever such an application is filed the same should be decided by a speaking order. Principles of natural justice in this regard would be clearly applicable……….”
8. From the various decisions, referred to above, it is evident that the Joint Commissioner while hearing and disposing of the stay application has to exercise his discretion in a judicious manner. He has to record the reasons if the application is not accepted or partly accepted. This is beside the fact that proper opportunity of hearing has also to be given. It is true that stay is not automatic and the various factors like possibility of success in appeal, financial position of the assessee beside the factors which are relevant for grant of injunction, viz., existence of prima facie case, balance of convenience and the factor of irreparable loss have to be kept in view. The appellate authority has to draw a balance between the assessee and the Revenue. It is also true that the Government are not run with the bank guarantees or securities and recovery of arrears of taxes is the main source for the revenue on the basis of which daily working of the Government goes on. In the case of the Assistant Collector of Central Excise v. Dunlop India Ltd. it was observed by the apex Court that the Government are not run on the bank guarantees. Keeping in view of these facts, it could be stated that it is the each and individual case which has to be examined on its merit while disposing of the stay application. In the present case, it is not known whether at the time of making the stay application the fact of deposit of Rs. 8,26,739 was brought to the notice of the appellate authority or not. If this fact has been brought to the notice of the appellate authority, then the assessee would not have been required to make the payment of 50 per cent of the demand. The order which has been passed also does not contain any reason to show that the mind was properly applied. In other words, it cannot be considered to be a speaking order. Normally in a matter of discretion, this Court will not interfere in such an order except where the judicial review is necessary in the interest of justice. If the reasons are not recorded in the order or there is no proper application of mind that are the factors which could be considered by this Court. Accordingly, annexure G is quashed and the Joint Commissioner of Commercial Taxes (Appeals) is directed to hear the stay application of the petitioner afresh within 3 weeks from the date of submission of copy of this order.
9. Writ petitions stand disposed of with the above observations.