A failure to act fairly would be ‘failure to act in accordance with law’ and failure to make a decision in accordance with law would be contrary to law-applicability of principles of natural justice is intended to act as safeguard against arbitrariness
An honest tax-payer should not be subjected to unnecessary harassment, browbeating and an action not warranted in law-tax payers should not get a feeling that paying taxes honestly is not worthwhile exercise and that tax authorities are a menace to the society rather than simply being representatives of the state for enforcing the tax provisions.
In a democratic society governed by the rule of law, it is the duty of the State to do what is fair and just to the citizen and that it should not seek to defeat the legitimate claim of the citizen by adopting a legalistic attitude but should do what fairness and justice demand. While it is true that collection of revenue is a serious matter for the State and the bounden duty of the authorities functioning under the Act is to implement the provisions of the Act, there should be safety and assurance to an honest tax payer. An honest tax-payer should not be subjected to unnecessary harassment and an action not warranted in law, which can be of very serious consequence to tax payer if is allowed to remain without correction, such harassment and browbeating of an honest tax payer will otherwise drive even such honest tax payer to become cynical and lead to a situation where tax payers will get a feeling that paying taxes honestly is not worthwhile exercise; that tax authorities are a menace to the society rather than simply being representatives of the State for enforcing the tax provisions. The taxing authorities exercise quasi judicial powers and in doing so they must act in a fair and not a partisan manner. Although, it is part of their duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighted against the assessee. We are wholly unable to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee they should be deemed not to have exercised it in a proper and judicious manner.
While issuing a show-cause notice the taxing authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against.
Justice is rooted in confidence and justice is the goal of a quasi-judicial proceeding also. If the functioning of a quasi-judicial authority has to inspire confidence in the minds of those subjected to its jurisdiction, such authority must act with utmost fairness. Its fairness is obviously to be manifested by the language in which charges are couched and conveyed to the person proceeded against. While reading a show-cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence. Therefore, while issuing a show cause notice authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and especially when he has the power to take a punitive step against the person after giving him a show cause notice. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding.
Application of the principles of natural justice that no man should be condemned unheard is intended to prevent the authority from acting arbitrarily affecting the rights of the concerned person.
 The adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. These principles are well settled. The first and foremost principle is what is commonly known as audi alteram partem rule. It says that no one should be condemned unheard. Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair play. The concept has gained significance and shades with time. When the historic document was made at Runnymede in 1215, the first statutory recognition of this principle found its way into the "Magna Carta". The classic exposition of Sir Edward Coke of natural justice requires to "vocate interrogate and adjudicate". In the celebrated case of Cooper v. Wandsworth Board of Works the principle was thus stated:
"Even God did not pass a sentence upon Adam, before he was called upon to make his defence. "Adam" says God, "where art thou has thou not eaten of the tree whereof I commanded thee that though should not eat".
Since then the principle has been chiseled, honed and refined, enriching its content. Judicial treatment has added light and luminosity to the concept, like polishing of a diamond. Principles of natural justice are those rules which have been laid down by the Courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights. These rules are intended to prevent such authority from doing injustice. A failure to act fairly would be failure to act in accordance with the law and a failure to make a decision in accordance with the law would be contrary to law. It is well-settled that even when there is no specific provision in a statute or rules made there under for showing case against action proposed to be taken against an individual, which affects the right of that individual the duty to give reasonable opportunity to be heard will be implied from the nature of the function to be performed by the authority which has the power to take punitive or damaging action . Where the circumstances in which a person who is called on to exercise a statutory power and make a decision affecting basic rights of others are such that the law impliedly imposes on him a duty to act fairly. Good administration and an honest or bona fide decision must require not merely impartiality, nor merely bringing one's mind to bear on the problem, but of acting fairly, and to the limited extent that the circumstances of any particular case allow, and within the legislative framework under which the administrator is working, only to that limited extent do the so-called rules of natural justice apply, which in a case such as this is merely a duty to act fairly.11 The cardinal point that has to be borne in mind, in every case, is whether the person concerned should have a reasonable opportunity of presenting his case and the authority should act fairly, justly, reasonably and impartially. It is not so much to act judicially but is to act fairly, namely, procedure adopted must be just, fair and reasonable in the particular circumstances of the case. In other words application of the principles of natural justice that no man should be condemned unheard intends to prevent the authority from acting arbitrarily affecting the rights of the concerned person. It is fundamental rule of law that no decision must be taken which will affect the right of any person without first being informed of the case and giving him an opportunity of putting forward his case. An order involving civil consequences must be made consistently with the rules of natural justice.12 The object of the principles of natural justice-which are now understood as synonymous with obligation to provide a fair hearing is to ensure that justice is done, that there is no failure of justice and that every person whose rights are going to be affected by the proposed action gets a fair hearing.13
TAXING AUTHORITIES ENTRUSTED WITH THE TASK OF CALCULATING AND REALISING TAXES SHOULD FAMILIARISE THEMSELVES WITH RELEVANT PROVISIONS AND BECOME WELL VERSED WITH THE LAW ON THE SUBJECT-ANY REMISSNESS ON THEIR PART CAN ONLY BE AT THE COST OF THE NATIONAL EXCHEQUER
Taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that state issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity.14 We are really surprised at the manner in which the first respondent dealt with the matter of this assessment. It is clear that he did not exercise his own judgment in the matter and faithfully followed instructions conveyed to him by the Assistant Commissioner without giving the appellants an opportunity to meet the points urged against them. The whole procedure was contrary to the principles of natural justice. The procedure adopted was, to say the least, unfair and was calculated to undermine the confidence of the public in the impartial and fair administration of the sales-tax Department concerned. We would, have, simply on this ground, set aside the assessment order made by the first respondent and remanded the matter back to him for his due consideration in accordance with law; but as the matter is old and a remand would lead to unnecessary harassment of the appellants, we have preferred to deal with the appeal on merits.15 If a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authority's instruction, it will be a case of failure to exercise discretion altogether. 
EVERY ACTION OF AUTHORITY MUST BE SUBJECT TO RULE OF LAW AND INFORMED BY REASON-RULE OF LAW CONTEMPLATES GOVERNANCE BY LAWS AND NOT BY HUMOUR, WHIMS AND CAPRICES OF THE MEN TO WHOM THE GOVERNANCE IS ENTRUSTED-AN ACT UNINFORMED BY REASON IS ARBITRARY-ARBITRARINESS IS ANATHEMA TO STATE ACTION IN EVERY SPHERE AND WHEREVER THE VICE PERCOLATES, THE COURT WOULD NOT BE IMPEDED BY TECHNICALITIES TO TRACE IT AND WOULD STRIKE IT DOWN:
It is settled law that any action or decision of the State or a public authority is judicially reviewable, irrespective of the sphere in which the discretion was exercised by the State or the said authority. The scope of judicial review may vary with reference to the type of matter involved. But there is no such thing as unreviewable administrative discretion. Any act of the repository of power, whether legislative or administrative or quasi-judicial, is open to challenge if it is in conflict with the Constitution of India or the governing Act or the general principles of the law of the land or if it is so arbitrary or unreasonable that no fair minded authority could ever have done it. Whenever a decision-making function is entrusted to the subjective satisfaction of a statutory functionary, there is an implicit obligation to apply his mind to pertinent and proximate matters only, eschewing the irrelevant and the remote. If the action or the decision is perverse or if it has been arrived at by the authority misdirecting itself by adopting a wrong approach or if it has been influenced by irrelevant or extraneous matters, the Court would be justified in interfering with the same. The repository of power should act within the bounds of the power delegated and should not abuse his power. He must act reasonably and in good faith. Where there is arbitrariness in State action Article 14 of the Constitution springs in and judicial review strikes such an action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. Rule of law contemplates governance by laws and not by humour, whims and caprices of the men to whom the governance is entrusted for the time being. An act uninformed by reason is arbitrary. Arbitrariness is anathema to State action in every sphere and wherever the vice percolates, the Court would not be impeded by technicalities to trace it and would strike it down. Every State action has to be for a public purpose and must promote public benefit. The discretionary power conferred upon an authority for the public good is coupled with a duty to perform it under relevant circumstances. The fact that the exercise of the power is left to the discretion of the authority does not exonerate him from not discharging his duty. If the authority fails to discharge his duty by refusing to exercise his discretion when facts calling for its exercise exist, the Court will compel him to do so. If the discretionary power is exercised arbitrarily, capriciously or unreasonably or by taking into consideration extraneous and irrelevant considerations, in the eye of law, the authority concerned must be deemed not to have exercised the discretion at all, that is, he has not discharged his duty. In such a situation also the Court will compel the authority to discharge the duty of exercising the discretion honestly and in the spirit of the statute. If the authority exercises his discretion honestly and in the spirit of the statute no mandamus will be issued directing him to exercise his discretion in a particular way. A decision resulting from the exercise of power or discretion on the dictation of someone else is ultra vires and void.
Holders of public office should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.18 It should not be forgotten that every statutory power should be exercised fairly, honestly and reasonably and that no can be exercised at the mere ipse dixit of the officer and that nothing should not be done in an arbitrary or capricious manner.19It is the duty of a quasi-judicial officer to act without any bias in the discharge of his duties and that he must act in a fair and proper manner when dealing with any matter which he is called upon by law to decide in a quasi-judicial manner. In other words, it is the duty of the quasi-judicial officer to act judicially. This duty has been interpreted to be one which require the quasi-judicial officer to give each of the parties in a dispute an opportunity of adequately presenting his case. Viscount Haldane has described this duty in Local Govt. Board v. Arlidge, 1915 AC 120 at p. 132.20 It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating a show-cause proceeding. A show-cause proceeding is meant to give person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice. It is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, the entire proceeding initiated by show-cause notice gets vitiated by unfairness and bias and the subsequent proceeding become an idle ceremony. In the instant case from the underlined portion of the show cause notice it is clear that the third respondent has demonstrated a totally close mind at the stage of show cause notice itself.1
EVEN WHERE EXISING RIGHT IS SOUGHT TO BE TAKEN AWAY-PRINCIPLES OF NATURAL JUSTICE WOULD APPLY
The necessity to observe principles of natural justice extends and covers not merely the express rights conferred under the Act, but are required to be observed also where an existing right is sought to be taken away even in exercise of a statutory power vested in any authority irrespective of whether the order is administrative or quasi judicial, there is a duty to act fairly.
RECORDING OF REASONS:
It is too far well settled that an authority in making an order in exercise of its quasi-judicial function must record reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. The rule requiring reasons in support of a quasi- judicial order is basic as following the principles of natural justice. And the rule must be observed in its proper spirit. A mere pretence of compliance would not satisfy the requirement of law. The giving of reasons is one of the fundamentals of good administration. Failure to give reasons amounts to denial of justice. Reasons are live links between the mind of the decision-taker to the controversy in quesTion and the decision or conclusion arrived at. Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out. The "inscrutable face of the sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance. The absence of reasons renders an order indefensible and unsustainable particularly when the order is subject to further challenge before a higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected must know why his application has been rejected. It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons for its conclusion. It is the duty and obligation on the part of the Court to record reasons while disposing of the case. The hallmark of an order and exercise of judicial power by a judicial forum is to disclose its reasons by itself and giving of reasons has always been insisted upon as one of the fundamentals of sound administration justice-delivery system, to make known that there had been proper and due application of mind to the issue before the Court and also as an essential requisite of principles of natural justice. The giving of reasons for a decision is an essential attribute of judicial and judicious disposal of a matter before Courts, and which is the only indication to know about the manner and quality of exercise undertaken, as also the fact that the Court concerned had really applied its mind.  The juristic basis underlying the requirement that Courts and indeed all such authorities, as exercise the power to determine the rights and obligations of individuals must give reasons in support of their orders has been examined in a long line of decisions rendered by the Supreme Court. In Ram Phal v. State of Haryana & Others , giving of satisfactory reasons was held to be a requirement arising out of an ordinary man's sense of justice and a healthy discipline for all those who exercise power over others. In Director, Horticulture Punjab & Others v. Jagjivan Parshad , recording of reasons was held to be indicative of application of mind especially when the order is amenable to further avenues of challenge. It is in the light of the above pronouncements unnecessary to say anything beyond what has been so eloquently said in support of the need to give reasons for orders made by Courts and statutory or other authorities exercising quasi judicial functions. All that we may mention is that in a system governed by the rule of law, there is nothing like absolute or unbridled power exercisable at the whims and fancies of the repository of such power. There is nothing like a power without any limits or constraints. That is so even when a Court or other authority may be vested with wide discretionary power, for even discretion has to be exercised only along well recognized and sound juristic principles with a view to promoting fairness, inducing transparency and aiding equity. What then are the safeguards against an arbitrary exercise of power? The first and the most effective check against any such exercise is the well recognized legal principle that orders can be made only after due and proper application of mind. Application of mind brings reasonableness not only to the exercise of power but to the ultimate conclusion also. Application of mind in turn is best demonstrated by disclosure of mind. And disclosure is best demonstrated by recording reasons in support of the order or conclusion. Recording of reasons in cases where the order is subject to further appeal is very important from yet another angle. An appellate Court or the authority ought to have the advantage of examining the reasons that prevailed with the Court or the authority making the order. Conversely, absence of reasons in an appealable order deprives the appellate Court or the authority of that advantage and casts an onerous responsibility upon it to examine and determine the question on its own. An appellate Court or authority may in a given case decline to undertake any such exercise and remit the matter back to the lower Court or authority for a fresh and reasoned order. That, however, is not an inflexible rule, for an appellate Court may notwithstanding the absence of reasons in support of the order under appeal before it examine the matter on merits and finally decide the same at the appellate stage. 
1 A.K.Sachdeva and Ayushi Sachdeva, Advocates
2 Hindustan Sugar Mills v. State of Rajasthan (1980) 45 STC 194 (SC)
3 Raghavendra Sherrigar v. Assistant Commissioner of Commercial Taxes, VI Circle, Hubli and Another (2005) 142 STC 133; Reva Enviro System (P) Ltd v. State of UP (2006)148 STC 279 (All)
4 Commissioner of Income-tax v. Simon Carves Ltd AIR 1968 SC 2368
5 Oryx Fisheries Pvt. Ltd v. Union of India and Others (2010) 13 SCC 427
6 Canara Bank & Others v. Shri Debasis Das and Others (2003) 4 SCC 557
7 (1963) 143 ER 414
8 Canara Bank & Others v. Shri Debasis Das and Others (2003) 4 SCC 557
9 Mohd. Naved v. Secretary of the State for the Home Department 2012 UKUT 14 (IAC)
10 Maneka Gandhi v. Union of India AIR 1978 SC 597: 1978 SCR (2) 621;
11 Re H.K.(An infant)  2 QB 617  1 All ER 226, (1967) 2 WLR 962
12 D.K.Yadav Vs. J.M.A. Industries Ltd (1993) 3 SCC 259
13 State Bank of Patiala and Others v. S.K.Sharma AIR 1996 SC 1669: (1996) 3 SCC 364
14 Parshuram Pottery Works Co. Ltd v. Income-tax Officer, Circle-I, Ward-A, Rajkot, Gujarat AIR 1977 SC 429
15 Mahadayal Premchandra v. Commercial Tax Officer Calcutta and Another (1958) 9 STC 428 (SC)
16 Anirudhsinhji Karansihnji Jadeja v. State of Gujarat AIR 1995 SC 2390: (1995) 5 SCC 302:
17 B.L.Wadehra (Dr.) v. State NCT of Delhi and others AIR 2000 Delhi 266;
18 Vineet Narain v. Union of India (1998) 1 SCC 226: AIR 1998 SC 889
19 E.K.Hajee Mohammed Meera Sahib and Sons v. Sales Tax Officer, II Circle, Trivandrum (1992) 86 STC 99 (Ker)
20 Ramjibhai Ukabhai Parmar v. Manilal Purushottam Solanki, AIR 1960 Gujarat 19
21 A.N. Dyes Corporation v. State of Andhra Pradesh and others AIR 1981 AP 386
22 Siemens Engineering and Manufacturing Co. of India Ltd v. Union of India and Another AIR 1976 SC 1785; Kranti Associates Pvt. Ltd v. Masood Ahmed Khan (2010) 9 SCC 496
23 Steel Authority of India Ltd v. Sales Tax Officer, Rourkela-I, Circle and Others (2008) 11 RC 254
24 The Secretary, Curator, Victoria Memorial Hall v. Howrah Ganatantrik Nagrik Samity, AIR 2010 SC 1285;
25 (2009) 3 SCC 258
26 (2008) 5 SCC 539
27 Maya Devi (D) by LRs. v. Raj Kumar Batra (D) LRs and Others (2010) 9 SCC 486