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held in good faith and not merely a pretence. “To put it differently it is open to the
Court to examine the question whether the reasons for the belief have a rational connec-
tion or a relevant bearing to the formation of the belief and are not extraneous or irrele-
vant to the purpose of the section.”
27. In Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District
I, Calcutta and Another, AIR 1961 SC 372, the Court has observed that :
“The expression “reason to believe” postulates belief and the existence of
reasons for that belief. The belief must be held in good faith: it cannot be merely a
pretence. The expression does not mean a purely subjective satisfaction of the In-
come Tax Officer; the forum of decision as to the existence of reasons and the belief
is not in the mind of the Income Tax Officer. If it be asserted that the Income
Tax Officer had reason to believe that income had been under assessed by
reason of failure to disclose fully and truly the facts material for assessment,
the existence of the belief and the reasons for the belief, but not the suffi-
ciency of the reasons, will be justiciable. The expression therefore predicates
that the Income Tax Officer holds the belief induced by the existence of rea-
sons for holding such belief. It contemplates existence of reasons on which the
belief is founded, and not merely a belief in the existence of reasons inducing the be-
lief; in other words, the Income Tax Officer must on information at his disposal be-
lieve that income has been under-assessed by reason of failure fully and truly to
disclose all material facts necessary for assessment. Such a belief, be it said, may not
be based on mere suspicion; it must be founded upon information.”
(Emphasis supplied)
28. The view stands reiterated in Income-Tax Officer I Ward, District VI,
Calcutta and others v. Lakhmani Mewal Das, (1976) 3 SCC 757.
29. In Bhikhubhai Vithlabhai Patel and others v. State of Gujarat and another,
(2008) 4 SCC 144, while dealing with yet another legislation, i.e. Gujarat Town
Planning and Urban Development Act, the Court reiterated that there is nothing
like absolute or unfettered discretion and at any rate in the case of expression of a
statutory powers. With approval it reiterated the following passage expressed
and explained by Prof. Sir William Wade in Administrative Law (9th Edn.) in the
chapter entitled “Abuse of discretion” and under the general heading “the prin-
ciple of reasonableness” which reads as under :
“The common theme of all the authorities so far mentioned is that the no-
tion of absolute or unfettered discretion is rejected. Statutory power con-
ferred for public purposes is conferred as it were upon trust, not absolutely-
that is to say, it can validly be used only in the right and proper way which
Parliament when conferring it is presumed to have intended. Although the
Crowns lawyers have argued in numerous cases that unrestricted permis-
sive language confers unfettered discretion, the truth is that, in a system
based on the rule of law, unfettered governmental discretion is a contradic-
tion in terms. The real question is whether the discretion is wide or narrow,
and where the legal line is to be drawn. For this purpose everything de-
pends upon the true intent and meaning of the empowering Act.
The powers of public authorities are therefore essentially different from
those of private persons. A man making his will may, subject to any rights
of his dependents, dispose of his property just as he may wish. He may act
out of malice or a spirit of revenge, but in law this does not affect his exer-
cise of his power. In the same way a private person has an absolute power
to allow whom he likes to use his land, to release a debtor, or, where the
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