Gujarat High Court declines to enhance CBDT informant reward: detailed discretion under 2007 Guidelines upheld

Background of the dispute

The matter in ABC Vs Union of India (Gujarat High Court) concerned the scope of judicial review over rewards granted to informants by the Central Board of Direct Taxes (CBDT) under the Guidelines for Grant of Rewards to Informants, 2007. The assessee–informant sought a higher reward than what had been finally sanctioned by the Full Board, contending that the original recommending authority had proposed a substantially larger amount.

The Gujarat High Court was called upon to decide whether it could direct enhancement of the reward by re‑evaluating the CBDT’s calculation, or whether the reward scheme being ex gratia and discretionary insulated such decisions from judicial interference except in very narrow circumstances.

Facts leading to the writ petition

Information supplied and search action

  • The petitioner, a Real Estate Consultant, claimed to have supplied specific information to the Income Tax Department regarding alleged unaccounted cash transactions by the SHELADIA Group in connection with purchase of land.
  • According to the information, the group allegedly made cash payments of approximately Rs.47.50 crores directly to original land owners, resulting in substantial escapement of income.
  • Acting on this information, the Department conducted a search on 14.12.2010 at the premises of the SHELADIA Group and certain land sellers.
  • As per the petitioner’s version, the search operation led to:
    • Disclosure of undisclosed income of Rs.60.48 crores; and
    • Seizure of cash of Rs.1.5 crores.

Initial reward payments

  • The informant reward proposal was initiated under the Guidelines for Grant of Rewards to Informants, 2007.
  • Initially, an interim reward of Rs.1,00,000/- was granted to the petitioner.
  • Subsequently, by order dated 07.07.2015, the competent committee sanctioned an additional amount of Rs.14,00,000/- towards reward, treating it as a final reward at that stage.
  • Thus, by 2015, the petitioner had already received Rs.15,00,000/- in aggregate as reward.

First round of writ proceedings

  • Dissatisfied, the petitioner approached the High Court in Special Civil Application No.1899 of 2018, claiming higher reward on the ground that the tax collection pursuant to his information exceeded Rs.5 crores, thereby attracting the provision enabling relaxation of the monetary ceiling by the Full Board.
  • The Coordinate Bench, by order dated 04.04.2018, held that:
    • The petitioner’s entitlement under the scheme was limited and inherently discretionary.
    • However, since the collection exceeded Rs.5 crores, the authorities were directed to take a fresh and final decision on the quantum of reward in accordance with the 2007 Guidelines.
  • Pursuant to this direction, the matter was placed before the Full Board of CBDT for reconsideration.

CBDT’s reconsideration and final reward determination

Tax recovery attributable to information

The Court recorded the following undisputed aspects:

  • Total tax collection connected with the broader set of cases was about Rs.8.12 crores.
  • Out of this, approximately Rs.4.12 crores of tax was directly relatable to the information furnished by the petitioner.
  • The balance portion of the Rs.8.12 crores pertained to other entities or issues not entirely traceable to the petitioner’s information, though the recommending authority had considered the full amount while suggesting reward.

Recommendation vs.