Mandatory Reasoned Decision for Informant Rewards

1. The Core Dispute: Informant’s Right to a Reasoned Decision

The petitioner provided detailed information to the Income Tax Department regarding alleged tax evasion by a group of builders. Following the prescribed procedure, he signed a written statement and was subsequently granted an interim reward of ₹1 lakh. However, no further decision was communicated regarding a final reward.

Revenue’s Stand: The department refused any further payment, claiming that the information provided did not lead to “large-scale tax evasion” or “vital detection” beyond what was already covered by the interim reward.
Petitioner’s Stand: The informant argued that once information is acted upon and an interim reward is paid, the Revenue is legally bound to conclude the process by determining the final reward amount through the prescribed Committee.

2. Legal Ruling: The Requirement for a Reasoned Order

The High Court emphasized that while rewards are ex-gratia and at the discretion of the department, this discretion cannot be exercised arbitrarily or opaquely.

I. Role of the Committee (Clauses 2.1 & 13.1)

Under the 2007 Guidelines, the Informant Reward Committee is the specific body tasked with evaluating the accuracy, risk, and utility of the information to determine the final reward quantum.

The Ruling: The Revenue cannot simply “silent-reject” a claim. The absence of a formal Committee decision on record is a procedural lapse.

II. Duty to Pass a “Speaking Order”

The court held that the Revenue must pass a reasoned final decision (a “speaking order”) to inform the petitioner why further reward is either being granted or denied.

If the ₹1 lakh interim reward is deemed sufficient to satisfy the policy, the department must explicitly state this in a formal order after considering the final tax realizations directly attributable to the informant’s data.

3. Final Directives: Matter Remanded

The Court found that the Revenue authorities had failed to document any formal decision-making process by the Committee regarding the final reward.

Remand for Hearing: The Revenue was directed to place the matter before the Informant Reward Committee.
Principles of Natural Justice: The Committee was ordered to hear the petitioner and consider his submissions regarding the enhancement of the reward.
Time-Bound Outcome: The department must obtain a reasoned final decision from the Committee, either enhancing the reward or confirming that no further amount is payable.

Key Takeaways for Informants

Discretion is not Arbitrariness: The Department’s “absolute discretion” to grant a reward does not mean they can ignore the procedural requirements of their own Guidelines.
Finality of Assessments: Final rewards are only determined after all assessments related to the information have attained finality (i.e., no appeals are pending).
Vested Right to a Decision: While you do not have a vested right to the money until it is awarded, you do have a right to a legal and reasoned determination of your claim.

HIGH COURT OF GUJARAT

Gopal Dhanjibhai Bhimani

Income-tax Department^*

A.S. Supehia and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 15565 of 2023

JANUARY 6, 2026

Rathin P. Raval for the Petitioner. Varun K.Patel for the Respondent.

ORDER

A.S. Supehia, J. – Since a short issue is involved in the matter, the same is taken up for final hearing.

2. RULE. Learned Senior Standing Counsel Mr. Varun K. Patel waives service of notice of rule on behalf of the respondents.

3. The petitioner, by way of the present writ petition, is claiming the reward upon furnishing the information to the respondent-department, as per the policy in the form of Guidelines for Grant of Rewards to Informants, 2007. It is the case of the petitioner that he had supplied vital information to the respondent-department relating to the evasion of tax and, pursuant to that, the petitioner was called upon by the respondentdepartment to fill up the prescribed form, which he filled in the presence of the competent officer. The petitioner was also granted an interim award of Rs. 1,00,000/-. However, thereafter, the respondent-department had refused to give any further reward in accordance with the policy. Hence, the petitioner was constrained to approach this Court by way of filing the writ petition.

4. Learned advocate Mr. Rathin P. Raval, appearing for the petitioner, at the outset has placed reliance on the order dated 13.07.2023 passed by the Supreme Court in the case of Ketan Kantilal Modi v. Union of India 2023 Live Law (SC) 581, and has submitted that the Committee which is formed under the policy may be directed to reconsider the case of the petitioner and take a necessary decision after hearing the present petitioner, since after the interim reward of Rs. 1,00,000/-, the respondent-department has not passed any final award. It is submitted that as per the information supplied by the petitioner to the respondent-department, which discloses tax evasion running into crores of rupees, it is impossible to believe that there is no escapement of income and that the petitioner, as a consequence, is not entitled to further reward.

5. In response to the aforesaid submissions advanced by learned advocate Mr. Raval, learned Senior Standing Counsel Mr. Patel has submitted that the petitioner would not be entitled to any further amount as per the policy, since the Revenue did not find any vital information regarding any large-scale tax evasion by the Vasant Group of builders. Since no addition was made during the assessment on the issue of earned money, the petitioner is not entitled to any further award except the interim reward of Rs. 1,00,000/-, which has already been paid to him. Thus, it is urged that the petitioner is not entitled to any further reward.

6. The aforementioned facts about the grant of information by the present petitioner relating to tax evasion of the Vasant Group of builders to the respondent-department are not in dispute. The petitioner was asked to fill up the form of statement as per the Guidelines of 2007, more particularly, as prescribed under Clause No. 8 of such Guidelines. The petitioner was called upon by the Income Tax Authority and, accordingly, he had signed the written statement in the presence of the competent authority on 13.05.2013. The petitioner was also given an amount of Rs. 1,00,000/- as an interim reward in terms of the Policy Guidelines, 2007. However, no final reward has been granted by the respondentdepartment for the reason that on reassessment it was found that no income had escaped assessment.

7. At this stage, we may refer to the provisions of Clause No. 2.1 of the Guidelines for Grant of Rewards to Informants, 2007, which mention the formation of the Committee of three persons, being (1) the Director General of Income Tax (Inv.) of the zone concerned, (2) the cadrecontrolling Chief Commissioner of the region concerned, and (3) the Commissioner of Income Tax concerned or the Director of Income Tax (Inv.), which has to take a decision regarding the grant of reward.

8. At this stage, we may refer to the decision of the Supreme Court in the case of Ketan Kantilal Modi (supra), wherein the Supreme Court has held thus :

***

“We carefully perused the Policy (Annexure P-1) which is admittedly applicable to the case of the applicant. Under Clause 4.1 of the Policy, the reward is upto 20% of the amount evaded plus the amount of fine and penalty levied. As per the policy, a committee comprising of three members is empowered to take a decision regarding the reward. We have perused the Minutes of the meeting dated 18.04.2011.

Though in the affidavit in response to the rejoinder, a reliance is placed in a note-sheet, we find that there is no mention in the Minutes that the decision of the Committee is based on any note sheet. The decision does not record the reasons why the appellant is not entitled to 20% as provided in the Policy and why the reward should be restricted to Rs.5.50 lakhs.

Reliance is also placed by the learned counsel appearing for the respondents on letter dated 12.10.2011. The letter simply records that reward amount of Rs.5.50 lakhs is being forwarded by a demand draft.

The minutes show complete non application of mind on the prayer made by the appellant. It is well settled that if the decision-making authority does not record reasons for coming to a particular conclusion, the reasons cannot be supplied by filing affidavits.

We, therefore, direct the Committee constituted under the State Government Policy dated 20.06.2001 to reconsider the case of the appellant. The pleadings in this appeal and other documents which are on record shall be placed before the Committee.

We may also note here that the order dated 20.09.2018 records the statement of learned ASG that the amount of reward has been enhanced to Rs.9.45 lacs. This also supports the reasons recorded by us that there is no application of mind by the Committee.

The Committee will give opportunity of being heard to the appellant and then decide whether the appellant is entitled to any amount over and above Rs.9.45 lakhs already paid to him.

Needless to add that if the committee finds that appellant is entitled to additional amount, the Committee will recommend payment of reasonable interest to the appellant.

Appropriate decision shall be taken by the Committee within a period of six months from today and shall be communicated to the appellant.

The impugned judgement and order is modified to the above extent. The Appeal is partly allowed. No costs

9. It is the case of the petitioner that he is entitled to an amount over and above the interim reward of Rs. 1,00,000/- based upon the information given to the respondent-department. At this stage, we may further refer to the procedure to be followed by the respondent-department for granting of reward to the petitioner, which is prescribed in Clause 15.2 of the Policy Guidelines, 2007, which governs the applicability of the monetary ceiling for interim rewards, i.e. the calculation of the amount/reward recommended for which approval is sought. Items 6(a), (b) and (c) of annexure to para 2.2 of Clause 13.1 of the said Guidelines mandate the procedure to be adopted for calculating the final reward, which includes interim reward, ad hoc reward, part of final reward and total of interim reward and part of final reward. Whereas, item 6(c) particularly refers to the net amount of final reward to be recommended.

10. The Clauses 13.1 and 13.2 of the Policy Guidelines, 2007 refer to the calculation of the quantum of the amount to be rewarded and the part of final reward which is to be determined after the decision in appeal, etc. The interim reward of Rs. 1,00,000/- finds place in Clause No. 15.1 of the said Policy Guidelines, which the petitioner has already received. In the facts of the present case, we have noticed that, in fact, the respondent-department has not passed any final reward, since it is their contention that as the petitioner has already been granted a reward of Rs. 1,00,000/- as per the policy and the assessment does not reveal any further addition to the income declared by the Vasant Group of builders, there is no need to pass the final reward as the petitioner is only entitled to Rs. 1,00,000/-. In our considered opinion, the respondent-department has to pass an order declaring to the extent that the petitioner or the informant is not entitled to any further reward/award over and above the interim reward, and that the interim reward of Rs. 1,00,000/-, which has already been paid, would suffice the requirements of the policy and the information furnished by the petitioner to the respondent-department.

11. We find that the respondents have not placed anything on record regarding any decision made by the Committee in this regard. Thus, in the interest of justice and in light of the order passed by the Supreme Court, we direct that the aforementioned Committee, as mentioned in Clause No. 2.1 of the Policy Guidelines, or any other Committee which is in existence today relating to the grant of rewards to informants, shall take a decision after hearing the petitioner, with regard to enhancement of the reward or, in the alternative, to pass necessary orders on the interim reward which has already been paid to the petitioner. Such decision shall be taken, in accordance with law, after hearing the petitioner, within a period of six months from today.

12. Accordingly, the present writ petition stands partly allowed. Rule is made absolute to the aforesaid extent. It goes without saying that we have not expressed any opinion with regard to the quantum of the reward.