A quasi-judicial error does not constitute misconduct absent gross or habitual negligence.

The applicant, an IRS officer, submitted a remand report as Assessing Officer in proceedings concerning penalties under Sections 271D and 271E of the Income Tax Act.

The disciplinary case alleged that he accepted revised, unaudited financial statements without adequately verifying them against the earlier records and failed to identify the alleged tampering or replacement of impounded documents.

A charge memorandum under Rule 16 of the CCS (CCA) Rules, 1965 was issued on 5 October 2020; following UPSC advice, the disciplinary authority imposed the minor penalty of censure on 22 March 2022. The applicant’s appeal was rejected, prompting the present OA.

He challenged the penalty, contending, among other things, that the remand report was part of a quasi-judicial function and that the alleged deficiencies did not amount to misconduct.

1. Whether the applicant could raise in the OA the contention that the remand-report function was quasi-judicial, although he had not raised it in his reply to the charge memorandum.

2. Whether the applicant’s preparation and submission of the remand report was a quasi-judicial function and whether the alleged omissions constituted misconduct warranting disciplinary penalty.

Section 250(4) of the Income Tax Act empowers the Commissioner (Appeals) to make further inquiries or direct the Assessing Officer to do so; the Tribunal treated the remand request as an exercise of that statutory power and the applicant’s report as part of a quasi-judicial function.

Under the CCS (CCA) Rules, 1965, disciplinary action requires misconduct; an error of judgment or ordinary negligence in quasi-judicial work does not, by itself, constitute misconduct. Relying on Union of India v. J. Ahmed, AIR 1979 SC 1022, State of Punjab v. Ram Singh, (1992) 4 SCC 54, and T.C. Jindgar v. Rural Electrification Corporation, W.P. (C) No. 4790/2002, decided 20 April 2018, the Tribunal stated that gross or habitual negligence may constitute misconduct even without mens rea, but the charge must establish such culpability.

The Tribunal also relied on the principle that assessment proceedings are quasi-judicial, citing V.V.V.R.K. Yachendra Kumar Rajah of Venkatagiri v. ITO, (1968) 70 ITR 779.

The Tribunal held that the applicant could raise the quasi-judicial-function point in the OA because it involved a question of law.

Although the CIT(A)’s remand communication did not expressly cite Section 250(4), the Tribunal found that the request for a remand report fell within that provision and that the applicant was acting in a quasi-judicial capacity.

It further found that the remand directions did not specifically require comparison of the two sets of financial statements or summoning the earlier auditor, and that the respondents had identified no applicable procedure or SOP prescribing those steps.

The charge did not allege gross or habitual negligence; nor did the material establish that the applicant was involved in the alleged document tampering. Accordingly, the alleged error or omission in preparing the report did not establish misconduct warranting censure.

It allowed the OA, quashed the penalty order dated 22 March 2022 and the charge memorandum dated 5 October 2020, and made no order as to costs.