The Gujarat High Court has dismissed a petition seeking enhancement of a reward granted by the Central Board of Direct Taxes (CBDT), holding that rewards paid to informants are ex-gratia in nature and lie within the discretion of the competent authority. 

The bench of Justice Bhargav D. Karia and Justice Pranav Trivedi examined Paragraph 13.1 of the 2007 Reward Guidelines, which provides that the competent authority may grant a reward of up to 10% of the additional tax actually realised, subject to a ceiling of ₹15 lakh. The provision further authorises the CBDT Full Board to relax the ceiling where additional tax collection exceeds ₹5 crore. 

The petitioner, a real estate consultant, had provided information to the Income Tax Department regarding alleged tax evasion in a land transaction involving the Sheladia Group. According to the petitioner, cash payments amounting to approximately ₹47.50 crore had been made directly to original landowners during land purchases.

Acting upon the information, the Income Tax Department conducted search and raid operations on 14 December 2010. The proceedings reportedly resulted in disclosures of approximately ₹60.48 crore and seizure of cash worth ₹1.5 crore. 

The petitioner contended that the information supplied led to substantial tax recovery and therefore entitled him to a significantly higher reward under the “Guidelines for Grant of Rewards to Informants, 2007” issued by the Ministry of Finance and CBDT. 

Initially, the petitioner received an interim reward of ₹1 lakh. Subsequently, an additional reward of ₹14 lakh was granted in July 2015, taking the total reward to ₹15 lakh. 

The petitioner had earlier approached the High Court through a separate writ petition, following which the authorities were directed to reconsider the matter because the tax collection allegedly exceeded ₹5 crore. Pursuant to that direction, the CBDT Full Board reassessed the reward claim and sanctioned an additional amount of ₹2,51,484. As a result, the petitioner received a total reward of ₹17,51,484. 

Dissatisfied with the amount, the petitioner again approached the High Court seeking enhancement of the reward.

The petitioner argued that the recommending authority had originally proposed a reward of ₹44.55 lakh, representing approximately 5.48% of ₹8.12 crore recovered by the Department. According to the petitioner, once such a recommendation had been made, the CBDT ought to have granted the entire amount rather than restricting the reward to ₹17.51 lakh. 

Reliance was also placed on the Supreme Court’s decision in The Secretary, Central Board of Direct Taxes v. B. Shyam Sunder to support the claim for a higher reward. 

The department opposed the petition, emphasizing that the reward scheme does not confer any vested right upon an informant.

The authorities pointed out that after a detailed examination of the information supplied, the recoveries made, and the applicable factors under the 2007 Guidelines, the CBDT Full Board determined that a final reward of ₹17,51,484 was appropriate. Since ₹15 lakh had already been paid, the balance amount of ₹2,51,484 was released in December 2018. 

The Revenue further argued that the guidelines expressly provide that the grant of reward is discretionary and not a matter of entitlement. 

The Court noted that while the recommending authority had suggested a much higher reward, the CBDT Full Board undertook a fresh and detailed evaluation of the claim.

According to the Board, the recommending authority had assessed the reward based on six factors, whereas the policy required evaluation across a larger set of criteria. The Board scrutinized 14 separate pieces of information supplied by the informant and found that only six were accurate while eight were not. Based on this assessment, the Board awarded proportionate weightage for accuracy and recalculated the reward. 

Ultimately, the CBDT assigned an overall weightage of 21.57% rather than the full weightage earlier contemplated, leading to the final reward determination of ₹17.51 lakh. 

The Court observed that the petitioner had already benefited from such relaxation because the total reward exceeded the ordinary ceiling of ₹15 lakh and ultimately reached ₹17.51 lakh. 

Informant Had Signed Undertaking Accepting CBDT’s Discretion

A crucial factor considered by the Court was that the petitioner had signed a declaration while furnishing information to the Department. In that declaration, the informant acknowledged that any reward would be an ex-gratia payment entirely within the discretion of the competent authority and that he would not challenge the correctness of the decision before any court. 

The Bench noted that this undertaking reinforced the discretionary character of the reward scheme.

Dismissing the petition, the High Court held that the CBDT is an expert body entrusted with assessing the quality of information, assigning weightage and determining reward amounts under the policy framework.

The Court ruled that judicial review does not extend to re-evaluating technical calculations undertaken by the Board unless the decision is vitiated by manifest illegality or patent arbitrariness. Since the CBDT had conducted a detailed examination and applied the prescribed methodology, no interference was warranted. 

The Bench further held that the Supreme Court’s decision in B. Shyam Sunder did not assist the petitioner because the factual and policy framework involved in the present case was materially different. Consequently, the writ petition was dismissed. 

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