Allahabad High Court
Rohtas Project Ltd. Thru Director Shri ... vs Pr. Commissioner Of Income Tax ... on 27 April, 2017
Bench: Sudhir Agarwal, Kaushal Jayendra Thaker
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH Court No. - 3 A.F.R. Case :- MISC. BENCH No. - 30203 of 2016 Petitioner :- Rohtas Project Limited through Director Shri Paresh Rastogi Respondent :- The Pr. Commissioner Of Income Tax (Central) 7/81-B, Tilak Nagar, Kanpur and others Counsel for Petitioner :- Surendra Kumar Garg,Ashish Bansal,Shashank Dhaon Counsel for Respondent :- Manish Mishra Hon'ble Sudhir Agarwal,J.
Hon'ble Dr. Kaushal Jayendra Thaker,J.
1. Shri Ashish Bansal Advocate appearing for the petitioner has confined his relief in respect to the order dated 30.6.2016 (annexure IX-A) whereby assessment cases of petitioner along with some others have been transferred from jurisdiction of Deputy Commissioner of Income Tax, Central Circle, Meerut to Additional Commissioner of Income Tax /Joint Commissioner, Income Tax, Range-5, Lucknow.
2. It is submitted that before exercising power under Section 127(2) of Income Tax Act, 1961 (hereinafter referred to as 'Act 1961'), it is mandatory on the part of authority concerned to record reasons for transferring assessment cases from one jurisdiction to other and also to give opportunity of hearing. In the present case, it is urged, that no reason has been recorded at all.
3. Shri Manish Mishra sought to explain that the reasons given in impugned order is "decentralization of cases from central charges" and should be taken a "sufficient reason".
4. We have heard learned counsel for petitioner and Shri Manish Mishra for respondent.
5. Petitioner is a company registered under Companies Act, 1956 (hereinafter referred to as " Act, 1956") having its registered office at Delhi since 30.9.2003. It is regularly filing income tax return at Delhi and is subjected to assessment by Assessing Officer at Delhi.
6. There was search seizure operation under Section 132(1) on 9.7.2008 on petitioner's premises and other group concern, their directors and family members etc. Consequent thereto, jurisdiction in cases of 21 persons was centralized and transferred to Deputy Commissioner of Income Tax/Assistant Commissioner Of Income Tax, Central Circle, Meerut. The said Assessing Officer issued notices under Section 153(A) calling aforesaid persons to file their returns for six Assessment Years (hereinafter referred to as "A.Y.") for being subjected to assessment as per provisions contained under Section 153(A), 153(B), 153(C ) and 153(D). The said notices were issued to petitioner on 4.2.2010 requiring to file returns for six A.Ys. i.e. 2003-04 to 2008-09.
7. Petitioner appeared before Income Tax Settlement Commission (herinafter referred to as 'ITSC') by filing an application under Section 245(C) on 26.11.2010 and matter was finally decided/settled under order dated 28.5.2012 passed by ITSC under Section 245(D)(4).
8. Petitioner then filed return for A.Y. 2011-12 with Deputy Commissioner of Income Tax/Assistant Commissioner of Income Tax, Central Circle, Meerut. The assessment was made by order dated 10.01.2012. Similarly for A.Y. 2012-13, 2013-14 and 2014-15 returns were filed with aforesaid Assessing Officer at Meerut and assessments were completed on 15.10.2014, 1.6.2015 and 30.10.2015.
9. Thereafter Principal Commissioner of Income Tax, Central, Kanpur (hereinafter referred to as "PCIT, Kanpur") issued a notice under Section 263(1) of Act, 1961 for A.Y. 2012-13. It also passed order dated 16.6.2015 setting aside assessment order dated 15.10.2014 relating to A.Y. 2012-13 and direct Assessing Authority to make assessment afresh.
10. When the matter was pending for giving effect to order dated 16.6.2015, petitioner was served with letter dated 7.11.2016 informing that his income tax cases have been decentralized and assigned to Joint Commissioner of Income Tax (Range-5), Lucknow (hereinafter referred to as " JCIT, Lucknow") in view of order dated 30.6.2016 of PCIT, Kanpur.
11. Learned counsel for petitioner has confined relief in this petition only to the correctness of transfer order dated 30.6.2016, pursuant whereto letter dated 7.11.2016 has been issued. He submitted that the said order was passed in utter violation of natural justice and without assigning any reason which is a condition precedent for exercising power of transfer under Section 127 of Act, 1961.
12. Now we proceed to examine respective issue raised in this petition. Power of transfer has been exercised in this case under Section 127(2)(a) which reads as under : -
"where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;"
(emphasis added)
13. Provision is very clear. Order of transfer can be passed after complying two requirements; (i) after giving Assessee a reasonable opportunity of hearing wherever it is possible to do so; and (ii) recording of reasons for doing so.
14. Statute says that "opportunity of hearing" is necessary in such cases where it is possible to do so meaning thereby it is not necessary to be observed invariably in each and every case, whenever orders transferring cases are passed. However, second requirement that 'reasons' shall be recorded is applicable in all the cases irrespective of the fact whether order of transfer has been passed after giving opportunity of hearing or not. Statute is clear and in emphatic terms requires that 'reasons' shall be recorded by Competent Authority. Not only that, but, reasons must be communicated to Assessee, otherwise very purpose of recording reasons would be frustrated. When it is said that order shall be passed after recording reasons, in our view, reasons cannot be recorded and kept in file but the order itself must contain reasons for transfer and communicated to Assessee.
15. Respondents in this case have taken a defence that grant of opportunity was not found feasible, therefore, referring to the words "wherever it is possible to do so", used in Section 127(2)(a), submission is that present case is one where grant of opportunity to petitioner was not possible and hence it will not vitiate impugned order of transfer.
16. We find that in various authorities wherein validity of order of transfer under Section 127(2)(a) has been dealt with consensus view is that opportunity of hearing, if not afforded, or reasons not recorded, order of transfer would be bad. However, no authority has been placed before us wherein this phrase "wherever it is possible to do so", has been considered in the context of Section 127(2) of Act, 1961. No authority is cited to show meaning of the words "wherever it is possible to do so" and how and in what manner, the aforesaid phrase would dilute or mitigate, otherwise mandate of legislature, of affording a reasonable opportunity of being heard to Assessee before passing order of transfer.
17. In Division Bench judgment of this Court in Writ (Tax) Petition No. 877 of 2010, Sanjay Gupta Vs. Union of India decided on 25.11.2010, notices were issued to Assessee inviting objections Assessee actually filed objections and thereafter transfer order was passed. Basic issue was, where objection has been filed but neither grounds taken in the objections are discussed nor reasons are given in the order of transfer, can it be said that reasonable opportunity was given to Assessee and order contain reason. Court held that mere mention of words that transfer is required for "administrative convenience and coordinated investigation", is not sufficient, particularly when Assessee has made objections raising grounds which have not been considered at all. For this purpose Court also relied and followed Calcutta High Court's judgment in Naresh Kumar Agarwal Vs. Union of India, (2010) 320 ITR 361.
18. In Ajantha Industries Vs. Central Board of Direct Taxes 1976 (102) ITR 281 (SC) , a notice was served upon Assessee, proposing transfer to facilitate investigation whereagainst Assessee filed objection and thereafter order of transfer was passed. It was challenged on the ground that no reasons were given or communicated in the order of transfer. Revenue took a defence that reasons were mentioned in the show cause notice, therefore, order of transfer for absence of reasons would not be bad. This argument of Revenue was not accepted. Court said that Section 127 has been introduced in Act, 1961 and even substituted Section 127 by Finance Act, 1976 emphasizes upon "recording of reasons". Once an order is passed transferring a case of an Assessee to another area, order containing reasons has to be communicated. Communication of order is absolutely essential requirement since Assessee is then made aware of reasons which impelled authority to pass order of transfer. Assessee shall have an opportunity to approach High Court under Article 226 of Constitution of India. Court thus said that "we are clearly of opinion that the requirement of recording reasons under Section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to Assessee". Court specifically overruled an otherwise judgment of Delhi High Court in Sunanda Vs. Union of India, (1975) 99 ITR 391. Court said, when law requires reasons to be recorded in the order affecting prejudicially interests of any person, who can challenge such order in Court, it ceases to be a mere administrative order and the vice of violation of principles of natural justice on account of omission to communicate reasons is not expiated.
19. In another Division Bench judgment of this Court in Writ Tax Petition No. 16 of 2014, Smt. Chandra Prabha Kushwaha and others Vs. CIT and others decided on 9.1.2014, neither any opportunity was afforded to Assessee nor reasons were communicated. Revenue admitted this flaw and did not take defence that opportunity was not possible in that matter. Court therefore followed the decision in Ajantha Industries Vs. Central Board of Direct Taxes ( supra) and earlier Division Bench decision of this Court in Vinay Kumar Jaiswal Vs. CIT, (1996) 221 ITR 568 ( All); Ashok Kumar Jain Vs. Commissioner of Income Tax and others Writ Tax No. 620 of 2010 decided on 7.7.2014 and held that there is an admitted case of denial of opportunity and lack of 'reasons' hence order of transfer is bad. Revenue in the relied on case also did not take any defence that opportunity was not possible in the facts of the cases.
20. Above exposition of law with respect to application of principles of natural justice, when specifically incorporated in a statute, and requirement of recording of reasons, distinguished from conclusions, are well established.
21. However, in this particular case, looking into the facts, we have to examine, whether respondents are justified in contending that non issue of notice and giving reasonable opportunity to Assessee would not vitiate order of transfer in view of the fact that requirement of notice is qualified with the phrase "wherever it is possible to do so" and, therefore, in every case law does not require that opportunity is must and also "whether this defence is available in this case".
22. Phrase "wherever it is possible to do so" as such could not be shown to have been used in any other statute and came up for consideration before Court, but a similar phrase "as far as possible" has been used in several statutes and considered by Courts, time and again.
23. Section 127 is a procedural provision for ascertaining liability of an Assessee to determine in a fair, impartial and effective manner, so that no one is unduly benefited and wherever competent authority, having power of transfer under section 127 or any Assessee has apprehension, or for other administrative reason, it is found necessary that case should be transferred from jurisdiction of one authority to another, the same may be done. Statute also incorporates requirement of principles of natural justice as also recording of reason but simultaneously has used phrase "whenever it is possible to do so". This has been noticed by a Constitution Bench in Kanshi Ram Agarwal Vs. Union of India, AIR 1965 SC 1028. Reading Section 127, Court has said that Section 127(1) imposes an obligation on the authority exercising power under the said Section to record 'reasons' for directing transfer of a case from one Income Tax Officer to another. It further requires that whenever power conferred by Section 127 is intended to be exercised, an opportunity should be given to Assessee, "whenever it is possible to do so" and reasons have to be recorded for making order of transfer. Court thus held that opportunity to Assessee shall be offered "whenever it is possible to do so" but order must contain reasons for transfer. Court held that "requirement that opportunity should be given, cannot be said to be obligatory, because it has been left to discretion of authority to consider whether it is possible to give such opportunity to Assessee. This is of course, true, in coming to the conclusion, that Authority must act reasonably and bona-fide; but if Authority comes to conclusion that it is not possible to give a reasonable opportunity to Assessee, same can be dispensed with. However, it is not so with regard to requirement that reasons must be recorded for making transfer.
24. So far as Section 127(1) is concerned, there is no dispute about this position. The twin requirement under Section 127(2) has some complication. It is true that under Act, 1961 i.e. Section 120 read with Section 124, Assessing Officer is vested with jurisdiction over an area where any person carrying on the business or profession resides. Therefore, in normal course, an Assessee is entitled to be assessed by Assessing Officer having jurisdiction as stated in the aforesaid provisions but there is no such vested right in an Assessee to be assessed by a particular Assessing Officer. In given case, Competent Authority may transfer a matter from one Assessing Officer to another, may be having effect of change of place also but that will not affect any substantial right of Assessee.
25. On this aspect, we find support from judgment in Panna Lal Binjraj Vs. Union of India, AIR 1957 (SC) 397, wherein Court held that infringement of right to be assessed by Assessing Officer having jurisdiction in a particular area by transferring case to another cannot be said to be an infringement, material in nature. It is only a deviation of a minor character from general standard and does not necessarily involve a denial of equal rights for simple reason that even after such transfer, case is dealt with under the normal procedure which is prescribed in the Act, 1961. Production and investigation of books of account, enquiries to be made by Income Tax Officer are same in a transferred case as in others which remain with Assessing officer of area in which other Assessee resides or carries on business. There is thus no differential treatment and no scope for argument that particular Assessee is discriminated with reference to other Assessees similarly situated whose cases are not transferred, therefore, transfer of case from one place to another is a matter which may disturb some convenience of Assesseee but if other factors of importance of higher degree are available, an order of transfer otherwise validly passed, is not to be assailed as something which has caused no serious prejudice to Assessee.
26. An attempt on the part of learned counsel for Assessee that mere fact that opportunity was not given shall vitiate order of transfer, in our view, cannot be accepted for the reason that Statute does not make requirement of opportunity mandatory but it is subject to condition "wherever it is possible to do so" and in a given case, the mere fact that notice was not given to Assessee, will not vitiate order if the circumstances do justify such non affording of opportunity.
27. Thus, at the pain of repetition, we hold that careful reading of Section 127(2)(a) leads no manner of doubt that requirement of "reasonable opportunity" to Assessee is subjected and conditional i.e. "whenever it is possible to do so" department may proceed to pass an order of transfer without giving such opportunity. When a phrase has actually been used by Legislature in a statute, we cannot either ignore it or omit or render it redundant by reading that in every case an opportunity is must, else order of transfer would be rendered bad. The words used by legislature have to be read and given due meaning and effect and that is the basic principle of interpretation. Each and every word used by legislature has some meaning or consequence and whenever an statute is considered, every word must be given its logical meaning and consequence unless there appears to be some inconsistency or conflict resulting in consequences to be disturbing or there are other compelling reasons showing that some part does not convey the same meaning as it ought to be or the same is redundant or is inconsistent with rest of the provisions. However that is not so particularly in this case and from judgment of Constitution Bench in Panna Lal Binjraj Vs. Union of India (supra) also we find that requirement of opportunity has not been held mandatory. The mandate is available only for requirement of recording of 'reason'.
28. Then comes the question "whether order of transfer contains any reason and whether mandatory requirement of recording of reason is satisfied or not". The reason mentioned in the order is "decentralization of cases". Requirement of reason under Section 127 has a basic condition that before causing some inconvenience or prejudice to Assessee, Competent Authority passing order of transfer must show, from order of transfer, a conscious application of mind on its part that transfer order is not a mechanical exercise. Requirement of reasons does not mean that order must contain a detailed discussion on several grounds for justifying order of transfer, but requirement of statute stands satisfied if from a bare reading of order, any person of ordinary prudence may come to know as to what is the reason which has prevailed in the mind of Competent Authority to exercise power of transfer and such reason or ground is not flimsy, imaginary, whimsical. It must disclose that patently, logic and prudence has been applied before passing it.
29. Looking to the entire facts and circumstances and the impugned order, we find it difficult to read substantial compliance of Section 127(A) that any reason has been given in the impugned order. Hence we allow this writ petition, partly, to the extent that impugned order dated 30.6.2016 (Annexure IX-A to the writ petition) passed by Principal Commissioner of Income Tax (Central), Kanpur under Section 127, in so far as it pertains to petitioner, is hereby set aside.
30. No order as to cost.
Order Date :- 27.4.2017 prabhat