1. Challenge to orders transferring income-tax proceedings between officers in the same locality under Section 127(1) of the Income-tax Act, 1961, for failure to record reasons. (Para 1 )
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1964 Supreme(SC) 248
SUPREME COURT OF INDIA
6th October, 1964.
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, M. HIDAYATULLAH, RAGHUBAR DAYAL AND J.R. MUDHOLKAR, JJ.
Kashiram Agarwala (In both the Appeals), Appellant
Versus
Union of India and others (In both the Appeals), Respondents.
Civil Appeals Nos. 22 and 261 of 1964.
Advocates appeared
M/s. B. M. Kirpal, S. Murty and K. K. Jain, Advocates, for Appellant (In both the Appeals); Mr. S. V. Gupte, Solicitor General of India 1029 (M/s. N. D. Karkhanis and R. N. Sachthey, Advocates, with him) for Respondents (In both the Appeals).
Important Points
Under Section 127(1) of the Income-tax Act, 1961, the requirement to record reasons for transferring a case is a corollary to providing a reasonable opportunity of being heard; thus, for transfers within the same locality, both requirements are dispensed with by the proviso.
Subject
Tax Law - Income Tax
Act Referred
Headnote
(A) Income-tax Act, 1961 - Section 127(1) - Transfer of case from one Income-tax Officer to another - Requirement of giving reasonable opportunity of being heard and recording of reasons - Proviso to Section 127(1) - Transfer between officers in the same city, locality or place - Whether the requirement to record reasons is dispensed with along with the requirement to give an opportunity - Recording of reasons is a natural consequence and corollary of the requirement that a reasonable opportunity should be given to the assessee - Transfers within the same locality are purely administrative orders for convenience of the department and involve no prejudice - Requirement to record reasons is unnecessary where the proviso applies. (Paras 3, 4, 5, 6, 9)
Facts of the case:
The appellant challenged the validity of two orders passed by the revenue board directing the transfer of pending income-tax proceedings from one officer to another within the same city. The appellant contended that the orders were invalid as the board failed to record reasons for the transfer, arguing that the proviso to Section 127(1) only dispensed with the requirement of providing an opportunity to be heard, not the requirement to record reasons.
Findings of Court:
The impugned orders cannot be challenged on the ground that reasons were not recorded for directing the transfer of cases between officers in the same locality.
Issues: Whether the proviso to Section 127(1) of the Income-tax Act, 1961, which waives the requirement of giving a reasonable opportunity of being heard for transfers within the same locality, also waives the requirement for the authority to record reasons for such transfer.
Ratio Decidendi: The court held that the requirement to record reasons flows as a natural consequence and corollary of the requirement to provide a reasonable opportunity to the assessee. Since transfers within the same locality are administrative in nature, made for departmental convenience, and cause no prejudice to the assessee, the proviso to Section 127(1) dispenses with both the requirement of giving an opportunity and the consequential need to record reasons.
Result: Appeals dismissed.
Facts of the case:
The appellant challenged the validity of two orders passed by the revenue board directing the transfer of pending income-tax proceedings from one officer to another within the same city. The appellant contended that the orders were invalid as the board failed to record reasons for the transfer, arguing that the proviso to Section 127(1) only dispensed with the requirement of providing an opportunity to be heard, not the requirement to record reasons.
Findings of Court:
The impugned orders cannot be challenged on the ground that reasons were not recorded for directing the transfer of cases between officers in the same locality.
Issues: Whether the proviso to Section 127(1) of the Income-tax Act, 1961, which waives the requirement of giving a reasonable opportunity of being heard for transfers within the same locality, also waives the requirement for the authority to record reasons for such transfer.
Ratio Decidendi: The court held that the requirement to record reasons flows as a natural consequence and corollary of the requirement to provide a reasonable opportunity to the assessee. Since transfers within the same locality are administrative in nature, made for departmental convenience, and cause no prejudice to the assessee, the proviso to Section 127(1) dispenses with both the requirement of giving an opportunity and the consequential need to record reasons.
Result: Appeals dismissed.
Legal Category Hierarchy
Advocates:
B.N.KIRPAL, K.K.JAIN, N.D.Karkhanis, R.N.SACH, S.MURTHY, S.V.Gupta
B.N.KIRPAL, K.K.JAIN, N.D.Karkhanis, R.N.SACH, S.MURTHY, S.V.Gupta
Table of Contents
2. Whether the proviso to Section 127(1) of the Income-tax Act, 1961, dispenses only with the requirement of giving a reasonable opportunity or also the recording of reasons. (Para 3 , 4 )
3. Transfers within the same locality are administrative for convenience, causing no prejudice, and the requirement to record reasons is a corollary of providing a reasonable opportunity. (Para 5 , 6 , 8 )
4. The proviso to Section 127(1) of the Income-tax Act, 1961, dispenses with both the requirement to provide a reasonable opportunity and the requirement to record reasons. (Para 9 )
5. Appeals dismissed; orders transferring cases within the same locality are valid despite the absence of recorded reasons. (Para 10 )
6. Does the requirement to record reasons under Section 127(1) of the Income-tax Act, 1961, apply to transfers within the same locality?
No. The proviso to Section 127(1) dispenses with the requirement to provide a reasonable opportunity, and since recording reasons is a natural corollary of that opportunity, it is also unnecessary for transfers within the same locality. (Para 5 , 9 )
7. What is the legal nature of a transfer order made between Income-tax Officers in the same city or locality?
Such orders are purely administrative in nature, passed for the convenience of the department, and generally involve no prejudice to the assessee. (Para 6 )
8. How does the legislative history of Section 127(1) influence its interpretation regarding the necessity of recording reasons?
The provision was based on judicial observations that opportunity and recorded reasons were desirable for transfers between different places to address assessee objections, not for administrative transfers within the same locality. (Para 7 , 8 )
Judgment
GAJENDRAGADKAR, C.J.I. :
These two appeals arise out of two writ petitions filed by the appellant Kashiram Agarwala in the Punjab High Court, Circuit Bench, at Delhi challenging the validity of two orders passed by the Central Board of Revenue (hereinafter called the Board ) under S.127(1) of the Income-tax Act, 1961 (No. 43 of 1961) (hereinafter called the Act ). These two orders have been passed on the 18th January, 1963, and they have directed that the income-tax proceedings then pending against the appellant should be transferred from the Income-tax Officers D Ward District IV(I), and F Ward District IV(2), Calcutta, respectively to the Income-tax Officer E Ward Companies District III, Calcutta. The petitioner alleged that these two orders were invalid, because before exercising its power under S. 127(1), the Board had failed to comply with a mandatory requirement prescribed by the said provision. These petitions were dismissed summarily by the High Court, and it is against these orders of summary rejection that the appellant has come to this Court by special leave.
2. Section 127(1) of the Act reads thus:
"The Commissioner 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, transfer any case from one Income-tax Officer subordinate to him to another also subordinate to him, and the Board may similarly transfer any case from one Income-tax Officer to another:
Provided that nothing in this sub-section shall be deemed to require any such opportunity to be given where the transfer is from one Income-tax Officer to another whose offices are situate in the same city, locality or place."
Sub-section (2) lays down that the transfer which is authorised to be made by sub-section (1), can be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Income-tax Officer from whom the case is transferred. There is an explanation to S. 127 which it is unnecessary to mention.
3. It is common ground that the impugned orders do not record any reasons why the Board thought it necessary to transfer the cases pending against the appellant from one Incometax Officer to the other; and the argument is that Section 127(1) imposes an obligation on the authority exercising its power under the said Section to record its reasons for directing the transfer of a case from one Income-tax Officer to another. It will be noticed that S.127(1) requires that where the power conferred by it is intended to be exercised, an opportunity should be given to the assessee wherever it is possible to do so, and reasons have to be recorded for making the order of transfer. The requirement that opportunity should be given, cannot be said to be obligatory, because it has been left to the discretion of the authority to consider whether it is possible to give such an opportunity to the assessee. It is, of course, true that in coming to the conclusion that it is not possible to give the required opportunity to the assessee, the authority must act reasonably and bona fide; but if the authority comes to the conclusion that it is not possible to give a reasonable opportunity to the assessee, that can be dispensed with. That, however, is not so with regard to the requirement that reasons must be recorded for making the transfer. So far as S. 127(1) is concerned, there is no dispute about this position.
4. The question which calls for our decision in the present appeals is: what is the effect of the proviso to S. 127(1)? The proviso lays down that nothing in sub-section (1) shall be deemed to require any such opportunity to be given in a case like the present. It is plain that the transfer in the present case is from one Income-tax Officer to another whose offices are situate in the same locality; and so, the point to consider is, what is the effect of this proviso? It is urged by Mr. Jain that the effect of t
