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2015 Supreme(HP) 1944
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
Rajiv Sharma, Sureshwar Thakur, JJ.
Virbhadra Singh - Appellant
Versus
Commissioner of Income Tax - Respondent
CMP Nos. 3652 to 3655, 3658 to 3665 of 2015 and CWP Nos. 2014, 2015, 2017 to 2020 of 2015
Decided On : 01-04-2015
For the Appellant :N.K. Sood, Senior Advocate, Y.W. Chauhan, Chander Shekhar Verma, Pranay Pratap Singh and Neeraj Sharma
For the Respondent:Vinay Kuthiala, Sr. Adv., Vanda Kuthiala and Diwan Singh, Advocates
The central legal point established in the judgment is the entitlement of the petitioners to pre-decisional hearing in order to contest the show cause notices, and the importance of compliance with principles of natural justice and providing a reasonable opportunity of being heard.
Headnote:
Income-tax Act - Centralization of Cases - Section 127(2)(a) of the Income-tax Act, 1961 - The court emphasized the importance of providing a reasonable opportunity of being heard to the assessee, compliance with principles of natural justice, and the need for the order to be self-contained and to contain specific reasons. The court held that the petitioners were entitled to pre-decisional hearing in order to contest the show cause notices dated 20.1.2015.
Fact of the Case:
The petitioners were issued show cause notices for centralization of cases based on inquiries and material gathered during assessment proceedings. The petitioners requested the respondent to supply the information/material to the assessee, which was turned down, stating that the material would be supplied during the course of assessment proceedings.
Finding of the Court:
The court found that the material sought by the petitioners should have been supplied to them before the assessment proceedings, and that they were entitled to pre-decisional hearing to contest the show cause notices.
Issues: The issues involved the compliance with principles of natural justice, the requirement for a reasonable opportunity of being heard, and the need for the order to be self-contained and to contain specific reasons.
Ratio Decidendi: The court held that the order for centralization of cases must show due application of mind, provide a reasonable opportunity of being heard, and comply with the principles of natural justice. It emphasized the importance of pre-decisional hearing for the petitioners.
Final Decision: The court stayed the operation of the impugned show cause notices dated 20.1.2015 in favor of the petitioners.
ORDER :
CWP No. 2014/2015 alongwith CWPs No. 2015/2015, 2017, 2018, 2019 and 2020 of 2015
1. Mr. N.K. Sood, Senior Advocate with Mr. Y.W. Chauhan, Mr. Chander Shekhar Verma, Mr. Pranay Pratap Singh and Mr. Neeraj Sharma, Advocates, for the petitioner(s)
Mr. Vinay Kuthiala, Senior Advocate with Ms. Vanda Kuthiala and Mr. Diwan Singh, Advocates, for the respondent.
CMP No. 3652 of 2015 in CWP No. 2014 of 2015
CMP No. 3654 of 2015 in CWP No. 2015 of 2015
CMP No. 3658 of 2015 in CWP No. 2017 of 2015
CMP No. 3660 of 2015 in CWP No. 2018 of 2015
CMP No. 3662 of 2015 in CWP No. 2019 of 2015
CMP No. 3664 of 2015 in CWP No. 2020 of 2015
Allowed and disposed of.
CWP No. 2014/2015 alongwith CWPs No. 2015/2015, 2017, 2018, 2019 and 2020 of 2015
Notice. Ms. Vandana Kuthiala, Advocate, appears and waives service of notice on behalf of the respondent. Reply be filed within four weeks.
CMP No. 3653 of 2015 in CWP No. 2014 of 2015
CMP No. 3655 of 2015 in CWP No. 2015 of 2015
CMP No. 3659 of 2015 in CWP No. 2017 of 2015
CMP No. 3661 of 2015 in CWP No. 2018 of 2015
CMP No. 3663 of 2015 in CWP No. 2019 of 2015
CMP No. 3665 of 2015 in CWP No. 2020 of 2015
2. Petitioners were issued show cause notices for centralization of cases on 20.1.2015. The notices have been issued on the basis of inquiries carried out and also the material gathered during the course of assessment proceedings and information available. Petitioners requested the respondent to supply the information/material to the assessee, which found basis for issuance of notices dated 20.1.2015. The request of the petitioners was turned down on 16.2.2015. The text of letter dated 16.2.2015 reads as under:
"With reference to above subject, your Counsel vide letter dated 30.01.2015 has requested to supply the information/material to the assessee, which form the basis for issuance of present Show Cause Notice. In this regard, it is informed that the information/reason in terms of section 127 of Income-tax Act, 1961, is already given in the Show Cause Notice itself. The material gathered, relating to the respective assessment years, will be supplied and put to you by the Assessing Officer during the course of assessment proceedings as envisaged by law. Therefore, in accordance with the statutory mandate and settled law an opportunity of hearing is being accorded to you and you may submit your objections, if any, against the centralization and transfer of your case to Central Circle on the basis of the facts stated in the show cause notice. Your response will be duly considered by me before passing any order in accordance with law."
3. It is evident from the text of letter dated 16.2.2015 that the material sought for by the petitioners were to be supplied to them by the Assessing Officer during the course of assessment proceedings, as envisaged by law.
4. The issuance of notices under Section 127 of the Income-tax Act, 1961 must prima facie show due application of mind. The expression used in Section 127(2)(a) of the Income-tax Act, 1961 is "reasonable opportunity of being heard". The reasonable opportunity of being heard in the matter to be granted to the assessee must be effective and not mere formality. The order must contain specific reasons after taking into consideration the factual matrix. Merely stating that the transfer is for the purpose of coordinating in itself is not a ground to consolidating the cases at one place. The cause of action has arisen within the State of Himachal Pradesh. The convenience of the party cannot be overlooked. The order passed by the competent authority transferring cases is a quasi judicial order and not an administrative order. The decision to transfer the case must comply with the provisions of section 127(2)(a) of the Income-tax Act. The principles of natural justice have to be complied with at every stage. Violation of principles of natural justice at the initial stage cannot be cured at the subsequent stage. Moreover, the order should be self-contained/speaking and not merel
