Income-tax--

----Transfer of case---Condition precedent---Opportunity to be heard-- Opportunity to be heard will not be effective unless reasons for transfer are given in notice under S.127---Reply to notice which does not give reasons would not amount to waiver or estoppel against right to have reasonable opportunity to be heard---Indian Income Tax Act, 1961, S. 127

Section \127 of the Income Tax Act, 1961, specifically. provides that the Director-General or Chief Commissioner or 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 Assessing Officer to any other Assessing Officer. When the section requires giving of a reasonable opportunity of hearing to an assessee before passing an order of transfer, the same would obviously mean that the assessee will be entitled to make his objection or representation against the proposed order of transfer and such representation and objection cannot be an effective one unless it is known to him for what reason or on what grounds such proposal is being made. If such reason for proposal of such transfer is not indicated in the show-cause notice, the opportunity of the petitioner to represent against such, proposal will be entirely an illusory and not effective one. A reply to the notice under section 127 without giving reasons would not amount to either waiver of or estoppel, against provisions of reasonable opportunity of hearing, the same being mandatory:

Held, that, admittedly, in the instant cases, in the show-cause notice the grounds or reason for proposed transfer was not indicated. Hence, the entire proceedings were vitiated and were liable to be set aside.

Ajantha Industries v. CBDT (1976) 102ITR 281 (SC); Pannalal Binjraj v. Union of India (1957) 31 ITR 565 (SC); Saptagiri Enterprises v. CIT (1991) 189 ITR 705 (AP) and Vijayasanthi Investments (Pvt.) Ltd. v. Chief CIT (1991) 187 ITR 405 (AP) ref.

Kappoor for Petitioners.

JUDGMENT

The present writ applications have been heard analogously with Items Nos. (3) to (9) as appearing under the heading "for order", common question of law and fact being involved.

In each of the writ applications, the petitioner had challenged an order passed by respondent No. 1, Commissioner of Income-tax Central II, Calcutta, under section 127(1)/127(2) of the Income-tax Act, transferring all the cases of the petitioner from the present Assessing Officer in Calcutta to the Assessing Officer at Patna. Since the point which has been raised by the writ petitioner in the instant application really involved a pure question of law and both the parties have addressed the Court in full on the questions of law even at the admission stage, I have decided to dispose of writ application on such questions of law without any affidavit and that parties to the proceedings do not object to such proposal.

The main challenge of the writ petitioner to the aforesaid order passed under section 127 of the Income Tax Act, 1961, is that such transfer has been made denying reasonable opportunity of hearing to the petitioner. It is not disputed by the parties that each of the petitioners in each of cases was issued with a show-causes notice proposing to transfer the case in exercise of power under section 127 of the Act. And that each of petitioners also replied to such show-cause notice and was heard and was given a hearing.

It is, however, the grievance of the petitioner that in the show-cause notice where the proposal was made for transfer, no reason was indicated for which such proposal was made and, therefore, the petitioner was denied reasonable opportunity of making an effective representation.

It is also the contention of the petitioners that it is a condition precedent to exercise of power under section 127 of said Act also to indicate the reason for such proposal of transfer in the show-cause notice, but for which there cannot be any reasonable opportunity for an assessee to make a representation against such proposal. It is, therefore, contended that non- indication of reason for such proposal in show-cause notice prevented the petitioner from making an effective representation to the same, and, therefore, the principles of natural justice have been violated.

Admittedly, in the final order which has been passed by respondent No. 1 after hearing the petitioner a reason has been recorded and the same has also been communicated. In petition, the petitioner has also challenged such reasons on various grounds like vagueness of the same and that such reasons are really extraneous consideration on which such transfer cannot be made. But I am not inclined to go into such questions in view of the order which I propose to pass hereinafter.

In my view, the points raised as to the denial of opportunity of hearing has great substance. It may be noted in this connection that before the amendment of section 127 previously there was no provision in the corresponding section of the previous Act for giving a hearing to an assessee before passing such order of transfer. The Supreme Court in the case of Pannalal Binjraj v. Union of India (1957) 31 ITR 365, while interpreting section 5(7A) of the old Act held, inter alia, that it would be prudent if the principles of natural justice are followed, where circumstances permit, before any order of transfer under the said section is made by the Commissioner of income-tax or the Central Board of Revenue, as the case may be, and notice is given to the party affected and he is afforded a reasonable opportunity of representing his views on the question and the reasons for the order are reduced, however briefly, to writing. The Supreme Court further held in that case that there was no presumption against the bona fides or the honesty of an assessee and normally the income-tax authorities would not be justified in refusing to an assessee a reasonable opportunity of representing his views when any order to the prejudice of the normal procedure laid down in the Act is sought to be made against him, be it a transfer from one Income-tax officer to another within the State or without. It is after the aforesaid observation of the Supreme Court in the aforesaid case of Pannalal Binjraj v. CIT (1957) ITR 565, the present amendment to section 127 of the present Act of 1961 was brought about. Section 127 of the Act specifically provides that the Director-General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers or to any other Assessing Officer. While Mr. Kapoor appearing for petitioner in support of the application has contended, inter alia, that reasonable opportunity of hearing cannot be made available to the petitioner unless in the very order proposing such transfer the reason is indicated, learned counsel appearing for the respondents have contended that no interference is called for by this Court in view of the fact that the aforesaid provisions of law require the authority to record the reasons for such transfer and to indicate the same which has been duly done and in any event the petitioner is not also entitled to raise such question of recording of reasons in the order proposing such transfer, namely, the show-cause notice, inasmuch as the petitioner did submit a reply to the show-cause notice and appeared before the appropriate authority and made his submission.

After considering the respective submissions of the parties I am, however, of the view that when the aforesaid provisions of section 127, specifically provide that after giving the assessee a reasonable opportunity of being heard the order of transfer is to be passed after recording reasons, the intention of the legislature is, absolutely clear and the same must be given effect to. It is true, it has also been provided in the said section that such reasonable opportunity of being heard will be given wherever it is possible to do so but we need not go into that question in the present case inasmuch as it is not the case of the respondents at all that it was not possible to give hearing to the petitioner. The question, therefore, which really has come up for determination for this Court as to whether in the show-cause notice it will be necessary to give the reason for proposing such transfer.

In my view when the section requires the giving of a reasonable opportunity of hearing to an assessee before passing an order of transfer, the same would obviously mean that the assessee will be entitled to make his objection or representation against the proposed order of transfer and such representation and objection cannot be an effective one unless it is known to him for what reason or on what grounds such proposal is being made. If such reason for proposal of such transfer is not indicated in the show-cause notice the opportunity of the petitioner to represent against such proposal will be entirely an illusory and not effective one as it is well settled now because of different judicial decisions that personal inconvenience of an assessee cannot override a public interest necessitating such transfer.

Under such circumstances if the reason is not indicated in the show-cause notice, it is not understood how the assessee can represent against such proposal and against what he can represent except expressing his personal inconvenience to be suffered for such transfer or such other matters which are held to be irrelevant considerations for the purpose of such transfer. I am quite conscious of the position that there is no straitjacket formula in deciding what would be reasonable opportunity of hearing and the same may differ under the facts and circumstances of different cases. But in a case of the present nature the requirement of reasonable opportunity of hearing to an assessee before making an order of transfer cannot but mean that the assessee would be entitled to represent or object to such proposed transfer which is not possible without disclosure of the grounds or reason for such proposal. The view which I have taken is supported by two Division Bench decisions of the Andhra Pradesh High Court. In the case of Vijayasanthi Investments (Pvt.) Ltd. v. Chief CIT (1991) 187 ITR 405, a Division Bench of the Andhra Pradesh High Court was of the view that for the transfer of case under section 127 of the Act the requirement of recording reasons is a mandatory one under the law and in such a case the assesssee must be given a reasonable opportunity of being heard with a view to enable him to effectively show cause against the proposed transfer and it is also necessary to mention in the notice the reasons for the proposed transfer so that the assessee could make an effective representation with reference to the reasons set out.

The same view has been taken by another Division Bench of the same High Court in the case of Saptagiri Enterprises v. CIT (1991) 189 ITR 705 (AP). It was held by the said Division Bench, inter alia, that furnishing of specific and intelligible reasons for the transfer of a case is only a concomitant of the concept of reasonable opportunity enshrined in section 127(1)/127(2) of the Act and unless the assessee knows the precise reasons for transfer, he would be handicapped in putting forth his objections effectively.

In this connection, it is also worth referring to the decision of the Supreme Court of India in the case of Ajanta Industries v. CBDT (1976) 102 ITR 281, where the provisions for the recording of reasons were held not to be mandatory and the order under section 127 of the Act was held not to be an administrative order.

Admittedly, in the instant case, in the show-cause notice the grounds or reason for proposed transfer was not indicated. It is true as contended by learned counsel appearing for the respondent that even then the petitioner replied to the show cause and he was also given hearing. That, in my view, will not, however, absolve the liability of the respondent in the matter of indicating the grounds or reasons for such proposed transfer in the show-cause notice. Such a provision for giving reasonable opportunity of hearing being mandatory and when it is not the case of the respondent that it was not possible to give a hearing, it was mandatory to indicate such grounds or reasons in the show-cause notice and non-indication thereof certainly amounted to denial of reasonable opportunity of hearing to the petitioner. The fact that the petitioner gave a reply to the show-cause notice expressing inter alia, leis personal inconvenience would not in my view amount to either waiver or estoppel, against provision of reasonable opportunity of hearing, the same being mandatory and when it is possible to give such hearing.

Under such circumstances in my view, for non-compliance of the aforesaid provision of the statute and denial of reasonable opportunity of hearing, the entire.. proceeding is vitiated and the same is liable to be set aside. It may be recorded in this connection that the reason which has been indicated ultimately in the final order was further sought to be substantiated and clarified by the respondent by producing certain records before this Court (which were given inspection to the petitioner) wherefrom it appears that under certain directions of the Supreme Court, the Chief Justice of the Patna High Court is now monitoring the cases relating to animal fodder at Bihar and in connection with the same the appropriate authority being the Income-tax Commissioner of Bihar has corresponded with the appropriate authority in Calcutta being of the view that the records of the present petitioner required to be transferred having relation to such animaltender cases. Mr. Kapur has also attacked such reasons on various grounds and learned counsel appearing for the respondent have also sought to justify the same. But I am not inclined to go into such points or the merits of reasons since I am of the view that the entire proceeding itself is vitiated because of denial of reasonable opportunity of hearing to the petitioner.

I am further of the view that although because of denial of such opportunity to the petitioner the proceeding has been vitiated, the respondents will certainly be at liberty to proceed afresh against each of the petitioners under the aforesaid provision of section 127 of the Act, if they are so advised. But, in such event, they will certainly indicate in the show-cause notices also the grounds or reasons for such proposed transfer to enable each of the petitioners to make an effective representation against the same.

This writ application, therefore, succeeds. The impugned order passed by respondent No. 1, dated September 25, 1996, under section 127 of the Income-tax Act is set aside.

The respondents, however, will be at liberty to proceed against each of the petitioners afresh but only after indicating the grounds or reasons for transfer in the show-cause notice to enable the petitioners to make an effective representation against the same and a final order shall be passed by respondent No.l after hearing each of the petitioners and considering the representation and/or objection made to the show7cause notice and after recording reasons.

Since no affidavit has been filed by the respondent the allegations made in the writ petition, will be deemed to have been denied by the respondent.

There will be no order as to costs.

The order passed in the present writ petition will govern W. P. No. 2111 of 1996 (Hitesh Chandak v. CIT), W. P. No. 2112 of 1996 (Prabha Devi Chandak v. CIT-11 Central (Cal.), W. P. No. 2113 of 1996 (Debesh Chandak & Sons Y. CIT, Central-II, (Cal.), W. P. No. 2114 of 1996 (Anita Maheswari v. CIT, Central-II, (Cal.), W. P. No. 2115 of 1996 (Central Roller Flour Mills (P.) Ltd. v. CIT, Central-II, (Cal.), W. P. No. 2116 of 1996 (Saroj Devi Chandak v. CIT, Central-II, (Cal), and W. P. No. 2117 of 1996 Dipesh Chandak v. CIT Central-II (Cal.) ref.

All parties are to act on signed copy of the operative part of this judgment on the usual undertaking.

M.B.A./3345/FCOrder accordingly