Mahesh Kumar Jain v. The Principal Commissioner Of Income Tax-2, Room

S.B. Civil Writ Petition No. 27598/2018 Mahesh Kumar Jain S/o Shri Mali Ram Jain, Aged About 57Years, R/o 13/1032, Malviya Nager, Jaipur-302017 ----Petitioner Versus 1. The Principal Commissioner Of Income Tax-2, Room No.111, New Central Revenue Building, Statue Circle, Jaipur.111, New Central Revenue Building, Statue Circle, Jaipur. 2. Deputy Commissioner Of Income Tax (Dcit), CentralCircle-1, Udaipur, (Now Assistant Commissioner OfIncome Tax, (Acit), Central Circle-1), 2Nd Floor, MoomalTower, 16 Saheli Marg, Udaipur.Circle-1, Udaipur, (Now Assistant Commissioner OfIncome Tax, (Acit), Central Circle-1), 2Nd Floor, MoomalTower, 16 Saheli Marg, Udaipur. ----Respondents For Petitioner(s) : Mr. Mahendra GargieyaFor Respondent(s): Mr. Nikhil SimloteFor Respondent(s): Mr. Nikhil Simlote HON'BLE MR. JUSTICE VEERENDR SINGH SIRADHANA 24/05/2019 Order The instant writ application has been instituted against theimpugned order dated 27[th] September, 2018, wherein request ofthe petitioner has been declined by the Principal, Commissioner ofIncome Tax-2, Jaipur, only by recording of the reasons put-forthby the petitioner and comments received from the Principal,Commissioner of Income Tax (Central, Jaipur).Heard and considered. A glance of the impugned order dated 27[th] September, 2018,would reflect that the authority while adjudicating upon the matterdid not apply its mind to either the reasons detailed out by thepetitioner or the reasons resisting the prayer, furnished byPrincipal-CIT (Central, Jaipur). In the case of Ajantha Industries & Ors. Vs. Central Board of Direct Taxes & Ors: (1976) 102 ITR 0281, a LargerBench of the Apex Court of the land, while dealing with the issuesof transfer under Section 127 of Income Tax Act, 1961, held thus: “5. Unlike Section 5(7A) Section 127(1) requires to berecorded prior to the passing of an order of transfer. Theimpugned order does not state any reasons whatsoever formaking the order of transfer. It is submitted on behalf of the Revenue by Mr. Sharmathat reasons were communicated to assessees in the noticecalling for objection against the proposed transfer. It is,therefore, manifest that the reasons given in that showcause notice, namely, "facility of investigation" can be readas a part of the impugned order although there is nomention of any reasons therein as such. We are unable to accede to this submission. It appearsSection 5(7A) of the Old Act came for consideration inPannalal Binjraj and Anr. v. The Union of India and Ors. (1),and this Court observed at page 589 as follows: “…....it would be prudent if the principles of natural justiceare followed, where circumstances permit, before any orderof transfer under Section 5(7A) of the Act is made by theCommissioner of Income-tax or the Central Board ofRevenue, as the case may be, and notice is give to the partyaffected and he is afforded a reasonable opportunity ofrepresenting his views on the question and the reasons ofthe order are reduced however briefly to writing.... There isno presumption against the bona fide or the honesty of anassessee and normally the Income-tax authorities would notbe justified in refusing to an assessee a reasonableopportunity of representing his views when any order to theprejudice of the normal procedure lead down in Section64(1) and (2) of the Act is sought to be made against him beit a transfer from one Income-tax Officer to anotherwithin the State of from an Income-tax officer except ofcourse where the very object of the transfer would befrustrated if notice was given to the party affected. If thereasons for making the, order reduced however briefly towriting it, will also help the assessee in appreciating thecircumstances which make it necessary or desirable for theCommissioner of Income tax or the Central Board of Revenue, as the case may be, to transfer his case underSection 5(7A) of the Act and it will also help the court indetermining the bona fides of the order as passed if andwhen the same is challenged in court as mala fide ordiscriminatory. It is to be hoped that the Income-taxauthorities will observe the above procedure whereverfeasible. 6. This judgment was rendered by this Court on December21, 1956, and we find that in the Act Section 127 replacedSection 5(7A) where the legislature has introduced, interalia, the requirement of recording reasons in making theorder of transfer. It is manifest that once an order ispassed transferring the case file of an assessee to anotherarea the order has to be communicated. Communication ofthe order is an absolutely essential requirement since theassessee is then immediately made aware of the reasonswhich impelled the authorities to pass the order oftransfer. It is apparent that if a case file is transferredfrom the usual place of residence or office where ordinarilyassessments are made to a distant area, a great deal ofinconvenience and even monetary loss is involved. That is thereason, why before making an order of transfer thelegislature has ordinarily imposed the requirement of a showcause notice and also recording of reasons The questionthen arises whether the reasons are at all required to becommunicated to the assessee. It is submitted, on behalf ofthe Revenue, that the very fact that reasons are recordedin the file, although these are not communicated to theassessee, fully meets the requirement of Section 127(1).We are unable to accept this submission. The reason for recording of reasons in the order andmaking these reasons known to the assessee is to enable anopportunity to the assessee to approach the High Courtunder its writ jurisdiction under Article 226 of theConstitution to even this Court under Article 136 of theConstitution in an appropriate case for challenging theorder, inter alia, either on the ground that it is malafide orarbitrary or that it is based on irrelevant and extraneousconsiderations. Whether such a writ or special leaveapplication ultimately fails is not relevant for a decision ofthe question. 7. We are clearly of opinion that the requirement ofrecording reasons under Section 127(1) is a mandatorydirection under the law and non-communication thereof is not saved by showing that the reasons exist in the filealthough not communicated to the assessee. Mr. Sharma drew our attention to a decision of Delhi HighCourt in Sunanda Rani Jain v. Union of India and Ors. (2),where the learned single Judge has taken a contrary view,for the reasons, which we have given above, we have no holdthat the said decision is not correct. The appellant drew our attention to a decision of this Courtin Shri Pragdas Umar Vaishya v. Union of India and Ors. (3),where Rule 55 of the Mineral Concession Rules, 1960,providing for exercise of revisional power by the CentralGovernment was noticed. It was held that under Rule 56 theCentral Government in disposing of the revision applicationmust record its reasons and communicate these reasons tothe parties affected thereby. It was further held that thereasons could not be gathered from the nothing in the fileof the Central Government. Recording of reasons anddisclosure thereof is not a mere formality. The appellant drew our attention to a decision of this Courtin Shri Pragdas Umar Vaishya v. Union of India and Ors. (3),where Rule 55 of the Mineral Concession Rules, 1960,providing for exercise of revisional power by the CentralGovernment was noticed. It was held that under Rule 56 theCentral Government in disposing of the revision applicationmust record its reasons and communicate these reasons tothe parties affected thereby. It was further held that thereasons could not be gathered from the nothing in the fileof the Central Government. Recording of reasons anddisclosure thereof is not a mere formality. Mr. Sharma drew our attention to a decision of this Court inKashiram Aggarwalla v. Union of India and Ors. (4), It issubmitted that this Court took the view that orders underSection 127(1) are held in that decision to be "purelyadministrative in nature" passed for consideration ofconvenience and no possible prejudice could be involved inthe transfer. It was also held therein that under theproviso to Section 127(1) it was not necessary to give theappellant an opportunity to be held and there wasconsequently no need to record reasons for the transfer.This decision is not of any assistance to the Revenue in thepresent case since that was a transfer from one Income-taxofficer to another income tax officer in the same city, or,as stated in the judgment itself, "in the same locality" andthe proviso to Section 127(1), therefore, applied. When Law requires reasons to be recorded in a particularorder affecting prejudicially the interests of any person,who can challenge the order in court, it cease to be a mereadministrative order and the vice of violation of theprinciples of natural justice on account of omission tocommunicate the reasons is not expiated.” Applying the principle deducible from the opinion of the ApexCourt of the land, as extracted hereinabove, it is evident that the impugned order dated 27[th] September, 2018, is in infraction tomandatory requirements of recording reasons for the conclusion. Accordingly, instant writ application succeeds, and is, herebyallowed. The impugned order dated 27[th] September, 2018, ishereby quashed. Matter is remanded back to the Principal,Commissioner of Income Tax-2, Jaipur, for adjudication afresh, inaccordance with law. (VEERENDR SINGH SIRADHANA),J Pcg/103