High Court Of Allahabad
R.K. Agarwal & Ors. vs. CIT & Ors.
Section 127(2)
A.K. Yog & Prakash Krishna, JJ.
Civil Misc. Writ Petn. Nos. 55 to 57 of 2006
23rd February, 2006
Counsel Appeared
Ravi Kant & R.S. Agrawal, for the Petitioners : Bharat Ji Agrawal with Ashok Kumar, for the Respondents
JUDGMENT
By the court :
Heard Shri Ravi Kant, senior advocate, assisted by Shri R.S. Agrawal, advocate for the petitioners and Shri Bharat Ji Agrawal, senior advocate along with Shri Ashok Kumar, advocate for the respondents.
The above writ petitions are decided finally as all the respondents are represented by the standing counsel representing the Department. Initially the respondents did not file counter-affidavit, on the understanding that these writ petitions are to be decided on the basis of three documents, i.e., notice dt. 26th Oct., 2005/Annex. 2, reply of the assessee/Annex. 3 dt. 27th Oct., 2005 and the impugned order of transfer dt. 16th Dec., 2005/Annex. 4 to the writ petition, the authenticity of which was not disputed before the Court.
Petitioners have approached this Court through aforementioned writ petitions under Art. 226 of the Constitution of India and seek to challenge transfer of their case by a common order dt. 16th Dec., 2005 passed by CIT-I, Kanpur in exercise of powers vested under s. 127(2), IT Act, 1961 (called the ‘Act’) from Kanpur to AO at New Delhi (Annex. 4 to the leading writ petition).
For convenience we refer to the facts leading Writ Petn. No. 55 of 2006 (R.K. Agarwal vs. CIT & Ors.).According to the petitioner, he is engaged in the business of sale of printing paper and board. He is, besides Smt. Rekha Agrawal (wife of his brother) and Shri Mayank Agrawal (brother of the petitioner) partner in the firm M/s Malay Enterprises.
In paras 4 and 5, it is pleaded that the petitioner and his firm “has got absolutely no connection with the company known as M/s Trimurti Fragrances (P) Ltd. He is neither a shareholder nor director of the aforesaid concern.” Petitioner has however, admitted that he is married to the sister of Pradeep Agarwal, one of the directors of M/s Trimurti Fragrances (P) Ltd. In para 6 of the writ petition, it is stated that petitioner is an income-tax payer for the last several years. A search and seizure operation under s. 132 of the Act was conducted on 2nd July, 2003 within the residential and business-premises belonging to the partners/directors of the said firms/units called ‘Shikhar Gutkha Group’. CIT served a show-cause notice on the subject titled “Transfer of your case record from Kanpur to New Delhi”. Relevant contents of the said show-cause notice dt. 26th Oct., 2005/Annex. 2 to the writ petition are reproduced below : “Please refer to the notice under s. 127(2) of the IT Act, 1961 dt. 20th Sept., 2005 above.
Consequent upon the search and seizure operation under s. 132 on 2nd July, 2003 in the Shikhar Gutka Group, a number of cases connected with Shikhar Gutka have already been centralized with Dy. CIT, Central Circle-9, New Delhi. A search operation was also conducted at your residential premises along with the Shikhar Gutka Group. Since your case is also found to be connected with Shikhar Gutka Group, it is proposed to transfer your cases to Dy. CIT, Central Circle-9, New Delhi, for the purpose of co-ordinated and effective investigation.
In this regard a notice dt. 20th Sept., 2005 was issued to you in terms of s. 127(2) of the IT Act, 1961 by learned CIT-I, Kanpur fixing the date of hearing at 27th Sept., 2005 which was duly served on you. In this connection I am directed to intimate that one more opportunity of being heard is being provided to you in terms of s. 127(2) of the IT Act, 1961 in respect of proposed transfer of your case to the jurisdiction of Dy. CIT, Central Circle-9, New Delhi under Central Range-4 of CIT (Central)-II, New Delhi. The date of hearing in this regard is fixed at 12.00 p.m. on 31st Oct., 2005.”
8. Petitioner submitted reply dt. 27th Oct., 2005/Annex. 3 through speed post. For ready reference, relevant paragraphs of the aforesaid reply are reproduced below : “With reference to your notice dt. 26th Oct., 2005 firstly I have to inform your honour that my counsel attended on 27th Sept., 2005, but he came to know that you are on leave and on next date, i.e., 31st Oct., 2005, due to Dewali festival I will be out of Kanpur therefore, I am sending my reply through speed post, I have to submit that I am a regular income-tax payer and filed our return of income upto asst. yr. 2004-05. You have not assigned any reason in your notice under reference except a search has been conducted in Shikhar Gutkha Group. I may submit that I have no connection with Shikhar Gutkha group except family relation with Shri Murlidhar Agarwal. Thus, proposed action initiated by you is illegal and bad in the eyes of law and till then I reserve my right to reply further in this connection. Further, I have to inform you that my case is very much identical to the case Mr. Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar, Kanpur. The case of aforesaid person and firm was transferred under s. 127 by CIT(Central) Kanpur to New Delhi. Being aggrieved, both of them filed a writ petition before Hon’ble Allahabad High Court and Hon’ble Court vide order dt. 2nd May, 2005 stayed the operation of order passed under s. 127 and also held that ‘since the case of main company M/s Trimurti Fragrances (P) Ltd. which was sought to be transferred and after that the case of Shikhar Gutkha from Kanpur to Delhi has been stayed by this Court, we find that the case of the petitioner on that very grounds should not have been transferred. Consequently, as an interim measure we stay the operation of the impugned order dt. 4th April, 2005…’
For your kind perusal, I am enclosing herewith copy of stay order dt. 2nd May, 2005 in both the cases. In view of the stay order as discussed above passed by Hon’ble Allahabad High Court, the main grounds for transferring my case are truly identical, therefore my case should not be transferred till disposal of writ petition filed by M/s Trimurti Fragrances (P) Ltd. I request you that looking into the totality of the facts and view of Hon’ble Allahabad High Court in the stay order passed in the case of Mr. Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar, please do not transfer my case from Kanpur to New Delhi otherwise it will cause grave injustice and harassment to me and also violation of views of Hon’ble Allahabad High Court as well as disregard for Hon’ble Allahabad High Court stay orders passed in both the aforesaid cases.”
9. The CIT-I, Kanpur passed the impugned order of transfer dt. 16th Dec., 2005/Annex. 4 to the writ petition, relevant paras 5 and 6 of it are : “5. The main objection of the above-named assessees to the transfer of their cases to the Dy. CIT, Central Circle-IX, New Delhi is that they have no connection with Shikhar Gutkha Group except family relation with Shri Murlidhar Agrawal of the said group. They have also stated that their case is very much identical to the case of Mr. Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar, Kanpur which was transferred under s. 127 of the IT Act, 1961 by the CIT (Central), Kanpur to New Delhi and the operation of the order of the CIT(C) has been stayed by the Hon’ble High Court, Allahabad vide order dt. 2nd May, 2005 in a writ petition filed by Mr. Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar before the Hon’ble High Court, Allahabad. Therefore, in view of the stay order passed by the Hon’ble High Court Allahabad, their cases should not be transferred.
6. The above-named assessees in their replies have merely stated that their cases are identical to that of Mr. Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar, Kanpur which were transferred to Delhi by the CIT(C), Kanpur. They have not elaborated their contention as to in which manner their cases are identical to the aforesaid Mr. Virendra Kumar Jain and Mr. Vijay Kumar Pradeep Kumar, Kanpur. They have also not given any explanation with regard to their contention that they do not have any connection with Shikhar Gutkha Group of cases. Therefore, the objections raised by the said three assessees against the proposed transfer of their cases to Dy. CIT, Central Circle-IX, New Delhi are therefore, not tenable. It is necessary to centralise the cases of above- named assessees with Dy. CIT, Central Circle-IX, New Delhi so that co-ordinated and post search investigation could be done in these cases consequent upon the aforesaid search and seizure action.” Being aggrieved, petitioners have filed abovementioned writ petitions invoking extraordinary jurisdiction of this Court under Art. 226, Constitution of India, praying for issuing writ, order or direction in the nature of certiorari calling for the record of the case and quashing the impugned order dt. 16th Dec., 2005/Annex. 4 to the writ petition and also a writ, order or direction in the nature of prohibition to restrain respondent No. 2/The Dy. CIT, Central Circle-9, New Delhi from taking further action in pursuance of the said impugned order dt. 16th Dec., 2005 and other usual reliefs. We may note that Sri R.K. Agrawal, the petitioner in Writ Petn. No. 56 of 2006 categorically pleaded that he has absolutely no concern/connection with the company M/s Trimurti Fragrance (P) Ltd. Similarly, in Writ Petn. No. 57 of 2006, the petitioner claims to be individual and claim to be employee of the Firm Malay Enterprises (referred to above).
12. As noted above, order of transfer has been passed with respect to the above petitioners in spite of their categorical stand taken in their reply that they have no concern/connection of any nature with M/s Trimurti Fragrance (P) Ltd. or its business.
13. Learned counsel for the petitioner submits that the impugned order of transfer suffers from manifest error apparent on the face of record to the extent that petitioner, in his reply dt. 27th Oct., 2005 (in response to show cause notice dt. 26th Oct., 2005) has specifically contended “that he had no connection with Shikhar Gutkha Group except family relation with Sri Murlidhar Agrawal.”
14. It is further pointed out that in spite of the aforesaid plea taken, the impugned order of transfer does not disclose as to why the case of the petitioner was transferred to New Delhi. The petitioners, in other words, contend that unless there is anything to show that there was any kind of connection or association of the petitioner with the firm/companies belonging to Shikhar Gutkha Group, the impugned transfer order cannot be justified. It is also submitted that the reasoning adopted by CIT-I/concerned authority in the impugned order of transfer to the effect that assessee had failed to give “any explanation with regard to their contention that they do not have any connection with Shikhar Gutkha Group of cases. Therefore, the objections raised by the assessees against the proposition (to the transfer) of their cases to Dy. CIT Central Circle-9 therefore are not tenable” is misconceived approach. The pith and substance of the argument is that assessees could not be required to prove something which is non-existent or in the negative; it is for the Department to prove the affirmative.
15. It is being contended that if it is true that petitioner had no concern or connection with Shikhar Gutkha Group of cases, the question to centralize the cases of the petitioner with that of Shikhar Gutkha Group did not arise at all.
16. In reply, the learned counsel representing the Department referred to the show-cause notice which recites—”A search operation was also conducted on your residential premises along with the Shikhar Gutka Group. Since your case is also found to be connected with Shikhar Gutka Group, it is proposed to transfer your case to Dy. CIT, Central Circle-9, New Delhi for the purpose of coordinated and effective investigation.” (Underlined, italicised in print, to lay emphasis laid by the learned counsel for the Department).
17. Referring to the recitation in the show-cause notice, it is being argued that no fault can be found in the impugned order of transfer, particularly in view of the admission of the assessee with respect to the case of Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar. The aforesaid stand, taken in defence by the Department to defend the impugned order of transfer, has two aspects : (1) As to whether the recitation appearing in show-cause notice can be availed for the purpose to sustain the impugned order of transfer wherein there is no such mention. Conspicuously impugned order of transfer does not refer to the fact that on the basis of search operation in question anything was found to indicate the connection or association of the assessee with Shikhar Gutkha Group. We may refer to the specific definite stand taken by the assessee in his reply dt. 27th Oct., 2005/Annex. 6 to the writ petition wherein it has categorically stated—”I may submit that I have no connection with Shikhar Gutkha Group except family relation with Shri Murlidhar Agarwal”. Such a plea being taken by the assessee, it was more the reason for the Department to have specifically recorded a finding as to why such a positive statement was not being accepted. In absence of it, the plea taken by the assessee could not be ignored or brushed aside. Reasoning of the Department is clearly misconceived and misapprehended and the approach in rejecting the contention of the assessee on this score cannot be sustained. The second aspect of the stand taken by the Department before this Court is that the assessee in his reply had already come forward to state that his case is identical to the case of Vijendra Kumar and M/s Vijay Kumar Pradeep Kumar which was transferred from Kanpur to New Delhi under s. 127 of the Act and who had approached High Court by filing writ petition and obtained interim orders. The said submission clearly ignores the later portion of the reply of the assessee. Aforesaid statement, in our opinion, was made for the sole purpose to inform the Department that transfer (of) his case need to be stayed in view of the interim order passed by the Hon’ble High Court. This statement, however, did not and cannot be read to mean that petitioner admitted his connection or association with the aforesaid persons, namely Virendra Kumar Jain and M/s Vijay Kumar Pradeep Kumar.
Learned counsel for the Department also submitted that it is not expected to disclose the material while passing order of transfer in the interest of effective assessment proceedings and to ensure that assessee does not resolve (resort) to such practices which may cause hindrance in the process. There can be no quarrel on the aforesaid proposition. But the question remains as to whether the Department, on the basis of above stand can completely ignore a categorical statement of the assessee that he has no connection/association with respect to Shikhar Gutkha Group cases.
We find that no prejudice will be caused to the Department if precise reason is disclosed to show that authority did apply his mind to the material on record or information available on the basis of search and seizure operations, giving link to the fact that the ‘assessee’ has some connection or association and by making a mention of the said fact in the transfer order. This is more so necessary to show that the authority, exercising its statutory power of transfer, had actually gone through the record and applied its mind before passing the impugned order of transfer and that the power to transfer case is not exercised mechanically. If Department remains silent it will frustrate the whole object of the statutory provisions that transfer should not be passed mala fide, or arbitrarily or on irrelevant/extraneous considerations.
We may refer the apex Court decision in the case of Ajantha Industries & Ors. vs. CBDT & Ors. 1976 CTR (SC) 79 : AIR 1976 SC 437. For convenience paras 9, 10, 11 and 15 of the said judgment (are) reproduced as under :
“9. This judgment was rendered by this Court on 21st Dec., 1956, and we find that in the 1961 Act s. 127 replaced s. 5(7A) where the legislature has introduced, inter alia the requirement of recording reasons in making the order of transfer. It is manifest that once an order is passed transferring the case file of an assessee to another area the order has to be communicated. Communication of the order is an absolutely essential requirement since the assessee is then immediately made aware of the reasons which impelled the authorities to pass the order of transfer. It is apparent that if a case file is transferred from the usual place of residence or office where ordinarily assessments are made to a distant area, a great deal of inconvenience and even monetary loss is involved. That is the reason why before making an order of transfer the legislature has ordinarily imposed the requirement of a show-cause notice and also recording of reasons. The question then arises whether the reasons are at all required to be communicated to the assessee. It is submitted, on behalf of the Revenue, that the very fact that reasons are recorded in the file, although these are not communicated to the assessee, fully meets the requirement of s. 127(1). We are unable to accept this submission.
10. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Art. 226 of the Constitution or even this Court under Art. 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations. Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question.
11. We are clearly of opinion that the requirement of recording reasons under s. 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 the assessee.
15. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in Court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated.”
In that view of the matter, we find that the impugned order of transfer suffers from manifest error apparent on the face of record and the same cannot be sustained in law.
The impugned order of transfer dt. 16th Dec., 2005/Annex. 4 to the writ petition (common to all writ petitions) passed against the assessee-petitioners, in abovementioned writ petitions, is hereby set aside with direction to the respondents (if so advised) to pass fresh orders in accordance with law. We make it clear that the time consumed from the date of filing of the reply till the decision of the writ petition shall not be reckoned to, for the purpose of limitation to complete an assessment proceeding.
Petitions are allowed.
[Citation : 283 ITR 532]
