06 October 1964
Supreme Court


Case number: Appeal (civil) 22 of 1964






DATE OF JUDGMENT: 06/10/1964


CITATION:  1965 AIR 1028            1965 SCR  (1) 671  CITATOR INFO :  D          1976 SC 437  (14)

ACT: Income  Tax  Act, 1961 (43 of  1961),  s.  127(1)-Income-tax Proceedings  transferred  from  one  Income-tax  Officer  to another in the same locality -Recording of reasons,  whether mandatory-Proviso to s. 127(1) effect of.

HEADNOTE: Income-tax  proceedings  against the  appellant  before  two officers  in  Calcutta were transferred by an order  of  the Central  Board  of  Revenue under s. 127(1)  of  the  Indian Income-tax  Act, 1961 to another Income-tax Officer  in  the same place.  The transfer was challenged by the appellant in writ proceedings before the Circuit Bench of the Punjab High Court  at Delhi as being invalid on the ground, that in  not recording the reasons for the transfer, the order making the transfer  did  not comply with a mandatory provision  of  s. 127(2).   The  High Court having-turned down the  plea,  the appellant came to the Supreme Court by special leave. It was contended by the appellant that although the  proviso to  s. 127(1) made the giving of a hearing to  the  assessee unnecessary in cases where the transfer was from one officer to  another  in  the  same city,  place,  or  locality,  the provision  for recording reasons which was  mandatory  under the  main  clause  of  s.  127(1)  had  not  been  similarly dispensed  with.  Therefore even in those cases  which  were covered by the proviso reasons had to be recorded. HELD  :  The recording of reasons was a  corollary  to,  and bound up with the provision for a hearing. [674 C-D]. Where the transfer was from an officer in one locality to an officer  in another locality it was provided that a  hearing should, if possible, be given to the assessee.  Reasons  for the transfer had to be recorded to show that the  objections of  the assessee had been taken into account.  Even  when  a hearing was not actually given on the ground that it was not possible,  recording of reasons remained desirable  for  the satisfaction of the assessee.[674 E-F]. However when the transfer was from one officer to another in



the  same locality, no question of giving a hearing  to  the assessee  arose as there was no prejudice to him.  Under  s. 124(3) of the Act all the officers in the same locality  had concurrent  jurisdiction.  An order of transfer  within  the locality  was a purely administrative order, based  entirely on the convenience of the department.  On principle in  such cases neither can notice be said to be necessary, nor  would it be necessary to record any reasons for the transfer. [675 A-D]. The  provision for hearing and for recording of reasons  was made   in  s.  127(1)  obviously  in  compliance  with   the observations  of this Court in Pannalal Binjraj v. Union  of India.   In that case where the order of transfer  from  one locality to another had been challenged as violative of Art. 14,  the court while holding that it  was  unconstitutional, remarked.  that it was desirable before transferring a  case to  give the assessee a hearing and to record reasons.  [676 E-G]. 672 Considered in this background and in the light of the object sought to achieved, the proviso to s. 127(1) only meant that in  cases  covered it no opportunity need be  given  to  the assessee,  and the consequential pee for  recording  reasons was  also  unnecessary.   The  impugned  orders  there  fore remained valid. [677 A-C] Pannalal  Binjraj  v.  Union of India,  [1957]  S.C.R.  233, referred to.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeal No. 22 of  1964 and Civil Appeal No. 261 of 1964. Appeals  by special leave from the judgment and  order  date April  10, 1963 of the Punjab High Court (Circuit Bench)  at in Civil Writ Nos. 258-D and 257-D of 1963. B.   N.  Kirpal, S. Murty and K. K. Jain, for the  appellant (in both the appeals). S.   Y.  Gupte,  Solicitor-General, N. D. Karkhanis  and  R. Sachthey, for the respondents (in both the appeals). The Judgment of the Court was delivered by Gajendragadkar C. J. 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(1), and ’F’ Ward District IV(2) Calcutta, respectively to the  Income  Tax  Officer ’F 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.               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               subordi-               673               nate  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. 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  Income-tax Officer  to  the other; and the argument is that  s.  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  opport- unity  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  reason.  able 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. 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 situated 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 the. 674 proviso  is  that  the requirement as to  the  giving  of  a reasonable  ,opportunity alone is dispensed with in  respect of cases falling under the proviso, but not the  requirement as  to the recording of reasons.  If the words used  in  the proviso are literally construed, it may have to be  conceded that there is some force in this contention. But,  on the other hand, the provision that nothing in  sub- section (1) shall be deemed to require any opportunity to be given,  is worded in an emphatic form; and that fact has  to be  home in mind in considering the effect of  the  proviso. Besides,  it  would not be unreasonable to assume  that  the



recording  of  reasons  prescribed by  S.  127(1)  would  be appropriate where a transfer is being made otherwise than in the  manner  prescribed  by the proviso.  In  such  a  case, normally,  the  assessee  has  to  be  given  a   reasonable opportunity to be heard; and the natural corollary of  -this requirement is that his objections to the transfer should be considered  and reasons given why the transfer is made  des- pite  the  objection of the assessee.  In other  words,  the requirement  as  to  the recording, of reasons  flows  as  a natural consequence and corollary of the requirement that  a reasonable opportunity should be given to the assessee.  If, however,  a  reasonable  opportunity is  not  given  to  the assessee on the ground that it is not possible to do so,  S. 127(1) requires that the transfer being of a category  where a  reasonable opportunity should be given to  the  assessee, the  authority  should  record its reasons  for  making  the transfer,  even though no opportunity was in fact  given  to the assessee.  If that be the true position, it is not  easy to  understand why the proviso should be so construed as  to require reasons to be given for the transfer, even though no opportunity  to the assessee is required to be given.   That is one aspect of the matter which has to be borne in mind in determining the true scope and -effect of the proviso. There  is  another  consideration which  is  also  relevant. Section  124  of  the Act deals  with  the  jurisdiction  of Income-tax  Officers.  ’S. 124(3) provides that  within  the limits  of the area assigned to him, the Income-tax  Officer shall have jurisdiction-               (a)   in  respect of any person carrying on  a               business or profession, if the place at  which               he  carries on his business of  profession  is               situate within the area, or where his business               or  profession  is carried on in  more  places               than  one,  if  the  principal  place  of  his               business  or profession is situate within  the               area, and               (b)   in respect of any other person  residing               within -the area. 675 This  provision clearly indicates that where a  transfer  is made  under  the proviso to s. 127(1)  from  one  Income-tax Officer  to  another in the same locality, it  merely  means that  instead of one Income-tax Officer who is competent  to deal  with  the case, another Income-tax  Officer  has  been asked  to  deal  with it.  Such an order is  purely  in  the nature of an administrative order passed for  considerations of  convenience of the department and no possible  prejudice can  be  involved  in such a transfer.   Where,  as  in  the present  proceedings, assessment cases pending  against  the appellant  before an officer in one ward are transferred  to an  officer  in  another ward in the same  place,  there  is hardly  any  occasion for mentioning any  reasons  as  such, because  such  transfers are invariably made on  grounds  of administrative convenience, and that shows that on principle in  such  cases  neither  can  the  notice  be  said  to  be necessary,  nor would it be necessary to record any  reasons for the transfer.  The provisions contained’ in s. 124(3) of the  Act  deal with the same topic which  was  the  subject- matter  of s. 64(1) and (2) of the earlier  Income-tax  Act, 1922  (No. 11 of 1922).  There is, however, this  difference between  these  two  provisions that whereas  s.  124  fixes jurisdiction,  territorial or otherwise, of  the  Income-tax Officers, s. 64 fixed the place where an assessee was to  be assessed. In  this  connection,  it is also  necessary  to  take  into



account the background of the provision contained in s. 127. In Pannalal Binjraj v. Union of India(1) the validity of  s. 5(7A) of the earlier Act of 1922 was challenged before  this Court.  The said section had provided that the  Commissioner of  Income-tax  may transfer any case  from  one  Income-tax Officer subordinate to him to another, and the Central Board of  Revenue  may transfer any case from any  one  Income-tax Officer to another.  Such transfer may be made at any  stage of the proceedings, and shall not render necessary the  are- issue of any notice already issued by the Income-tax Officer from  whom the case is transferred.  The argument which  was urged before this Court in challenging the validity of  this provision  was that it infringed the  citizens’  fundamental rights  conferred  by Articles 14 and 19(1)(g) of  the  Con- stitution.  In support of this argument, reliance was placed on  the fact that s. 64(1) and (2) conferred a right on  the assessee  to  have his tax matter adjudicated  upon  by  the respective  officers mentioned in the said  provisions;  and since  s.  5(7A) authorised the transfer of  the  assessee’s case  from one Income-tax Officer to another, that  involved infringement of his fundamental rights (1)  [1957] S.C.R. 233. 676 guaranteed by Articles 14 and 19(1)(g) read with s. 64(1)  & (2).  It is necessary to emphasise that s. 5(7A)  authorised transfer of income-tax cases from one officer to another not necessarily  within  the same place.  In  other  words,  the transfer authorised by s. 5(7A) would take the case from the jurisdiction of an officer entitled to try it under s. 64(1) &  (2) to another officer who may not have  jurisdiction  to try  the case under the said provision.  That,  indeed,  was the basis on which the validity of S. 5 (7A) was challenged. This  Court, however, repelled the plea raised  against  the validity  of the said section on the ground that  the  right conferred  on  the  assssee by s. 64(1) &  (2)  was  not  an absolute right and must be subject to the primary object  of the Act itself, namely, the assessment and collection of the income-tax;  and it was also held that where the  exigencies of tax collection ,so required, the Commissioner of  Income- tax  or  the  Central  Board of Revenue  had  the  power  to transfer his case under S.    5  (7A) to some other  officer outside  the area where the assessee resided or  carried  on business.  That is how s. 5(7A) was sustained. Even  so,  this  Court  observed in  the  case  of  Pannalal Binjraj(1)  that  it would be better if  an  opportunity  is given to the assessee in cases where the powers conferred by s.  5(7A)  were intended to be exercised, because  he  would then  be  able  to mention his objections  to  the  intended transfer.  It is in that connection that this Court  further expressed  its  opinion that if the reasons for  making  the transfer "are reduced, however briefly, to writing, it  will help  the assessee in appreciating the  circumstances  which make it necessary or desirable to order such a transfer." It is  obviously  in pursuance of these observations  that  the Legislature has made the relevant provisions in s. 127(1) of the  Act.  If this background is home in mind, it  would  be clear  that  the propriety of giving an  opportunity  to  an assessee  and  the desirability of recording  reasons  which this   Court  emphasised,  had  reference  to  cases   where transfers  were  intended  to be  made  from  an  Income-tax Officer  in one place to the Income-tax Officer  in  another place; and they obviously had no reference to transfers like the  present where instead of one officer dealing  with  the case,  another  officer in the same place is asked  to  deal with it.



It  is in the light of these considerations that we have  to construe  the  proviso  to S. 127(1).  As  we  have  already indicated, the construction for which Mr. Jain contends is a reasonably  possible  construction.  In fact, if  the  words used  in the proviso are literally read, Mr. Jain  would  be justified in contending that (1) [1957] S.C.R. 233. 67 7 requirement  that reasons must be recorded applies  even  to falling under it.  On the other hand, if the obvious  object proviso is taken into account and the relevant previous ound is  borne in mind, it would also seem reasonable to that  in regard to cases falling under the proviso, an opportneed not be  given to the assessee, and the consequential  to  record reasons  for the transfer is also unnecessary, and  view  is plainly consistent with the scheme of the provision and true intent  of its requirements.  We would accordingly hold  the impugned  orders  cannot be challenged on  the  ground  that Board has not recorded reasons in directing the transfer  of the pending against the assessee from one Income-tax Officer other in the same locality. The result is, the appeals fail and are dismissed.  There be no order as to costs. Appeals dismissed. 678