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Issues Involved:
1. Validity of the notices issued u/s 127 of the Income-tax Act, 1961. 2. Justification for the transfer of assessment proceedings from Panipat to New Delhi. 3. Compliance with the rules of natural justice. Summary: Issue 1: Validity of the Notices Issued u/s 127 of the Income-tax Act, 1961 The petitioners contended that the notices dated July 12, 2001, were invalid as they did not disclose the reasons/basis for the proposed transfer of assessment proceedings. The court noted that the notices merely stated the need for "co-ordinated enquiries and investigations" without providing specific reasons. Citing precedents, the court held that such notices are insufficient and inadequate for an effective response, thus violating the rules of natural justice. However, since the petitioners had filed detailed objections, they were deemed to have waived their right to be informed of the reasons, and no prejudice was suffered by them. Issue 2: Justification for the Transfer of Assessment Proceedings The court examined the reasons provided in the impugned order dated July 26, 2001, for transferring the assessment proceedings from Panipat to New Delhi. The reasons included: - Rajesh Mahajan being a director and shareholder in Mahajan Industries Pvt. Ltd. and Pan Foods Ltd. - Rajesh Mahajan being a trustee of Ram Lal Mahajan Charitable Trust. - Offices of Rajesh Mahajan and Rakesh Mahajan being located in the same building. - Alleged intermingling of seized papers of Mahajan Overseas Ltd. and Mahajan Exports with those of Mahajan Industries Pvt. Ltd. and Pan Foods Ltd. - Rajesh Mahajan's residence at B-81, Greater Kailash-I, New Delhi. The court found these reasons to be irrelevant and lacking any nexus with the object sought to be achieved. The court emphasized that suspicion, even if bona fide, cannot justify the transfer of proceedings without concrete material showing financial nexus. Issue 3: Compliance with the Rules of Natural Justice The court highlighted that the legislative intent of section 127 of the Act requires compliance with the rules of natural justice, including giving the assessee a reasonable opportunity to be heard and recording reasons for the transfer. The court found that the impugned order did not deal with the objections raised by the petitioners and was passed without due application of mind, thus violating the legislative mandate. Conclusion: The court allowed the petition and set aside the impugned order dated July 26, 2001, due to the following reasons: 1. The show-cause notices did not disclose specific reasons for the proposed transfer, violating the rules of natural justice. 2. The impugned order did not address the objections raised by the petitioners, indicating a lack of application of mind. 3. The reasons provided in the impugned order were irrelevant and had no nexus with the object sought to be achieved. There was no order as to costs.
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