1999 (12) TMI 54 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the transfer orders u/s 127 of the Income-tax Act, 1961.
2. Compliance with the principles of natural justice.
3. Adequacy of reasons provided for the transfer.

Summary:

1. Validity of the Transfer Orders u/s 127 of the Income-tax Act, 1961:
The petitioners challenged the orders passed by respondents transferring their cases from New Delhi to Faridabad. The orders were issued u/s 127(2) of the Income-tax Act, 1961, citing "administrative convenience and coordinated investigation" as the reason for the transfer. The court examined whether these reasons were adequately communicated and justified.

2. Compliance with the Principles of Natural Justice:
The court noted that the concept of natural justice requires that the affected party be given a reasonable opportunity of being heard and that reasons for the transfer be recorded and communicated. The court referred to precedents like Ajantha Industries v. CBDT [1976] 102 ITR 281 (SC) and Vijayasanthi Investments Pvt. Ltd. v. Chief CIT [1991] 187 ITR 405 (AP), which emphasize the necessity of disclosing specific reasons for the transfer to enable the assessee to make an effective representation.

3. Adequacy of Reasons Provided for the Transfer:
The court found that the show-cause notices issued to the petitioners did not adequately specify the reasons for the transfer. The notices were either vague or did not mention any reason at all. The court held that merely stating "administrative convenience and coordinated investigation" without providing specific details does not meet the requirement of reasonable opportunity of being heard as enshrined in section 127 of the Act.

Conclusion:
The court held that the orders transferring the cases of petitioners Nos. 1 to 3 and 5 were invalid due to non-compliance with the principles of natural justice and inadequate communication of reasons. However, the transfer of petitioner No. 4's case within the same city was upheld as it complied with section 127(3) of the Act. The court quashed the impugned orders of transfer and allowed for fresh proceedings if done in accordance with the law.