2017 (4) TMI 1416 - HC - Income Tax

Power of transfer u/s 127 - reasons given in impugned order is decentralization of cases from central charges and should be taken a sufficient reason - Requirement of reason under Section 127 - Held that - Careful reading of Section 127(2)(a) leads no manner of doubt that requirement of reasonable opportunity to Assessee is subjected and conditional i.e. whenever it is possible to do so department may proceed to pass an order of transfer without giving such opportunity. When a phrase has actually been used by Legislature in a statute we cannot either ignore it or omit or render it redundant by reading that in every case an opportunity is must else order of transfer would be rendered bad. The words used by legislature have to be read and given due meaning and effect and that is the basic principle of interpretation. Each and every word used by legislature has some meaning or consequence and whenever an statute is considered every word must be given its logical meaning and consequence unless there appears to be some inconsistency or conflict resulting in consequences to be disturbing or there are other compelling reasons showing that some part does not convey the same meaning as it ought to be or the same is redundant or is inconsistent with rest of the provisions. However that is not so particularly in this case and from judgment of Constitution Bench in Panna Lal Binjraj Vs. Union of India 1956 (12) TMI 1 - SUPREME COURT also we find that requirement of opportunity has not been held mandatory. The mandate is available only for requirement of recording of reason . Requirement of reason under Section 127 has a basic condition that before causing some inconvenience or prejudice to Assessee Competent Authority passing order of transfer must show from order of transfer a conscious application of mind on its part that transfer order is not a mechanical exercise. Requirement of reasons does not mean that order must contain a detailed discussion on several grounds for justifying order of transfer but requirement of statute stands satisfied if from a bare reading of order any person of ordinary prudence may come to know as to what is the reason which has prevailed in the mind of Competent Authority to exercise power of transfer and such reason or ground is not flimsy imaginary whimsical. It must disclose that patently logic and prudence has been applied before passing it. Looking to the entire facts and circumstances and the impugned order we find it difficult to read substantial compliance of Section 127(A) that any reason has been given in the impugned order. Hence we allow this writ petition partly to the extent that impugned order passed by Principal Commissioner of Income Tax (Central) Kanpur under Section 127 in so far as it pertains to petitioner is hereby set aside.

Summary

Issues Involved:
1. Validity of the transfer order of assessment cases under Section 127(2) of the Income Tax Act, 1961.
2. Requirement of recording reasons for transfer and providing an opportunity of hearing.

Detailed Analysis:

Issue 1: Validity of the transfer order of assessment cases under Section 127(2) of the Income Tax Act, 1961

The petitioner challenged the transfer order dated 30.6.2016, which transferred assessment cases from the jurisdiction of the Deputy Commissioner of Income Tax, Central Circle, Meerut, to the Additional Commissioner of Income Tax/Joint Commissioner of Income Tax, Range-5, Lucknow. The petitioner argued that the transfer was made without recording any reasons and without providing an opportunity for a hearing, as mandated under Section 127(2) of the Income Tax Act, 1961.

Issue 2: Requirement of recording reasons for transfer and providing an opportunity of hearing

The court examined the requirements under Section 127(2)(a) which states that an order of transfer can be passed after giving the assessee a reasonable opportunity of being heard, wherever it is possible to do so, and after recording reasons for the transfer. The court emphasized that recording reasons is mandatory in all cases, irrespective of whether an opportunity of hearing is provided. The reasons must be communicated to the assessee to allow them to challenge the order if necessary.

The respondents argued that the reason for the transfer was "decentralization of cases from central charges" and that providing an opportunity for a hearing was not feasible. However, the court found that the phrase "wherever it is possible to do so" does not dilute the legislative mandate of recording reasons. The court cited several precedents to support the requirement of recording and communicating reasons, including Ajantha Industries Vs. Central Board of Direct Taxes and other relevant cases.

The court concluded that the impugned transfer order did not comply with the statutory requirement of recording reasons. The reason provided, "decentralization of cases," was deemed insufficient as it did not demonstrate a conscious application of mind by the Competent Authority. The court held that the transfer order was invalid due to the lack of substantial compliance with Section 127(2)(a).

Judgment:

The court allowed the writ petition partly, setting aside the impugned order dated 30.6.2016 passed by the Principal Commissioner of Income Tax (Central), Kanpur, under Section 127, as it pertained to the petitioner. The court did not impose any costs.