2019 (7) TMI 1038 - HC - Income Tax

Transfer under Section 127 - mandatory requirements of recording reasons for the conclusion ignored - transfer from one Income-tax officer to another income tax officer in the same city - HELD THAT - Under Rule 56 the Central Government in disposing of the revision application must record its reasons and communicate these reasons to the parties affected thereby. It was further held that the reasons could not be gathered from the nothing in the file of the Central Government. Recording of reasons and disclosure thereof is not a mere formality. Revenue drew our attention to a decision of this Court in Kashiram Aggarwalla v. Union of India and Ors. (4) 1964 (10) TMI 8 - SUPREME COURT as submitted that this Court took the view that orders under Section 127(1) are held in that decision to be purely administrative in nature passed for consideration of convenience and no possible prejudice could be involved in the transfer. It was also held therein that under the proviso to Section 127(1) it was not necessary to give the appellant an opportunity to be held and there was consequently no need to record reasons for the transfer. This decision is not of any assistance to the Revenue in the present case since that was a transfer from one Income-tax officer to another income tax officer in the same city, or, as stated in the judgment itself, in the same locality and the proviso to Section 127(1), therefore, applied. 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 cease 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 Applying the principle deducible from the opinion of the Apex Court of the land, as extracted hereinabove, it is evident that the impugned order dated 27th September, 2018, is in infraction to mandatory requirements of recording reasons for the conclusion. Accordingly, instant writ application succeeds, and is, hereby allowed. The impugned order dated 27th September, 2018, is hereby quashed. Matter is remanded back to the Principal, Commissioner of Income Tax-2, Jaipur, for adjudication afresh, in accordance with law.

Summary

Issues:
Challenge to impugned order dated 27th September, 2018 for declining petitioner's request based on inadequate reasoning.

Analysis:
The High Court considered a writ application challenging an order dated 27th September, 2018, where the Principal, Commissioner of Income Tax-2, Jaipur, declined the petitioner's request without providing adequate reasoning. The court observed that the authority did not apply its mind to the petitioner's reasons or the reasons opposing the prayer. Reference was made to the case of Ajantha Industries & Ors. Vs. Central Board of Direct Taxes & Ors, where it was highlighted that under Section 127 of the Income Tax Act, 1961, reasons must be recorded prior to passing a transfer order. The court emphasized the importance of communicating reasons to the assessee to enable them to challenge the order if necessary.

The court noted that the requirement of recording reasons under Section 127(1) is mandatory, and non-communication of reasons to the assessee does not fulfill the legal obligation. A contrary view taken by the Delhi High Court was distinguished, emphasizing the necessity of disclosing reasons to the affected parties. The court also referred to a decision regarding the exercise of revisional power by the Central Government, highlighting the significance of recording and communicating reasons. The argument that orders under Section 127(1) are administrative in nature was dismissed, emphasizing that when the law mandates reasons to be recorded in an order affecting someone's interests, it ceases to be merely administrative.

In light of the principles established by the Apex Court and the legal requirements under Section 127(1), the High Court found the impugned order to be in violation of mandatory recording of reasons. Consequently, the writ application was allowed, the order dated 27th September, 2018, was quashed, and the matter was remanded back to the Principal, Commissioner of Income Tax-2, Jaipur, for fresh adjudication in compliance with the law.