1960 (9) TMI 7 - SC - Income Tax

Whether an individual case which was not a pending case could be transferred from one Income-tax Officer to another under sub-section (5) of section 5 of the Patiala Act, which was kept alive for assessment and reassessments relating to previous assessment years? Held that - Special provision for transfer of pending cases is all that is provided there, and if such a transfer takes place, the provisions of sub-section (7A) will be invoked. Those provisions are to be read as not prejudicing the general powers granted by sub-section (5) and vice versa. Appeal dismissed.

Issues Involved:
1. Competency of the Income-tax Officer, Special Circle, Ambala, to issue a notice under section 34 of the Patiala Income-tax Act.
2. Validity of the transfer order issued by the Commissioner of Income-tax under section 5(5) and 5(7A) of the Indian Income-tax Act.
3. Requirement of consultation with the Minister-in-charge or Central Board of Revenue under the Patiala Income-tax Act.

Issue-wise Detailed Analysis:

1. Competency of the Income-tax Officer, Special Circle, Ambala:
The appellant firm contested the jurisdiction of the Income-tax Officer, Special Circle, Ambala, to issue a notice under section 34 of the Patiala Income-tax Act. The firm argued that only the Income-tax Officer, B-Ward, Patiala, was the competent authority under section 64(1) of the Indian Income-tax Act. The court noted that the transfer of the case by the Commissioner of Income-tax on November 4, 1953, was characterized as ultra vires and incompetent. However, the court concluded that the exercise of power is referable to a jurisdiction that confers validity upon it, and not to a jurisdiction under which it would be nugatory. Thus, the notice issued by the Income-tax Officer, Special Circle, Ambala, was deemed valid.

2. Validity of the Transfer Order:
The appellant firm contended that the Commissioner of Income-tax's order transferring the case to the Income-tax Officer, Special Circle, Ambala, was invalid. The argument was based on the provisions of section 5(5) and 5(7A) of the Indian Income-tax Act, which had similar provisions in the Patiala Income-tax Act. The court examined whether the transfer should have been made under the Patiala Income-tax Act instead of the Indian Income-tax Act. It was argued that the Commissioner did not consult the Minister-in-charge as required by the Patiala Income-tax Act. The court held that the failure to consult the Central Board of Revenue did not render the order ineffective, as the provision for consultation was considered directory, not mandatory. Therefore, the transfer order was upheld as valid.

3. Requirement of Consultation:
The court addressed the requirement of consultation with the Minister-in-charge under section 5(5) of the Patiala Income-tax Act. It was argued that the Central Board of Revenue, which replaced the Minister-in-charge under the Indian Finance Act, 1950, was not consulted. The court referred to the principle that the neglect of a directory provision does not affect the validity of acts done. The court cited previous cases, including State of U.P. v. Manbodhan Lal Srivastava and K.S. Srinivasan v. Union of India, to support the view that the failure to consult did not invalidate the Commissioner's order. The court concluded that the provision for consultation was directory and its neglect did not affect the validity of the transfer order.

Additional Analysis:
The court also addressed the appellant's argument that the transfer of the case could only take place under section 5(7A) and not under section 5(5) of the Patiala Income-tax Act. The court clarified that section 5(7A) authorized the transfer of individual cases, while section 5(5) dealt with the distribution of work among Income-tax Officers. The court held that section 5(5) was applicable for cases that were not pending and allowed the Commissioner to direct the performance of functions by specific Income-tax Officers. The court emphasized that the plural form in the provision included the singular, allowing the Commissioner to arrange for the disposal of individual cases.

Conclusion:
The appeal was dismissed, and the court upheld the jurisdiction of the Income-tax Officer, Special Circle, Ambala, and the validity of the transfer order issued by the Commissioner of Income-tax. The court concluded that the failure to consult the Central Board of Revenue did not invalidate the Commissioner's order, as the provision for consultation was directory. The court also clarified the applicability of sections 5(5) and 5(7A) of the Patiala Income-tax Act, affirming the Commissioner's authority to direct the performance of functions by specific Income-tax Officers.

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