1967 (9) TMI 33 - HC - Income Tax

Whether an order transferring a case passed by one member of CBDT and not by the entire Board is valid - Held, yes

Issues Involved:
1. Validity of the transfer order passed by a single member of the Central Board of Direct Taxes.
2. Alleged violation of principles of natural justice due to lack of reasonable opportunity for the petitioners to produce evidence.

Detailed Analysis:

Issue 1: Validity of the Transfer Order
The petitioners challenged the transfer order on two grounds:
1. The order was passed by a single member of the Central Board of Direct Taxes (CBDT) and not by the entire Board.
2. The order did not record the reasons for the transfer.

Legal Framework:
- Section 127 of the Income-tax Act, 1961, empowers the Commissioner and the CBDT to transfer cases from one Income-tax Officer to another, provided reasons are recorded and the assessee is given a reasonable opportunity to be heard.
- Section 2(12) of the Act defines the "Board" as the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963.
- Section 4 of the Central Boards of Revenue Act, 1963, allows the Central Government to make rules regulating the transaction of business by the Board. Rule 4 of the Central Board of Direct Taxes (Regulation of Transaction of Business) Rules, 1964, permits the Chairman to distribute the business of the Board among its members.

Court's Analysis:
- The Act does not specify how the CBDT should function internally or whether it must act as a single unit.
- The Central Boards of Revenue Act, 1963, and the rules framed under it, specifically Rule 4, allow the Chairman to distribute business among the members.
- The order of transfer was passed by Shri S. A. L. Narain Rao, a member of the CBDT, who was authorized to deal with transfer matters.
- The court found that the words "for the purpose of regulating the transaction of business" in Section 4 of the Central Boards of Revenue Act, 1963, are broad enough to include the distribution of business among members.
- The court cited the Supreme Court's judgment in Barium Chemicals Ltd. v. Company Law Board, which upheld a similar rule allowing the Chairman to distribute business.

Reason Recording:
- The show cause notice issued to the petitioners stated that the transfer was for "facility of investigation."
- The court noted that the petitioners were aware of the reasons for the transfer and had not objected to the transfer itself but only to the location (Meerut).
- The court held that the absence of detailed reasons in the transfer order was a technical objection without substance.

Issue 2: Violation of Principles of Natural Justice
The petitioners argued that they did not have a reasonable opportunity to produce their evidence before the Income-tax Officer, Shri K. P. Jain.

Court's Analysis:
- The petitioners' account books had been seized by the income-tax authorities, but they did not request the examination or production of these books during the assessment proceedings.
- The court found that the petitioners had the opportunity to examine and use the account books but chose not to.
- Regarding the non-appearance of certain witnesses, the Income-tax Officer had rejected the request for summoning witnesses whose statements were deemed irrelevant. He did summon one witness considered relevant, but the petitioners did not examine him.
- The court concluded that the petitioners had a reasonable opportunity to produce evidence and their complaint was not well-founded.

Conclusion:
The court dismissed the writ petitions, holding that:
- The transfer order was validly passed by an authorized member of the CBDT.
- The petitioners had a reasonable opportunity to produce evidence, and there was no violation of the principles of natural justice.
- The petitions were dismissed with costs assessed at Rs. 200 in each case, and the stay order was discharged.

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