1968 (11) TMI 14 - HC - Income Tax

Transfer of case - Can the orders transferring the cases be treated as invalid as the petitioners were not afforded an oral hearing before the orders were made - Held no

Issues Involved:
1. Validity of transfer orders without oral hearing and pending proceedings.
2. Definite information for initiating proceedings under sections 34 and 148.
3. Validity of notices under sections 34 and 148.
4. Service of notices on the principal officer.
5. Assessment of income already assessed in the hands of other entities.
6. Limitation period under section 34(1)(b).

Issue-wise Detailed Analysis:

1. Validity of Transfer Orders Without Oral Hearing and Pending Proceedings:
The petitioners contended that the transfer orders dated September 4, 1958, and October 22, 1963, were invalid because they were not afforded an oral hearing, no proceeding was pending when the transfers were effected, and the reasons for the transfers were not stated. The court held that it was not incumbent upon the income-tax authorities to afford an opportunity to an assessee of being heard before his case is transferred. The court referenced the Supreme Court's recommendation in Pannalal Binjraj v. Union of India, which suggested that the principles of natural justice should be followed where circumstances permit, but it was not a legal requirement. Written objections were invited, and an oral hearing was not mandatory. The court also found that proceedings under section 34 had been initiated before the transfers, and the reasons for the transfers were clearly stated as "for facility of investigation and proper assessment." Accordingly, the contention that the transfer orders were invalid was rejected.

2. Definite Information for Initiating Proceedings Under Sections 34 and 148:
The petitioners argued that the Income-tax Officer was not definite about the entity earning the income, evidenced by initiating proceedings against both the dissolved firm and the association of persons. The court held that the validity of a notice under section 34 or section 148 must be determined by the information in the possession of the Income-tax Officer at the time of initiation. The court cited Chhotalal Haridas v. M. D. Karnik, where the Supreme Court allowed proceedings against multiple entities if it was unclear who earned the income. The court concluded that the further discovery of facts during investigation did not invalidate the initial notices, which were valid when issued.

3. Validity of Notices Under Sections 34 and 148:
The court examined the validity of the notices dated February 26, 1958, February 28, 1962, March 27, 1962, and March 16, 1966. It was held that the notices were validly issued based on the information available at the time. The court rejected the petitioners' argument that the notices were invalid due to the discovery of additional members in the association of persons. The court referenced the Supreme Court's guidance in Chhotalal Haridas v. M. D. Karnik, which allowed for comprehensive examination and assessment proceedings before final determination.

4. Service of Notices on the Principal Officer:
A contention was raised that the notices were invalid because they were not served upon the principal officer of the association of persons. The court declined to entertain this contention as it was not specifically and clearly taken in the writ petitions, and there was no averment that the individuals served were not the principal officers.

5. Assessment of Income Already Assessed in the Hands of Other Entities:
In Civil Misc. Writ Petition No. 39 of 1967, the petitioners argued that the income had already been assessed in the hands of India United Mills Ltd. and its managing agents, M/s. Agarwal & Co. The court noted that the appeal by India United Mills Ltd. had been allowed, and the amount was deleted from its assessment. The court held that the validity of the notices must be examined based on the information at the time of issuance and that the discovery of fresh facts did not invalidate the notices. The court was not satisfied that the impugned assessment proceedings referred to the same transactions taxed in the hands of other entities.

6. Limitation Period Under Section 34(1)(b):
The petitioners argued that the material for the assessment was available at the time of the original assessment, and the four-year limitation period under section 34(1)(b) applied. The court held that this matter could be more appropriately agitated before the Income-tax Officer. The petitioners failed to establish that all the materials were available to the Income-tax Officer at the time of the original assessment.

Conclusion:
All contentions raised in Writ Petitions Nos. 3338 of 1966, 3339 of 1966, and 39 of 1967 were rejected, and the petitions were dismissed with costs.

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