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TMI Blog2014 (12) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... ses to DCIT, Central Circle, Chandigarh (for short the 'impugned order'). 4. The petitioners have contended that before their cases could have been ordered to be transferred, they were entitled to fair and proper hearing and principles of natural justice were required to be complied with and the adjudicating authority was under an obligation to furnish the relevant material, which formed the basis of issuance of show-cause notices. This material, according to them, was never disclosed either in the show-cause notices or at the time of hearing and the same was disclosed only in the impugned order. Had the same been disclosed, the petitioners could have offered an appropriate explanation. The non-disclosure of the same has caused serious prejudice to them. The impugned order has been questioned on various other grounds as taken in the writ petitions. 5. The respondents filed their reply (s), wherein it was alleged that writ petitions are not maintainable since no legal right of the petitioners has been infringed and the respondents have acted only in exercise of their statutory duties in order to protect the interest of the department and for carrying out proper investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se which is vague and too general and the assessees could not have been expected to make an effective and purposeful representation against the proposed transfer while replying to the show-cause notices. 8. On the other hand, Shri Vinay Kuthiala, learned Senior Advocate assisted by Ms. Vandana Kuthiala, Advocate, for the respondents has vehemently argued that respondents have acted within the four corners of law and no exception of the same can be taken by the relevant. 9. We proceed to examine the first contention raised by the petitioners to the effect that even if the show cause notices are held to be valid even then the petitioners were not provided necessary material during the course of investigation and inquiry and the respondents have relied upon extraneous material in order to justify the transfer of the cases. 10. The relevant portion of the show cause notices in case of each of the petitioners reads thus:- In CWP No. 5173 of 2014: "On the basis of enquires carried out, and also material gathered during the course of assessment proceedings, in the cases of Sh. Virbhadra Singh (HUF), R/o. Holy Lodge, Jhaku, Shimla (AACHV0223N), Sh. Virbhadra Singh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singh w/o Sh. Virbhadra Singh and R/O Holy Lodge, Jhaku, Shimla (AESPK2933C), Sh. Vikramaditya Singh (CAXPS8819J), Ms. Aprajita Kumari D/o. Sh. Virbhadra Singh (AOUPK6157L), Sh. Anand Chauhan, R/o. Kailash Niwas, Inder Nagar, Dhali, Shimla (ADFPC3964R), Sh. Chunni Lal Chauhan, Prop. Universal Apple Associates, Parwanoo (AAHPC7645L), reveal the following:- 1. Agricultural income of Sh. Virbhadra Singh (HUF), R/o. Holy Lodge, Jhaku, Shimla (AACHV0223N) was shown as follows in the original returns filed at the below given details: A.Y. Returned income/agricultural income Date of filing Income Agri. 2009-10 Rs.16,38,438/- Rs.7,35,000/- 24.07.2009 2010-11 Rs.44,67,584/- Rs.15,00,000/- 29.07.2010 2011-12 Rs.15,13,712/- Rs.25,00,000/- 11.07.2011 The agricultural income has dramatically increased as follows in the revised returns filed at the following details: A.Y. Income as per revised return Date of filing Income Agri. 2009-10 Rs.16,38,938/- Rs.2,21,35,000/- 02.03.2012 2010-11 Rs.44,67,584/- Rs.2,80,92,500/- 02.03.2012 2011-12 Rs.15,13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received unsecured loans of Rs. 1.50 crores from Sh. Vakamulla Chandershekhar in FY 2011-12. Further on the basis of news item appearing in various national dailies shows that the assessee has invested Rs. 34 lacs in the purchase of shares of M/s Tarini Infrastructures Ltd. but no such investment appears to be declared by the assessee in her return of income. Investment in purchase of LIC Polices to the tune of Rs. 2.60 Crore for the F.Y. 2008-09, 2009-10 & 2010-11 were found to be made from the alleged agricultural income, shown in the revised income tax returns of Sh. Virbhadra Singh, HUF which was routed through the bank account of Sh. Anand Chauhan. However, the investment made is not found to be reflected in the assessee's return of income." In CWP No. 5456 of 2014: "On the basis of enquires carried out, and also material gathered during the course of assessment proceedings, in the cases of Sh. Virbhadra Singh (HUF), R/o. Holy Lodge, Jhaku, Shimla (AACHV0223N), Sh. Virbhadra Singh, R/o. Holy Lodge, Jhaku, Shimla (ALRPS6513N), Smt. Pratibha Singh w/o Sh. Virbhadra Singh and R/o Holy Lodge, Jhaku, Shimla (AESPK2933C), Sh. Vikramaditya Singh (CAXPS8819 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the assessee's return of income." 11. It was not in dispute that a detailed reply to the said notices was filed by each of the petitioners and they were also afforded an opportunity of hearing. But, the grievance made by the petitioners is that the reasons now spelt out in the impugned order are not the same to which they had been put to notice. Para-1 of the impugned order in all the cases sets out in verbatim the contents of the show-cause notices (supra), but thereafter the contents of Para-2 (Para-3 in CWP No.5453 of 2014, CWP No.5455 of 2014 and CWP No.5456 of 2014 ) in the impugned orders read as under:- "2. The information and facts also show that above named persons mentioned in para-1 above have close relations/ nexus and business dealings amongst themselves and other persons namely Sh. Vakamulla Chandershekhar and M/s Tarini Infrastructure Limited. The details of the transactions entered with the above entities are as under:- i. Interest free unsecured loan of Rs. 5.9 crores was advanced by Sh. Vakamulla Chandershekhar to Sh. Virbhadra Singh (Rs.2.4 Crore), Smt. Pratibha Singh (Rs.1.5 Crore) and Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rh under the charge of CIT (Central) Gurgaon. The details of the cases which are to be centralized are as under: Sr. No. Name & Address Presently Assessed with the AO CCIT Charge CIT Charge 1. Sh.Virbhadra Singh (HUF), R/o.Holy Lodge, Jhaku, Shimla (AACHV0223N) DCIT, Shimla Circle Shimla Shimla 2. Sh. Virbhadra Singh, R/o.Holy Lodge, Jhaku, Shimla (ALRPS6513N) DCIT, Shimla Circle Shimla Shimla 3. Smt. Pratibha Singh w/o. Sh. Virbhadra Singh and R/o. Holy Lodge, Jhaku, Shimla (AESPK2933C) DCIT, Shimla Circle Shimla Shimla 4. Sh. Vikramaditya Singh s/o Sh. Virbhadra Singh, r/o Holy Lodge, Jhaku, Shimla (CAXPS8819J) ITO, Ward-1, Shimla Shimla Shimla 5. Ms. Aprajita Kumari D/o. Sh. Virbhadra Singh (AOUPK6157L,) ITO, Ward-1 Shimla Shimla Shimla 6. Sh. Anand Chauhan, R/o. Kailash Niwas, Inder Nagar, Dhali, Shimla (ADFPC3964R) ITO, Ward-1, Shimla. Shimla Shimla 7. Sh. Chunni Lal Chauhan, Prop. Universal Apple Associates, Parwanoo (AAHPC7645L) DCIT,Parwanoo Circle Shimla Shimla Hence show cause notices u/s 127 of the I.T. Act, 1961 have been issued to the above persons on 25.6.2014 for furnishing their objections i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catory power has right to know the case he is required to meet. The fundamental principle remains that nothing should be used against the person, which has not been brought to his notice. If the relevant material is not disclosed to a party, there is prima facie unfairness irrespective of whether the material in question arose before, during or after the hearing. 16. For reasons best known to the respondent, it has treated all the petitioners/assessees as one person/assessee. We observe so because all the petitioners were admittedly issued individual showcause notices where separate and distinct allegations against each one of them had been set out. But, now when the impugned order is seen, it is absolutely clear that after setting out the allegations as mentioned in Para-1 of the show-cause notice, an omnibus reason common to all the petitioners has been recorded for the transfer of the cases, which indisputably did not find mention in the show-cause notices. 17. The show-cause notices issued to the petitioners in CWP No.5173 of 2014, CWP No.5452 of 2014 and CWP No.5453 of 2014 did not even make a reference of Shri Vakamulla Chandershekhar. Similarly, the petitioners in CWP No.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirements of natural justice are met only if opportunity to represent is given in view of proposed action. The demands of natural justice are not met even if the very person proceeded against has furnished the information on which the action is based if it is furnished in a casual way or for some other purpose. We do not suggest the opportunity need be a 'double opportunity' that is one opportunity on the factual allegations and another on the proposed penalty. Both may be rolled into one. But the person proceeded against must know that he is being required to meet the allegations which might lead to a certain action being taken against him. If that is made known the requirements are met. ..." (Emphasis added) .......In our view the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary. It ill comes from a person who has denied justice that the person who has been denied justice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been sought to be issued, then it was incumbent upon the respondent to have set out in detail and with precision the various acts of commission and omission to the notice of the petitioner so as to afford him an effective opportunity to meet the case of the department. In taking this view, we are fortified by the following observations of Hon'ble Supreme Court in Collector of Central Excise vs. H.M.M. Limited 1995 Supp (3) Supreme Court cases 322:- "...... If the department proposes to invoke the proviso to Section 11-A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said subsection are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso......" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no scope for assuming that the ground is implicit in the issuance of the show cause notice. [See: Collector of Central Excise vs. H.M.M. Limited, 1995 (76) E.L.T. 497 and Raj Bahadur Narain Singh Sugar M. Ltd. vs. Union of India and others, 1996 (88) E.L.T.24]." 26. In the decision M. A. Jackson v. Collector of Customs, reported in (1998) 1 SCC 198 which relates to a case under the Customs Act, the Department proceeded under Section 28(1) of the Customs Act alleging short levy of duty. The Department computed the duty on the basis of certain documents, for which no notice was given to the appellant. The question was whether the Department was justified in relying on the documents, copies of which were not furnished to the appellant. It was held thus:- "In our view, once it is admitted that the price mentioned in the magazine was not mentioned in the show-cause notice issued to the petitioner, any reliance on the said price mentioned in the magazine by the Customs authorities must be held to be illegal. Further, it is clear that though this point was taken in the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to hold that the noticee was not given proper opportunity to meet the allegations indicated in the show cause notice. (Ref: Commissioner of Central Excise Bangalore vs. Brindavan Beverages (P) Ltd. & ors. (2007) 5 SCC 388. 30. In view of the aforesaid exposition of law it can therefore safely be concluded that the fundamental principle of law is that adjudication has to be within the four corners of the allegations set out in the show cause notice. Any finding given beyond the terms of show cause notice will be hit by violation of principles of natural justice. 31. It is in terms of Section 127 of the Act that the respondent has ordered the transfer of the cases of the petitioners. This provision was subject-matter of consideration before the Hon'ble Supreme Court in M/s Ajantha Industries and others v. Central Board of Direct Taxes, New Delhi and others AIR 1976 SC 437 and relevant observations are as follows:- "5.......The successor section under the Income-tax Act, 1961 is Section 127 and the same may be set out: "Transfer of cases from one Income-tax Officer to another:- (1) The Commissioner may, after giving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case has been transferred from any Income-tax Officer or Income-tax Officers to two or more Income-tax Officers, the Income-tax Officers to whom the case is so transferred shall have concurrent jurisdiction over the case and shall perform such functions in relation to the said case as the Board or the Commissioner (or any Inspecting Assistant Commissioner authorised by the Commissioner in this behalf) may, by general or special order in writing, specify for the distribution and allocation of the work to be performed. (2) The transfer of a case under sub-section (1) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer or Income-tax Officers from whom the case is transferred. Explanation:- In this section and in Sections 121, 123, 124 and 125, the word 'case' in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, therefore, fairly well settled that if prejudicial allegations are to be made against a person, he must be given particulars of that before hearing, so that he can prepare his defence. The fair procedure and principle of natural justice are inbuilt into the rules. It is also well settled that show cause proceeding is meant to give a person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice. Therefore, at that stage the person proceeded against must be told the charges against him so that he can give an effective and proper reply to the same. Reply to show cause notice is not an empty formality because after all justice must not only be done but it must manifestly appear to be done which principle is equally applicable to quasi-judicial proceedings. 35. It is also equally settled that statutory authority must exercise its jurisdiction within the four corners of the law. Therefore, in case the respondent wanted to rely upon any material which subsequently came to its notice, then fairness demanded that petitioner ought to have been put to notice before acting upon the same especially when it not only forms the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er known to law by laying a challenge subject to the law of limitation. In Hira Lal Patni v. Kali Nath AIR 1962 SC 199 it was held: "The validity of a decree can be challenged in execution proceedings only on the ground that the court which passed the decree was lacking in inherent jurisdiction in the sense that it could not have seisin of the case because the subject-matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject-matter of the suit or over the parties to it." 39. In Grindlays Bank Ltd. versus Income-tax Officer, Calcutta and others AIR 1980 SC 656, the Hon'ble Supreme Court quashed the assessment order but then issued directions to make fresh assessment in the circumstances of the case. It was held as under:- "7. The next point is whether the High Court possessed any power to make the order directing a fresh assessment. The principle relief sought in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o by the statute. It was held as under:- "17....It is, however, difficult to agree with the submission made on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further direction. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute....." 41. A Division Bench of Bombay High Court in Commissioner of Income Tax versus Bharat Kumar Modi 2000 (246 ITR) 693, after taking note of the aforesaid well settled principles of law held that an order is not a nullity or in exercise of void ab-initio jurisdiction, when the Assessing Officer does not confront the assessee with the material in his possession. The said error is in irregularity which could be corrected by remitting the matter. Therefore, power of annulment and power to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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