1991 (9) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to a reasonable opportunity of hearing and a reasoned order when an assessee's application challenging the jurisdiction of an Assessing Officer and requesting transfer of a case is rejected.

Summary:

Issue 1: Entitlement to a Reasonable Opportunity of Hearing and a Reasoned Order

The petitioner, previously assessed at Gondia, objected to the jurisdiction of the Assessing Officer, Gondia, after filing returns at Nagpur for subsequent years. The Commissioner rejected the petitioner's application for transfer without a hearing, stating it was not "in the interest of the Revenue."

Legal Provisions:
Sections 120, 124, and 127 of the Income-tax Act govern the jurisdiction and transfer of cases. Section 127 mandates a reasonable opportunity of being heard and recording reasons for transfer, except when the transfer is within the same city, locality, or place.

Historical Context:
Section 127 corresponds to section 5(7A) of the Indian Income-tax Act, 1922. The Supreme Court in Pannalal Binjraj v. Union of India [1957] 31 ITR 565 emphasized the prudence of following natural justice principles before transferring a case.

Court's Observations:
The court noted that the scheme of sections 120, 124, and 127 balances the convenience of the assessee and the interest of the Revenue. The assessee has a vested right to be assessed at the principal place of business and to have jurisdictional objections determined by a high authority like the Commissioner.

Quasi-Judicial Nature:
The functions of objecting to jurisdiction and transferring a case are quasi-judicial, requiring fair play and adherence to natural justice principles, even if considered administrative.

Department's Propositions:
1. Statutes can exclude natural justice principles.
2. The assessee has no legal right to be assessed by a particular officer.
3. Section 127 requires hearing and a speaking order only for suo motu transfers.
4. Section 127 implies no hearing for transfer refusals.
5. Reviewing the application and enquiry report suffices for natural justice.

Court's Rejection of Propositions:
The court rejected all five propositions, emphasizing that section 127's object is to afford the assessee an opportunity to present their case and be informed of reasons for non-acceptance. The court highlighted that the maxim "Expressio unius est exclusio alterius" should not lead to inconsistency or injustice.

Conclusion:
The impugned order was quashed due to the absence of a hearing and lack of recorded reasons. The petitioner was directed to appear before the Commissioner for a hearing, and the Commissioner was instructed to pass a speaking order in accordance with the law.

Order:
The petition was allowed, and the impugned order dated January 14, 1991, was set aside. The Commissioner was directed to fix a hearing date and pass an appropriate order after hearing the petitioner. Rule made absolute with no order as to costs.