1982 (8) TMI 21 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the transfer order under Section 127 of the Income Tax Act, 1961.
2. Reasonable opportunity of being heard.
3. Justification and reasons for the transfer.
4. Economic loss and inconvenience due to the transfer.
5. Allegation of mechanical exercise of power by the Board.
6. Compliance with principles of natural justice and statutory requirements.

Detailed Analysis:

1. Validity of the Transfer Order:
The petitioners challenged the validity of the order dated May 10, 1982, passed by the Central Board of Direct Taxes (CBDT), transferring their cases from the Income Tax Officer (ITO) at Gauhati to the ITO, Company Circle in New Delhi. The transfer was effected under Section 127 of the Income Tax Act, 1961, to facilitate coordinated investigation due to the petitioners' alleged business connections in Delhi. The court found that the transfer order was valid, as it was based on substantial reasons and justified by the need for a coordinated investigation.

2. Reasonable Opportunity of Being Heard:
The petitioners argued that they were not given a reasonable opportunity of being heard, as the notice for the hearing was served on February 9, 1982, with the hearing scheduled for February 10, 1982. The court found that the petitioners were granted sufficient opportunities to be heard. The Board granted adjournments and allowed the petitioners' representatives to present their case. The petitioners' claim that they should have been heard at Gauhati was rejected as there was no reasonable ground for such a request.

3. Justification and Reasons for the Transfer:
The petitioners contended that the reasons for the transfer were vague and unjustified. The court found that the reasons for the transfer were clear and substantial. The searches conducted revealed extensive business connections in Delhi, and the transfer was necessary for coordinated investigation. The court held that the grounds for transfer were neither vague nor without material, and the Board's decision was based on reasonable cause.

4. Economic Loss and Inconvenience:
The petitioners claimed that the transfer would cause them economic loss and inconvenience. The court dismissed this contention, stating that expenses incurred due to a valid and lawful transfer cannot be a ground to prohibit the transfer. The court noted that Section 80VV of the Act allows for a deduction of expenses up to Rs. 5,000 per case, and the petitioners could claim this deduction for each of their 11 cases.

5. Allegation of Mechanical Exercise of Power:
The petitioners alleged that the Board exercised its power mechanically. The court examined the records and found that the Board had exercised its power under Section 127 after considering all relevant materials and objections. The court held that the Board's decision was not mechanical but based on a thorough examination of the case. The court distinguished this case from Chhugamal Rajpal v. S. P. Chaliha, where the Supreme Court found a mechanical exercise of power due to lack of material and reasons in the report.

6. Compliance with Principles of Natural Justice and Statutory Requirements:
The petitioners argued that the principles of natural justice were violated, and the statutory requirements under Section 127 were not complied with. The court held that the Board had granted the petitioners a reasonable opportunity to be heard, recorded the reasons for the transfer, and communicated the reasons to the petitioners. The court found that the Board had complied with the requirements of Section 127 and the principles of natural justice. The court referred to Ajantha Industries v. CBDT, where the Supreme Court emphasized the need for recording and communicating reasons for the transfer. The court found that the reasons in the present case were full, fair, and adequate.

Conclusion:
The court dismissed the petitions, holding that the transfer orders were valid, the petitioners were given a reasonable opportunity to be heard, and the Board's decision was based on substantial reasons. The court found no merit in the petitioners' contentions and upheld the transfer of cases to New Delhi. The stay orders were vacated, and there was no order as to costs.