TMI Blog2014 (12) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific and are on the contrary vague, lack details and/ or unintelligible or do not disclose the real material upon which a proposed action is contemplated to be drawn, then it is sufficient to hold that the noticee was not given proper opportunity to meet the allegations indicated in the show cause notice - 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. The requirement for recording of reasons in the order and making the reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under article 226 of the Constitution so as to enable him to challenge the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations - furnishing of specific and intelligible reasons for the proposed transfer of the case is only a concomitant of the concept of reasonable opportunity enshrined in section 127 (1) and (2) - unless the assessee knows the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Mr. Vinay Kuthiala, Senior Advocate with Ms. Vandana Kuthiala, Advocate, JUDGEMENT Per: Tarlok Singh Chauhan: Since common question of law and fact arise for consideration, therefore, all these cases are taken up together for disposal. 2. All the petitioners are income tax assessees and are aggrieved by the action of the respondents whereby their cases have been transferred to DCIT, Central Circle, Chandigarh. 3. Undisputed facts are that the petitioners prior to transfer of their cases were issued show-cause notices which were duly replied to by the petitioners and thereafter the respondents have passed the order transferring the cases 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 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.Verma, Neeraj Sharma, Hemant Sharma and Pranay Pratap Singh, Advocates, for the petitioners has vehemently argued that assuming that the show-cause notices are valid, even then the petitioners were not provided the necessary material during the course of investigation and inquiry and the respondents while passing the impugned order have relied upon extraneous material simply in order to justify the transfer of cases. This contention is without prejudice to the other contentions that the show-cause notices itself are not valid since the only reason given for transfer of the cases was that the same is being proposed for the effective and coordinated investigation of the assessment case 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2009-10 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. 5453 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 (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mla (ADFPC3964R) and Sh. Chunni Lal Chauhan, Prop. Universal Apple Associates, Parwanoo (AAHPC7645L), reveal the following:- The assessee has allegedly purchased apples of Sh. Virbhadra Singh, HUF from Sh. Anand Chauhan (agent of Sh. Virbhadra Singh, HUF) in cash. No further evidence of sale of apples by him or arranging cash sale receipts to Sh. Anand Chauhan from other agents of apple buyers has been furnished. In CWP No. 5455 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 (CAXPS8819J), Ms. Aprajita Kumari D/o. Sh. Virbhadra Singh (AOUPK6157L), Sh. Anand Chauhan, R/o. Kailash Niwas, Inder Nagar, Dhali, Shimla (ADFPC3964R) and Sh. Chunni Lal Chauhan, Prop. Universal Apple Associates, Parwanoo (AAHPC7645L), reveal the following:- The assessee has received unsecured loans of ₹ 1.50 crores from Sh. Vakamulla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HV0223N), 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 (CAXPS8819J), Ms. Aprajita Kumari D/o. Sh. Virbhadra Singh (AOUPK6157L), Sh. Anand Chauhan, R/o. Kailash Niwas, Inder Nagar, Dhali, Shimla (ADFPC3964R) and Sh. Chunni Lal Chauhan, Prop. Universal Apple Associates, Parwanoo (AAHPC7645L), reveal the following:- The assessee has received unsecured loans of ₹ 2.4cr from Sh. Vakamulla Chandershekhar in FY 2011-12. However there is no such information available in the return filed by the assessee for the relevant Assessment year. Further, investments in purchase of LIC Policies to the tune of ₹ 2.25 Crore during the F.Y. 2008-09 2009-10 in the assessee's name 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. 11. It was not in dispute that a detailed reply to the said notices was fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegations. 13. Here it may be noticed that on 30.6.2014 i.e. after about five days of issuance of show cause notice, the respondent addressed a letter to the Chief Commissioner of Income Tax, H.P. Region Shimla, on the subject of centralization of cases, which reads:- To The Chief Commissioner of Income Tax, H.P. Region, Shimla. Sir, Sub:- Centralization of cases- regarding- Kindly refer to your letter No. CCIT/SML/Tech/2014- 15/Sr.PS 02 dated 12.6.2014 enclosing therein letter of member investigation CBDT, regarding centralization of cases related to Sh. Virbhadra Singh and connected cases, in view of the above a meeting was held with the DGIT (Inv.) Chandigarh, DIT (Inv.) at Chandigarh alongwith your goodself in which it was decided that the cases related to Sh. Virbhadra Singh are to be centralized with DCIT/ACIT (Central) Circle Chandigarh 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandigarh to share result/ outcome of the investigation with this office so that the same may be utilized in passing the order u/s 127 of the I.T. Act, 1961. You are also requested to take up the matter with the DGIT (Inv.) Chandigarh in respect of the centralization of other cases related to Sh. Virbhadra Singh and which are not assessed under the jurisdiction of the undersigned. It would be noticed from the underlined portion of the letter that the respondent was well aware of the investigation being carried out in various cases relating to the petitioners, particularly, petitioner in CWP No.5453 of 2014 and 5457 of 2014 and one Vakamulla Chander Shekhar, but despite this the respondents did not make a mention of the same in the show-cause notices issued to the petitioners. 14. Though, prima facie, it appeared that the reasons in the impugned order were totally different from what was spelt out in the show-cause notices. But, then to test the veracity of the contentions of petitioners that the reasons now assigned in the show-cause notices have never been confronted to the petitioners, this Court vide order dated 18.11.2014 summoned the original records of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices vis- -vis the impugned order are only illustrative and not exhaustive and have been taken note of in order to satisfy ourselves that the reasons now reflected in the impugned order have never been made known to the petitioners individually in the showcause notices issued to them. Therefore, it is apparent that the impugned order is founded on grounds at variance from the one in the show-cause notices and consequently the same being based on extraneous consideration is bad in law. 19. In this background, the question which would require our consideration, therefore, is as to whether at the time of issuance of show-cause notices and passing of impugned order, the requirements of natural justice have been complied with because non-observance of natural justice is itself prejudice to any man and pr oof of prejudice independently of proof of denial of natural justice is unnecessary. It is here then that the action of the respondent is required to be tested on the touchstone of justice, equity, fair play and in case its decision is not based on justice, equity and fair play and has been taken after taking into consideration other material, then even though on the face of it, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which is worth anything, it must carry with it a right in the accused man to know the case which is made against him. He must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them.' .... (Emphasis supplied) 22. In De Smith, Woolf and Jowell's --Judicial Review of Administrative Action, under the caption 'Duty of adequate disclosure', it is said thus:- If prejudicial allegations are to be made against a person, he must normally, as we have seen, be given particulars of them before the hearing so that he can prepare his answers. In order to protect his interests he must also be enabled to controvert, correct or comment on other evidence or information that may be relevant to the decision; indeed, at least in some circumstances [here will be a duty on the decision maker to disclose information favourable to the applicant, as well as information prejudicial to his case. If material is available before the hearing, the right course will usually be to give him advance notification; ..... If relevant evidential material is not disclosed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the period from six months to five years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the authorities. The defaults enumerated in the proviso were more than one and if the authorities placed reliance on the proviso, it had to be specifically stated in the show-cause notice which was the allegation against the assessee falling within the four comers of the said proviso. 25. The requirement of making a person aware of the exact allegations he is required to meet is a requirement of natural justice as held by the Hon'ble Supreme Court in Kaur Singh vs. Collector of Central Excise, New Delhi 1997 (94) E.L.T. 289 (S.C.) = where the Hon'ble Supreme Court after placing reliance upon Collector of Central Excise vs. H.M.M and Raj Bahadur Narain Singh Sugar M. Ltd. vs. Union of India and others cases held that:- 3. This court has held that the party to whom a show cause notice of this kind is issued must be made aware of the allegation against it. This is a requirement of natural justice. Unless the assessee is put to such notice, he has no opportunity to meet the case against him. This is all the more so when a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be bad in law. The Hon ble Supreme Court observed as under:- ..There is nothing in the show cause notice or the ultimate order to hold how the act of appellant had 'obstructed the working of Municipal Council' or was 'against the interest of council.' We are, therefore, clearly of the opinion that not only the principles of natural justice were violated by the factum of the impugned order having been founded on grounds at variance from the one in the show cause notice, of which appellant was not even made aware of let alone provided an opportunity to offer his explanation, the allegations made against the appellant did not even prima facie make out a case of abuse of powers of President . 29. It cannot be disputed that the show cause notice is the foundation on which the department has to build up its case, therefore, if the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/ or unintelligible or do not disclose the real material upon which a proposed action is contemplated to be drawn, then it is sufficient to hold that the noticee was not given proper opportunity to meet the allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Section 27 of Finance (No. 2) Act, 1967, and Section 127 since then stands as under:- (1) The Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from any Income-tax Officer or Officers subordinate to him to any other Income-tax Officer or Income-tax Officers also subordinate to him and the Board may similarly transfer any case from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers. Provided that nothing in this sub-section shall be deemed to require any such opportunity to be given where the transfer is from any Income-tax Officer or Income-tax Officer or Income-tax Officers to any other Income-tax Officer and the offices of all such Income-tax Officers are situated in the same city, locality or place: Provided further that where any 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under article 226 of the Constitution so as to enable him to challenge the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations as would be clear from the perusal of para-10 thereof. 33. Furnishing of specific and intelligible reasons for the proposed transfer of the case is only a concomitant of the concept of reasonable opportunity enshrined in section 127 (1) and (2). Unless the assessee knows the precise reasons for the transfer, he would be handicapped in putting forth his objections effectively and in case the transfer of case is based on extraneous considerations then issuance of show cause notice becomes meaningless and is reduced to an idle formality. 34. The law 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has no power to have seisin over the case. An irregularity in procedure need not result in annulment unless the statute specifically stipulates to the contrary. 38. In Budhia Swain and others versus Gopinath Deb and others (1999) 4 SCC 396, the Hon ble Supreme Court highlighted that distinction exists and was well recognized between lack of jurisdiction and mere error of jurisdiction in the following terms:- 9. A distinction has to be drawn between lack of jurisdiction and a mere error in exercise of jurisdiction. The former strikes at the very root of the exercise and want of jurisdiction may vitiate the proceedings rendering them and the orders passed therein a nullity. A mere error in exercise of jurisdiction does not vitiate the legality and validity of the proceedings and the order passed thereon unless set aside in the manner 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice between the parties. The interest of justice require that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court, by the mere circumstance that it has initiated a proceeding in the court, must be neutralized. The simple fact of the institution of litigation by itself should not be permitted to confer an advantage on the party responsible for it. The present case goes further . 40. Similarly, in Kapoor Chand Shrimal versus Commissioner of Income Tax, Andhra Pradesh, Hyderabad (1981) 4 SCC 317, it was held that the duty of the appellate authority does not end with making a declaration that the assessments are illegal. It has also to issue further directions which include remanding the matter afresh unless forbidden from doing so 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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