TMI Blog1993 (6) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ities are impleaded as respondents (first respondent in the respective cases). The third respondent caused show-cause notices dated August 20, 1992, to be issued to all the petitioners proposing to transfer their cases from their respective existing assessing authorities at Mangalore to the file of the second respondent under section 127 of the Act to facilitate proper investigation. By the said notices, the petitioners were also required to appear before the Chief Commissioner of Income-tax, Bangalore, on September 7, 1992, at 11.15 a.m. and in case any of the petitioners did not wish to appear personally or through their authorised representative, they were required to file their objections in writing by September 7, 1992. The petitioners did not choose to appear before the third respondent either in person or through their authorised representatives on September 7, 1992, but filed their objections on August 18, 1992, wherein they objected to the proposed transfer on the following ground : "We hereby register our objections to the proposal, since we fall in the jurisdiction of Mangalore and all the business firms in which we are partners are situated in Mangalore. We have no of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officers at Mangalore, that the group dealt mainly in timber, plywood, granite, hospitals, hotels, construction of commercial complexes and residential flats; that the Commissioner, after going through the files of the group, found that there was substantial tax evasion and in order to have thorough investigation into the affairs of the petitioners, proposed that the entire group of cases should be centralised in order to conduct a co-ordinated investigation to probe into the matter under the supervision of senior officers of the Central Circle at Bangalore. The abovesaid three objections of the petitioners were countered by the respondents in the following manner : (a) that the proposed notice itself gave an opportunity to the assessees to appear before the Chief Commissioner on September 7, 1992, either in person or through authorised representative and, therefore, no further opportunity was required ; (b) that the proposed notices contained the reason for the proposed transfer, namely, to facilitate proper investigation ; and (c) that the order of the Commissioner also contains the reason for transfer, namely, 'in order to facilitate proper co-ordinated investigation'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The question that remains for consideration is whether the show-cause notice and the order of transfer can be said to contain the reasons for transfer and, therefore, valid. Sri Ramabhadran, learned counsel for petitioners, contended that merely stating in the notice that the "transfer is proposed to facilitate proper investigation", cannot be construed as setting out the reasons for the proposed transfer ; similarly, merely stating in the order of transfer that the transfer is "in order to facilitate proper co-ordinated investigation", cannot be construed as communicating the reasons for transfer that it was not sufficient to record the reasons for the transfer in a separate office note or official memorandum ; and that the order suffers from patent illegality, if the reasons are not communicated to the party. On the other hand, Mr. Dattu, learned standing counsel for the Department, contended that the reason for the transfer was to facilitate proper and co-ordinated investigation and this reason was communicated both in the show-cause notice and the order of transfer and it was not necessary to state anything more in the show-cause notice and the order. He further contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltimately fails is not relevant for a decision of the question." ". . . . the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. . . . Recording of reasons and disclosure thereof are not a mere formality.... When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated." He next relied on the judgment of a Division Bench of the Madhya Pradesh High Court in Sagarmal Spinning and Weaving Mills Ltd. v. CBDT [1972] 83 ITR 130, wherein it was held as follows (at page 133) : "The question whether the opportunity given is reasonable or not will be a matter for interpretation by the court and not by the authority itself. Similarly, the other aspect relating to the recording of reasons would clearly indicate that it has to be an order in the sense of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87 ITR 405 (AP), the show-cause notice and the order of transfer communicated to the assessee merely used the formula words "to facilitate detailed and co-ordinated investigations. The reasons behind the order were furnished in the writ proceedings. The court followed the decisions referred to above and held as follows (at page 411); "From the aforesaid decisions, it is clear that, in the matter of the transfer of a case under section 127 of the Act, it is necessary that the authority which proposes to transfer the case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being heard with a view to enable him to effectively show cause against the proposed transfer. The notice must also propose to give a personal hearing. It is also necessary to mention in the notice the reasons for the proposed transfer so that the assessee could make an effective representation with reference to the reasons set out. It is not sufficient merely to say in the notice that the transfer is proposed 'to facilitate detailed and co-ordinated investigation'. The reasons cannot be vague and too general in nature but must be specific and based on material facts. It is again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that merely stating that the transfer was to "facilitate investigation" cannot be treated as ascribing any reason at all for transfer. In the case considered by the Gauhati High Court, the order did contain a reason, i.e., search conducted in the group has revealed extensive business connections at Delhi. The court also pointed out that the petitioner in that case had admitted that the search had revealed undisclosed income of the petitioner. It is pointed out that the special leave petition filed against the decision of the Gauhati High Court was dismissed by the Supreme Court. In Shri Rishikul Vidyapeeth v. Union of India [1982] 136 ITR 139, the Rajasthan High Court held that the statement in the order of transfer that the transfer was effected to facilitate co-ordinated investigation along with other connected cases was treated as sufficient disclosure of the reason for transfer. In Maheshwari Lime Works v. CIT [1984] 147 ITR 804, the Madhya Pradesh High Court found that the reason given, namely, that centralisation of the cases at Jabalpur was necessary to have a thorough scrutiny and detailed investigation before completion of the assessment, was insufficient to comply wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f convenience. But, if the transfer is outside the city, the transfer ceases to be one of convenience but becomes one with the purpose of countering evasion of tax or a similar reason which is sought to be prevented by the transfer. In such cases, merely stating that the transfer is to facilitate co-ordinated investigation will not be a sufficient reason for the transfer. In this case, the reason alleged for the transfer of the files was stated for the first time in the statement of objections filed in the writ proceedings. The reason given is that, on going through the files of this group, the Commissioner noticed substantial evasion of tax and to detect tax evasion, a thorough investigation has to be carried out and for that purpose, the cases are to be transferred from one place to another. Strangely, this reason is not recorded in the official memorandum, let alone in the order communicated to the petitioner. The reason given in the official memorandum reads as follows "However, in order to facilitate co-ordinated investigation and proper assessment of the income of the assessees mentioned, centralisation of the cases with a senior officer in the Central Circle at Bangalore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in writing'. Section 269UD(2) casts an obligation on the authority that it 'shall cause a copy of its order under sub section (1) in respect of any immovable property to be served on the transferor'. It is, therefore, inconceivable that the order which is required to be served by the appropriate authority under sub-section (2) would be one which does not contain the reasons for the passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to record the reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. We are of the view, that the reasons for the order must be communicated to the affected party." (emphasis supplied). Dealing with the need to give reasons in the show-cause notice before effecting a purchase under section 269UD, the Supreme Court held (at page 553): "We have further pointed out that, although a presumption of an attempt to evade tax may be raised by the appropriate authority concerned in case of the aforesaid circumstances being established, such a presumption is rebuttable and this would ..... 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