TMI Blog2022 (4) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer. We are not impressed with the submission canvassed on behalf of the Revenue that Section 127 excludes, by necessary implication, an opportunity of hearing when transfer is on account of the administrative exigency or convenience. This proposition put forward by Mr.Bhatt, the learned senior counsel appearing for the Revenue, is based on the maxim expressio unius est exclusio alterius , which is a rule of prohibition by necessary implication. We do not think that the above rule will apply in the instant case. In the case of Ajantha Industries and Ors. [ 1975 (12) TMI 1 - SUPREME COURT] , the Supreme Court was dealing with a case, wherein the reasons were not communicated and it was said that failure to communicate the reasons for passing an order under Section 127 renders the order bad. We are of the view that the principles enunciated by the Supreme Court in the case of Ajantha Industries ( supra ), hold the field. This Court, over a period of time, has been following Ajantha Industries ( supra ) in its letter and spirit. We have no hesitation in coming to the conclusion that the impugned order of transfer and all the consequential proceedings pursuant theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, hearing and final disposal of present Petition, this Hon ble Court be pleased to direct Respondents not to take any coercive steps under the Act in any manner against the Petitioner Firm in respect of the amount quantified in the assessment order without prior permission of this Hon ble Court. E. This Hon ble Court be pleased to grant ex-parte adinterim relief in favour of the Petitioner and against the Respondents as prayed for in Para-C and Para-D of the Petition. F. This Hon ble Court be pleased to grant any other just and proper relief in the facts and circumstances of the case in the interest of justice and equality. 2. The writ-applicant seeks to challenge the legality and validity of the order dated 8th July 2021 passed by the respondent no.1 herein under Section 127(2) of the Income Tax Act, 1961, transferring the case of the writ-applicant from the office of the respondent no.3 at Surendranagar to the office of the respondent no.2 at Ahmedabad. 3. It appears that the writ-applicant filed its return of income on 8th October 2018 for the Assessment Year 2018-19, declaring the total income of ₹ 12,54,590=00. 4. A survey under section 133A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumn-6 of an order dated 08/07/2021 passed by respondent no.1 u/s.127(2) of the Act, not to pass any coercive orders in any manner against applicant assessee for A.Y. 2017-18 and for any assessment years without prior permission of this Hon ble Court. D. Pending admission, hearing and final disposal of Special Civil Application No.16529/2021, this Hon ble Court be pleased to direct income tax authorities as mentioned in Column-5 and Column-6 of an order dated 08/07/2021 passed by respondent no.1 u/s.127(2) of the Act that no proceedings under the provisions of the Income Tax Act including revision proceedings u/s.263 of the Act for A.Y. 2017-18 be initiated, continued and completed against the applicant on the basis of the jurisdiction so assumed by income tax authorities stated in Column-5 and Column-6 of order dated 08/07/2021 passed by respondent no.1 u/s.127(2) of the Act without prior permission of this Hon ble Court. E. Pending admission, hearing and final disposal of Special Civil Application No.16529/2021, this Hon ble Court be pleased to direct PCIT (Central), Ahmedabad to stay the revisional proceedings initiated u/s.263 of the Act against the applicant for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in defence of the impugned order : (a) A statute can, in appropriate cases, exclude the principles of natural justice; (b) Since the assessee has no legal right of being assessed by any particular Assessing Officer, the principles of natural justice can be validly excluded in the matter of the Income Tax Act; (c) Section 127 restricts the obligation of hearing and passing a speaking order only when the case is to be transferred suo motu ; (d) Section 127 excludes, by necessary implication, an opportunity of hearing when the transfer is on account of the administrative exigencies; (e) In the facts of the case on hand, the concept of empty formality may be invoked. In other words, assigning reasons and giving opportunity of hearing to the assessee would otherwise have been an empty formality. 17. Mr.Bhatt invited the attention of this Court to the following averments made in the affidavit-in-reply filed on behalf of the respondent no.1 : 3. At the outset, I submit that the petitioner has challenged the impugned order dated 08.07.2021 passed under section 127(2) of the Income Tax Act, 1961 ( the Act ) whereby the case of the petitioner was transferred fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of such cases selected for compulsory scrutiny and where there is impounded material (ii) In respect of such cases selected for compulsory scrutiny and where there is no impounded material (i) After the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, such cases shall be transferred to Central Charges u/s 127 of the Act within 15 days of issue of notice u/s 143(2) of the Act. (ii) After the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, assessment proceedings in such cases will be conducted by NeAC. The Assessing Officer shall upload the Survey Report in the ITBA at the time of issue of notice u/s 143(2) of the Act. 6. Subsequently, the CBDT vide Instruction F.No. 225/126/2020/ITA-II dated 30.09.2020 had extended the date of selection of cases for Compulsory Scrutiny on the basis of prescribed parameters, as communicated vide Board s letter dated 17.09.2020, from 30.09.2020 to 31.10.2020. A copy of CBDT Instructions dated 30.09.2020 is annexed hereto and marked as Annexure-R2. Relevant portion of the said com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad granted in principle approval for centralization of assessee s case with any Assessing Officer holding central charge under the charge of PCIT (Central), Ahmedabad. A copy of letter dated 30.06.2021 of the DGIT(Inv), Ahmedabad is annexed hereto and marked as Annexure-R3. 8. Keeping in view the CBDT s instructions dated 17.09.2020 (supra), the directions of the Director General of Income-tax (Investigation), Ahmedabad and the request of Pr. CIT (Central), Ahmedabad; an order under section 127(2) of the Act was passed by the then Pr. CIT-3, Ahmedabad on 08.07.2021 transferring the case (Sr. No. 14) from ITO Ward-2, Surendranagar to ACIT Central Circle- 2(3), Ahmedabad, w.e.f. 08.07.2021. 9. Subsequently, due to change of incumbent, notice u/s. 142(1) r.w.s. 129 of the Act along with detailed questionnaire was issued by the Assessing Officer i.e. ACIT Central Circle-2(3), Ahmedabad on 26.08.2021 calling for the details/information for assessment. The asseseee, in response to the above notice, had raised objection vide reply filed on 31.08.2021 on e-portal. In response to the same, the Assessing Officer provided copy of order u/s. 127(2) of the Act to the assessee vide l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law; 13. To obviate the difficulties being faced by the assessee due to COVID-19, CBDT issued such instructions to help the assessee to avoid physical contact and complete the assessment in e-proceedings manner which is in the interest of the assessee. 14. Considering the above facts of the case, it is submitted that the order dated 08.07.2021 passed u/s 127(2) of the Act by the then Pr.CIT-3, Ahmedabad was as per the provisions of the Act and in compliance to the guidelines issued by the CBDT vide letter dated 17.09.2020. 18. In view of the aforesaid, Mr.Bhatt prays that there being no merit in this writ-application, the same may be rejected. ANALYSIS : 19. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned order of transfer passed under Section 127(2) of the Act is sustainable in law. 20. It appears from the materials on record, as pointed out in the Civi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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, pass the order; (b) where the Director General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorize in this behalf. (3) Nothing in Sub-section (1) or Sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under Sub-section (1) or Subsection (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to know the grounds on which the authority has rejected his claim. 25. In the case of Power Controls and Ors. vs. CIT and Ors., MANU/DE/1195/1999 : (2000) 158 CTR (Del) 222, more particularly, para 19 of the report, the Court observed as under : ....though it may neither be possible nor desirable to confront the assessee with the entire material on record necessitating transfer of case to a particular AO for coordinated investigation but in order to provide a reasonable and proper opportunity to him to make an effective representation, as contemplated in Section 127(2), some basic summary of facts, giving some broad idea of the reason for the transfer of the case must be indicated in the show cause notice itself. 26. Their Lordships in the aforesaid case clarified in para 22 of the report as under : ....we (Their Lordships) are not holding for a moment that 'administrative convenience and/or 'co-ordinated investigation' cannot be valid ground for transferring the cases belonging to a particular group to a single AO. It would be a good ground, for transfer but the requirement of law, which has to be observed before transferring the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. A statutory authority cannot be permitted to support its order relying on or on the basis of the statements made in the affidavit de hors the order or for that matter de hors the records. 30. The question as to whether the exercise of power under Section 127(2) is administrative in nature or it is quasi-judicial has also been seriously argued by the parties, the stand of the Revenue being that it is administrative exercise of power, whereas the assessees' counsel submitted that it is quasijudicial function of the authority. 31. The requirement of giving opportunity to the assessee before passing an order of transfer of cases from one place to another under Section 127(2), coupled with the requirement of recording of reasons for passing such an order, cannot put the said power into the exclusive administrative domain of the authority but it symbolizes its quasi-judicial function. However, the distinction and the requirement of following the principles of natural justice and recording of reasons for passing an order in the proceedings either administrative or quasi-judicial have been reduced into a very thin margin, in effect, making such a distinction non-existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 1960, providing for exercise of revisional power by the Central Government was noticed. It was held that under rule 55 the Central Government in disposing of the revision application must record its reasons and communicate these reasons to the parties effected thereby. It was further held that the reasons could not be gathered from the nothings in the flies of the Central Government. Recording of reasons and disclosure thereof is not a mere formality. Mr. Sharma drew our attention to a decision of this Court in Kashiram Aggarwal vs. Union of India, (1965) 56 ITR 14 (SC). It is submitted that this Court took the view that orders under section 127(1) are held in that decision to be purely administrative in nature passed for consideration of convenience and no possible prejudice could be involved in the transfer. It was also held therein that under the proviso to section 127(1) it was not necessary to give the appellant an opportunity to be heard and there was consequently no need to record reasons for the transfer. This decision is not of any assistance to the Revenue in the present case since that was a transfer from one ITO to another ITO in the same city, or, as stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplement the notification with averments made in the counter-affidavit and that the power of transfer of assessment files from one authority to another is conferred on the CIT under Section 127(1) of the IT Act, 1961. The power is a quasi-judicial one. Such a power has to be exercised in a fair and reasonable manner and not in an arbitrary and mechanical way. The passing of a reasoned order is one of the requirements of fairness in action. 34. We find that a Division Bench of this Court in the case of Arti Ship Breaking vs. Director of IT (Inv.) Ors., (2000) 244 ITR 333, considered the similar question as to whether nondisclosure of reason in the order of transfer vitiates the order and in spite of referring the above decision of the Supreme Court decided to ignore such vital defect. The following observations of the Division Bench are quoted below : The last submission which has been made by learned advocate, Shri Puj, is with regard to transfer of the cases from Bhavnagar to Rajkot. It has been submitted by him that in pursuance of the search which had been carried out, the cases of the firm and its partners have been transferred to Rajkot. It has been submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the reason for which the case was transferred from Bhavnagar to Rajkot were not communicated to the petitioner before the petition was filed, but, looking to the affidavit-in-reply filed by the respondent concerned and the submissions made by the learned advocate, Shri Naik, it is clear that the reasons were recorded by the concerned authority on the file. The said reasons have already been communicated to the petitioner in the present proceedings. In the circumstances, it cannot be said that the order with regard to the transfer of the case from Bhavnagar to Rajkot is without any application of mind. It is also true that the petitioner had raised certain objections with regard to the transfer when, by a show-cause notice, the petitioner was called upon to show cause as to why its case should not be transferred to Rajkot. It appears, that the said objections were considered but for administrative exigencies, ultimately the impugned order with regard to transfer was passed under the provisions of section 127 of the Act. Thus, it cannot be said that the objections filed by the petitioner were not considered by the concerned authority before passing the impugned order with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in view of the subsequent decisions of the Supreme Court in the cases of Managing Director, ECIL vs. B.Karunakar AIR 1994 SC 1074; and State Bank of Patiala vs. S.K. Sharma AIR 1996 SC 1669, the principles laid down in the case of Ajantha Industries ( supra ) are no longer a good law. According to their lordships in the above two later decisions it was held that at times non-communication of a report or reasons recorded by the authority would not vitiate the entire enquiry or the proceedings especially when even after furnishing the report or reasons to the concerned person no different consequences would have followed. 36. The decision of this Court in the case of Arti Ship Breaking ( supra ) was taken notice of by a Coordinate Bench of this Court, to which one of us (J.B.Pardiwala) was a party in the case of Millennium Houseware vs. Commissioner of Income Tax, Valsad (Special Civil Application No.18243/2011 to Special Civil Application No.18251/2011). 37. In Millennium Houseware ( supra ), it was argued on behalf of the Revenue that the decision of the Supreme Court in the case of Ajantha Industries ( supra ) would no longer be a good law in view of the subsequent Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the delinquent had not raised any objection during the enquiry that the non-furnishing of the copies of the statements was disabling him or has disabled him, as the case may be, from effectively cross-examining the witnesses or to defend himself. In such a case it was held that no prejudice was resulted to the delinquent on account of not furnishing him the copies of the statements of witnesses. On account of the said violation of rule, according to the said decision, it could not be said that the delinquent did not have a fair hearing or that the disciplinary enquiry against him was not a fair enquiry. 16. In the above context, it was further held that it was possible to say that there had been a substantial compliance with the sub-clause (iii) of Regn. 68(x) (b), in the facts and circumstances of the case, though not a full compliance. According to the said decision, this, in turn, raised the question whether each and every violation of rules or regulations governing the enquiry automatically vitiates the enquiry and the punishment awarded or whether the test of substantial compliance should be invoked in cases of such violation and whether the issue has to be examined f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferring power of transfer. In none of those decisions, the court had any occasion to consider the said statutory provision as well as the specific view taken by a three-judge-bench in the case of Ajantha Industries (supra) on the above point. Thus, with great respect to the learned judges, we are unable to subscribe to the view that the decision of Ajantha Industries (supra), has lost its force in view of those two subsequent decisions. 18. Since we propose to hold that the law laid down in the case of Ajantha Industries (supra), is still the law of the land and has not been overruled by any competent bench of the Supreme Court whereas a co-ordinate Division Bench has taken a contrary view, judicial decorum demands that we should refer the matter to a larger bench for deciding the question which we formulate below : Whether the decision of the three-judge-bench of the Supreme Court in the case of Ajantha Industries reported in [1976] 102 ITR 281 so far as it lays down the law that the requirement of recording reasons under section 127(1) of the Income tax Act is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is founded on three principles. One is the requirement of transferring the assessment in appropriate cases which would have element of public interest. Second is that the assessee cannot choose his Assessing Officer. Section 124 of the Act which lays down the jurisdiction of the Assessing Officers ensures proper administration of assessments giving consistency, transparency and predictability on the question of which Assessing Officer would deal with which assessments. Nevertheless, an assessee cannot choose his Assessing Officer. At the same time, it is also recognised that transferring the assessment of an assessee at a far away place would lead to hardship and cause prejudice. It is in this context that the section requires giving of a reasonable opportunity of being heard to the assessee and to record reasons for transferring the assessment. The Courts have also recognised that transferring an assessment of an assessee at a far away distance would certainly cause inconvenience and prejudice. It is in this respect that under sub-section (3) of section 127, the requirement of hearing and recording of reasons for transferring an assessment is not made applicable when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr.Bhatt, the learned senior counsel appearing for the Revenue, is based on the maxim expressio unius est exclusio alterius , which is a rule of prohibition by necessary implication. We do not think that the above rule will apply in the instant case. In this context, we can do no better than to quote the following passage from De Smith's Judicial Review of Administrative Action , fourth edition (at page 187) : (3) Where legislation expressly requires notice and hearing for certain purposes but imposes no procedural requirement for other purposes. Here the maxim expressio unius est exclusion alterius may be invoked to deny a right to notice and hearing in a context where the statute or the rules are silent. But this maxim, like so many other aids to interpretation, certainly requires to be watched , it may be a valuable servant, but a dangerous master to follow... The exclusio is often the result of inadvertence or accident, and the maxim ought not to be applied, when its application, having regard to the subject-matter to which it is to be applied, leads to inconsistency or injustice. CONCEPT OF THE USELESS FORMALITY THEORY : 42. The aforesaid c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that no real prejudice is caused to the affected party. 16. We shall initially refer to two cases where discretion was exercised not to grant relief and the first one was a case where relief was refused even though there was breach of natural justice. The first one is Gadde Venkteswara Rao v. Government of Andhra Pradesh and Ors. MANU/SC/0020/1965 : [1966] 2 SCR 172. There the Panchayat Samithi, in exercise of its statutory powers passed a resolution on 25.8.1960 to locate a primary health center at Dharmajigudem. Later, it passed another resolution on 29.5.1961 to locate it at Lingapalem. On a representation by villagers of Dharmajigudem, government passed orders on 7.3.1962 setting aside the second resolution dated 29.5,1961 and thereby restoring the earlier resolution dated 25.8.1960. The result was that the health center would continue at Dharmajigudem. Before passing the orders dated 7.3.62, no notice was given to the Panchayat Samithi. This Court traced the said order of the government dated 7.3.1962 to Section 62 of the Act and if that were so, notice to the Samithi under Section 62(1) was mandatory. Later, upon a review petition being filed, government passed ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary for the Court to strike down an order merely because the order has been passed against the petitioner in breach of the natural justice. The Court can under Article 32 or Article 226 refuse to exercise its discretion of striking down the order if such striking down will result in restoration of another order passed earlier in favour of the petitioner and against the opposite party, in violation of principles of natural justice or is otherwise not in accordance with law. 18. We would next refer to another case, where, though there was no breach of principles of natural justice, this Court held that interference was not necessary, if the result of interference would be the restoration of another order which was not legal. In Mohammad Swalleh and Ors. v. Third Addl. District Judge, Meerut and Anr. MANU/SC/ 0776/1987 : [1988] 1 SCR 840 , which arose under the U.P. Urban Buildings (Regulations of letting, Rent and Eviction) Act, 1972, the prescribed authority dismissed an application filed by the landlord and this was held clearly to be contrary to the very purpose of Section 43(2)(rr) of the Act. The District Court, entertained an appeal by the landlord and allowed the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that cases relating to breach of natural justice, do also occur where all facts are not admitted or are not all beyond dispute. In the context of those cases there is a considerable case law and literature as to whether relief can be refused even it the court thinks that the case of the applicant is not one of real substance or that there is no substantial possibility of his success or that the result will not be different, even if natural justice is followed. See Malloch v. Aberdeen Corporation (1971) 1 WLR 1578, (per Lord Reid and Lord Wilberforce), Glynn v. Keele University (1971) WLR 87, Cinnamons v. British Airport Authority (1980) 1 WLR 582 and other cases where such a view has been held. The latest addition to this view is R v. Eating Magistrates court exp. Fannaran (1996) 8 Admn. L.R. 351 (See Desmith, Supp.) (1998) where Straughton L.J. held that there must be 'demonstrable beyond doubt' that the result would have been different. Lord Woolf in Lloyd v. Mc Mohan (1987) 2 WLR 821 has also not disfavoured refusal of discretion in certain cases of breach of natural justice. The New Zealand Court in McCarthy v. Grant (1959) NZLR 1014 however, goes halfway when it say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble unanimity that the courts can, in exercise of their discretion , refuse certiorari, prohibition, mandamus or injunction even though natural justice is not followed. We may also state that there is yet another line of cases as in State Bank of Patiala v. S.K. Sharma MANU/SC/0438/ 1996 : (1996) II LLJ 296 SC, Rajendra Singh v. State of M.P. MANU/SC/0690/1996 : AIR 1996 SC 2736, that even in relation to statutory provisions requiring notice, a distinction is to be made between cases where the provision is intended for individual benefit and where a provision is intended to protect public interest. In the former case, it can be waived while in the case of the latter, it can be waived. 23. We do not propose to express any opinion on the correctness or otherwise of the useless formality theory and leave the matter for decision in an appropriate case, inasmuch as, in the case before us, admitted and indisputable facts show that grant of a writ will be in vain as pointed out by Chinnappa Reddy, J. 24. In our view, on the admitted and indisputable facts set out above, namely, the recall of our earlier order of the Court, it becomes mandatory for the court to restore the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hearing; (6) Exclusion in case of purely administrative matters; (7) Where no right of person is infringed; (8) The procedural defect would have made no difference to the outcome; (9) Exclusion on the ground of no fault of decision maker. 45. Having regard to the issue on which we have debated, it may be clinching to refer to the following observations made by a Constitution Bench of the Supreme Court in the decision rendered in C.B.Gautam vs. Union of India, (1993) 1 SCC 78, while dealing with the words for reasons to be recorded in writing occurring in Section 269UD(1) and (2) of the Income Tax Act : Section 269UD(1), in express terminology, provides that the appropriate authority may make an order for the purchase of the property for reasons to be recorded 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 the one which does not contain the reasons for the passing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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