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Bharat Nepal Kasth Bhandar Vs. Commissioner of Income-tax and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ Nos. 3157 and 3158 of 1970
Judge
Reported in[1972]83ITR835(All)
ActsIncome Tax Act, 1922 - Sections 5(7); Income Tax Act, 1961 - Sections 127 and 297(2)
AppellantBharat Nepal Kasth Bhandar
RespondentCommissioner of Income-tax and ors.
Appellant AdvocateP.N. Pachauri, Adv.
Respondent AdvocateB.L. Gupta and ;R.R. Misra, Advs.
Excerpt:
- - the petitioner will then not be able to contend that the order of transfer is bad either because he was not given an opportunity of being heard or because reasons for making the order had not been recorded. this principle is well settled......case from the file of the income-tax officer, a-ward, bareilly, to that of the income-tax officer, special investigation circle, lucknow, under section 127 of the income-tax act, 1961. the petitioner was required to state its objection, if any, to the proposed transfer of the case on or before 5th june, 1964. on 3rd june, 1964, the petitioner applied to the commissioner of income-tax, lucknow, for being given at least a month's time for filing objection to the proposed transfer of its case to the file of the income-tax officer, special investigation circle, lucknow. the petitioner followed its request for grant of time for filing objections, with its letter dated 11th june, 1964, requesting the commissioner of income-tax, lucknow, to let the petitioner know the reasons for.....
Judgment:

H.N. Seth, J.

1. These, two writ petitions can be conveniently disposed of by a common judgment.

2. In Writ Petition No. 3157 of 1970, the petitioner has prayed for a writ of certiorari for quashing an order of transfer dated 23rd June, 1964, made by the Commissioner of Income-tax, Lucknow. A prayer for quashing the assessment order dated 15th March, 1965, for the assessment year 1960-61 as also the appellate order, dated 18th March, 1970, has also been made.

3. In Writ Petition No. 3158 of 1970 the petitioner has questioned the validity of the transfer order, dated 23rd June, 1964, passed by the Commissioner of Income-tax, Lucknow, as also of the assessment order dated 14th March, 1966, for the assessment year 1961-62 and the appellate order dated I8th March, 1970.

4. The petitioner is a firm carrying on the business of purchase and sale of timbers in the city of Bareilly within the usual jurisdiction of the Income-tax Officer, D-Ward, Bareilly. The petitioner filed the returns of its income before the Income-tax Officer, D-Ward, Bareilly, for the assessment years 1960-61 and 1961-62, on 18th May, 1960, and 10th May, 1961, respectively. In due course these proceedings were transferred to the Income-tax Officer, A-Ward, Bareilly.

5. The Commissioner of Income-tax, U.P., Lucknow, issued a notice dated 25th May, 1964, to the petitioner informing it that it was proposed to transfer the petitioner's case from the file of the Income-tax Officer, A-Ward, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow, under Section 127 of the Income-tax Act, 1961. The petitioner was required to state its objection, if any, to the proposed transfer of the case on or before 5th June, 1964. On 3rd June, 1964, the petitioner applied to the Commissioner of Income-tax, Lucknow, for being given at least a month's time for filing objection to the proposed transfer of its case to the file of the Income-tax Officer, Special Investigation Circle, Lucknow. The petitioner followed its request for grant of time for filing objections, with its letter dated 11th June, 1964, requesting the Commissioner of Income-tax, Lucknow, to let the petitioner know the reasons for proposing transfer of its case from the file of the Income-tax Officer, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow, to enable it to file its objections on facts. In the meantime, the Commissioner of Income-tax, Lucknow, had issued another communication dated 10th June, 1964, to the petitioner informing it over again that it was proposed to transfer its case from the file of the Income-tax Officer, A-Ward, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow, under Section 127 of the Income-tax Act, 1961, and in case the petitioner had any objection to the proposed transfer of its case, it was required to appear before the Commissioner of Income-tax, Lucknow, on 23rd June, 1964, at 11-30 a.m. and to show cause why an order transferring its case may not be made under Section 127 of the 1961 Act. Instead of showing cause to the notice dated 10th June, 1964, the petitioner addressed a letter, dated 16th June, 1964, to the Commissioner of Income-tax, Lucknow, stating that unless the reasons for the proposed transfer were intimated to it, it was not possible for the petitioner to file any objection to the proposed transfer. Request for being allowed one month's time for filing objections was reiterated.

6. The Commissioner of Income-tax, thereafter, made an order, dated 23rd June, 1964, transferring the cases, particulars of which were mentioned in column 2 of the schedule annexed thereto, from the file of the Income-tax Officer, A-Ward, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow, in exercise of the powers conferred upon him by Sub-section (1) of Section 127 of the Income-tax Act, 1961, and of all other powers enabling it in this behalf. The schedule mentioned the case of the petitioner also.

7. On 28th June, 1964, the petitioner applied to the Commissioner of Income-tax, requesting him to state the reasons for the proposed transfer. The petitioner further stated that its case had been picked up by the Directorate of Inspection, for being dealt with by the new Special Investigation Circle at Lucknow, for some special reasons, and that the transfer of the case to Luck-now would involve unnecessary botheration, harassment and expense to it. It was also mentioned that the procedure that would be adopted by the Income-tax Officer, Special Investigation Circle, would be disadvantageous to the petitioner inasmuch as the Income-tax Officer who gives hearing does not pass the assessment order without the approval of the Directorate and it is the person in the Directorate who actually determines the assessment without hearing the assessee. It was claimed that the order of transfer was not only unwarranted but was defective inasmuch as the condition precedent for making that order had not been complied with. The petitioner, therefore, requested that the order of transfer be recalled and so long as its request was not considered further proceedings for assessment may be stayed.

8. It appears that after the receipt of the transfer order, dated 23rd June, 1964, the petitioner's case in respect of the assessment years 1960-61 and 1961-62 was actually transferred to the file of the Income-tax Officer, Special Investigation Circle, Lucknow. The Income-tax Officer at Lucknow issued notices to the petitioner informing it about the transfer of the case to him and also requiring it to participate in the proceedings. Thereafter, by his orders, dated 15th March, 1965, and 14th March, 1966, the Income-tax Officer, Special Investigation Circle, Lucknow, made assessments on the petitioner for the years 1960-61 and 1961-62, respectively.

9. Copies of the various letters filed as annexures to the writ petitions do not indicate that after the Income-tax Officer, Special Investigation Circle, Lucknow, intimated the petitioner about the transfer of its case to Lucknow and requiring the petitioner to participate in the assessment proceedings, any objection was raised on behalf of the petitioner about the assessment proceedings being taken at Lucknow. At this place it may be mentioned that the Commissioner of Income-tax had transferred the cases of ten other assessees from the file of the Income-tax Officer, A-Ward, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow. Those cases included the cases of Hirday Narain, Yogendra Prakash, Surendra Prakash and Girjendra Prakash, who were partners in the petitioner-firm. Certain objections were filed on behalf of the firm, M/s. Hirday Narain, Yogendra Prakash and Sri Surendra Prakash objecting to the continuance of their proceedings in respect of the assessment years 1960-61 and 1961-62 before the Income-tax Officer, Special Investigation Circle, Lucknow, on the ground that the order made by the Commissioner of Income-tax did not cover their cases for the assessment years 1960-61 and 1961-62. According to them, the Commissioner's order purported to transfer 1he cases which had to be considered under the Act of 1961. In respect of the assessment years 1960-61 and 1961-62, the returns had been filed before April 1, 1962, and in terms of Section 297(2)(a) of the Income-tax Act, 1961, the assessments had to be made as if the Income-tax Act, 1961, had not been passed.

10. After the assessment had been made by the Income-tax Officer, Special Investigation Circle, Lucknow, the assessee went up in appeal before the Appellate Assistant Commissioner. One of the grounds taken in this appeal was that the order made by the Commissioner of Income-tax, transferring the case of the petitioner to the file of the Income-tax Officer, Special Investigation Circle, Lucknow, was wholly illegal and without jurisdiction. The Appellate Assistant Commissioner, however, held that it was not open to him to scrutinise the validity of the order transferring the case from the file of the Income-tax Officer, A-Ward, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow. He further observed that nothing else had been pointed out to him which went to show that jurisdiction over the case had not been validly exercised by the Income-tax Officer concerned. On other points the appeals filed by the petitioner were allowed and the cases for the two years were sent back to the Income-tax Officer for making fresh assessment in the light of the observations-made in that order.

11. The petitioner has now filed these two writ petitions in this court, in respect of the assessment proceedings for the assessment years 1960-61 and 1961-62. Main argument advanced by the petitioner before us is that inasmuch as the returns for the two assessment years 1960-61 and 1961-62 had been filed before 1st April, 1962, the Commissioner of Income-tax had no jurisdiction to transfer the assessment proceedings for those two years from the file of the Income-tax Officer, A-Ward, Bareilly, to that of the Income-tax Officer, Special Investigation Circle, Lucknow, in exercise of his powers under Section 127 of the Income-tax Act, 1961. It was contended that the entire proceedings before the Income-tax Officer at Lucknow, including the assessment orders made by him and the proceedings following it were all without jurisdiction and are liable to be quashed. In the alternative it is urged that the order of transfer, dated 23rd June, 1964, was vitiated inasmuch as the assessee had not been given an effective opportunity of showing cause against the proposed order of transfer. It was pointed out that, in spite of the request being made by the petitioner, the reason why the Commissioner of Income-tax wanted to transfer the proceedings to Lucknow was not communicated to it, and, as such, the petitioner was denied an effective opportunity to show cause against the proposed order of transfer. The petitioner further claims that the order of transfer was defective inasmuch as the Commissioner of Income-tax did not record reasons for transferring the case from the file of the Income-tax Officer, Bareilly, to that of the Income-tax Officer at Lucknow.

12. These petitions have been contested on behalf of the Commissioner ofIncome-tax and the two other respondents. Sri Krishna Prasad Tandon,Income-tax Officer (Judicial), filed a counter-affidavit on behalf of theCommissioner of Income-tax. He filed a copy of the reasons recorded on23rd June, 1964, by the Commissioner for making the order of transfer.The copy of the reasons was filed as annexure ' B ' to the counter-affidavitand reads as follows:

' None appears. The assessees in this group were given an opportunity of being heard and this was not availed of. As the cases in this group require proper investigation, I, therefore, pass orders under Section 127 of the Act as per proforma transferring the cases maintained therein from the jurisdiction of the Income-tax Officer, Bareilly, to the jurisdiction of the Income-tax Officer, Special Investigation Circle, Lucknow. '

13. The petitioner, thereafter, took a further objection to the effect that the reason contained in annexure ' B ' to the counter-affidavit of Sri Krishna Prasad Tandon could not in law be considered to be a reason as contemplated by Section 127 of the Income-tax Act, 1961, for transferring the case from the file of the Income-tax Officer, Bareilly, to that of the Income-tax Officer at Lucknow, and, therefore, the order of transfer made without complying with the provisions of Section 127 of the Income-tax Act, 1961, was invalid and without jurisdiction.

14. Relevant portion of Section 127 of the Income-tax Act, 1961, reads as follows :

' 127. (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 Income-tax 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: . . . .

Explanation.--In this section and in Sections 121, 123, 124 and 125, the word ' case ', in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.'

15. Relying upon the Explanation to Section 127, learned counsel for the petitioner argued that the case which can be transferred by the Commissioner of Income-tax under that section means proceedings under the 1961 Act which may be pending on the date on which the order of transfer is made He urged that the proceedings which are not pending under the 1961 Act would not be covered by the expression 'case' and, consequently, they would not be liable to be transferred under Section 127. He relied upon Section 297(2)(a), which runs as follows:

''(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922, (XI of 1922) (hereinafter referred to as the repealed Act)- (a) where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed. '

16. He argued that, as, in the instant case, the return for the two years were filed before April 1, 1962, under the 1922 Act, assessment proceedings had to be taken and continued as if the 1961 Act had not been passed, as stated in Section 297(2)(a) of the 1961 Act. This implies that in respect of these proceedings it should be considered that Section 127 of the 1961 Act also does not exist and, therefore, any order of transfer of proceedings commenced on returns filed before the commencement of the 1961 Act, made under Section 127 of that Act, would be without jurisdiction and invalid.

17. We have carefully considered this argument raised on behalf of the petitioner and, for reasons which we are presently going to state, we are of opinion that this argument does not entitle the petitioner to the relief claimed by it. Even if it be considered that because of the provisions of Section 297(2)(a) of the Act, the provisions of Section 127 of the 1961 Act are not applicable to the assessment proceedings pending against the petitioner, in respect of the assessment years 1960-61 and 1961-62, this very section provides that such proceedings have to be taken and continued as if the 1961 Act had not been passed. The effect of this provision is that, notwithstanding the repeal of the Income-tax Act, 1922, the various provisions of the 1922 Act will survive and exist for the purposes of continuing and finalising the assessment proceedings commenced on the return of income which had been filed before 1st of April, 1962. Section 5(7A) of the 1922 Act conferred a power on the Commissioner of Income-tax for transferring any case from one Income-tax Officer subordinate to him to another. Unlike Section 127 of the 1961 Act, Sub-section (7A) of Section 5 of the 1922 Act did not provide for any opportunity being given to the assessee to be heard before making the order of transfer, and there was no requirement of recording of reasons before making an order of transfer. Once Section 127 of the 1961 Act is out of the way, the order for the transfer of proceedings, pending stgainst the petitioner for the assessment years 1960-61 and 1961-62, will be one under Section 5(7A) of the 1922 Act. The petitioner will then not be able to contend that the order of transfer is bad either because he was not given an opportunity of being heard or because reasons for making the order had not been recorded.

18. Learned counsel for the petitioner contended that, on the face of it, the order of transfer was made by the Commissioner of Income-tax in exercise of the powers under Section 127 of the 1961 Act and it is not open to the revenue to justify the' correctness of that order with reference to Section 5(7A) of the 1922 Act. We are unable to accept this argument. In the case of L. Hazari Mal Kuthiala v. Income-tax Officer, Special Circle, Ambala Cantt., [1961] 41 I.T.R. 12 ; [1961] 1 S.C.R. 892 (S.C.), it was contended that the order of the Commissioner of Income-tax transferring his case from one Income-tax Officer to another was incompetent inasmuch as iti doing so he purported to act under Sub-sections (5) and (7A) of Section 5 of the 1922 Act when properly his jurisdiction to make the order of transfer was under the corresponding provision of the Patiala Income-tax Act. The contention was repelled by the Supreme Court with the following observation :

' This argument, however, loses point, because the exercise of a power will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it will be nugatory. This principle is well settled.'

19. See Pitamber Vajirshet v. Dhondu Navlapa, [1887] I.L.R, 12 Bom. 486, 489.

20. Applying the aforesaid observation of the Supreme Court, we find that in case the Commissioner of Income-tax has the power to transfer the proceedings under Section 5(7A) of the 1922 Act and the order of transfer has been made in accordance with that provision, the order cannot be said to be without jurisdiction merely because it purports to have been made under a provision which does not apply to the facts of the case. Moreover, the authority under which the order of transfer has been made has been described as follows in the order dated 23rd June, 1964 ;

' In exercise of the powers conferred by Sub-section (1) of Section 127 of the Indian Income-tax Act, 1961 (43 of 1961), and of all other powers enabling it in this behalf . . . '

21. It follows that the Commissioner of Income-tax has transferred the cases mentioned in the schedule in exercise of the powers under Section 127 of the Income-tax Act, 1961, as also under other provisions which enable him to transfer those cases. As stated earlier, the power to transfer cases under Section 5(7A) of the 1922 Act was available to the Commissioner. Even according to the petitioner's own case, on 23rd June, 1964, when the Commissioner of Income-tax made the order transferring the case pending against the petitioner, certain assessment cases were pending against it which could be transferred under Section 127 of the 1961 Act whereas the other cases could be transferred only under the 1922 Act. This being the position, the language used by the Commissioner, while transferring the cases, does not exclude the exercise of the power under Section 5(7A) of the 1922 Act. In any case the transfer of pending assessment proceedings for the assessment years 1960-61 and 1961-62 was authorised by Section 5(7A) of the 1922 Act and the order of transfer cannot be said to be defective or without jurisdiction.

22. Learned counsel for the petitioner then argued that, after the repeal of the Indian Income-tax Act, 1922, by the 1961 Act, the power under Section 5(7A) of the 1922 Act could not be exercised as that provision ceased to exist. He contends that, in the circumstances, the revenue cannot rely upon this provision to justify the order of transfer. When the attention of the learned counsel was drawn to the provisions of Section 297(2Xa) of the 1961 Act, according to which notwithstanding the repeal of the 1922 Act in such cases proceedings for assessment were to be taken and continued as if the 1961 Act had not been passed, i.e., the 1922 Act was not repealed, the learned counsel urged that what was saved was only those provisions of the 1922 Act which concerned assessment proceedings. According to him the power of transfer given under Section 5(7A) of the 1922 Act did not concern assessment proceedings and, therefore, they were not saved by Section 297(2)(a) of the 1961 Act. We are unable to accept this argument. Clear intention underlying Section 297(2)(a) is that, where a return of income has been filed before the commencement of the 1961 Act, the assessment proceedings shall be continued and concluded in accordance with the provisions of the 1922 Act. A provision as to which officer will deal with the assessment proceedings is a provision which relates to assessment proceedings as such and, therefore, its existence in respect of the returns filed prior to 1st April, 1962, has been secured by Section 297(2)(a). In the result, we find that even if the argument of the petitioner that Section 127 of the 1961 Act has no application to the facts of the present case is accepted, the order of transfer is amply justified by the provisions of Section 5(7A) of the 1922 Act. It cannot be said to be without jurisdiction and cannot be quashed. Proceedings before the Income-tax Officer, Special Investigation Circle, Lucknow, are also not without jurisdiction and cannot be quashed.

23. In the result we find no force in the two writ petitions which are dismissed with costs.


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