HIGH COURT OF BOMBAY
Global Energy (P.) Ltd.
Commissioner of Income-tax
Writ Petition No. 870 of 2012
Date of Pronouncement – 19.02.2013
V. M. Kanade, J.
Heard learned counsel appearing on behalf of the petitioner and learned counsel appearing on behalf of the respondent.
2. Rule. Rule is made returnable forthwith. By consent heard forthwith.
3. The grievance of the petitioner in the petition inter alia is that the respondent authority has passed an order under Section 127(1) of the Income Tax Act, without giving any reasons whatsoever for transferring the case to further investigation from Goa to Delhi. Learned counsel in support of his submission has relied on the judgment of the Apex Court in the case of Ajantha Industries v. CBDT  102 ITR 281 (SC). On the other hand learned counsel appearing on behalf of the revenue has relied on other judgments of Allahabad High Court, Jarkhand High Court and Bombay High Court in support of her submissions that it is permissible for authority to transfer a case from one place to another on the ground that co-ordination investigation is necessary.Online GST Certification Course by TaxGuru & MSME- Click here to Join
4. We are of the view that the submissions made by learned counsel on behalf of the petitioner will have to be accepted in view of the ratio laid down by the judgment of the Apex Court in the case of Ajantha Industries and others (supra). In the said case the Apex Court has observed as under:-
The short question that arises for consideration is whether failure to record the reasons in the order which was communicated to the appellants is violative to the principles of natural justice for which order is to he held invalid.
While considering this question after taking into consideration relevant provisions, the Apex court has observed as under:-
The reason for recording of reasons in the order and making these reasons known to the assessee is to unable an opportunity to the assessee to approach the High Court under its Writ jurisdiction under Article 226 of the Constitution of India or even this Court under Article 136 of the Constitution of India in an appropriate case for challenging the order, inter alia either on the ground that it is mala fide or arbitrary or that it is based on irrelevant or extraneous considerations. Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question. We are clearly of the opinion that 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.
5. The Apex Court in the said judgment has overruled the judgment of the Delhi High Court in the case of Sunanda Rani Jain v. Union of India,  99 ITR 391 and other decisions of Andra Pradesh High Court.
6. In our view ratio of the said judgment squarely applies to the facts of the present case. In the impugned order which has been passed under Section 127(1) by the Commissioner of Income Tax has merely stated in the said order that for the purpose of co-ordinating investigation, it is necessary to transfer the case to New Delhi.
7. In our view merely mentioning this reason that it is necessary to transfer it for co-ordinated investigation is not sufficient in view of the clear observation made by the Apex Court in the case of Ajanthan Industries (supra) where it has been mentioned that the reasons have to be recorded in the order and, as such, the commissioner ought to have given reasons why co-ordination investigation is necessary. There cannot be any dispute that the case can be transferred for the purpose of co-ordianting investigation but why the commissioner feel that is necessary to transfer the case for co-ordinated investigation has to be at least briefly stated in the said order.
8. Learned counsel appearing on behalf of the revenue has relied on the judgment of the Bombay High Court in the case of One-up Shares and Stock Brokers (P) Ltd v. R.R. Singh CIT  262 ITR 275. In the said case the Division Bench came to the conclusion that the High Court should not interfere under Article 226 of the Constitution of India and ordered that where the Department has centralized the cases concerning various companies. Perusal of the said judgment clearly indicate the point which has canvassed in this case by learned counsel appearing on behalf of the petitioner was not an issue before Division Bench and therefore the observation made by the Division Bench of Bombay High Court would not apply to the facts of the present case. Learned counsel though relied on the judgment of Allahabad High Court in the case of Trimurti Fragrances (P) Ltd v. CIT  283 ITR 547. The Allahabad High Court came to the conclusion that there was sufficient compliance of principles of natural justice and further observed that the distance between Kanpur and Delhi can be covered within few hours and that the person involved already having business transaction and activities between Kanpur and Delhi. Though Allahabad High Court has taken into consideration various judgments of other Courts, the judgment in the case of Ajantha Industries (supra) was not brought to their notice. In the said case search and seizure operation under Section 132(1) of the Income Tax Act was conducted both at Kanpur and Delhi on 2.7.2003 at the site of the petitioner group of Writ Petitions. The commissioner of Income Tax Kanpur issued notice under Section 127(2) of the Income Tax Act. Thereafter by order dated 22.2.2005 transferred the investigation to New Delhi. It was mentioned in the impugned order that transfer was made for co-ordinating investigation. Allahabad High Court in paragraph 29 has observed as under:-
It may also be remembered that this power is vested not in minor officials but in top-ranking authorities like the Commissioner of Income-tax and the Central Board of Revenue who act on the information supplied to them by the Income-tax Officers concerned. This power is discretionary and not necessarily discriminatory and abuse of power cannot be easily assumed where the discretion is vested in such high officials. (Vide Matajog Dobey v. H.S. Bhari(1)). There is moreover a presumption that public officials will discharge their duties honestly and in accordance with the rules of law. (Vide People of the State of New. York v. John E. Van De Carr, etc.(1) It has also been observed by this Court in A . Thangal Kunju Musaliar v. M. Venkitachalam Potti(2) with reference to the possibility of discrimination between assessees in the matter of the reference of their cases to the Income-tax Investigation Commission that:-
In paragraph 12 of the said order after referring to the case of Pannalal Biniraj v. Union of India, AIR 1957 SC 397, the Allahabad High Court observed as under:-
“It is to be presumed, unless the, contrary were shown, that the ‘administration of a particular law would be done I not with an evil eye and unequal hand’ and the selection made by the Government of the cases of persons to be referred for investigation by the Commission would not be discriminatory.”
9. In the light of the said observation after taking into consideration the observation made by the Apex Court in the said judgment and also the judgments of other High Courts the contention of the petitioner in the said case was rejected. The ratio of the said judgment in our view would not apply to the facts of the present case. It is to be noted that the judgment of Ajantha was not brought to the notice of the Court even other facts which apparently were considered by Allahabad High Court are referred in paragraph 6 as under:-
The Commissioner of Income-tax-II, Kanpur, by means of the impugned order dated February 22, 2005/annexure 3 to the writ petition transferred the case of the petitioner from the Assessing Officer at Kanpur to the Assessing Officer, New Delhi; the relevant portion of which reads :
In exercise of the power conferred by Sub-section (2) of Section 127 of the Income-tax Act, 1961, and all other powers enabling me in this behalf, I, the Commissioner of Income-tax-II, Kanpur, hereby transfer the case, particulars of which are mentioned in columns (1) to (4) of the Schedule appended below, for coordinated investigation (other cases of this group already centralised by the learned Commissioner of Income-tax-I, Kanpur, with the Deputy Commissioner of Income-tax, Central Circle-9, New Delhi, vide his order dated January 23, 2004) from the Assessing Officer mentioned in column (5) to the Assessing Officer mentioned in column (6) thereof.
10. From the aforesaid observation it appears that even on earlier occasions cases were transferred from Kanpur to Delhi. An order of centralized investigation was passed by learned Commissioner of Income Tax by his order dated 23.1.2004 from the Assessing Officer mentioned in column no. 5 to the Assessing Officer mentioned in column no.6. In view of the said ratio, the said judgment would not apply to the facts of the present case. Lastly reliance was placed on the judgment in the case of Jharkhand Mukti Morcha v. CIT  225 ITR 284. In the said case also Jharkhand High Court came to the conclusion that co-ordinated investigation would be a good ground for transferring the cases.
11. Again there cannot be any dispute regarding some observation which has to be noticed that co-ordinating investigation can always be a good ground for transfer from one place to another. What the Apex Court has observed in Ajantha Industries (supra) is that while transferring the case on the ground of co-ordinated investigation, some reason has to be given by the commissioner which reveals why it is necessary to transfer the case for the purpose of co-ordinated investigation. In our view unfortunately Commissioner of Income Tax apart from stating that case has been transferred for co-ordinating investigation has not given any other reason. Impugned order is therefore quashed and set aside. Matter is however remanded back to the Commissioner of Income Tax who shall pass fresh order under Section 127(1) of the Income Tax Act after giving an opportunity to the petitioner and pass an order in accordance with law after recording his reasons.
12. Petition is accordingly partly allowed and disposed of. Contentions of both the parties are kept open.
13. Petition stands disposed of with no order as to costs.