MAHESH KUMAR JAIN S/O SHRI MALI RAM JAIN vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX-2

This judgment was rendered by this Court on December 21, 1956, and we find that in the Act Section 127 replaced Section 5(7A) where the legislature has introduced, inter alia, the requirement of recording reasons in making the order of transfer. It is manifest that once an order is passed transferring the case file of an assessee to another area the order has to be communicated. Communication of the order is an absolutely essential requirement since the assessee is then immediately made aware of the reasons which impelled the authorities to pass the order of transfer. It is apparent that if a case file is transferred from the usual place of residence or office where ordinarily assessments are made to a distant area, a great deal of inconvenience and even monetary loss is involved. That is the reason, why before making an order of transfer the legislature has ordinarily imposed the requirement of a show cause notice and also recording of reasons The question then arises whether the reasons are at all required to be communicated to the assessee. It is submitted, on behalf of the Revenue, that the very fact that reasons are recorded in the file, although these are not communicated to the assessee, fully meets the requirement of Section 127(1). We are unable to accept this submission. The reason for recording of reasons in the order and 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 to even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is malafide or arbitrary or that it is based on irrelevant and 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 opinion that the requirement of recording reasons under Section 127(1) is a mandatory direction under the law and non-communication thereof is (4 of 5) [CW-27598/2018] not saved by showing that the reasons exist in the file although not communicated to the assessee. Mr. Sharma drew our attention to a decision of Delhi High Court in Sunanda Rani Jain v. Union of India and Ors. (2), where the learned single Judge has taken a contrary view, for the reasons, which we have given above, we have no hold that the said decision is not correct. The appellant drew our attention to a decision of this Court in Shri Pragdas Umar Vaishya v. Union of India and Ors. (3), where Rule 55 of the Mineral Concession Rules, 1960, providing for exercise of revisional power by the Central Government was noticed. It was held that under Rule 56 the Central Government in disposing of the revision application must record its reasons and communicate these reasons to the parties affected thereby. It was further held that the reasons could not be gathered from the nothing in the file 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 Aggarwalla v. Union of India and Ors. (4), 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 held 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 Income-tax officer to another income tax officer in the same city, or, as stated in the judgment itself, "in the same locality" and the proviso to Section 127(1), therefore, applied. 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 cease 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.” Applying the principle deducible from the opinion of the Apex Court of the land, as extracted hereinabove, it is evident that the (5 of 5) [CW-27598/2018] impugned order dated 27th September, 2018, is in infraction to mandatory requirements of recording reasons for the conclusion. Accordingly, instant writ application succeeds, and is, hereby allowed. The impugned order dated 27th September, 2018, is hereby quashed. Matter is remanded back to the Principal, Commissioner of Income Tax-2, Jaipur, for adjudication afresh, in accordance with law. (VEERENDR SINGH SIRADHANA),J Pcg/103