Peacock Chemicals (P.) Ltd. v. Commissioner Of Income-Tax And Others.

1. The short question of law is whether the order of transfer passed under section 126 of the Income-tax Act suffers from any error of law.

2. The petitioner is a private limited company.

3. It is registered under the Companies Act. Its head office is situated at 8/7, Industrial Area Site No. 4, Sahibabad, Ghaziabad. During the investigation of the account books of Goel Gases (P.) Ltd., 136-M, Connaught Place, New Delhi, a number of correspondence between the two companies were found. Therefore, survey of business premises at 8/7, Industrial Area Site No. 4, Sahibabad, Ghaziabad, was made. Since from the investigation and survey it transpired that the petitioner was a sister concern of Goel Gases, notice under section 127 of the Income-tax Act for transfer of the case of the petitioner to New Delhi for a detailed and proper investigation was issued. It was objected to by the petitioner and it was claimed that it should have been informed of the material on the basis of which the opposite parties formed the opinion that the transfer of the case for co-ordinated investigation was necessary. After considering the explanation, the impugned order was passed on March 6, 1989. The validity of this order has been assailed by the petitioner and it is claimed that it is in violation of the provisions of section 126. It is claimed that since the notice did not disclose any material for co-ordinated investigation, it was contrary to the provisions of law and settled decisions given by the, Hon'ble Supreme Court and various High Courts. Reliance has been placed on Nasir Ahmed v. Assistant-Custodian General, Evacuee Property, (1980) 3 SCC 1 : AIR 1980 SC 1157 and Mahabir Prasad Santosh Kumar v. State of U.P, (1970) 1 SCC 764 : AIR 1970 SC 1302.

4. None of these decisions are of any assistance. The two decisions in Nasir Ahmed, (1980) 3 SCC 1 : AIR 1980 SC 1157, and Mahabir Prasad, (1970) 1 SCC 764 : AIR 1970 SC 1302, are not under income-tax. They are on general principles of natural justice. In the first case, the notice was held invalid as it was a foundation for proceeding under section 7 of the Evacuee Property Act and it having been issued on a premise which was not sustainable under law, was held to be invalid.

5. And in the second case, the order was quashed because it was not a speaking order even though opportunity was given. But in the present case, neither was the notice issued under section 126 of the Income-tax Act invalid nor was the order passed without affording opportunity or giving reasons. As regards Sagarmal Spinning and Weaving Mills Ltd. v. CBDT, [1972] 83 ITR 130 (MP), the High Court did observe that facility of investigation would not be a sufficient reason for transfer of a case and would not be in compliance with the requirements of section 127, but it made it clear that the order of transfer was being quashed because, “it did not give any reason for the transfer of the case in the order which was in contravention of the mandatory provisions of section 127”. In Maheshwari Lime Works v. CIT, [1984] 147 ITR 804, a Division Bench of the Madhya Pradesh High Court, distinguishing the decision in Sagarmal's case, [1972] 83 ITR 130 (MP), held that notice issued for detailed and co-ordinated investigation was sufficient compliance if the appropriate authority, while passing the order, gives adequate reasons. It was so in the present case.

6. Reliance was also placed on North Bihar Agency v. State of Bihar, (1981) 3 SCC 131 : AIR 1981 SC 1758, and Dhakeswari Cotton Mills Ltd. v. CIT, [1954] 26 ITR 775 (SC), in support of the submission that no reasonable opportunity was afforded to the petitioner. In the first decision, it was held by the Hon'ble Supreme Court that where reliance was placed on additional material by a quasi-judicial authority and this was done without apprising the party concerned of it, then the order was vitiated, as it would be in violation of the principles of natural justice. Similarly, in Dhakeswari Cotton Mills Ltd. v. CIT, [1954] 26 ITR 775 (SC), it was held that where a judicial enquiry was made or some material was supplied to the authority concerned which required it to be explained, then the order, without intimating the affected, would be in violation of principles of natural justice. Neither of the decisions is of any help to the petitioner.

7. In the result, this petition fails and is dismissed summarily.