Jagannadha Rao, J.:— The petitioner seeks the issue of a writ of mandamus declaring that the third respondent, the Assistant Commissioner of Income-tax (Inv. Circle-2), Vishakhapatnam, has no jurisdiction to take any action in regard to the petitioner's file No. PAN V-2, Vishakhapatnam. The first respondent is the Chief Commissioner of Income-tax, Administration, Bombay, and the second respondent is the Assistant Commissioner of Income-tax (Inv. Circle 3-(1)), Bombay. In effect, the petitioner is questioning the transfer of its file from Bombay to Vishakhapatnam as being violative of section 127 of the Income-tax Act, 1961.

2. The brief facts are as follows: The petitioner is a private limited company incorporated under the Companies Act. Its registered office is said to be located at 503, Jolly Bhawan, No. 1, New Marine Lines, Bombay, and its head office is said to be located at No. 2, Brabourne Road, Calcutta. It is the petitioner's case that the principal places of business are at Bombay and Calcutta and the business is controlled both by the registered office and the head office. It is said that the books of account are maintained at the registered office at Bombay. The petitioner was assessed previously by the third respondent, inclusive of the assessment for the assessment year 1986-87 at Bombay. The returns for 1989-90 of the company are filed at Bombay. So far as the directors are concerned, their income-tax and wealth-tax assessments are made at Calcutta. It is said that the company does not carry on any business at Vishakhapatnam and also that they have no personnel to look into the assessment work at that place. While so, the second respondent (Assistant Commissioner of Income-tax, Bombay), issued a notice on November 22, 1988, addressed to the principal officer of the petitioner at 10 — 50—16, Waltair Uplands, Vishakhapatnam, stating that the petitioner's case is proposed to be transferred from Bombay to the office of the third respondent (Assistant Commissioner, I.T, Vishakhapatnam). The petitioner sent a reply dated December 2, 1988, stating that, on account of the facts to which we have referred above, the transfer is likely to seriously affect its business interests and its smooth functioning, that it will lose the aid and assistance of its auditors at Bombay and Calcutta who are well conversant with its accounting affairs since a long time, and that there are no business activities at Vishakhapatnam, etc. It is also stated that if the company assessment files are transferred to Calcutta, they have no objection. Thereafter, a further notice was issued by the Deputy Commissioner of Income-tax (HQ-Technical), Bombay, requiring the petitioner to see the first respondent (Chief Commissioner of Income-tax, Bombay) on February 13, 1989, in connection with the transfer. The petitioner filed fresh objections on February 20, 1989, reiterating the objections filed earlier before the second respondent. The petitioner states that it did not receive any orders later except the order dated January 18, 1990, from the second respondent under section 127 of the Act stating that the records of the petitioner have been transferred to the third respondent at Vishakhapatnam. The petitioner alleged that the conditions requisite under section 127(2) of the Act have not been complied with, that respondents Nos. 2 and 3 are not subordinates to the first respondent, that a reasonable opportunity of being heard has not been given, that the show-cause notice dated February 2, 1989, did not contain any reasons, that the petitioner, on its own, tried to file its objections to the extent possible, that the final orders setting out reasons were “never” communicated, that on the contrary, the letter dated January 18, 1990, from the second respondent is merely an intimation that the file is transferred, that no reasons were set out even in that intimation and that no reasons were communicated by the first respondent. It is also stated that vague reasons cannot be accepted. Reference is made to the case in Ajantha Industries v. CBDT, [1976] 102 ITR 281 (SC), Sagarmal Spinning and Weaving Mills Ltd. v. CBDT, [1972] 83 ITR 130 (MP) and to the decision of this court in V.K Steel Industries (P.) Ltd. v. Asst. CIT, [1991] 187 ITR 403 (AP), decided by Jeevan Reddy J. (as he then was) and Syed Shah Mohd. Quadri J. A counter-affidavit dated June 20, 1990, was filed initially by the third respondent (Assistant Commissioner of Income-tax, Vishakhapatnam), stating that the cases of the petitioner and those of Messrs. Andhra Steel Corporation and of Messrs V.K Steel Industries, Vishakhapatnam, are closely connected as there is close relationship between the managing directors who are said to be members of the same family, that the transfer was effected “as per orders of the Bombay Chief-Commissioner (Tech.) No. B.C CCIT/Cent II/1989-90 dated May 29, 1989” and the case records were received on September 27, 1989, that the transfer was effected “in order to co-ordinate investigation” in the group of cases stated above and also having regard to the claims and admissions made in the course of search operations under section 132 of the Act against the directors on February 24, 1987. Reference is made to the sworn statement of Smt. Shanti Devi, w/o Sri C.L Mittal and director of the company dated February 24, 1987, to the effect that everything is being looked after by her husband and she does not know anything. Reference is also made to the sworn statement of Sri C.L Mittal to the same effect. These aspects, it is stated, clearly revealed that “the case required detailed and co-ordinated investigation at a place, Vishakhapatnam, where Sri C.L Mittal looks after the business affairs of Smt. Shanti Devi, managing director of the assessee-company”. Reference is also made to a report of the Assistant Director of Inspection, Bombay, dated March 3, 1987, to say that no business activity in actual terms is carried on at Bombay at the address given by the petitioner company, that during the search operations, it was found that the address given by the company at Bombay, namely, 59, Forbes St., Fort, Bombay-23, was indeed that of Shri Sunderlal Saraf, a chartered accountant, that no books of account or other statutory registers were found at those premises, that the said chartered accountant stated that the directors of the company were his relatives and that no transactions were ever conducted there and that he further stated that he was filing returns at Bombay on the basis of information sent from Vishakhapatnam. The claim of the petitioner to the contrary is denied. It is also stated that the assessee should have filed the writ petition at Bombay.

3. A reply affidavit dated August 20, 1990, was filed denying the above-said allegations in the counter and also referring to a notice of change of registered office filed on April 23, 1989, under section 146 of the Companies Act shifting the registered office from 59, Forbes St., Bombay 23, to 503, Jolly Bhawan, New Marine Lines, Bombay. Reference is also made to a letter dated March 19, 1987, addressed to the third respondent by Sri C.L Mittal, denying the correctness of the statements made and recorded in the search operations.

4. After several adjournments granted by us, an additional counter-affidavit dated October 23, 1990 was filed by the third respondent with reference to the file of the first respondent. The affidavit was based on the record. The allegations contained therein are similar to those in the earlier counter-affidavit dated June 20, 1990. It is repeated that a detailed and coordinated investigation was considered necessary. It is stated again that the intimation dated January 18, 1990, regarding the transfer sent by the third respondent is based on the order of transfer dated May 29, 1989, passed by the first respondent.

5. The point for consideration is: Whether the transfer of the petitioner's assessment file from Bombay to Visakapatnam is valid and in compliance with the provisions of section 127 of the Income-tax Act, 1961?

6. We have heard the submissions of Sri Y. Ratnakar for the petitioner and of Sri. M. Suryanarayana Murthy for the Department.

7. Under sub-section (1) of section 127 of the Act, the Director-General or Chief Commissioner or 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 one or more Assessing Officers subordinate to him to any other Assessing Officer or Assessing Officers also subordinate to him. Under subsection (2) of section 127, if there is no such subordinate officer, officers of superior status are vested with this power.

8. Under this section, therefore, giving a reasonable opportunity of being heard wherever it is possible to do so and recording of reasons for the transfer are essential. The Supreme Court has held in Ajantha Industries v. CBDT, [1976] 102 ITR 281, already referred to, as follows (headnote):

“The requirement of recording reasons under section 127(1) of the Income-tax Act, 1961, for the transfer of a case from one Income-tax Officer to another, is a mandatory direction under the law and noncommunication thereof to the assessee is noi saved by showing that the reasons exist in the file although not communicated to the assessee. Recording of reasons and disclosure thereof are not a mere idle formality. When law requires reasons to be recorded in a particular order affecting prejudicially the interest of any person, who can challenge the order in court, it ceases 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.

Non-communication of the reasons in the order passed under section 127(1) was a serious infirmity and the order was invalid.”

9. Therefore, apart from giving a reasonable opportunity of being heard, whenever it is possible to do sq, and recording reasons for the transfer, the communication of the reasons is also necessary. Else, the order of transfer is liable to be declared invalid.

10. In Sagarmal Spinning and Weaving Mills Ltd. v. CBDT, [1972] 83 ITR 130, the Madhya Pradesh High Court further observed that the question whether the opportunity given to the affected party is reasonable or not will be a matter for interpretation by the court and not by the authority itself. The learned judges observed further that (headnote):

“Facility of investigation would not be a sufficient reason for transfer of a case; and the mention of that reason in the show-cause notice proposing a transfer of the case would not be in compliance with the requirements of section 127. Nor would the giving of some reason in a return filed before the High Court in the writ proceeding be in compliance with the section.”

11. The above-said decision was again followed by the same High Court in Shivajirao Angre v. Commissioner Of Income-Tax, [1986] 158 ITR 162. In that case, the show-cause notice issued to the petitioner stated that the Commissioner proposed the transfer as such transfer was considered necessary “for the purpose of detailed and co-ordinated investigation”. The petitioner submitted objections but, thereafter, no order was served on the petitioner regarding the transfer. The petitioner received notices from the officers to whom the case was transferred. After referring to the cases referred to above by us, the Madhya Pradesh High Court held that the words used in the notice “did not amount to reasons”. No order containing any reasons was also communicated. The writ petition was allowed.

12. In V.K Steel Industries (Pi) Ltd. v. Asst. CIT, [1991] 187 ITR 403 (AP), the impugned order passed by the Chief Commissioner of Income-tax, Hyderabad, stated that the cases pertaining to the petitioner are transferred from the Assistant Commissioner, Circle 4(3), Hyderabad, to the Assistant Commissioner (Investigation Circle 1), Vishakhapatnam. The reason given in the order was said to be “to facilitate detailed and coordinated investigation”. The order was preceded by a show-cause notice which too stated the same reasons. However, when the writ petition was being heard, a copy of the reasons behind the order, as having been reduced to writing, was furnished. The Division Bench then observed (at p. 404):

“It is evident that these reasons were not communicated to the petitioner. We do not see any justification for withholding the reasons and communicating only the conclusion. Indeed the reasons for transfer must have also been stated in the show-cause notice so as to enable the person concerned to make an effective representation. Since that has not been done, the order of transfer is liable to be quashed and it is accordingly quashed.”

13. From the aforesaid decisions, it is clear that, in the matter of the transfer of a case under section 127 of the Act, it is necessary that the authority which proposes to transfer the case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being heard with a view to enable him to effectively show cause against the proposed transfer. The notice must also propose to give a personal hearing. It is also necessary to mention in the notice the reasons for the proposed transfer so that the assessee could make an effective representation with reference to the reasons set out. It is not sufficient merely to say in the notice that the transfer is proposed “to facilitate detailed and co-ordinated investigation”. The reasons cannot be vague and too general in nature but must be specific and based on material facts. It is again not merely sufficient to record the reasons in the file but it is also necessary to communicate the same to the affected party.

14. From the facts stated earlier, it is clear that a show-cause notice was issued by the second respondent (Assistant Commissioner of Income-tax, Bombay) on November 22, 1988, and that a further notice was sent by the Deputy Commissioner, Income-tax, Bombay, on February 13, 1989, requiring the petitioner to see the Chief Commissioner (first respondent) on February 13, 1989, and then an intimation regarding transfer of file to Vishakhapatnam was sent by the Assistant Commissioner of Income-tax, Vishakhapatnam (third respondent) on January 18, 1990. Neither the notice dated January 22, 1988, nor the intimation dated February 13, 1989, contain any reasons. The petitioner was never intimated of any reason for the transfer much less the various reasons now mentioned in the counter-affidavit. In fact, no show-cause notice giving reasons for any proposed transfer was ever issued by the Chief Commissioner of Income-tax, Bombay (first respondent) who (it is now revealed) is said to have passed the order of transfer. What is more, the so called order of transfer passed by the Chief Commissioner of Income-tax, Bombay, dated May 29, 1989, has not been communicated to the petitioner till today. The record of the case has been produced before us by learned standing counsel for the Depart ment and we find that the copies of the order dated May 29, 1989, were sent to other departmental officers but was not even marked to the petitioner. In fact, it is not contended in the counter or before us that the order of transfer was ever communicated to the petitioner. Yet another very important aspect is that the final order, even as recorded in the file, does not contain the various reasons now sought to be referred in the two counter-affidavits.

15. The transfer is, therefore, clearly vitiated and is liable to be quashed and is, accordingly, quashed.

16. So far as the other objection that is raised by the respondent, namely, that the writ petition should have been filed in Bombay is concerned, there is no substance therein, because the third respondent at Vishakhapatnam has taken action pursuant to the transfer order and a part of the cause of action can be said to have arisen within the State of Andhra Pradesh. The writ petition is, therefore, allowed and it is declared that the order transferring the file from Bombay to Vishakhapatnam is invalid. There will be no order as to costs.

17. This will not, however, preclude the competent authority from taking further action in accordance with law.