# KASHIRAM AGARWALA v. UNION OF INDIA AND OTHERS

- **Citation:** [1965] 1 S.C.R. 671
- **Court:** Supreme Court of India
- **Decided:** 1964-10-06
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, M. Hidayatullah, Raghubar Dayal, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kashiram-agarwala-v-union-of-india-and-others-3376
- **Pages:** 7

## Headnote

Income Tax Act, 1961 (43 of 1961), s. 121(1)-'lncome-tax Proceedings transferred from one Income-tax Officer to another in the same locality
-Recording of reasons,
whether mandatory-Proviso to
s.
127(1)
effect of.
Income-tax proceedings against the appellant before two officers in
Calcutta were transferred by an. order of the Central Board of Revenue
under s. 127(1) of the Indian Income-tax Act, 1961 to another Incomelal< Officer in the same place. The transfer was challenged by the appellant
in writ proceedings before the Circuit Bench of the Punjab High Court at
Delhi as being invalid on the ground, that in not recording the reasons for
the transfer, the order making the transfer did not comply with a mandatory provision of s. 127(2). The High Court having !urned down the
plea, the appellant came to the Supreme Court by special leave.
It was contended by the appellant that although the proviso to s. 127(1)
made the giving of a hearing to the assessee unnecessary in cases where
the transfer was from one officer to another in the same city, place, or
locality, the provision for recording reasons which was mandatory under
the main clause of s. 127(1) bad not been similarly dispensed with. There·
fore even in those cases which were covered by the proviso reasons had
to be recorded.
HE.LO : The recording of reasons was a corollary to, and bound up
with the provision for a hearing. [674 C-D].
Where the transfer was from an officer in on.e locality to an officer: in
another locality it was provided that a hearing should, if possible, be given
to the assessee.
Reasons for the transfer had to be recorded to show that
the objections of the assessee had been taken into account Even when a
hearing was not actually given on the ground that it was not possible,
recording of reasons remained desirable for the satisfaction of the assessce.
[674 E-F].
However when the transfer was from one office.r to another in the
same locality, no question of giving a hearing to the assessee arose as there
was no .prejudice to him.
Under s. 124(3) of the Act all the officers in
the same locality had concurrent jurisdiction. An order of transfer within
the Jocafity was a purely administrative order, based entirely on the convenience of the department.
On principle in such cas.es neither can notice
be said to be necessary, nor would it be necessary to record any reasons
for the transfer. [675 A-DJ.
The provision for hearing· and for recording of reasons was made in
s. 127(1) obviously in compliance with the observations of this Court in
Pannalal Binjraj v. Union of India.
In that case where the order of
transfer from one locality to another had been challenged as violative of
Art. 14, the court while holding that it was unconstitutional, remarked,
that it was desirable before transferring a case to give the assessee a hearing
and to record reasons. [676 E-G).
672
SUPREME
COURT
REPORTS
(l 965) l S.C.R.
Considered in this baekground and in the light of the object sought to be
A
achieved, the proviso to s. 127(1) only meant that in "ases covered by
it no opportunity need be given to the asscssee, and the consequential need
for recording rCasolls waa also unnecessary. The impugned orders therefore remained valid. (677 A-CJ.
Pannalal Blnjraj v. Union of India, [1957] S.C.R. 233, referred to.
CIVIL APPELLATE JURISDICT!ON : Civil Appeal No. 22
of
B
1964 and Civil Appeal No. 261 of 1964.
Appeals by special leave from the judgment and order dated
April 10, 1963 of the Punjab High Court (Circuit Bench) at Delhi
in Civil Writ Nos. 258-D and 257-D of 1963.
B. N. Kirpal, S. Murty and K. K. Jain, for the appellant (in
C
both the appeals) _
S. V. Gupte, Solicitor-General, N. D. Karkhanis and R. N.
Sachthey, for the respondents (in both the appeals).
The Judgment of the Court was dcliv•red by
D
Gajendragadkar C. J.
These two appeals arise .out of t\\ • ·
writ petitions filed by the appellant Kashiram Agarwala in the
Punjab High Court, Circuit Bench, at Delhi challenging t

## Text

A
B
c
D
E
F
G
H
KASHIRAM AGARWALA
v.
UNION OF INDIA AND OTHERS
October 6, 1964
(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO,
M. HIDAYATULLAH, RAGHUBAR DAYAL
AND J. R. MUDHOLKAR JJ.)
Income Tax Act, 1961 (43 of 1961), s. 121(1)-'lncome-tax Proceedings transferred from one Income-tax Officer to another in the same locality
-Recording of reasons,
whether mandatory-Proviso to
s.
127(1)
effect of.
Income-tax proceedings against the appellant before two officers in
Calcutta were transferred by an. order of the Central Board of Revenue
under s. 127(1) of the Indian Income-tax Act, 1961 to another Incomelal< Officer in the same place. The transfer was challenged by the appellant
in writ proceedings before the Circuit Bench of the Punjab High Court at
Delhi as being invalid on the ground, that in not recording the reasons for
the transfer, the order making the transfer did not comply with a mandatory provision of s. 127(2). The High Court having !urned down the
plea, the appellant came to the Supreme Court by special leave.
It was contended by the appellant that although the proviso to s. 127(1)
made the giving of a hearing to the assessee unnecessary in cases where
the transfer was from one officer to another in the same city, place, or
locality, the provision for recording reasons which was mandatory under
the main clause of s. 127(1) bad not been similarly dispensed with. There·
fore even in those cases which were covered by the proviso reasons had
to be recorded.
HE.LO : The recording of reasons was a corollary to, and bound up
with the provision for a hearing. [674 C-D].
Where the transfer was from an officer in on.e locality to an officer: in
another locality it was provided that a hearing should, if possible, be given
to the assessee.
Reasons for the transfer had to be recorded to show that
the objections of the assessee had been taken into account Even when a
hearing was not actually given on the ground that it was not possible,
recording of reasons remained desirable for the satisfaction of the assessce.
[674 E-F].
However when the transfer was from one office.r to another in the
same locality, no question of giving a hearing to the assessee arose as there
was no .prejudice to him.
Under s. 124(3) of the Act all the officers in
the same locality had concurrent jurisdiction. An order of transfer within
the Jocafity was a purely administrative order, based entirely on the convenience of the department.
On principle in such cas.es neither can notice
be said to be necessary, nor would it be necessary to record any reasons
for the transfer. [675 A-DJ.
The provision for hearing· and for recording of reasons was made in
s. 127(1) obviously in compliance with the observations of this Court in
Pannalal Binjraj v. Union of India.
In that case where the order of
transfer from one locality to another had been challenged as violative of
Art. 14, the court while holding that it was unconstitutional, remarked,
that it was desirable before transferring a case to give the assessee a hearing
and to record reasons. [676 E-G).
672
SUPREME
COURT
REPORTS
(l 965) l S.C.R.
Considered in this baekground and in the light of the object sought to be
A
achieved, the proviso to s. 127(1) only meant that in "ases covered by
it no opportunity need be given to the asscssee, and the consequential need
for recording rCasolls waa also unnecessary. The impugned orders therefore remained valid. (677 A-CJ.
Pannalal Blnjraj v. Union of India, [1957] S.C.R. 233, referred to.
CIVIL APPELLATE JURISDICT!ON : Civil Appeal No. 22
of
B
1964 and Civil Appeal No. 261 of 1964.
Appeals by special leave from the judgment and order dated
April 10, 1963 of the Punjab High Court (Circuit Bench) at Delhi
in Civil Writ Nos. 258-D and 257-D of 1963.
B. N. Kirpal, S. Murty and K. K. Jain, for the appellant (in
C
both the appeals) _
S. V. Gupte, Solicitor-General, N. D. Karkhanis and R. N.
Sachthey, for the respondents (in both the appeals).
The Judgment of the Court was dcliv•red by
D
Gajendragadkar C. J.
These two appeals arise .out of t\\ • ·
writ petitions filed by the appellant Kashiram Agarwala in the
Punjab High Court, Circuit Bench, at Delhi challenging the validity of two orders passed by the Central Board of Revenue (hereinafter called 'the Board') under s. 127(1) of the Income-Tax Act,
E
1961 (No. 43 of 196l)(hereinafter called 'the Act'). These two
orders have been passed on the 18th January, 1963, and they
have directed that the income-tax proceedings
then pendin&
against the appellant should be transferred from the Income Tax
Officers 'D' Ward District lY(I), and 'F Ward District IY(2),
Calcutta, respectively to the Income Tax Officer 'E' Ward ComF
panics District III, Calcutta.
The petitioner alleged that these
two orders were invalid, because before eY.ercising its power under
s. 127(1), the Board had failed to comply w;th a mandatory
requirement prescribed by the said provision.
These pctitiom
were dismissed summarily by the High Court, and it is against
these orders of summary rejection that the appellant has come to
G
this Court by special leave.
Section 127(1) of the Act reads thus:
"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 one Income
Tax Officer subordinate to him to another also subordiH
•
A
B
c
KASHIRAM v. UNION (Gajendraggdkar C.1.)
67~
nate to him, and the Board may similarly transfer any
case from one Income-tax Officer to another:
Provided that nothing in this sub-section shall be
deemed to require any such opportunity to be given
where the transfer is from one Income-tax Officer to
another whose offices
are situate in the same city,
locality or place."
Sub-section (2) Jays down that the transfer which is authorised
to be made by sub-section (1), can be made at any stage of the
proceedings, and shall not render necessary the re-issue of any
notice already issued by the Income-tax Officer from whom the
case is transferred.
There is an explanation to s. 127 which it is
unnecessary to mention.
It is common ground that the imp!lgned orders do not record
any reasons why the Board thought it necessary to transfer the
cases pending against the appellant from one Income-tax Officer
to the other; and. the argument is that s. 127(1) imposes
an
D
obligation on the authority exercising its power under the said
section to record its reasons for directing the transfer of a case
from one Income-tax Officer to another.
It will be noticed that
·s. 127(1) requires that where the power conferred by it is intended
to be exercised, an opportunity should be given to the assessee
wherever· it is possible to do so, and .reasons have to be recorded
E
for making the order of transrer.
The requirement that opportunity should be given, cannot.be said to be obligatory, because
it has been left to the discretion of the authority to consider
whether it is possible to give such an opportunity to the assessee.
It is, of course, true that in coming to the conclusion that it is
F
not possible to give the required opportunity to the assessee, the
authority must act reasonably and bona fide; but if the authority
comes to the conclusion that it is not possible to give a reasonable
opportunity to the assessee, that can be dispensed with.
That,
however, is not so with regard to the requirement that reasons
must be recorded for making the transfer.
So far as s. 127(1)
is concerned, there is no dispute about this position.
G
The question which calls for our decision in the present
appeals is : what is the effect of the proviso to s. 127 (1) ? The
proviso Jays down that nothing in sub-section (1) shalJ be deemed to require any such opportunity to be given in a case like the
present. It is plain that the transfer in the present case is from
H
one Income-tax Officer to another whose offices are situated in the
same locality; and so, the point to consider is, what is the effect
of this proviso? It is urged by Mr. Jain that the effect of the
<;74
SUPREME
COURT
REPORTS
'[1965] l S.C.R.
proviso is that the requirement as to the giving of a reasonable
A
-0pportunity alone is dispensed with in respect of cases falling under
the proviso, but not the requirement as to the recording of reasons.
If, the words used· in the proviso are literally construed, it may
have to be conceded that there is some. force in this contention.
But, on the other hand, the provision that nothing in subn
section (1) shall be deemed to require any opportunity· to be given,
is worded in an emphatic form; and that fact has to be borne in
mind in considering the effect .of the proviso.
Besides, it would
not be unreasonable to assume that the recording of reasons
prescribed by s. 127(1) would be appropriate where a transfer is
being made otherwise than in· the manner prescribed by the pro- c
viso.
In such a case, normally, the. assessee has to be given a
reasonable opportunity to be heard; and the natural corollary of
1his requirement is that
his objections to the transfer should
·be considered and reasons given why the transfer is made despite the· objection of the assessee.
In other words, the_ requirement as to the recording of reasons flows as a natural consequence D
and corollary of the requirement that a reasonable opportunity
should be given to the assessee.
If, however, a reasonable opportunity is not given to the assessee on the ground that it is not
possible to do so, s. 127 ( 1) requires that the transfer being of
a category where a reasonable opportunity should be given to the
assessee, the authority sliould · record its reasons for making the E
transfer, even though no opportunity was in fact given to the
·assessee. If that be the true position,' it is not easy to understand
why the proviso should be so construed as· to require reasons to
be given for the transfer, even though no opportunity to
the
assessee is required to be given .. That is one aspect of the matter
-which has to be borne in mind in determining the true scope and
F
effect of -the proviso.
There is another consideration which is also relevant. Section
124 of the Act deals with the jurisdiction of Income-ta{ Officers.
S. 124(3) provides that within the limits of-the area assigned to
nim, the Income-tax Officer shall have jurisdiction-
( a) in respect of any person carrying on a business
or profession, if the place at which he carries on his busi-
. ness of profession is situate within the area, or where
his business or profession is carried on in more places
than one, if the principal place of his business or profession is situate within the area, and
.
(b) in respect of any other person residing within
the area.
G
H
A
B
c
D
E
F
G
H
KASHIRAM v. UNION (Gajendragadkar C.J.)
67S
This provision clearly indicates that where a transfer is made
under the provltio to s. 127(1) from one Income-tax Officer to
another in the same locality, it merely means that instead of on:e
Income-tax Officer who is competent to deal with the case,
another Income-tax Officer has been asked to deal with it. Such
an order is purely in the nature of an administrative order passed
for considerations of convenience of the department and no
possible prejudice can be involved in such a transfer.
Where,
as in the present proceedings, assessment cases pending against
the appellant before an officer in one ward are transferred to an
officer in another ward in the same place, there is hardly any
occasion for mentioning any reasons ~s such, because such transfers are invariably made on grounds of administrative convenience, and that shows that on principle in such cases neither
can the notice be said to be necessary, nor would it be necessary
to record any reasons for the transfer.
The provisions contained
in s. 124(3) of the Act deal with the same topic which was the
subject-matter of s. 64(1) and (2) of the earlier Income-tax Act,
1922 (No. 11 of 1922). There is, however, this difference
between these two provisions that whereas s. 124 fixes jurisdiction,
territorial or otherwise, of the Income-tax Officers, s. 64 fixed the
place· where. an assessee was to be assessed.
In this connection, it is also necessary to take into account
the background
of the prov.ision
contained in s. 127.
In
Pannalal Binjraj v. Union of India(') the validity of s. 5(7A) of
the earlier Act of 1922 was challenged before this Court. The
said section had provided that the Commissioner of Income-tax
may transfer any case from one Income-tax Officer subordinate
to him to another, and the Central Board of Revenue may transfer
any case from any one Income-tax Officer to :mother.
Such
transfer may be made at any stage of the proceedings, and shall
not render necessary the re-issue of any notice already issued by
the Income-tax Officer from whom the case is transferred.
The
argument which was urged before this Court in challenging the
validity of this provision was that it infringed the citizens' fundamental rights conferred by Articles 14 and 19(1)(g) of the Constitution.
In support of this argument, reliance was placed on
the fact that s. 64(1) and (2) conferred a right on the asscssee to
have his tax matter adjudicated 'Upon by the respective officers
mentioned in the said provisions; and since s. 5(7A) authorised
the transfer of the assessee's case from one Income-tax Officer to
another, that involved infringement
<>f his fundamental rights
(I) [1957] S.C.R. 233.
676
SUPREME
COURT
REPORTS
[ 1965) 1 S.C.R.
guaranteed by Articles 14 and I 9(1)(g) read with s. 64(1) & (2).
A
It is necessary to emphasise that s. 5(7 A) authorised transfer of
income-tax cases from one officer to another not necessarily
within 'he same place.
In other words, the transfer authorised
by s. 5(7 A) would take the case from the jurisdiction of an officer
entitled to try it under s. 64(1) & (2) to another officer who may
not have jurisdiction to try the case under the said provision.
B
That, indeed, was the basis on which the validity of s. 5 ( 7 A) was
challenged.
This Court,· however,
repelled the plea
raised
against the validity cif the said section on the ground that the
right conferred on the assessee by s. 64(1) & (2) was not an
abso_lute right and must be subject to the primary object of the
Act itself, namely, the assessment and collection of the incomeC
tax; and it was also held that where the exigencies of tax collection
.so required, the Commissioner of Income-tax or the Central
Board of Revenue had the power · to transfer his case under
s. 5(7A) to some other officer outside the area where the assessee
resided or carried on business.
That is how s. 5(7 A) was susD
tained.
Even so, this Court observed in the case of Pannalal Binjraj(')
that it would be better if an opportunity is given to the
assessee in cases where the powers conferred by s. 5(7 A) were
intended to be exercised, because he would then be able
to
mention his objections to the intended transfer .. It is in that
E
connection that this Court further expressed its opinion that if
the reasons for making the transfer "are reduced, however briefly,
to writing, it will help the assessee in appreciating the circumstances which make it necessary or desirable to order such a
transfer." It is obviously in pursuance of these observations that
the Legislature has made the relevant provisions in s. 127 ( 1) of F
the Act. If this background is borne in mind, it would be clear
that the propriety of giving an opportunity to an assessee and the
desirability of recording reasons which this Court emphasised,
had reference to cases where transfers were intended to be made
from an Income-tax Officer in one place to the Income-tall' Officer
in another place; and they obviously had no reference to transfers
G
like the present where instead of one officer dealing with the case,
another officer in the same place is asked to deal with it.
It is in the light of these considerations that we have to
construe the proviso to s. 127(1).
As we have already indicated,
the construction for which Mr. Jain contends is a reasonably
H
possible construction. In fact, if the words used in the proviso
are literally read, Mr. Jain would be justified in contending that
{I) [19S7) S.C.R 23l.
A
B
c
KASIURAM v. UNION (Gajendragadkar C.J.)
677
the requirement that reasons must be recorded applies even to
cases falling under it.
On the other hand, if the obvious object
of the proviso is taken into account and the relevant previous
background is borne in mind, it would also seem reasonable to
hold that in regard to cases falling under the proviso, an opportunity need not be given to the assessee, and the consequential
need to record reasons for the transfer is also unnecessary, and
this view is plainly consistent with the scheme of the provision and
the true intent of its requirements.
We would accordingly hold
that the impugned orders cannot .be challenged on the ground that
the Board has not recorded reasons in directing the transfer of the
cases pending against the assessee from one Income-tax Officer
to another in the same locality.
The result is, the appeals fail and
are dismissed.
There
would be no order as to costs.
Appeals dismissed.