JUDGMENT A.K. Yog and Dilip Gupta, JJ.
1. This petition has been filed for quashing the order dated 20th December, 2005 passed by the Commissioner of Income Tax-II, Kanpur under Section 127 of the Income Tax Act, 1961 (hereinafter referred to as the 'Act').
2. This is the third petition filed by the petitioners for challenging the orders passed under Section 127 of the Act, The first petition was filed for quashing the order dated 18th June, ,2004 passed by the Commissioner of Income Tax-II, Kanpur under Section 127(2) of the Act transferring the cases mentioned in the order from Assessing Officers at Kanpur to the Assessing Officers at Mumbai by filing writ petition No. 1 120 of 2004 which was allowed by the judgment and order dated 7.4.2005 but it was left open to the Commissioner to pass a fresh order in accordance with law. The relevant portion of the order is quoted below:
On perusal of the aforementioned order we find that no reasons whatsoever has been mentioned in the order transferring the cases. This Court in the case of Vinay Kumar Jaiswal and Ors. v. Commissioner of Income-tax and Ors. while dealing with the mater relating to the transfer of the case under Section 127 of the Act has held as follows:
It is obvious that when certain factual allegations are made in the objections of the assessee. they have to be dealt with, otherwise the very purpose of hearing would be frustrated. In their objections, the petitioners had specifically mentioned that all the concerns of the family barring a few which were recently established are being assessed at Kanpur and they were paying a good amount of tax in Kanpur. They have also mentioned that the accounts of all the concerns of the family are maintained at Kanpur and only manufacturing and trading activities are conducted at Bhilai. Hence it was incumbent upon the Commissioner of Income-tax to deal with the said averments which he has not done in the impugned order and for this reason also the impugned order has been vitiated.
Since in the present case no reasons have been recorded and there is no other order on record passed by Commissioner of Income-tax, we are of the considered opinion that the said order can not be sustained and is, therefore, set aside on the ground that the various objections raised by the Petitioners have not been dealt with in the transfer order.
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In view of the foregoing discussions, we set aside the order dated 18.06.2004 leaving it open to the Commissioner of Income-tax-II, Kanpur to pass a fresh order in accordance with law.
3. Pursuant to the aforesaid directions issued by this Court, a notice dated 12.8.2005 was issued by the Commissioner of Income-Tax to the petitioners to which written objections dated 26.8.2005 were filed containing reasons for not transferring the records of the cases from Kanpur to Mumbai. The Commissioner of Income-Tax-II, Kanpur then passed the order dated 6.9.2005 under Section 127(2) of the Act transferring the cases from the Assessing Officers at Kanpur to the Assessing Officers at Mumbai. This order was challenged by the petitioners by filing Writ Petition No. 1371 of 2005 which was heard by us on 18th October, 2005. We allowed the petition and set-aside the order dated 6th September, 2005 but left it open to the Commissioner to pass a fresh order in accordance with law. The relevant portion of the order is as follows:
A perusal of the judgment and order dated 7.4.2005 passed by this Court in Writ Petition No. 1120 of 2004 clearly shows that the earlier order dated 18.6.2004 in respect of the present petitioners was set aside on the ground that the various objections raised by the petitioners had not been dealt with in the order. In making he aforesaid observations, the Court placed reliance upon the observations made by this Court in the ease of Vinay Kumar Jaiswal and Ors. v. Commissioner of Income-tax and Ors. . We find that the order impugned in the present petition suffers from the same defect inasmuch as the objections dated 26.8.2005 filed by the petitioners, a copy of which has been annexed as Annexure '7' to the writ petition, have not been considered at all and only a bald statement has been made in the impugned order that the objections were not tenable. It may be pointed out that in their objections the petitioners had raised a number of grounds including the grounds that the statement contained in the notice regarding most of the cases of the group being assessed at Mumbai was factually incorrect and the main cases of Pradeep Kumar Bansal (petitioner No. 3) and M/s Bansal Sharevest Services Ltd. (petitioner No. 1) were being assessed at Kanpur since more than last ten years and that the Tax Consultant of the Chartered Accountant of the assesses were at Kanpur. It was further objected that if at all the group cases were to be assessed at one place for coordinated investigation, then they should be centralized at Kanpur. These objections have not been considered in the impugned order and a vague statement has been made that since other cases of this group had been centralized at Mumbai, it is necessary to centralize the said three cases at Mumbai so that coordinated and meaningful investigation could be done. Even the details of the cases, which had been earlier centralized, have not given in the impugned order. The observations made by this Court in the judgment and order dated 7.4.2005 in Writ Petition No. 1120 of 2004 have, therefore, not been complied with. Such being the position, the impugned order dated 6.9.2005 (Annexure '1' to the writ petition) cannot be sustained and is liable to be set aside.
4. Thereafter a fresh notice dated 12th December, 2005 was issued by the Commissioner of Income-Tax to the petitioners inviting objections to the proposed transfer of the cases to Mumbai. The petitioners filed their objections. The Commissioner of Income Tax-II, Kanpur passed a detailed order dated 20th December, 2005 under Section 127 of the Act and the relevant portion of the Order is quoted below :
The Hon'ble Allahabad High Court vide order dated 18.10.2005 has again set aside the order dated 6.9.2005 with the direction to pass a fresh order in accordance with law. These cases were again fixed for hearing as per this office letters dated 12.12.2005. The similar objections have been filed by the assessees. The main objection is that it will create inconvenience to the assessees if the cases are transferred and centralized at Mumbai. These objections are also not convincing looking to facts that Shri Pradeep Kumar Bansal, director and key person of the group, has residence cum business premises at 1502/1503 and 1506 Safalya Tara Baug, Love lane, Byculla, Mumbai. In addition, he has business at Kolkata, Bhuj, Raj Kot, Banglore, Mathura, New Delhi and Haridwar. The case of Shri Rajendra Prasad Bansal, 1175, Hara Pathak, Manik Chowk, Mathura, a case belonging to this group, has also been transferred and centralised at Mumbai from Mathura vide order dated 3.3.2004 of the Commissioner of Income Tax-I, Agra. Another case of this group namely Shri Rajeev Bansal assessed at Kanpur with Renge-I, Kanpur (under jurisdiction of Commissioner of Income Tax-I, Kanpur) is also in process for centralising at Mumbai.
In the search conducted on 26.7.2003, material has been found indicating large scale transactions in shares out side the Stock Exchanges. Seized papers also show that assessees have been indulging in accommodation entries for financing share applications/gifts. Cash has been deposited in a number of bank branches and cheques have been issued immediately afterwards for share applications/gifts. There are several gift deeds in favour of persons who have no business activities in Mumbai and prima-facie it was found that these are accommodation entries and not bona fide gifts as claimed by the assessees. There are huge transactions in the names of various parties who have to business in Mumbai. At Mumbai, the SEBI team perused the Sauda sheets at the Masjid Bunder Office of Mr. Rajeev Bansal, another case of this group, and found certain transactions which are not matching with NSE trade details. This indicates that transactions have been carried out out-side the systems of exchange and also out-side the regular books of accounts. The statements of accounts obtained from the banks during the course of investigation reveal deposits of huge cash in bank, accounts of various assessees of this group. Looking to these, facts I find that these are fit cases to be centralised at Mumbai.
In view of the above and in exercise of the powers conferred by Sub-section (2) of Section 127 of the Income Tax Act (43 of 1996), Section 11 of the Wealth Tax Act 1975 and all other powers enabling, me in this behalf, I, the Commissioner of Income Tax-II, Kanpur hereby transfer the cases, particulars of which are mentioned hereunder in Col. 3, from the Assessing Officer mentioned in Col.5 therein to the Assessing Officer mentioned in Col.6:
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7. Learned counsel for the petitioners submitted that the impugned order is unjustified as the same is based on conjectures and surmises and the reasons stated in the impugned order by no stretch of imagination attract the provisions of Section 127 of the Act for transferring the cases to Mumbai. Shri Upadhya further submitted, after placing reliance upon the decisions in Ajantha Industries and Ors. v. Central Board of Direct Taxes, New Delhi and Ors. ; Shri vinay Kumar Jaiswal v. Commissioner of Income Tax and Ors. and Vijaysanthi Investments Pvt. Ltd. v. Chief Commissioner of Income Tax and Ors. that the authority was under a statutory obligation to specify the reasons and justify transfer of records but the impugned order has been passed ignoring the principles laid down in the aforesaid decisions.
8. Shri Awasthi, learned Counsel appearing for the department, however, contended that the order dated 20th December, 2005 contains valid reasons for transferring the cases and the petitioners had failed to make out any case for interference by this Court under Article 226 of the Constitution of India.
9. We have carefully considered the submissions advanced by the learned Counsel for the parties and also perused the records including the order dated 20th December. 2005.
10. The Commissioner of Income Tax has, as is clear from the order itself (quoted above), dealt with the main objection raised by the petitioners that inconvenience will be caused to the assessees if the cases are transferred and centralised at Mumbai and has rejected the same on the ground that Sri Pradeep Kumar Bansal, Director and key person of the group, has not only residence cum business premises at 1502/1503 and 1506 Safalya Tara Baug, Love lane, Byculla, Mumbai but has business places also at Kolkata, Bhuj, Raj Kot, Banglore, Mathura, New Delhi and Haridwar. It has also been observed that in the search conducted on 26th July, 2003 material was found indicating large scale transactions in shares outside the Stock Exchanges and seized papers also indicated that the assessees had been indulging in accommodation entries for financing share applications/gifts. In fact, cash had been deposited in a number of bank branches and cheques were issued immediately afterwards for share applications/gifts and prima facie it was found that these were accommodation entries and not bonafide gifts. At Mumbai the SEBI perused the Sauda Sheets at the office of Mr. Rajeev Bansal and found certain transactions which were not matching with the NSE trade details. The statement of accounts obtained from banks during the course of investigation also revealed deposits of huge cash in bank accounts of various assessees of this group. He, therefore, concluded that it was a fit where the case should be centralised at Mumbai.
11. Learned counsel for the petitioners, however, contended that the order is arbitrary and is based on irrelevant and extraneous consideration. In support of his connection, he relied upon the decision of Hon'ble Supreme Court in the case of Ajantha Industries and Ors. (supra) wherein it was observed :
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 or 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 mala fide 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.
12. He further contended that the reasons cannot be vague and too general in nature but must be specific and based on material facts as was observed by the Andhra Pradesh High Court in Vijaysanthi Investments Pvt. Ltd. (supra).
13. The primary question, therefore, that arises for our consideration is regarding the scope of judicial interference and the parameters of the Court's power of judicial review of the decisions taken by the authorities.
14. The Hon'ble Supreme Court in Commissioner of Income-tax, Bombay and Ors. v. Mahindra & Mahindra Ltd. and Ors. considered this aspect and paragraph-11 of the judgment is quoted below-
By now, the parameters of the Court's power of judicial review of administrative or executive action or decision and the grounds on which the Court can interfere with the same are well settled and it would be redundant to recapitulate the whole catena of decisions of this Court commencing from Barium Chemicals on the point. Indisputably, it is a settled position that if the action or decision is perverse or is such that no reasonable body of persons, properly informed, could come to, or has been arrived at by the authority misdirecting itself by adopting a wrong approach, or has been influenced by irrelevant or extraneous matters the Court would be justified in interfering with the same. This Court in one of its later decisions in Smt. Shalini Soni v. Union of India , has observed thus; "It is an unwritten rule of the law, constitutional and administrative, that whenever a decision making function is entrusted to the subjective satisfaction of a statutory functionary, there is an implicit obligation to apply his mind to pertinent and proximate matters only, eschewing the irrelevant and the remote ". Suffice it to say that the following passage appearing at pages 285-86 in. Prof, de Smith's treatise 'Judicial Review of Administrative Action'(4th Edn.) succinctly summarises the several principles formulated by the Courts in that behalf thus: "The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it: it must not act under the dictation of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion it must not do what it has been forbidden to do, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to all relevant considerations, must not be swayed by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. Nor where a judgment must be made that certain facts exist can a discretion be validly exercised on the basis of an erroneous assumption about those facts. These several principles can conveniently be grouped in two main categories; failure to exercise a discretion, and excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account; and where an authority hands over its discretion to another body it acts ultra vires, Nor, is it possible to differentiate with precision the grounds of invalidly contained within each category.
15. In State of U.P. and Ors. v. Renusagar Power Co. and Ors. it was held that an order/decision in exercise of administrative power will be set aside if there is manifest error in exercise of such power or it is manifestly arbitrary.
16. The famous "Wednesbury Case" Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation (1947) 2 All ER 680 (CA) is considered to be the landmark in so far as the basic principles relating to judicial review of administrative or statutory direction are concerned. We quote a passage from the judgment of Lord Greene which is as follows:
It is true that discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology used in relation to exercise of statutory discretions often use the word 'unreasonable' in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the. things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters, which he is bound to consider. He must exclude from his consideration matters, which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting 'unreasonably'. Similarly, there may be something so absurd that no sensible person could even dream that it lay within the powers of the authority.... In another, it is taking into consideration extraneous matters. It is unreasonable that it might almost be described as being done in bad faith; and in fact, all these things run into one another.
17. The grounds for judicial review of administrative action were further summarized in 1985 by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service 1984 (3) All. ER. 935, (commonly known as CCSU case) as illegality, procedural impropriety and irrationality. He said more grounds could in future become available, including the doctrine of Proportionality which was a principle followed by certain other members of the European Economic Community. Lord Diplock observed in this case as follows:
... Judicial review has I think, developed to a stage today when, without reiterating any analysis of the steps by which the development has come about, one can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground I would call 'illegality', the second 'irrationality' and the third 'procedural impropriety'. That is not to say that further development on a case-by-case basis may not in course of time add further grounds. I have in mind particularly the possible adoption in the future of the principle of 'proportionality' which is recognized in the administrative law of several of our fellow members of the European Economic Community.
Lord Diplock explained 'irrationality' as follows:
By 'irrationality' I mean what can by now be succinctly referred to as 'Wednesbury unreasonableness'. It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.
18. In Union of India and Anr. v. G. Ganayutham , the Supreme Court after referring to the aforesaid two cases namely Wednesbury case and CCSU case observed :
We are of the view that even in our country-in cases not involving fundamental freedoms the role of our courts/tribunals in administrative law is purely secondary and while applying Wednesbury and CCSU principles to test the validity of executive action or of administrative action taken in exercise of statutory powers, the courts and tribunals in our country can only go into the matter, as a secondary reviewing court to find out if the executive or the administrator in their primary roles have arrived at a reasonable decision on the material before them in the light of Wednesbury and CCSU tests. The choice of the options available is for the authority; the court/tribunal cannot substitute its view as to what is reasonable.
19. In Indian Railway Construction Co. Ltd. v. Ajay Kumar the Supreme Court observed :
It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary. ...If a power (whether legislative or administrative) is exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated.
20. In People's Union for Civil Liberties and Anr. v. Union of India and Ors. 2004 AIR SCW 379 while dealing with the same issue, the Supreme Court observed as under:
The jurisdiction of this Court in such matter is very limited. The Court will not normally exercise its power of judicial review in such matters unless it is found that formation of belief by the statutory authority suffers from mala fide, dishonesty or corrupt practice. The order can be set aside if it is held to be beyond the limits for which the power has been conferred upon the authorities by the Legislature or is based on the grounds extraneous to the legislation and if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction required thereunder.
21. In State of N.C.T. of Delhi and Anr. v. Sanjeev alias Bittoo 2005 AIR SCW 1987 the Supreme Court in paragraphs 16 and 18 held as follows:
16...One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is 'illegality' the second 'irrationality' and the third 'procedural impropriety'.
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18. The Court will be slow to interfere in such matters relating to administrative functions unless decision is tainted by any vulnerability enumerated above; like illegality, irrationality, and procedural impropriety. Whether action falls within any of the categories has to be established. Mere assertion in that regard would not be sufficient.
22. The aforesaid decisions of the Hon'ble Supreme Court clearly set out the parameters for any inteference by the Courts. It is possible if the decision is perverse or is such that no reasonable body or person could come to it or it has been influenced by irrelevant or extraneous considerations. The Courts can also examine the matter to find out whether the executive had arrived at a reasonable decision on the material before them in the light of the Wednesbury and CCSU test referred to above and the Courts cannot substitute its view as to what is reasonable. The order can also be set aside if there is manifest error in the exercise of power or the exercise of power is manifestly arbitrary.
23. It is in the light of the principles stated above, we proceed to examine the impugned order dated 20th December, 2005.
24. As pointed out above, the Commissioner has examined the objections raised by the assessees. The main objection regarding inconvenience I has been considered and reasons have been assigned for rejecting the same. It cannot be said that the reasons pointed out in the impugned order, are wholly irrational to the extent that no person of normal prudence can arrive at the said conclusion or the same are wholly irrelevant and outside the scope of Section 127 of the Act. Shri Pradeep Kumar Bansal, the Director and the key person of the, group, has residence cum business premises at Mumbai which fact has not been denied in the petition. In fact, he has business places at many places in the country. It has also been observed by the Commissioner of Income Fax that from the papers seized during the search conducted on 26th July, 2003 it transpires that the assessees had been indulging in accommodation entries for financing share applications/gifts and the statement of account obtained from the banks at Mumbai during the course of investigation reveals deposits of huge cash in bank accounts of the various assessees of this group.
25. The facts of the case, therefore, do not persuade us to hold that the order impugned is either arbitrary or is based on irrelevant or extraneous considerations or there is manifest error apparent on the fact of record. Such being the position, we do not consider it to be a fit case for interference under Article 226 of the Constitution of India.
26. The writ petition is, accordingly dismissed.