Sahara Airlines Ltd. And Ors. vs Director General Of Income Tax … on 8 February, 2006

JUDGMENT

Pradeep Kant, J.

1. This is a bunch of writ petitions filed by different assessees belonging to Sahara Group, consisting of several companies, firms and individuals, challenging the order passed under Section 127(2) of the IT Act, 1961, transferring the cases of Sahara Group from their respective AOs at Lucknow to the Asstt. CIT, Central Circle-6, New Delhi.

2. Though the orders in respect of all the assessees have been passed individually and separately, which have been challenged in the writ petitions filed by them, but since the ground of transfer and the questions of fact and law, which have been raised and require determination, are one and the same, we have proceeded to decide the petitions by one common order, with the consent of the parties’ counsel. The writ petition No. 5395 (MB) of 2005: Sahara Airlines Ltd. v. Director General of IT (Inv.) North, and Ors. is being taken as the leading petition.

The pleadings exchanged in one or more writ petitions shall form the basis of challenge and defence in all the writ petitions.

3. In all, there are 48 assessees, out of which, six are individual assessees at Lucknow and rest of the assessees are company, firm or individuals. Out of these 48 assessees, 31 companies including six individual assessees are assessed at Lucknow, two are assessed at Kolkata, nine at Mumbai, five at New Delhi and one at Pune. Twelve companies and six individuals are being assessed at present by the Asstt. CIT, Central Circle at Lucknow and rest of the assessees at Lucknow are being assessed by the respective AOs of their circle.

4. The notice under Section 127(2) of the Act has been issued in all the cases and the date of notice is 20th June, 2005. The notice has been issued and served upon the petitioners saying that the Sahara Group consists of several companies, firms and individuals, which are presently assessed to tax at various places, including at Lucknow, Delhi and Kolkata. The group has over a period of time diversified its business activities across cities and towns of the country. There is, however, an interlacing and interconnection of funds and of business activities amongst the various entities of the group. The Sahara Group had earlier filed an application before the Chief CIT (Central) North, New Delhi for the transfer of cases being assessed in the Central Circle, Lucknow on the ground that the administrative/control offices of most of cases of this group have shifted to Delhi and that it is a fact that presently most of the offices of the group concerns including that of M/s Sahara Airlines Ltd. and of Sahara India (Firm) are located in Delhi and many of the companies are also assessed to tax at New Delhi and, therefore, the CIT (Central), Kanpur was of the opinion that for co-ordinated investigation and assessment, the cases of the Sahara Group should be centralized in New Delhi for which the assessee was being afforded’ an opportunity of being heard by attending the office personally or through Authorised Representative on a particular date.

5. The petitioner submitted its reply to the aforesaid notice on 5th July, 2005 and again on 11th July, 2005. In the reply to the recital made in the notice, it was denied that most of the offices of the group including that of Sahara Airlines Ltd. and of Sahara India (Firm) are located in Delhi, for the reason that the registered office as well as command office of the assessee is situated at Lucknow and it is only a branch office which is situated at New Delhi. Exception was also taken to the reliance being placed upon the application for transfer moved by the petitioner in the year 1996, which application, according to the petitioner could not have been taken into consideration as on transfer of the cases in pursuance of the aforesaid application of 1996 to New Delhi vide order dt. 9th Dec, 1996 making it effective from 1st May, 1997, the petitioner requested that the cases of the petitioner may be assessed at Lucknow, which prayer was accepted by the CBDT, who cancelled the earlier order of transfer vide order dt. 29th April, 1997. It was further pleaded that the cases of the group were transferred in the Central Circle at Lucknow in the year 1991 and despite more than 14 years having lapsed since the group cases were centralized, despite request for decentralization of cases at Lucknow, the cases have not been so far decentralized and now out of the blue, it is proposed that the cases of the assessee-petitioner be transferred to Central Circle, New Delhi.

6. The reply also indicated that the assessee would be facing lot of inconvenience as the entire activities of the assessee are centralized at Lucknow, which is the command office of the assessee and all the books of account and movement of staff from Lucknow to New Delhi time and again just for the compliance of the income-tax proceedings involve not only precious manhours, loss of time but also hampers the day-to-day running of business of the assessee and that the proposed action may have been justified had there been no competent authority at Lucknow but the cases at Lucknow are being presently assessed in the Central Circle itself and, therefore, there cannot be any reason for transfer.

7. The observation regarding interlacing and interconnection of funds and the business activities amongst the various entities of the group, in the notice was found to be sweeping observation by the petitioners and was not specifically denied or accepted. In view of equally competent officer being available at Lucknow and assessment at Lucknow being made by the Central Circle, it was requested that the proposal for transfer be dropped.

8. Again on 11th July, 2005 an additional reply was submitted reiterating the same stand that the registered office of the assessee-company as well as its administrative/control office are situated in Lucknow, in respect of the companies which are proposed to be transferred to New Delhi. The principal place of business is Lucknow, and the administrative control in respect of the group companies is exercised at Lucknow and the directors/partners are also placed at Lucknow. The companies which are being assessed at Delhi were (i) M/s Sahara India Corporation Ltd.; (ii) M/s Sahara India Investment Corporation Ltd.; (iii) M/s Sahara India International Corporation Ltd.; (iv) M/s Sahara India Electricals Ltd.; and (v) M/s Sain Processing & Weaving Mills (P) Ltd. All these companies are said to be dormant companies in which either no business is being carried on or they are investment companies having their registered/administrative office at New Delhi and that it was not a case where the principal place of business of the major concerns of the group is situated at New Delhi, but it is only reverse inasmuch as the companies which are being assessed at Lucknow have their principal place of business at Lucknow only. The reason for filing the application for transfer of cases from Lucknow to New Delhi in the year 1996 and subsequent reason for cancellation of the transfer order, on the own difficulty of the Department was also mentioned. Anxiety was also shown as to what purpose would be achieved by shifting the centralization of cases from Lucknow to Delhi inasmuch as the cases are already centralized in Central Circle-I, Lucknow, which means that a co-ordinated enquiry is already being conducted at Lucknow and by shifting the centralization to New Delhi, no useful purpose can be achieved. The observation made in the notice regarding the interlacing and interconnection of funds and business activities amongst the various entities was again said to be a sweeping observation, and thus was avoided from being categorically replied.

9. After considering the reply of the petitioners, the impugned order of transfer was passed on 29th July, 2005. The order of transfer passed under Section 127(2) of the Act takes into consideration the various objections raised by the petitioners and holds that the Sahara Group consists of several companies, firms and individuals, which are presently assessed to tax at various places, including at Lucknow, Delhi and Kolkata. After centralization of some of the cases of the group at Lucknow in 1991, the group has, over a period of time, diversified its business activities, which are now spread across cities and towns of the country. There is an interlacing and interconnection of funds and of business activities amongst the various entities of the group. In the aforesaid reply, the assessee denied that there is any interlacing and interconnection of funds and of the business activities amongst the entities of the group on the ground that the various entities of the group are separate having separate nature of business and separately assessed to tax. This claim of the assessee was, however, not found as acceptable. A few examples of interlacing of funds and close connection amongst the various entities of the group were also enclosed as annexure to the aforesaid order. The order further said that since the different entities of the Sahara Group are presently being assessed at various places including at Lucknow, Delhi and Kolkata, it is considered necessary for the purposes of co-ordinated investigation and assessment that all the cases are centralized at one place.

The plea of the assessee that the cases being assessed at Delhi are all dormant cases was not found to be correct and for that purpose substantial income/loss has been shown in the order itself for asst. yrs. 2003-04 and 2004-05. The CIT also found that there is an interlacing of funds and close connection of the cases assessed at Delhi with other cases of the group and few examples of the same were enclosed as annexure. Therefore, for’ the purposes of co-ordinated investigation and assessment, it was necessary that the cases of the group which are being assessed at various places be centralized at one place with a single AO. The plea taken by the assessee that there is no difficulty in coordinated investigation, as some cases of the group are already centralized in the Central Circle at Lucknow was also not accepted.

10. The CIT, while considering the objections of the petitioners against the proposed transfer having found that they were not sufficient to drop the proposal also considered and held that though the transfer of the case of the assessee from Lucknow to New Delhi may cause some inconvenience to the assessee, as per submissions made in the written replies, such inconvenience that may be caused to the assessee, cannot override the need of the Revenue for a better investigation of the case, after relying upon various judgments of the various Courts.

11. The main thrust of attack to the impugned orders is as follows :

(i) The CIT, while taking proceedings for passing an order under Section 127(2), acts as a quasi-judicial authority and his decision cannot be treated as purely administrative action, which would necessarily require an objective consideration of the issues and laying down of reasons, which are germane to the question involved, namely, the transfer of cases from one place to another.

(ii) The requirement of affording opportunity of hearing means an effective opportunity and not merely an eye-wash and that recording of reasons would also necessarily mean that the validity of the same and reasonableness thereof, can be subjected to judicial scrutiny.

(iii) There was no justification for transferring the cases from Lucknow to New Delhi as a group of cases was already being assessed with the Central Circle at Lucknow right from the year 1991 and, therefore, the transfer of all the cases from Lucknow is an arbitrary action (out of 31 assessees/petitioners at Lucknow, only 18 are being assessed with the Central Circle, including six individuals from the year 1991/1993 and rest of the assessees at Lucknow are being separately assessed at different circles even in Lucknow).

(iv) The application moved by the petitioners in the year 1996 for transfer of cases from Lucknow to New Delhi under the given circumstances, at that time, could not have been made the basis of transfer in the year 2005, ignoring the subsequent events and developments.

(v) Interlacing and interconnection of funds and business activities of different entities and companies are mere business transactions and well-known in the business world and, therefore, this ground in itself could not be a reason for transferring the cases.

(vi) It was for the best co-ordinated investigation and assessment that the petitioners were being assessed in the Central Circle at Lucknow (18 in number, out of 48) and, therefore, if for the same reasons all the assessees were to be assessed by one AO, then it would have been reasonable to transfer the cases from Delhi to Lucknow instead of transferring Lucknow cases to New Delhi and that the petitioners were ready for the cases being transferred from Delhi to Lucknow and getting all the cases assessed under one single authority under the Central Circle at Lucknow for which they have no objection; and

(vii) That the office having entire control of the group is situated at Lucknow and that all policy decisions are taken at Lucknow. The head and brain of the group is situated at Lucknow and, therefore, it is the principal place of business of the entire group, which is the basis for determining jurisdiction under Section 124 and thus there was no justifiable reason for transfer of the cases.

12. It may be put on record that after the order of transfer was passed, the petitioners moved an application to the Director General of IT (Inv.) North, Lucknow for intervention and directions for recall/reconsideration/modification of the order passed under Section 127(2) of the IT Act by the CIT (Central), Kanpur transferring the case of the assessee from Central Circle-I, Lucknow to Central Circle-VI, New Delhi but it appears that the Director General has found it not proper to intervene in the matter.

13. Section 127 of the Act, which reads as under, prescribes two pre-requisite conditions for exercising power of transfer of a case from one AO to another AO in the circumstances given therein, namely, opportunity of hearing to the assessee and recording of reasons for the transfer.

127. (1) The Director General or Chief CIT or CIT may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever is possible to do so, and after recording his reasons for doing so, transfer any case from one or more AOs subordinate to him (whether with or without concurrent jurisdiction) to any other AO or AOs (whether with or without concurrent jurisdiction) also subordinate to him.

(2) where the AO or AOs from whom the case is to be transferred and the AO or AOs to whom the case is to be transferred are not subordinate to the same Director General or Chief CIT or CIT :

(a) where the Directors General or Chief CITs or CITs to whom such AOs are subordinate are in agreement, then the Director General or Chief CIT or CIT from whose jurisdiction the case is to be transferred 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, pass the order;

(b) where the Directors General or Chief CITs or CITs aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, authorize in this behalf.

(3) Nothing in Sub-section (1) or Sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any AO or AOs (whether with or without concurrent jurisdiction) to any other AO or AOs (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.

(4) The transfer of a case under Sub-section (1) or Sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the AO or AOs from whom the case is transferred.

14. It cannot be disputed that if a statute requires affording of an opportunity of hearing before an order is passed to the person to whom the order relates, it would be an effective opportunity, which is required to be given. The effective hearing, which is required to be given would mean that the assessee must know the ground for the proposed transfer/proposed action and opportunity to rebut the same and to establish that the grounds for such transfer are not tenable under law or for any other reason, as may be admissible under law, such ground would not be sufficient to pass an order of transfer. In doing so, the material which is being sought to be relied upon and the facts, which have led to the formation of opinion for proposed transfer, have to be broadly and briefly informed to the assessee. On knowing the aforesaid ground and the facts and circumstances of the case, the assessee would have a right to object by filing written representation/objections and thereafter the authority concerned, after affording an opportunity of personal hearing, would pass an order either accepting the objections or the pleas raised by the assessee, or giving his own reasons for not accepting the same. The latter exercise would be incorporated and reduced into writing, which would meet the requirement of recording of reasons in the order. The reasons, so recorded, have to be relevant and germane to the issues raised which can be supported by documentary evidence or such evidence, as may be available, but if reasons are absurd or non-existent, mere recording of statement of reasons would not be sufficient to hold the order as valid for the compliance of the requirement of recording reasons. But the sufficiency or adequacy of material for recording such reasons, may not be a factor to raise a plea of quantitative insufficiency of material, so as to make the reasons recorded as arbitrary or bad.

15. In regard to the opportunity being afforded to the petitioners, it is apparent and there is no serious dispute also that the notices as required to be issued to the petitioners giving the grounds for the proposed transfer and affording opportunity of hearing, were issued and served, to which the petitioners responded not only by filing objections but also additional objections and they were also afforded personal hearing before passing of the order. However, an attempt has been made to impress that full opportunity could not be said to have been afforded as the observation in the matter of interlacing and interconnection of funds and business activities of different entities of the group, was only a sweeping observation in the notice but in passing the order, a list of few such companies/assessees has been annexed as annexure to support the aforesaid ground but the names of such companies/assessees were not disclosed to the petitioners in the notice.

16. The aforesaid plea of the petitioners is to be seen in the light of the contents of the notice issued under Section 127(2) and the case of the petitioners, which has been taken in the writ petition. In the notice, it has been specifically incorporated that there is an interlacing and interconnection of funds and of business activities amongst various entities of the group. The petitioners chose not to deny it by specifically making any such averment in their objections but felt satisfied by saying that the observation is sweeping and that various entities of the group have separate business and are separately assessed before the Department, despite the fact that they had filed two set of objections.

17. Separate business and separate assessment of the group companies was not an answer to the plea of interlacing and interconnection of funds.

The petitioners, instead of specifically denying that there was any interlacing and interconnection of funds or business activities with different entities of the group, chose to give a evasive reply and avoided the plea and, therefore, for establishing the aforesaid fact, if the CIT, from the own record of the assessee, has shown the material on the basis of which such an opinion was formed by him, that too, after affording opportunity of personal hearing, it cannot be said that the petitioners were deprived of any opportunity or reasonable opportunity to meet the ground.

18. The CIT, after hearing the petitioners, while considering the objections, for establishing the factum of interlacing and interconnection of funds and business activities of different entities of the group, named a few companies giving their details from the own balance sheets of the assessee-companies. The naming of these companies and showing the investment made in the unquoted equity shares of the various sister-concerns, the details of which were obtained from the own balance sheet of the companies and also that the companies had entered into joint ventures with the sister-concerns for the joint development of housing projects, that too from the own record of the company, would not mean that the petitioners were not afforded any opportunity to rebut the entries of the balance sheet or the details of such joint venture projects with the sister-concerns and profit-sharing ratio shown therein.

19. Few of the joint ventures which are quoted therein, are Sahara States, Hyderabad with co-ventures (i) Sahara India Commercial Corporation Ltd. assessed at Kolkata; (ii) Sahara India Corporation Ltd. assessed at Delhi; and (iii) Sain Processing & Weaving Mills Ltd. assessed at Delhi and also Sahara States, Bhopal with co-ventures (i) Sahara India Commercial Corporation Ltd.; (ii) Sahara Airlines Ltd.; and (iii) Sahara India International Corporation Ltd.

From the above details, it implies that the Sahara India Financial Corporation Ltd. holds balance 7.5 per cent shares in both these joint venture projects.

20. The details also show on examination of balance sheet of M/s Sahara India (Firm) for asst. yr. 2003-04 the following transactions :

(i) The firm has shown receipt of Rs. 250.45 crores as reimbursement from M/s Sahara India Financial Corporation Ltd. and has shown to have paid rent and utility charges of Rs. 3.57 crores and lease rent of Rs. 5.33 crores to M/s Sahara India Financial Corporation Ltd.

(ii) The firm has shown receipt of Rs. 442.53 crores as commission and service charges form M/s Sahara India Commercial Corporation Ltd. Kolkata.

(iii) The firm has shown to have received Rs. 20.81 crores as service charges from M/s Sahara Airlines Ltd. The firm has shown to have paid Rs. 9.80 crores against air freight and cargo charges and Rs. 5.17 crores against computer lease rent to M/s Sahara Airlines Ltd.

(iv) The firm has shown to have received Rs. 3.73 crores under the head service charges from M/s Sahara India International Corporation Ltd.

It may be added that M/s Sahara India (Firm) has its zonal offices at Gorakhpur, Lucknow, Varanasi, Bokaro, Bhopal, Patna, Baroda, Jaipur and Hyderabad and also offices at Kolkata, Noida, Delhi and Mumbai., Sri J.B. Roy, one of its partners, resides at New Delhi. The products division of M/s Sahara India (Firm) has its offices at Lucknow, Noida, Kolkata, Pondichery, Daman, Ahmedabad, Mumbai, Chennai, Bhopal and Jaipur.

M/s Sahara Airlines Ltd. has shown to have taken a loan of Rs. 417.04 crores from M/s Sahara India Commercial Corporation Ltd. in asst. yr. 2004-05. On the other hand, this company has given the loans amounting to Rs. 13.71 crores and advances of Rs. 69.07 crores. The balance sheet also shows that the company has given a loan of Rs. 3.80 crores to M/s Sahara India Ltd. and has made the following investment:

(i) It has invested Rs. 22.81 crores with M/s Sahara T.V. Ltd., Mauritius.

(ii) It has invested in the shares of M/s Sahara India Corporation Ltd. by subscribing to 4,61,89,800 shares of Rs. 10 each.

(iii) It has invested in the shares of M/s Sahara India Commercial Corporation Ltd. (Overseas), Mauritius by subscribing to 1500 shares, whose book value is shown at Rs. 6.99 lakhs.

It may be added that the main business activities of M/s Sahara Airlines Ltd. are carried out at Delhi (Ambadeep Building, Kasturba Gandhi Road).

During the financial year 1999-2000 corresponding to the asst. yr. 2000-01, M/s Sahara India Financial Ltd. gave a sum of Rs. 239.40 crores to M/s Sahara India Commercial Corporation Ltd., Kolkata on account of loan for the Amby Valley which is located near Lonawala.

During the course of assessment for asst. yr. 1999-2000 of M/s Sahara India (Firm), it was noticed that M/s Sahara India Commercial Corporation Ltd. has mobilized funds through M/s Sahara India (Firm) as under :

Rs.

 (i)   Optionally convertible debentures (Sahara 10)                20,83,54,000
 (ii)  Optionally convertible debentures (Sahara 14)              3,30,03,07,000
 (iii) Equity shares of Rs. 10 each at a premium of Rs. 90          36,42,47,000
       per share
 (iv)  Preference shares                                               16,83,000
                                                                  _________________
                                                                  3,87,45,91,000
                                                                  _________________
 

The above examples were given to illustrate the interlacing and interconnection of funds amongst the different entities of the Sahara Group.
 

21. During the course of arguments, Sri Rakesh Dwivedi, learned senior advocate, did admit that the interlacing and interconnection of funds and business activities is a part of business and no exception can be taken thereof, as each and every entry stands explained or would be explained, as required.
 

22. Sri Dewan, who initially submitted that interlacing is nothing but inter-borrowing of funds amongst the entities of the group or taking loan, which is permissible under law, however, adopted the same stand as was taken by Sri Rakesh Dwivedi and said that the interlacing and interconnection of funds and business activities is a common phenomenon in a group of companies and that the assessments are being separately made of each assessee of the company and they are being separately assessed, therefore, there cannot be any objection to that as the law permits to do so.

23. In the light of the aforesaid stand of the petitioners, not much remains to hold that due opportunity was not afforded to the petitioners, while considering the question of interlacing and interconnection of funds and business activities of different entities of the Sahara Group.

24. It may be a different matter that inter-borrowing or inter-loaning of funds or making investment in sister-concern or interlacing of funds may be permissible under law and no exception can be taken in such activities, which may be common in practice in the business world but the admissibility and permissibility of such activities or interconnection or interlacing of funds, cannot be a ground for rejecting the reasons given in the impugned order of transfer. In the assessment proceedings, if it is found that all such activities are permissible and entries are properly explained and that the tax has been duly assessed and income has rightly been shown, probably there cannot be any objection to such activities but such conditions/activities are undoubtedly relevant for getting the assessment made by one single officer. If the CIT has found and as it is admitted, may not be specifically, but apparently, that there is interlacing and interconnection of funds and business activities amongst the different entities in the group, the view taken by the CIT that such an assessment should be made by a single officer, cannot be faulted with. The ground of transfer cannot be a ground for rejection of the entries in the records nor would be a ground for making assessment in a particular manner.

Thus there appears to be no enforceable grievance of not affording reasonable opportunity in this Court, to the petitioners before passing the impugned order.

25. In the case of Mahabir Prasad Santosh Kumar v. State of UP and Ors. , it has been held by the apex Court that “….Recording of reasons in support of a decision on a disputed claim by a quasi-judicial authority ensures that the decision is reached according to law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency. A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim”.

26. In the case of Power Controls and Ors. v. CIT and Ors. (2000) 158 CTR (Del) 222 : 2000 (1) AD (Del) 545, and in particular para 19 of the report, the Court observed that “…though it may neither be possible nor desirable to confront the assessee with the entire material on record necessitating transfer of case to a particular AO for co-ordinated investigation but in order to provide a reasonable and proper opportunity to him to make an effective representation, as contemplated in Section 127(2), some basic summary of facts, giving some broad idea of the reason for the transfer of the case must be indicated in the show cause notice itself”.

Their Lordships in the aforesaid case clarified in para 22 of the report that “…we (Their Lordships) are not holding for a moment that ‘administrative convenience1 and/or ‘co-ordinated investigation’ cannot be valid ground for transferring the cases belonging to a particular group to a single AO. It would be a good ground, for transfer but the requirement of law, which has to be observed before transferring the assessee’s case from one officer to another, is that the assessee must be apprised of the basic and broad facts, which, in the opinion of the authorities concerned, necessitate co-ordinated investigation by a single AO, to enable the assessee to putforth his viewpoint on the issue so that a considered decision is taken to prevent unnecessary harassment to the assessee and at the same time the object of the transfer is achieved, which of course is the prime consideration in such like matters”.

27. In Pannalal Binjraj v. Union of India 1957 SCR 233, the Court observed that “….If the reasons for making the order are reduced however briefly to writing, it will also help the assessee in appreciating the circumstances which make it necessary or desirable for the CIT or the Central Board of Revenue, as the case may be, to transfer his case under Section 5(7A) of the Act and it will also help the Court in determining the bona fides of the order as passed if and when the ‘same is challenged in the Court as mala fide or discriminatory’.”

28. This was a case under Section 5(7A) of the IT Act, 1922. The Court also took notice of the fact that the Central Board of Revenue or the CIT, as the case may be, instructed the ITOs concerned to minimise the inconvenience caused to the assessees and even proceed to their respective residence or places of business in order to examine the accounts and evidence. In spite of the denials of the assessees in the affidavits which they filed in rejoinder, Their Lordships presumed that such facilities will continue to be afforded to them in the future and the inconvenience and harassment which would otherwise be caused to them will be avoided. A humane and considerate administration of the relevant provisions of the IT Act would, go a long way in allaying the apprehensions of the assessees and if that is done in the true spirit, no assessee will be in a position to charge the Revenue with administering the provisions of the Act with “an evil eye and unequal hand”.

29. Next, it has been vehemently urged from the side of the petitioners that the order impugned is being sought to be defended by giving explanation in the counter-affidavit, though such explanation or reasons do not find mention in the order itself.

30. Reliance has also been placed upon the case of Commissioner of Police v. Gordhandas Bhanji , in support of the plea that public order, publicly made, in exercise of a statutory authority cannot be construed in the light of explanation subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public order made by public authorities are meant to have public effect and are intended to affect the action and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.

31. In the case of Hindustan Petroleum Corpn. Ltd. v. Darius Shapur and Ors. , the Supreme Court observed that.

When an order is passed by a statutory authority, the same must be supported either on the reasons stated therein or on the grounds available therefor in the record. A statutory authority cannot be permitted to support its order relying on or on the basis of the statements made in the affidavit de hors the order or for that matter de hors the records.

32. Reliance has also been placed upon the case of Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 627 for the aforesaid proposition.

33. The petitioners’ plea that the order has been sought to be improved and supplemented by the reasons given in the counter-affidavit, apparently does not stand supported by averments made in the counter-affidavit when compared with the reasons recorded in the order for transfer. The counter-affidavit only explains the reasons given in the impugned order.

34. It has been the own case of the petitioners that the directors and partners have shifted to Delhi and that Shri J.B. Roy has shifted his residence to New Delhi. The aforesaid position is not being rebutted and rather is admitted in para 24 of rejoinder-affidavit. This fact was very well mentioned in the application dt. 17th Oct., 1996 and if the proposed notice and the impugned order both give reference to the said application, it cannot be said that this plea was not in the show cause notice or in the order itself.

35. In respect to the details of the companies and firms being given in the order, for the purpose of showing a glimpse of interlacing and interconnection of funds and business activities amongst sister-concerns, regarding which there was a specific plea in the notice, as has already been recorded by us, it does not in anyway adversely affects the merits of the order and for the reasons given in the earlier part of the judgment that would also be not a case to hold that this is an additional reason given by the CIT, which is otherwise sought to be improved by making assertion in the counter-affidavit.

36. The consolidation of cases at Delhi would not mean that any new ground has been raised in the counter-affidavit but, in fact, when all the assessment cases are to be assessed under one single officer, it can, without straining the language, be termed as ‘consolidation of cases’ for the purpose of making appropriate assessment of tax and collection thereof. This phrase ‘consolidation of cases’ does not give any additional impetus to the order impugned but only explains a circumstance for transfer of the cases, which is otherwise inherently present in the order itself.

37. The plea that the transfer of cases is in the administrative convenience and Delhi is having a better infrastructure, as urged by the counsel for the respondents, though has been raised in the arguments but does not find place in the counter-affidavit in the specific terms. But it is clear that the order for transferring the cases to one single officer at a particular place has been passed for co-ordinated investigation and assessment and, therefore, such a place would be chosen by the CIT only if it is administratively convenient and there is required infrastructure for the purpose.

The reasons thus flow from the order as well as from the record, as has been held in the case of Hindustan Petroleum Corpn. Ltd, (supra).

38. In regard to the plea that the order suffers from acute unreasonableness as it takes into consideration, the application dt. 17th Oct., 1996 moved by the petitioners themselves for transfer of the cases from Lucknow to New Delhi, following facts are essential in understanding the issue and also to find out that whether the reference to the aforesaid application was wholly irrelevant, which has the effect of vitiating the order and, if not, the extent to which the said reference has swayed the order.

39. Eleven companies were being assessed under one officer in the Central Circle, Lucknow since the year 1991 and thereafter seven more assessees including one company and six individuals were brought under the same officer sometime in the year 1993. Thus in all 18 petitioners were and are being assessed by the Asstt. CIT, Central Circle, Lucknow. Request for transfer of cases to New Delhi from Lucknow was for the first time made on 21st Oct., 1994, then on 9th Nov., 1994 and 17th Jan., 1996 but having failed to get the cases transferred from Lucknow to New Delhi, the last application dt. 17th Oct., 1996 was moved by the group giving reference to all these earlier applications.

40. It was the case of the group that the administrative/control office of the main group companies/firms was shifted to Delhi and that directors/partners, who were controlling day-to-day affairs of different companies had also shifted their residence from Lucknow to Delhi, and the affairs of the firms/companies were being controlled from Delhi and all the records/accounts were also being maintained at Delhi.

41. It was also mentioned in the application that Sahara India Airlines Ltd. is one of the large companies of the group, which is engaged in the business of air taxi operator on domestic sector in the country which has totally independent activities, not related to the group, which is otherwise engaged mainly in para-banking business in India. All the operations of the said company are managed/looked after and operated from New Delhi.

On 3rd Nov., 1996 Sahara India Financial Corporation Ltd. resolved to, shift the registered office of the company from Lucknow to Noida in the National Capital Region, New Delhi. The transfer order was passed on 20th Nov., 1996 transferring all the cases of assessment from Lucknow to New Delhi including 18 Sahara companies/assessees making it effective w.e.f. 9th Dec, 1996.

However, by means of order dt. 9th Dec, 1996, the CBDT made the order of transfer effective w.e.f. 1st May, 1997, instead of 9th Dec, 1996 and thus modified the order dt. 20th Nov., 1996 to that extent. Necessary forms were filed with the Registrar of Companies notifying the change in its registered office changing the same from Lucknow to Noida. After the aforesaid order of transfer passed on the own request of the petitioners, which was passed on the practical difficulties, which were being faced by the petitioners, the petitioners appear to have moved an application on 19th April, 1997 that in case the Department is having difficulty in transferring the cases to Delhi, the Sahara Group would have no objection, if they were to be assessed at Lucknow, The order of transfer dt. 20th Nov., 1996 passed by the CBDT was cancelled vide order dt. 29th April, 1997 and the cases were again transferred to Lucknow. On 18th May, 1997, the registered office of the company, Sahara India Financial Corporation Ltd., was also resolved to be transferred from Noida to Lucknow, for which necessary formalities were done with the Registrar of Companies.

It has been specifically pleaded and contended by Sri Anil Dewan that the earlier order of transfer was cancelled, because of the difficulty being faced by the Department in dealing with the cases at New Delhi, on the request so made by the petitioners.

42. The fact that the transfer order dt. 20th Nov., 1996 was cancelled because of the difficulties being faced by the Department has been refuted by the respondents nor such a mention finds place in the order of cancellation of transfer but taking the plea as correct that the said transfer order was cancelled by the Department, because of its own difficulty in carrying on the assessment at New Delhi, the same would mean that the petitioners were neither unwilling nor were facing any inconvenience or difficulty in being assessed at New Delhi, despite 18 assessees of the group were already being assessed by one single officer at Lucknow, therefore, if the cases are now being transferred to New Delhi, there cannot be a possible objection on the ground that the earlier transfer was cancelled on the request of the petitioner and, therefore, the contents of the said application could not have been taken into consideration.

43. A perusal of the aforesaid application of the year 1996 would reveal that it was moved by all the then assessees (Sahara Group) because of the diversification of the business activities of the Sahara Group and its business transactions in New Delhi. Mere transfer and re-transfer of the registered office of one company or the other, from Lucknow to Noida and Noida to Lucknow was hardly of any significance for the purpose of assessment being made either at Lucknow or New Delhi.

The application in its contents was not confined to any one particular company or its change of administrative and controlling office but in fact, it related to the entire group, pleading that all the companies/firms had initially started their operations from Lucknow but now Lucknow is one of the several main branches of the group companies and, therefore, this could not be a bar for determining the jurisdiction in their case at New Delhi. The main business activity of the group was said to be para-banking and not that of air taxi.

44. In regard to the business activities, as enumerated in the application, at Delhi, coupled with the admitted fact that the offices of the group are situated throughout the country and that five group companies were being assessed at Delhi and that the activities of the group have diversified and spread across the country with the significant presence in New Delhi, the CIT, if in the background of the own case of the petitioner, made a reference of the aforesaid application dt. 17th Oct., 1996, while proceeding to consider the plea for making a co-ordinated assessment for the purpose of just and correct assessment and collection of tax, it cannot be said that he was mainly swayed by the said fact or that it was wholly an irrelevant consideration.

The conduct of the petitioners shows that they themselves were not sure as to whether they should be assessed at Lucknow or at Delhi and, therefore, the CIT was fully justified to provide a place for assessment under one office at his own discretion after taking into account the various factors necessary for the purpose.

45. It is not the order nor the case of the Department that since the petitioners had moved an application in the year 1996 for transfer of the cases, therefore, on that application, the cases are being transferred, rather the relevance of the said application has been limited to the extent of making a reference of the same to the facts given in the order with respect to various activities of the Sahara Group of Companies at New Delhi and the request of the petitioners themselves regarding the request for transfer of cases from Lucknow to New Delhi.

46. It is also relevant to mention that as per the own pleading of the petitioners, which has been strenuously pressed, the cancellation of the transfer order dt. 20th Nov., 1996, passed on the request of Sahara Group on its application dt. 17th Oct., 1996, was passed not because of any difficulty or inconvenience of the petitioners (Sahara Group), nor such an inconvenience was ever pleaded for cancellation of the earlier transfer order and if that be so, reference to the aforesaid application can be of no exception.

47. The fact remains that at the time when the group moved the application for the first time for transfer of cases from Lucknow to New Delhi on 21st Oct., 1994, and then again on 9th Nov., 1994 and 17th Jan., 1996 and lastly on 17th Oct., 1996, the same position as it exists today, namely, 18 companies/assessees of the group were being assessed under one single officer at Central Circle-I, Lucknow, but despite the aforesaid group assessment being made of a part of the group companies/assessees, the prayer was made for transfer of all the cases to New Delhi. The order of transfer, therefore, while making reference of the application dt. 17th Oct., 1996, does not take into consideration any such fact, which is wholly irrelevant nor can be termed as an extraneous consideration nor it has swayed the order away from the merits of the claim of either parties.

48. Moreover, the order not being solely passed on the factum of moving the application in the year 1996 for transfer of the cases by the petitioners but on reasons independent thereof, namely, interlacing and interconnection of funds and business activities with the sister-concerns and necessity to have the assessment made at one place under one officer, which reasons are in themselves sufficient to sustain the order.

The order cannot thus be held to be arbitrary or bad on this count.

49. The next argument which has been stressed with full force is that there could not be any reason, much less a justifiable reason for transferring the cases from Lucknow to New Delhi, particularly when 18 out of 31 assessees including companies, firms and individuals are being assessed under one officer in Central Circle-I, Lucknow, namely, Asstt. CIT right from the year 1991, in some cases and from the year 1993 and, therefore, even if for any good reason all the cases are to be assessed by one single officer, that could have been done by transfer of the cases from New Delhi to Lucknow, but the order does not show any such reason as to why such an order cannot be passed nor it discloses the reasons for making an order of transfer vice-versa.

50. While elaborating the aforesaid argument, it has also been stated that the petitioners would have no objection if all the cases are transferred from New Delhi to Lucknow, Central Circle, a fact which has been specifically stated in the writ petition also. A corollary to the aforesaid statement is that the reasons for transfer of cases to New Delhi are absolutely arbitrary, perverse and do not get support from various documents which have been relied upon by the CIT, besides being factually incorrect.

51. Before proceeding to test the reasons and their alleged arbitrariness or illegality, it would be appropriate to put the record straight and see the case of the petitioners, which they have taken in reply to the notice issued against the proposed transfer of cases from Lucknow to New Delhi and that whether such a plea of concession for transferring the cases from New Delhi to Lucknow was ever taken before the CIT.

52. In their replies dt. 5th July, 2005 and 11th July, 2005, the petitioners did not appear to have made any such statement that all the cases be transferred and centralized at Lucknow. The reply dt. 5th July, 2005 disputed the observations made in the proposed notice that the administrative/controlling offices of most of the cases of the group concerns, including that of M/s Sahara Airlines Ltd. and of Sahara India (Firm) are located in Delhi and many of the companies are also assessed to tax at New Delhi which also challenged the notice on the ground that it has relied upon the application dt. 17th Oct., 1996 moved by the petitioners, and raised a grievance that despite the request for decentralization of cases at Lucknow, the cases were not decentralized but suddenly this transfer has been proposed. The reply only made a challenge to the proposed transfer and it did not say that all the cases from New Delhi may be transferred to Lucknow.

53. Similarly in the additional reply, the same pleas were reiterated. A- bare reading of the aforesaid two replies would indicate that the petitioners in their reply have very cautiously stated that the group is continuously being assessed to tax in the same range in the Central Circle, Lucknow and that no purpose would be achieved by shifting the centralization of cases from Lucknow to Delhi, which means that a co-ordinated enquiry is already being conducted at Lucknow. While making the said reply, the petitioners avoided to mention that there were only 12 companies/firms and 6 individuals, whose cases were centralized and even remaining 13 companies/assessees were being differently assessed at Lucknow itself and of course 5 companies, were being assessed at Delhi, apart from the companies which were being assessed at different places at Kolkata, Mumbai and Pune. The reply gives an impression as if all the companies of the group are being assessed in the Central Circle-I, Lucknow and for that matter the petitioners reiterated that the proposed transfer be dropped. In fact, the petitioners very well knew that it is not the transfer of the cases of only 18 assessees, who were being assessed by a single officer in Central Circle, Lucknow but it includes all the assessees at Lucknow as well as New Delhi, who are being separately assessed, and of course, the cases from Kolkata were also to be transferred to New Delhi.

54. The plea that the petitioners were willing to have all the cases transferred at Lucknow specifically in the letter to the Director General of IT (Inv.) North, Lucknow on 18th Aug., 2005 is in the following terms : “If at all it is proposed to centralize all the cases, the same may be centralized at Lucknow where the assessee has paraphernalia and the man power to co-operate with the Department in the assessment proceedings”, This letter, besides being addressed to the Director General, who had not passed the order for transfer, was written after the impugned order was passed on 29th July, 2005.

55. The stand of the petitioners before the CIT was that the proposed transfer is bad and is not justified nor is legal, which is based on factually incorrect information, ignoring the centralization of the cases at Lucknow and the competence of the Central Circle, where the group of companies is being assessed under a single officer and, therefore, the proposal of transfer be dropped. All the pleas raised in the reply were in fact, challenge to the proposed transfer and not for suggesting that the cases from New Delhi be transferred to Lucknow and if it is done so, the petitioners would have no objection. The reply, in fact, made a grievance of not decentralizing the cases of the petitioners (18 in number) which were being assessed by a single officer since 1991 or 1993, reflecting an element of discomfort in not decentralizing the cases.

56. The argument, therefore, that the CIT did not consider the aforesaid plea of the petitioner of transferring all the cases from New Delhi to Lucknow, thus cannot be said to have been raised before the CIT. The subsequent raising of the aforesaid proposal before another authority who had no jurisdiction to review or recall the order of the CIT under the Act and thereafter making a clear statement to that effect in the writ petition, would not render the impugned order bad on this ground. The said plea also ignores the fact, that it is not only cases at Lucknow were to be transferred to Delhi but also that of Kolkata.

57. It may be appropriate to mention that the CIT was not required to give reasons for not transferring the cases to Lucknow, but he was to record reasons for transferring the cases out of Lucknow, which he has done. It can also not be presumed that the CIT, while proposing and choosing the venue, would not have considered, as to which place would be more appropriate for the purpose and had he come to the conclusion that the cases be transferred to some other place, he could have done so.

58. Challenging the transfer of cases for co-ordinated and effective investigation, detailed arguments were made from the side of the petitioners to suggest that this could not have been a ground in the present case for transfer but later on, the aforesaid argument was confined only to the plea that there was no valid reason for transferring the cases to New Delhi when a group of companies was already being assessed at Central Circle under a single officer at Lucknow and that if any transfer was to be made, then the cases should be transferred from New Delhi to Lucknow under the same circle.

59. Sri Anil Dewan, learned Counsel for the petitioners could not dispute and rather candidly submitted, that when there are several companies/firms/ individuals/assessees in a group then they can be directed to be assessed under one single officer in consideration of exigencies of effective and proper assessment to income-tax and consequent tax collection. In fact, he reiterated the stand that the petitioners would have no objection if all the cases are transferred to Lucknow and assailed the reasons for transferring the cases to New Delhi.

60. In a group where several companies, firms, institutions and individuals are the assessees and having common directors and partners, etc. in one or the other company or firm and where there is inter-corporate transactions and borrowings and where inter-corporate loans are provided and where there is an element of interlacing of funds and intermixing of activities with other entities, it is necessary for the correct, proper and just assessment of tax and for collection thereof, to get the assessment made under one single officer. This would not only be convenient to the Department in making assessment of tax but would also be beneficial to the assessees while participating in the assessment proceedings.

The best co-ordinated investigation and assessment would require that all the cases are considered by an officer, who can have his access to the record of all the assessees and proper investigation could be made. This will also be less time-consuming and more transparent and apparent. In view of the clear stand of the petitioners that there cannot be any objection to the cases being assessed by a single officer for co-ordinated and effective investigation, it requires no further discussion to hold that the ground for transfer of cases to one single officer cannot be said to be illegal, arbitrary or bad in law.

61. We would like to put on record a passage from the judgment in the case of General Exporters v. CIT and Anr. (2001) 167 CTR (Mad) 196 : (2000) 241 ITR 845 (Mad), wherein the Court considering judgments passed by various High Courts, has held that facilitating of investigation or co-ordinate investigation is a substantial ground for transfer of case, which reads as under:

In Jharkhand Mukti Morcha v. CIT , the Ranchi Bench of the Pata High Court, after referring to Sameer Leasing Co. Ltd. v. Chairman CBDT , V.K. Steel Industries (P) Ltd. v. Asstt. CIT , and Vijayasanthi Investment (P) Ltd. v. Chief CIT , preferred to follow the decision reported in Assam Surgical Co. v. CBDT and Bhatia Minerals v. CIT , as against the view of the Andhra Pradesh High Court in Vijayasanthi Investments (P) Ltd. v. Chief CIT (supra) and further held thus:

Apart from the Delhi and Allahabad High Courts, the Gauhati High Court in the case of Assam, Surgical Co. v. CBDT (supra), the Rajasthan High Court in the case of Rishikul Vidyapeeth v. Union of India and the Calcutta High Court in the case of Dwarka Prasad Agarwalla v. Director of Inspection , have held that facility of investigation or co-ordinated investigation is a substantial ground for transfer from one officer to another officer.

62. The only question that remains to be answered is regarding the transfer of cases from Lucknow to New Delhi. It has been submitted on behalf of the petitioners that since the principal place of business of the group, namely, Sahara Group, consisting of companies, firms and individuals is at Lucknow, therefore, keeping in mind the provisions of Section 124 of the Act, which defines the jurisdiction of an officer for the purpose of assessment, the cases could not have been directed to be transferred to New Delhi. In support of this plea, it has been urged that the principal place of business of the company would mean, where the policy decisions are taken, directives are issued and control is effected, namely, where the head and brain of the company is situated. Since the controlling office and the command office of the group is at Lucknow, therefore, Lucknow would be the principal place of business for the purpose of determining jurisdiction.

63. In response, it has been submitted that the principal place of business for the purpose of Section 124 would mean, where the business activities and operations of the company are being undertaken and not merely where the headquarter or the registered office is situated. It has further been argued that in any case considerations for passing an order under Section 127(2) are entirely different than the requirement of Section 124, which provision, in effect, would not be attracted when considering the applicability of Section 127(2).

64. The determination of jurisdiction under Section 124 and under Section 127(2) has different connotations and a different purpose. Considerations, therefore, also differ and there cannot be a valid defence for the assessee for challenging the order passed under Section 127(2) on the ground that the assessment should be made at a place where the assessees/group companies are having principal place of busineSections Section 127(2) does not restrict the exercise of discretion of transfer of cases to any such limitation nor its exercise is to be guided by the principal place of business of the group companies/assessees. It would be sufficient that if there are several assessees in a group and they are having their business transactions and activities at different places, which require consolidation of assessment proceedings to be conducted at one place under single officer, such cases can be transferred to any one particular place, which is found to be appropriate by the authority. Of course, if the order is absolutely arbitrary transferring the cases to a particular place, where the assessee is having no business activities or where no fruitful purpose would be served in transferring the cases, a plea can be raised that such an order is not in consonance with the provisions of the Act but the burden of proof would lie upon the assessee to plead and prove the same. Mere inadequacy or insufficiency of material for the reasons recorded to the contrary, would in itself be not a ground for faulting the order.

65. Section 124(1), which reads as under, prescribes the jurisdiction of the AO in respect of an assessee on the given principles and grounds mentioned therein, whereas Section 127 is an exception to the aforesaid provision of Section 124.

124. (1) Where by virtue of any direction or order issued under Sub-section (1) or Sub-section (2) of Section 120, the AO has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction

(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or 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.

66. Section 127 confers power to transfer the cases of an assessee on the discretion of the authority competent that it is necessary to do so in the interest of Revenue and for proper assessment of tax and collection thereof. The said discretion is not guided nor is controlled by the provisions of Section 124. Section 124 is a provision defining the jurisdiction in normal circumstances, whereas Section 127 can be attracted only when it is felt by the CIT or the CBDT or the authority competent that it is proper or appropriate to exercise power under the said provision in the interest of Revenue and for proper adjudication of the tax liability or collection thereof. Thus, as a sequel to the aforesaid principle, it follows that the transfer of cases can be ordered for facilitating the task of effective investigation and for best and co-ordinated assessment.

67. The discretion to pass such an order has to be exercised keeping in mind the inbuilt restraint that such an action should not be taken arbitrarily or for any extraneous reason or with an ulterior motive but only with a view to get the correct assessment of tax done, wherein by and large, the factors, which may be taken into account, are that the business of the assessee group is scattered and its activities are not confined at one particular place but at different places and it is necessary to have the assessment under one single authority, who may require access to all the records, which if seen together and cross-checked, may clear out and give correct picture of the income, on which the assessment of tax is to be made or the accounts are maintained by different assessees of a group where there is inter-transactions of money, interlacing of funds and of business activities with sister-concerns, which would also require the consolidation of all such cases and the records in all the cases to be available to the AO or in a given case, the conduct of the assessees would not permit the assessment to be carried on at a particular place where normally it is to be made and so on so forth. There cannot be any straight jacket formula or any straight guidelines, under which the discretion of transfer of cases can be exercised. Each and every case will depend on its own facts and the reasons for transfer may be apparent from the order of transfer.

68. The question as to whether the exercise of power under Section 127(2) is administrative in nature or it is quasi-judicial has also been seriously argued by the parties, the stand of the Revenue being that it is administrative exercise of power, whereas the assessees’ counsel submitted that it is quasi-judicial function of the authority.

69. The requirement of giving opportunity to the assessee before passing an order of transfer of cases from one place to another under Section 127(2), coupled with the requirement of recording of reasons for passing such an order, cannot put the said power into the exclusive administrative domain of the authority but it symbolizes its quasi-judicial function. However, the distinction and the requirement of following the principles of natural justice and recording of reasons for passing an order in the proceedings either administrative or quasi-judicial have been reduced into a very thin margin, in effect, making such a distinction non-existent. Any order, even if it is administrative, has to meet the test of Article 14 of the Constitution and should be supported by reasons, which are not absurd or arbitrary. An order of transfer of cases under Section 127(2) may cause some inconvenience to the assessee and, therefore, any such order has to be passed after hearing and by giving reasons. The aforesaid requirement does fulfil the necessary ingredients of principles of natural justice, which have also been incorporated in the aforesaid provision. Thus, the nature of the authority, which is exercised under Section 127(2) is not of much significance, i.e., whether it is taken as administrative exercise of power or quasi-judicial exercise of power.

70. In the case of Ajantha Industries and Ors. v. CBDT and Ors. 1976 CTR (SC) 79 : (1976) 1 SCO 1001, the apex Court was dealing with a case, wherein the reasons were not communicated and it was said that failure to communicate the reasons for passing an order under Section 127 makes the order bad.

The apex Court in aforesaid case observed as under :

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 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.

The infirmities as found by the apex Court in the aforesaid case do not exist in the present case, as the reasons in this case were duly communicated for passing the order under Section 127(2).

71. In Benz Corporation v. ITO and Ors. , Kerala High Court held that the “….Chief CIT had filed a counter-affidavit stating certain facts and circumstances which were not disclosed in any of the communications. The Chief CIT could not supplement the notification with averments made in the counter-affidavit’ and that ‘the power of transfer of assessment files from one authority to another is conferred on the CIT under Section 127(1) of the IT Act, 1961. The power is a quasi-judicial one. Such a power has to be exercised in a fair and reasonable manner and not in an arbitrary and mechanical way. The passing of a reasoned order is one of the requirements of fairness in action”.

72. In the context of the present order, the petitioners have assailed the same saying that it is absolutely an arbitrary order and the reasons given therein are no reasons in the eye of law. The argument has been developed by asserting that five companies assessed at Delhi are dormant companies, whereas the main business of the group is being carried out at Lucknow in the companies having a larger turnover of income. This is being refuted by the Revenue by giving certain details of turnovers and the business activities, their area of operation, and by pleading that the order of transfer itself shows that the main entities of the group are having their business in Delhi, apart from interlacing of funds and business activities amongst the sister-concerns, and various transactions of money shown in the said order. It has also been submitted in reply, that the assessees of the group are assessed at different places, namely, 18 assessees in Lucknow are grouped together and are being assessed by the Asstt. CIT, Central Circle-I, Lucknow but there 13 companies are being still assessed separately. Besides, 5 companies are assessed at New Delhi, 2 in Kolkata, 5 in Mumbai and 2 in Pune and, therefore, if the order of transfer of cases to Delhi is passed, it cannot be said that the order is arbitrary or it lacks bona fides or that the transfer has been made at a place where the group is having no business activities or is not, carrying any business or business operations over there.

73. The case of G. Mohandas and Anr. v. CTT and Ors. , on which reliance has been placed by the learned Counsel for the petitioners, was a case where on the request of the petitioner/assessee, the cases of establishment were transferred from Kerala to Chennai as they proposed to shift their entire business activities to Chennai but later, on the report of the Asstt. CIT, the cases were re-transferred from Chennai to Kerala. The Court while considering the power to transfer the cases did observe that while doing so, the convenience of the assessee cannot stand in the way but further held that the said power should not be exercised arbitrarily or on flimsy grounds, nor for extraneous or irrelevant considerations. The Court further held that the said requirements can easily be assessed from the reasons given in the order as it is mandatory on the part of the officer to give such reasons under Section 127 of the IT Act. The order of transfer (re-transfer) was quashed by the High Court considering the submissions of the learned Counsel for the petitioner that most of the assessments have been completed after transfer in the Chennai office, and the assessees have already transferred the registered office to Chennai and they are gradually closing down the business at Trivandrum. Further, the transfer of the registered office of Kerala Hotels (P) Ltd. was approved by the Company Law Board and the certificate of incorporation with respect to the company at Chennai was also produced. Also the petitioner permanently shifted their residence to Chennai. The details of the property purchased in Tamil Nadu were also given and it was pleaded before the Court that the property in Kerala cannot be sold out immediately but it will take some time and they shall sell them during the course of the period.

The aforesaid case is of no assistance to the petitioners as it was based on the facts of the aforesaid case, wherein the assessee closed their business at Kerala, whereas in the instant case, no such plea had been raised of closing down the business at New Delhi of all the companies.

74. It may be brought on record that on a plea being raised by the learned Counsel for the petitionersm, Sri Anil Dewan, that no notice has been issued for transferring the cases pending at Pune and Mumbai to New Delhi and, therefore, this reason of centralization of cases or consolidation thereof at Delhi, is not true, Sri Gopal Subramaniam appearing for the respondents categorically stated that the notices for transfer of the cases from Pune and Mumbai to New Delhi are also ready for despatch but since in the meantime an interim order has been passed in this case at Lucknow and on the parity of the said order, proceedings for transfer of cases to New Delhi have been stayed by the Kolkata High Court also, therefore, notices could not be issued as yet.

75. We may not take judicial notice in the strict, sense of the aforesaid fact of proposed issuance of notice for transfer of cases from Pune and Mumbai to New Delhi but in view of the argument of the petitioners themselves about non- issuance of such notice, the information given by Sri Gopal Subramaniam may also be a relevant factor for transferring the cases to New Delhi, more so when the order in question takes note of the fact that the assessees under Sahara Group are being assessed at various places apart from Lucknow, Kolkata and Delhi, as it makes a mention that they are presently assessed at various places including Lucknow, Delhi and Kolkata.

76. Sri Gopal Subramaniam has submitted that since the offices of several group entities are located at Delhi and some of the group entities are also being assessed to tax at Delhi while others are assessed elsewhere at Kolkata, Pune and Mumbai, the centralization of the assessment cases at New Delhi “cannot be attributed (to) any malice or motive. He also reiterated that principal business of the group is the mobilization of deposits, which is now spread over in all major cities of the country; housing projects of the Sahara Group are being developed in 217 cities of the country with an investment running into several lakh crores of rupees which is being handled by M/s Sahara India Commercial Corporation Ltd., assessed at Kolkata, airlines business of the group was being handled by M/s Sahara Airlines Ltd. at New Delhi. The Sahara Group has also made inroads in the media business and has started 24-hour TV channels, besides producing films and the business activities pertaining to the media business are being looked after by a group company at Mumbai and all the activities pertaining to the media business are concentrated outside Lucknow.

77. Under the circumstances when the business activities of the Sahara Group and its offices are spread throughout the country and there is interlacing/interconnection of funds and business activities amongst various entities of the group, the choice of a venue looking to the business activities of the group by making an overall assessment, the order passed by the CIT cannot be held to be unjustified or unreasonable.

78. The choice of place where the cases are to be transferred is fully within the domain of the transferring authority. The assessee can have no choice to ask for a particular officer or a particular place for the assessment to be made when power under Section 127(2) is to be exercised. It is sufficient that the place where the cases are being transferred has sufficient links with the business activities of the group assessees and that the comparative volume of business at a particular place may not be very material. An assessee though can raise a plea against the transfer to a particular place in case it is found that there is no business activity at all at the proposed place of transfer of the group companies/firms/individual assessees but even if the business activities are carried on with a comparatively lesser amount of investment or volume of business is less, it would not be reasonable to hold that the order of transfer of cases to such place suffer from any arbitrariness.

79. Even assuming that the cases pending at New Delhi or Kolkata could have been transferred to Lucknow, where a part of the group companies/assessees are being assessed under one single officer, the order cannot be interfered with on this ground as the cases could have been transferred to Delhi also and if the CIT finds, in his discretion, that transfer of cases to New Delhi would be proper, looking to the facts and circumstances of the case, where administrative exigencies can be adequately/comprehensively addressed, such a discretion cannot be interfered with. It was for the CIT to decide the place where the assessment of tax with respect to group companies, firms and individuals is to be made.

80. It is also to be taken note of that when application for transfer of all the cases from Lucknow to New Delhi was made on 21st Oct., 1994, 9th Nov., 1994, 17th Jan., 1996 and lastly 17th Oct., 1996, on which application the cases were transferred to New Delhi, 18 assessees of the group were already being assessed by a single officer, namely, Asstt. CIT, Central Circle-I, Lucknow, but even then the petitioners themselves made request for transfer of all cases from Lucknow to New Delhi, which may also be a relevant factor for transferring the cases from Lucknow to New Delhi.

81. It is being urged by the learned Counsel for the petitioners that transfer of cases from Lucknow to New Delhi is not mere inconvenience but is an harassment, which according to him is repeated inconvenience being caused to the assessee.

82. In Pannalal Binjraj case (supra) this argument of inconvenience, however, was held to be not conclusive. The Court in the said case observed that…. There is no fundamental right in an assessee to be assessed in a particular area or locality’.

Pannalal Binjraj (supra) also says that the question as to whether one or the other of the authorities will proceed to assess a particular assessee has got to be determined not only having regard to the convenience of the assessee but also the exigencies of tax collection and that “….In order to assess the tax payable by an assessee more conveniently and efficiently it may be necessary to have him assessed by an ITO of an area other than the one in which he resides or carries on business. It may be that the nature and volume of his business operations are such as require investigation into his affairs in a place other than the one where he resides or carries on business or that he is so connected with various other individuals or organizations in the way of his earning his income as to render such extra-territorial investigation necessary before he may be properly assessed. These are but instances of the, various situations which may arise wherein it may be thought necessary by the IT authorities to transfer his case from the ITO of the area in which he resides or carries on business to another ITO whether functioning in the same State or not”.

83. On considering the case of Dayaldas Kashiram v. CIT ILB 1940 Bom 650, the Court observed that “…in effect this section does not give a right to the assessee to have his assessment at a particular place but determines the ITO who is to have power to assess him”.

84. We are not impressed by the aforesaid plea as the transfer of the cases has been effected for the best co-ordinated assessment and investigation and for proper adjudication of the tax and collection thereof in the light of the circumstances and reasons recorded in the order and, therefore, mere inconvenience to the assessee cannot be a ground for holding the order bad, which has been passed wholly in accordance with the provisions of the Act.

85. During the period when the judgment was reserved, an application was moved on 20th Jan., 2006 for rehearing of the case on the ground that recently on 19th Jan., 2006 Sahara Airlines has been transferred to M/s Jet Airlines Ltd. and thus one of the main entities at Delhi is no more in existence and, therefore, the order which is mainly based upon the business activities of the said company cannot be sustained and is liable to be set aside.

86. Learned counsel, however, arguing on the said application made it clear that the petitioners do not want rehearing of the cases but only wish to put on record the subsequent event.

87. In response, learned Counsel for the Revenue has urged that the order of transfer has been passed not on the ground of Sahara Airlines being controlled and being operated from Delhi but considering the entire scenario of the Sahara Group of Companies, firms and individuals situated at various places and their diversified business activities, and other reasons recorded in the order. M/s Sahara Airlines Ltd. was being assessed at Lucknow but admittedly five group companies were being and are being assessed at New Delhi, besides several companies being assessed elsewhere viz., Kolkata, Pune and Mumbai. Further, it was the own case of the petitioners, which reflects from their application dt. 17th Oct., 1996 for transfer of cases, that the main business of the group was para-banking and not the business of air taxi, which was a totally independent activity of M/s Sahara Airlines arid, therefore, even if there has been transfer of Sahara Airlines to some other airlines, it would hardly be a ground for holding the order bad or illegal.

88. This Court, taking into consideration the arguments raised, passed the following order on the said application:

Sri Wasiquddin Ahmad, learned Counsel for the petitioner, has very candidly submitted that he has moved this application for rehearing of the writ petition only to bring to the notice of this Court the subsequent developments which have taken place after hearing of the writ petition was concluded and not for rehearing the petition.

Sri Pradeep Agarwal says that no case for rehearing the matter is made out and further says that subsequent development cannot be guiding factor for considering the validity of the impugned order in the writ petitions.

Place this application on record of the case. The order will be passed thereon at the time of final order/disposal of the writ petition.

89. In the light of the aforesaid submissions made by the respondents and the own case of the petitioners, regarding the independent nature of business activities of M/s Sahara Airlines and also in view of the statement given by the learned Counsel for the petitioners that he only wanted to bring the subsequent development to the notice of the Court, it will not be necessary for us to consider the plea of subsequent event aforesaid any further, nor would it make the order bad requiring interference by us.

90. The validity of an order impugned is to be tested in the light of the facts and circumstances as it existed on the day of the passing of the order. Any subsequent development or event cannot make the order bad nor it can be set aside on that ground, unless such an event has the effect of nullifying the order. It would be a different matter in a given case that any subsequent development or change or subsequent event, if relevant, may give opportunity to the aggrieved person, for approaching the authority concerned for consideration of such an event. The authority, in turn, would be at liberty to consider the said prayer as per rules and as per the requirement of the facts and circumstances of the case, if so warranted, as per his own discretion.

91. We thus, for the reasons stated above, do not find any arbitrariness or illegality in the impugned order of transfer. The petitions have no force and are hereby dismissed.