My file has been moved to another city under section 127. The order says only that it was for facility of investigation, and nobody has given me the reasons. Is that enough?
No. Section 127(1) requires the authority to record reasons before it transfers your case, and the Supreme Court held that recording them is not enough on its own — they have to reach you. Reasons sitting in the departmental file that were never communicated do not save the order: the Andhra Pradesh High Court's judgment upholding this transfer was set aside and the transfer orders quashed. The point of communicating them is to let you challenge the transfer under Constitution Art. 226, or under Constitution Art. 136, on the ground that it rests on irrelevant and extraneous material.
Decided by the Supreme Court (Supreme Court of India — P.K. Goswami J, K.K. Mathew J and N.L. Untwalia J) on 1975-12-05, reported as 1976 AIR 437; 1976 SCR (2) 884; 1976 SCC (1) 1001; [1976] 102 ITR 281 (SC); Civil Appeal No. 724 of 1975. It bears on section 127, section 127(1), section 124, section 124(3), section Constitution Art. 226, section Constitution Art. 136, section 5(7A) of the Indian Income-tax Act, 1922, section 243 (Act of 2025), section 242 (Act of 2025) of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
A transfer looks like housekeeping and is treated as such by almost everybody, which is why the defect survives so often. The order arrives as a one-line intimation that your file now sits in another city, the reasons are never given, and by the time the new officer is issuing notices the transfer is old news. This judgment says the order was invalid from the start. Take it early, because the remedy is a writ and a writ court asks why you waited.
Binding on every court and authority in India.
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The first appellant was a registered firm and the other two appellants were its only two partners. They had been assessed for a number of years at Nellore in the ordinary course. On 23 January 1973 the Central Board sent them a notice under section 127 proposing to transfer their case files "for facility of investigation" from the Income-tax Officers at Nellore to the Income-tax Officer, B Ward, Special Circle II, Hyderabad, and asked them to say in writing within fifteen days whether they objected. They did object. On 26 July 1973 the Board passed the order of transfer. They took the order to the Andhra Pradesh High Court on a writ petition. The learned single Judge called for the relevant file, found that reasons had in fact been recorded by the Board before the order was passed, held that the mere failure to communicate those reasons to the appellants was not fatal, and dismissed the petition. Their Letters Patent Appeal to a Division Bench met the same fate, and it is that judgment of 12 September 1974 in Writ Appeal No. 626 of 1974 that came to the Supreme Court by special leave.
The appeal was allowed, the judgment of the Andhra Pradesh High Court was set aside and the orders of transfer were quashed, with no order as to costs. The Court held that the requirement of recording reasons under section 127(1) is a mandatory direction under the law, and that non-communication of those reasons is not saved by showing that they exist in the file although they were never communicated to the assessee. Non-communication of the reasons in an order passed under section 127(1) is a serious infirmity in the order, for which the order is invalid.
The Court began with the change in the statute. Section 5(7A) of the Indian Income-tax Act, 1922 had been considered in Pannalal Binjraj, decided on 21 December 1956, where the Court had gone no further than to observe that it would be prudent to follow the principles of natural justice, where circumstances permit, before an order of transfer was made. Section 127 then replaced section 5(7A) in the 1961 Act, and the legislature introduced into it, among other things, the requirement of recording reasons. Unlike section 5(7A), section 127(1) requires reasons to be recorded before the order of transfer is passed. From that the Court drew the consequence. Where the law requires reasons to be recorded in a particular order affecting prejudicially the interests of a person who can challenge that order in court, the order ceases to be a mere administrative order, and the vice of violating the principles of natural justice by omitting to communicate the reasons is not expiated. The purpose of recording reasons in the order and making them known to the assessee is to give the assessee the opportunity of approaching the High Court in its writ jurisdiction under Constitution Art. 226, or this Court under Constitution Art. 136 in an appropriate case, to challenge the order — among other grounds, on the ground that it is based on irrelevant and extraneous material. Whether such a petition would in the end succeed or fail is not relevant to deciding the question. Reasons that never leave the file cannot be attacked, and the right of challenge is therefore defeated in advance.
We are clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee.
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Handle my notice → Ask a CA on WhatsAppNo. Section 127(1) requires the authority to record reasons before it transfers your case, and the Supreme Court held that recording them is not enough on its own — they have to reach you. Reasons sitting in the departmental file that were never communicated do not save the order: the Andhra Pradesh High Court's judgment upholding this transfer was set aside and the transfer orders quashed. The point of communicating them is to let you challenge the transfer under Constitution Art. 226, or under Constitution Art. 136, on the ground that it rests on irrelevant and extraneous material. This was decided by the Supreme Court (Supreme Court of India — P.K. Goswami J, K.K. Mathew J and N.L. Untwalia J) and bears on section 127, section 127(1), section 124, section 124(3), section Constitution Art. 226, section Constitution Art. 136, section 5(7A) of the Indian Income-tax Act, 1922, section 243 (Act of 2025), section 242 (Act of 2025) of the Income Tax Act 1961. It is reported as 1976 AIR 437; 1976 SCR (2) 884; 1976 SCC (1) 1001; [1976] 102 ITR 281 (SC); Civil Appeal No. 724 of 1975. A transfer looks like housekeeping and is treated as such by almost everybody, which is why the defect survives so often. The order arrives as a one-line intimation that your file now sits in another city, the reasons are never given, and by the time the new officer is issuing notices the transfer is old news. This judgment says the order was invalid from the start. Take it early, because the remedy is a writ and a writ court asks why you waited. If it applies to you, the first step is this: Ask in writing for a certified copy of the order under section 127 itself, not just the covering letter telling you your file has moved.
The first appellant was a registered firm and the other two appellants were its only two partners. They had been assessed for a number of years at Nellore in the ordinary course. On 23 January 1973 the Central Board sent them a notice under section 127 proposing to transfer their case files "for facility of investigation" from the Income-tax Officers at Nellore to the Income-tax Officer, B Ward, Special Circle II, Hyderabad, and asked them to say in writing within fifteen days whether they objected. They did object. On 26 July 1973 the Board passed the order of transfer. They took the order to the Andhra Pradesh High Court on a writ petition. The learned single Judge called for the relevant file, found that reasons had in fact been recorded by the Board before the order was passed, held that the mere failure to communicate those reasons to the appellants was not fatal, and dismissed the petition. Their Letters Patent Appeal to a Division Bench met the same fate, and it is that judgment of 12 September 1974 in Writ Appeal No. 626 of 1974 that came to the Supreme Court by special leave. The matter was decided on 1975-12-05 by the Supreme Court (Supreme Court of India — P.K. Goswami J, K.K. Mathew J and N.L. Untwalia J). On those facts the Supreme Court held as follows. The appeal was allowed, the judgment of the Andhra Pradesh High Court was set aside and the orders of transfer were quashed, with no order as to costs. The Court held that the requirement of recording reasons under section 127(1) is a mandatory direction under the law, and that non-communication of those reasons is not saved by showing that they exist in the file although they were never communicated to the assessee. Non-communication of the reasons in an order passed under section 127(1) is a serious infirmity in the order, for which the order is invalid.
The Court began with the change in the statute. Section 5(7A) of the Indian Income-tax Act, 1922 had been considered in Pannalal Binjraj, decided on 21 December 1956, where the Court had gone no further than to observe that it would be prudent to follow the principles of natural justice, where circumstances permit, before an order of transfer was made. Section 127 then replaced section 5(7A) in the 1961 Act, and the legislature introduced into it, among other things, the requirement of recording reasons. Unlike section 5(7A), section 127(1) requires reasons to be recorded before the order of transfer is passed. From that the Court drew the consequence. Where the law requires reasons to be recorded in a particular order affecting prejudicially the interests of a person who can challenge that order in court, the order ceases to be a mere administrative order, and the vice of violating the principles of natural justice by omitting to communicate the reasons is not expiated. The purpose of recording reasons in the order and making them known to the assessee is to give the assessee the opportunity of approaching the High Court in its writ jurisdiction under Constitution Art. 226, or this Court under Constitution Art. 136 in an appropriate case, to challenge the order — among other grounds, on the ground that it is based on irrelevant and extraneous material. Whether such a petition would in the end succeed or fail is not relevant to deciding the question. Reasons that never leave the file cannot be attacked, and the right of challenge is therefore defeated in advance. In the words reproduced by the source cited on this page: "We are clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee."
It was decided by the Supreme Court on 1975-12-05 and is reported as 1976 AIR 437; 1976 SCR (2) 884; 1976 SCC (1) 1001; [1976] 102 ITR 281 (SC); Civil Appeal No. 724 of 1975. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 127, section 127(1), section 124, section 124(3), section Constitution Art. 226, section Constitution Art. 136, section 5(7A) of the Indian Income-tax Act, 1922, section 243 (Act of 2025), section 242 (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed, the judgment of the Andhra Pradesh High Court was set aside and the orders of transfer were quashed, with no order as to costs. The Court held that the requirement of recording reasons under section 127(1) is a mandatory direction under the law, and that non-communication of those reasons is not saved by showing that they exist in the file although they were never communicated to the assessee. Non-communication of the reasons in an order passed under section 127(1) is a serious infirmity in the order, for which the order is invalid. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 127, section 127(1), section 124, section 124(3), section Constitution Art. 226, section Constitution Art. 136, section 5(7A) of the Indian Income-tax Act, 1922, section 243 (Act of 2025), section 242 (Act of 2025) of the Income Tax Act 1961, and was decided by Supreme Court of India — P.K. Goswami J, K.K. Mathew J and N.L. Untwalia J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check whether the order you were served carries the reasons. A reason given in the earlier show-cause notice is not the reason recorded in the order. Do not accept "the reasons are on the file". That is the precise answer this judgment rejects. Read section 127(3) before you complain about the hearing. Where the offices of all the officers concerned are in the same city, locality or place, no opportunity of being heard is required — but the obligation to record reasons is not dispensed with. Take the point while the assessment is still open and move promptly. The remedy the Court had in mind is a writ under Constitution Art. 226. Keep this separate from any objection that the officer never had jurisdiction over you at all. That objection is governed by section 124, and the clocks in section 124(3) run on it. For a tax year beginning on or after 1 April 2026, the transfer power is section 243 of the Income-tax Act, 2025, and the obligation to record reasons sits in its sub-section (3); the jurisdiction provision is section 242 of that Act.
Still good law. Fifty years on, this remains the statement of the law on a transfer under section 127, and nothing found displaces it. The Punjab and Haryana High Court applied it in Rajesh Mahajan v Commissioner of Income-tax, decided 31 July 2002, reproducing the holding that the requirement of recording reasons is mandatory and that non-communication is not saved by the reasons existing on the file. The Madras High Court set out the same passage in Chandran Somasundaram v Principal Director of Income Tax, pronounced 20 October 2022, but distinguished it on the facts: the centralisation orders had not been served, and the Court treated that as a procedural irregularity because the assessees had in fact received notices and been given an opportunity to respond. That is the shape of the modern argument. The rule itself is not doubted. What is fought over is whether a particular failure to serve the order caused the assessee any prejudice, and a reader taking this point should expect to have to show what the missing reasons cost him. Two limits on the holding are worth stating plainly. It is about section 127(1), the power exercised where all the officers concerned are subordinate to the same authority, and it decides nothing about whether an officer had jurisdiction over you in the first place, which is the work of section 124. And section 127(3) dispenses with the opportunity of being heard where the offices of all the officers concerned are situated in the same city, locality or place. That exception removes the hearing. It does not remove the recording of reasons, and it says nothing at all about communicating them. The provision has been carried forward. For a tax year beginning on or after 1 April 2026 the transfer power is section 243 of the Income-tax Act, 2025, whose sub-section (3) provides that the order may be passed after giving the assessee a reasonable opportunity of being heard, wherever it is possible to do so, and after recording his reasons therefor; sub-section (4) carries the same-city exception. The 1961 Act continues under section 536(2) of the 2025 Act for proceedings about any tax year beginning before 1 April 2026, however late those proceedings start, so this judgment decides live cases. No citator service was consulted: the later treatment recorded here is what was read in the two judgments named above. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in its own text and the sentence quoted here was then found word for word in later judgments of two different High Courts — Rajesh Mahajan (Punjab and Haryana, 31 July 2002, J.S. Khehar J) and Chandran Somasundaram (Madras, pronounced 20 October 2022, Anita Sumanth J). Three independent printings of the same words is the check that matters, because the judgment is fifty years old and its text circulates in several transcriptions. One of those transcriptions carries a defect you should know about before quoting from it. In the sentence explaining why the reasons are communicated — so that the assessee may approach the High Court under Constitution Art. 226, or the Supreme Court under Constitution Art. 136, to challenge the order as based on irrelevant and extraneous material — the electronic text ends on the word "condonations" where the sense requires "considerations". The same word appears in the Madras High Court's reproduction, which suggests both are working from one transcription rather than that either made a fresh slip. The key quote on this page is therefore taken from the concluding sentence, which reads the same in all three sources, and the reasoning above gives the sense of the earlier sentence rather than its disputed last word. What this judgment does not say. It does not hold that a transfer requires the assessee's consent. It does not say what happens to an assessment the transferee officer has already completed. It is not authority on section 127(2). The bench was P.K. Goswami, K.K. Mathew and N.L. Untwalia JJ, and the appeal was Civil Appeal No. 724 of 1975, decided 5 December 1975; of the citations given above, the Indian Tax Reports one is taken from a citation string printed inside the Punjab and Haryana judgment, the rest from the report of the judgment itself. On the statute: section 127 has four sub-sections and an Explanation, and there is no sub-section (5). Section 243 of the Income-tax Act, 2025 carries the obligation to record reasons in its sub-section (3), in the words "and after recording his reasons therefor", and the same-city exception in its sub-section (4). This page sits beside the library's statement of section 124. Read that one for which officer has your case and for the three deadlines in section 124(3) after which you cannot call his jurisdiction in question at all. Read this one for whether the order that moved your case is any good. The appeal came from the judgment and order of 12 September 1974 of the Andhra Pradesh High Court at Hyderabad in Writ Appeal No. 626 of 1974. The judgment does not decide what becomes of an assessment already completed by the transferee officer before the transfer order is set aside, and no later decision on that question was read. Nothing here deals with section 127(2), the transfer between officers who are not subordinate to the same authority. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed, the judgment of the Andhra Pradesh High Court was set aside and the orders of transfer were quashed, with no order as to costs. The Court held that the requirement of recording reasons under section 127(1) is a mandatory direction under the law, and that non-communication of those reasons is not saved by showing that they exist in the file although they were never communicated to the assessee. Non-communication of the reasons in an order passed under section 127(1) is a serious infirmity in the order, for which the order is invalid.
TaxSphere, “Ajantha Industries v CBDT”, https://taxnotice.vittsphere.com/caselaw/case/ajantha-industries-v-cbdt-reasons-for-a-127-transfer-must-be-communicated/ (validity last checked 2026-09-23)
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