Valid Transfer Order under Income Tax Act; Assessee Granted Personal Hearing

The court found that the order transferring the case from Mumbai to New Delhi under Section 127(2) of the Income Tax Act, 1961 was valid but lacked a necessary personal hearing for the assessee. Despite not interfering with the transfer due to time constraints, the court directed the Mumbai CIT to provide a personal hearing to the assessee and make a final decision promptly. The court made the rule absolute without awarding costs to either party.

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Issues:
Challenge to validity of order transferring case under Section 127(2) of the Income Tax Act, 1961 from Mumbai to New Delhi without affording a personal hearing to the assessee.

Analysis:

1. The petitioners challenged the order dated 5 January 2012 transferring the case from DCIT-8(1) Mumbai to DCIT, Delhi (Central)-6, New Delhi under Section 127(2) of the Income Tax Act, 1961. The petitioners contended that no personal hearing was provided despite submitting objections regarding the proposed transfer and the hardships it would cause due to all records being in Mumbai.

2. The court noted that Section 127(1) mandates a reasonable opportunity of being heard to the assessee before transferring a case. The Division Bench judgment in a similar case emphasized that the word "may" in the provision should be read as "shall," making a personal hearing mandatory. In this case, although reasons were provided to the assessee, no personal hearing was granted, which was deemed necessary.

3. The court deliberated on the relief to be granted to the assessee due to the absence of a personal hearing. Despite the delay in approaching the court, the court balanced the principles of natural justice with the need to protect revenue. The court declined to interfere with the transfer of the case for A.Y. 2010-11 to New Delhi, considering the impending time bar under Section 153(1)(a) by 31 March 2013. However, the court directed the CIT-8 Mumbai to provide an opportunity for a personal hearing to the assessee regarding the transfer order.

4. The court directed the assessee to file a reply within two weeks before the CIT-8 Mumbai, who would then pass final orders within three weeks after affording a personal hearing. The assessee was required to appear before the CIT-8 Mumbai on a specified date with a copy of the court order.

5. The court made the rule absolute in the aforementioned terms and decided that there would be no order as to costs in this matter.

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