2013 (5) TMI 692 - HC - Income Tax

Court upholds administrative nature of transfer orders under Income Tax Act, deems 'co-ordinated investigation' crucial

The court held that the transfer orders under Section 127(2) of the Income Tax Act were administrative, not quasi-judicial, making the writ appeals ... Transfer of search assessment proceeding to the ACIT-Visakhapatnam under sub-section (2) of Section 127(2) - centralization of cases for post search and seizure operations for the co-ordinated investigation - single judge quashed transfer orders - Whether the present appeals are maintainable? - whether the transfer orders are invalid]? - Held that:- In this case, a search was held at different places and documents were seized. It is necessary to see them together before passing the order of assessment. The transfer order is for administrative convenience for making co-ordinated investigation. The authority is exercising administrative and not judicial power. The judicial power is to be exercised after co-ordinated investigation, while passing search assessment orders. Thus the authority while passing the transfer orders, did not exercise judicial power. It is an administrative order and not a quasi judicial order, then the writ appeal would be maintainable quashing the order passed under Section 127 of the Act. The Department has transferred the cases to Visakhapatnam as-the main factory of flagship company was situate there most of documents were seized there and it was under the DIT-Hyderabad, under whose supervision, the search took place. In the transfer order, it is also mentioned that after search, assessment orders the assessee could seek de-centralisation after the search assessment order is passed, they could seek de-centralisation and the further appeals may be filed in the same way as they were filed earlier. There is no prejudice to them The notice had indicated the reason for transfer as 'centralisation' for 'co-ordinated investigation'. It is for this reason that order for transfer were made. There was no denial of reasonable opportunity to the Assesses. The word 'co-ordinated investigation' is not vague. The transfer orders transferring the cases to the ACIT-Visakhapatnam are valid. It has a definite meaning and the transfer order can not be set aside merely on the ground that the transfer has been done on vague terms. Issues Involved:1. Whether the present appeals are maintainable.2. Whether the transfer orders are invalid.Issue-wise Detailed Analysis:1. Whether the present appeals are maintainable:The primary contention was whether the transfer order under Section 127(2) of the Income Tax Act, 1961, is a quasi-judicial order. The counsel for the Assessees argued that the transfer order must indicate reasons and cannot be passed without giving a reasonable opportunity to the Assessees, thus making it quasi-judicial. They relied on the SKS-Ispat case, asserting that the writ petitions were filed to quash quasi-judicial orders and that the single judge's order under Article 227 was not appealable under the Chhattisgarh High Court (Appeal to Division Bench) Act, 2006.To determine if the impugned orders were quasi-judicial, the court referenced the AK-Kraipak case, which stated that the dividing line between administrative and quasi-judicial power is thin. The court noted that Section 127(2) requires that transfers be made after giving an opportunity to the assessee and recording reasons but concluded that this does not make the power quasi-judicial. The transfer order has civil consequences but does not decide the rights of the parties in the assessment, which is a judicial function. The transfer is for administrative reasons, not judicial.The court cited the Kashiram case, where the Supreme Court held that transfer orders are administrative, made for convenience. Similar views were echoed by the Gujarat High Court in Arti Ship Breaking. The court concluded that the transfer order is administrative, not quasi-judicial, making the writ appeal maintainable.2. Whether the transfer orders are invalid:The Assessees argued that the transfer order was not in consonance with the notice given, no opportunity was provided regarding the reasons mentioned in the transfer order, and the term 'co-ordinated investigation' was vague. The court examined the notice, which stated that the transfer was required for centralisation for co-ordinated investigation. The transfer orders were passed for this reason, and the Assessees had the opportunity to respond.The court held that the reasons were communicated, and the Assessees were given an opportunity. The term 'co-ordinated investigation' was not vague, as it implied a harmonious action necessary for investigating interconnected documents seized at multiple locations. The court referenced multiple High Court decisions, including those from Allahabad, Calcutta, Delhi, Gauhati, Patna, and Punjab & Haryana, which upheld transfer orders for co-ordinated investigation.The Assessees cited cases where transfer orders were set aside due to lack of opportunity or communication of reasons. However, the court distinguished these cases, noting that in the present case, reasons were communicated, and opportunity was provided. The court also discussed contrary views from the Andhra Pradesh and Madhya Pradesh High Courts, which found 'co-ordinated investigation' vague, but preferred the majority view of other High Courts.The court emphasized the importance of addressing black money and ensuring fairness in investigations. It noted that the transfer was for administrative convenience, with no statutory violation, and the Assessees faced no prejudice. The court concluded that the transfer orders were valid, and the term 'co-ordinated investigation' was not vague.Conclusions:(a) The power of transfer under Section 127(2) of the Income Tax Act, 1961, is not a judicial power.(b) The writ appeal is maintainable against the order of the Single Judge quashing the order passed under Section 127 of the Act.(c) The notice indicated the reason for transfer as 'centralisation' for 'co-ordinated investigation.' There was no denial of reasonable opportunity to the Assessees.(d) The term 'co-ordinated investigation' is not vague and has a definite meaning.Final Decision:The writ appeals are allowed, and the writ petitions filed by the Assessees are dismissed.