Court overturns assessment jurisdiction transfer order citing lack of reasons and breach of natural justice

The court set aside the order transferring the petitioner's assessment jurisdiction due to the lack of specific reasons in the notice and breach of natural justice principles. The petition was allowed and disposed of in favor of the petitioner.

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Issues Involved:
1. Transfer of jurisdiction of the petitioner’s assessment.
2. Breach of principles of natural justice.
3. Adequacy of notice and reasons for transfer.
4. Compliance with Section 127 of the Income Tax Act, 1961.

Detailed Analysis:

1. Transfer of Jurisdiction of the Petitioner’s Assessment:
The petitioner challenged the order dated 30.12.2015 by the Principal Commissioner of Income Tax, Ahmedabad, which transferred the petitioner’s assessment from DCIT (Circle-2)(1)(1), Ahmedabad to ACIT (Central Circle), Moradabad (U.P.). The petitioner, a company registered under the Companies Act, had its assessments initially processed in New Delhi until 2011 when it shifted its corporate office to Ahmedabad. Consequently, the jurisdiction for assessment was transferred to Ahmedabad, and pending appeals were also transferred upon the petitioner’s request. A search and seizure operation was conducted at the residential premises of the director of the petitioner company and at the corporate office and factory premises on 30-31/07/2015 by the Income Tax department’s investigation wing.

2. Breach of Principles of Natural Justice:
The petitioner argued that the notice issued by the Principal Commissioner lacked any reasons for the proposed transfer, thus breaching the principles of natural justice. The petitioner contended that without the necessary information and documents, and without a further hearing date, the ex-parte order of transfer was passed. The petitioner also highlighted the inconvenience and prejudice caused by transferring the assessment to Moradabad, which is nearly 700 kms away from Ahmedabad.

3. Adequacy of Notice and Reasons for Transfer:
The petitioner received a notice on 03.11.2015 indicating a hearing for the transfer of the case to Moradabad, but it did not specify the reasons for such transfer. The petitioner responded by seeking adjournment and further information, which was not provided. The Principal Commissioner’s final order did not address the petitioner’s objections adequately and failed to provide specific reasons for the transfer, merely stating that the transfer was for the sake of coordinated enquiries in search and seizure cases. The court emphasized that a notice must contain reasons for the proposed action to enable the noticee to respond effectively, as per the principles of natural justice.

4. Compliance with Section 127 of the Income Tax Act, 1961:
Section 127 pertains to the power to transfer cases by the prescribed Revenue authorities. It mandates giving the assessee a reasonable opportunity of being heard and recording reasons for the transfer. The court noted that the requirement of hearing is now part of the statute and must be fulfilled. The court found that the notice issued by the Principal Commissioner did not meet the requirement of granting a reasonable opportunity of hearing as it did not contain any grounds for the proposed transfer, thus failing the test of granting reasonable opportunity.

The court referenced previous judgments, including the Bombay High Court’s decision in Shikshana Prasaraka Mandali vs. Commissioner of Income Tax, which emphasized the necessity of a notice containing reasons for the proposed action to comply with the Audi Alteram Partem Rule. The court also cited the case of Shree Ram Vessel Scrap P. Ltd. v. Commissioner of Income Tax, which upheld the requirement of indicating prima facie reasons for the transfer in the show cause notice.

Conclusion:
The court concluded that the impugned order dated 30.12.2015 was flawed due to the lack of specific reasons in the notice and the breach of principles of natural justice. Consequently, the order was set aside, and the petition was allowed and disposed of.

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