2016 (9) TMI 505 - HC - Income Tax

High Court quashes transfer order under Income Tax Act, stressing importance of addressing objections and natural justice

Serenity Trades Pvt. Ltd. Versus D.V. Singh and Anr.

The High Court set aside the transfer order under Section 127(2) of the Income Tax Act, 1961, from Mumbai to Chennai. The court found the order deficient ... Transer of cases - Held that:- Impugned order transferring the petitioner's case from Mumbai to Chennai is a nonspeaking order inasmuch as it does not deal with any of the principal contentions of the petitioner that it is in no away related to the Sugal and Damani Group. This was evident by the fact that it is an independent company having its independent Directors, situate in Mumbai and has only a business relationship with Summit, which is a part of the Sugal and Damani Group. The aforesaid order indicates non application of mind to the objections raised by the petitioner. It is an accepted position that an assessee does not have a right to be assessed by a particular officer of the Revenue. Nevertheless, when a petitioner's case is being transferred from one State to another then, while passing an order under Section 127(2) of the Act, the order must indicate prima facie consideration of the objections made by the person whose case is proposed to be transferred. Mere stating that the objections have been duly considered, cannot be itself negate the objections and uphold the notice for transfer. The primafacie consideration must provide a link between the basis of the notice and the conclusion arrived at after prima facie consideration of the objections. This is clearly lacking in the impugned order dated 20th September, 2015. We also notice that the impugned order places reliance upon a panchanama to support the transfer when the same finds no mention in the show cause notices or even relied upon by the Revenue in the affidavit-in-reply filed. This is also a breach of principles of natural justice. In fact before us, no reliance was placed upon the panchanama. Issues:Challenge to transfer order under Section 127(2) of the Income Tax Act, 1961 from Mumbai to Chennai.Analysis:1. The petition contested the order transferring the case from Mumbai to Chennai under Section 127(2) of the Income Tax Act, 1961. The petitioner, engaged in online lottery ticket sales, had a business relationship with Summit Online Trade Solutions Pvt. Ltd., a part of the Sugal and Damani Group in Chennai. Following a search on the petitioner and the Sugal and Damani Group, a show cause notice was issued for centralizing the investigation in Chennai. The petitioner objected, emphasizing its independence from the group, but the Principal Commissioner of Income Tax still transferred the case to Chennai citing the association with the Sugal and Damani Group.2. The High Court found the transfer order to be deficient. The order did not address the petitioner's key contention of being unrelated to the Sugal and Damani Group adequately. The court noted that while an assessee does not have the right to choose their assessing officer, a transfer between states requires the order to show prima facie consideration of the objections raised. The court criticized the lack of a clear link between the objections and the decision in the order, highlighting a failure to apply proper reasoning. Additionally, reliance on a panchanama not mentioned in the show cause notices or the affidavit-in-reply was deemed a violation of natural justice principles.3. Consequently, the High Court set aside the transfer order dated 20th September 2015. The court clarified that this decision does not prevent the Revenue from pursuing lawful means to transfer the case in the future. The ruling emphasized the importance of proper consideration of objections and adherence to principles of natural justice in administrative decisions. The judgment underscores the necessity for reasoned and lawful administrative actions, especially in cases involving transfers between jurisdictions under the Income Tax Act, 1961.