2016 (11) TMI 605 - HC - Income Tax

Legal transfer upheld under Income Tax Act, emphasizing need for clear reasons in notices

The court upheld the legality of the impugned order and notice under Section 127(1) of the Income Tax Act, emphasizing the importance of recording and ... Transfer of cases - assessee’s contention at this stage is that the reasons were vague - Held that:- To constitute a fatal infirmity the reasons indicated in the order under Section 127 (1) dated 11.09.2012 should be of a nature which can be said to be no reasons at all. The order to the extent it is relevant has been extracted above; it clearly indicates that the decision to transfer assessee’s case is based upon the convenience of the income tax authorities who had conducted search in respect of the other entities and individuals in Jalandhar. The materials on record filed along with the counter affidavit support this conclusion. In Surya Pharmaceuticals’s case (2006 (5) TMI 46 - HIGH COURT, DELHI), the court held that administrative convenience could be a valid ground for transfer of the assessee’s case. In the circumstances of this case, the court is of the opinion that the opinion formation cannot be faulted – there is no gainsaying to the fact that but for the centralisation there could be different approaches leading to differing block assessment orders. Issues:1. Impugned notice and order under Section 127 (1) of the Income Tax Act lacking reasons.2. Transfer of assessee's case to Jalandhar based on search and seizure proceedings.3. Legality of the impugned order and notice challenged by the assessee.4. Revenue's contention on transferring and centralizing cases for administrative convenience.5. Requirement of recording and communicating reasons in transfer orders under Section 127 (1).6. Extension of the need for reasons to notice issued to the assessee.7. Lack of precise reasons in the notice issued to the assessee.Analysis:1. The writ petition challenges the notice and order under Section 127 (1) of the Income Tax Act, contending they lack reasons. The assessee objected to the transfer of their case to Jalandhar due to vague reasons mentioned in the notice, seeking precise reasons as per a decision of the Andhra Pradesh High Court.2. The transfer of the assessee's case was based on search and seizure proceedings under Section 132, involving other entities as well. The impugned notice proposed centralizing the case in Jalandhar for administrative convenience. The order to transfer the case was made under Section 127(2) of the Act, emphasizing public interest and coordinated investigation.3. The legality of the impugned order and notice was challenged by the assessee, citing Supreme Court and High Court judgments requiring specific reasons for such transfers. The absence of specific reasons in the notice and order rendered the transfer illegal and unenforceable, as per legal arguments presented.4. The revenue justified the transfer for administrative convenience, citing a court ruling supporting the centralization of cases under Section 127 based on the same grounds. The decision to transfer and centralize cases was made to streamline investigations and assessments.5. The court highlighted the importance of recording and communicating reasons in transfer orders under Section 127(1), distinguishing it from provisions under Section 34 of the old Act. The need for specific reasons was emphasized to enable the assessee to effectively challenge the transfer.6. Extending the requirement for reasons, the court emphasized the necessity of providing precise reasons not only in the order under Section 127(1) but also in the notice issued to the assessee. Vague reasons were deemed insufficient, and specific reasons based on material facts were deemed necessary for effective representation.7. The assessee's argument centered on the lack of precise reasons in the notice issued, emphasizing the need for specific reasons as per legal precedents. The court examined the reasons provided in the order and concluded that administrative convenience was a valid ground for the transfer, dismissing the writ petition for lacking merit.