2019 (5) TMI 782 - HC - Income Tax

Validity of Case Transfer Upheld under Income Tax Act, Centralization for Coordinated Investigation Justified

M/s. Soma Enterprise Limited Versus The Principal Commissioner of Income Tax-3, Hyderabad And The Principal Commissioner of Income Tax, Central -1, Mumbai

The court upheld the validity of the order transferring the case from Hyderabad to Mumbai under Section 127(2)(a) of the Income Tax Act, noting compliance ... Transfer of case u/s 127 (2)(a) - Currently, the jurisdiction is with the Dy. CIT, Circle - 3 (2), Hyderabad - centralization of the petitioner’s case at Mumbai - assessee objected to the proposed centralization but objections were overruled by the Pr. CIT, Hyderabad - non furnishing of reasons - coordinated and effective investigation - company have registered office at Pune and Corporate Office at Hyderabad - HELD THAT:- If the petitioner was really aggrieved by a one-line show-cause notice which did not indicate any reasons for the proposal; the petitioner could have given a one-line reply demanding the reasons to be furnished. If the Department had failed to furnish reasons even thereafter, but proceeded to pass orders, then the same would have been a clear violation of the procedure prescribed u/s 127 (2)(a). But, in this case, the petitioner understood the reasons and countered those reasons in their response. Therefore, it is no more open to the petitioner to cite the lack of reasons in the show-cause notice as a ground for assailing the impugned order. In fact, our experience shows that different jurisdictional authorities, different benches of the Tribunal and even different High Courts take different views on certain complicated issues. Therefore, when multiple parties located at different places coming under different jurisdictional Officers are involved in an investigation, there is nothing wrong in the competitive authority taking a decision to centralize the assessment of all the parties. In a nutshell, this is described as “coordinated and effective investigation” and hence the allegation that the same is a bald and vague statement, cannot be accepted. An Assessee who faces no hardship in shifting their registered office to another State just for the purpose of bagging contracts in that State also, cannot plead that the centralization and transfer for the purpose of coordinated and effective investigation would cause hardship to them. If huge infrastructure projects can be undertaken by the petitioner in various States without causing financial, managerial and logistic stress, they cannot plead stress in so far as the centralization and transfer of assessment alone. As we have indicated earlier, the respondents have not taken any decision arbitrarily to transfer the investigation to Mumbai. The decision is a fall out of a search conducted in the Offices of ABIL Group of entities and their Promoters. It may be true that the percentage of the work sub-contracted by the petitioner to ABIL Group of entities may be abysmally low. But the magnitude of the projects undertaken by the petitioner are so huge that even the small percentage sub-contracted to ABIL, with an obligation on their part to entrust the work to one of the partnership firms promoted by the promoters of the petitioner company runs into several Crores. Therefore, we do not think that the respondents can be accused of acting arbitrarily. Once it is found that the respondents have followed the procedure prescribed by law and once it is found that there was no arbitrariness, it may not be possible for us to interfere with the decision, in cases of this nature. Therefore, the Writ Petition is liable to be dismissed Issues Involved:1. Validity of the order passed under Section 127(2)(a) of the Income Tax Act, 1961, transferring the case from Hyderabad to Mumbai.2. Adequacy of reasons provided in the show-cause notice.3. Justification for the centralization of the assessment for 'coordinated and effective investigation.'4. Hardship caused to the petitioner due to the transfer of jurisdiction.Detailed Analysis:1. Validity of the Order under Section 127(2)(a):The petitioner challenged the order transferring their case from Hyderabad to Mumbai under Section 127(2)(a) of the Income Tax Act, 1961. The court noted that the procedure prescribed by Section 127(2)(a) was followed, including providing the petitioner with a reasonable opportunity to be heard and recording the reasons for the transfer. Therefore, the first and foremost requirement of following the procedure prescribed was duly complied with.2. Adequacy of Reasons in the Show-Cause Notice:The petitioner argued that the show-cause notice dated 21.11.2017 did not indicate any reasons, making the opportunity to show cause an empty formality. However, the court observed that the petitioner understood the reasons behind the show-cause notice and provided a detailed reply on 06.12.2017, objecting to the proposed centralization. The court held that the lack of reasons in the show-cause notice became insignificant since the petitioner was able to make an effective representation. The court further noted that if the petitioner was aggrieved by the one-line show-cause notice, they could have demanded the reasons to be furnished.3. Justification for Centralization for 'Coordinated and Effective Investigation':The petitioner contended that the reason stated in the impugned order, namely 'coordinated and effective investigation,' was vague and did not satisfy the statutory requirement. The court disagreed, stating that the background facts, including the search conducted in the offices of ABIL Group of Companies and the nexus between the petitioner and ABIL, justified the need for a coordinated and effective investigation. The court emphasized that different jurisdictional authorities and courts might take different views on complicated issues, making centralization necessary for a comprehensive investigation.4. Hardship Due to Transfer of Jurisdiction:The petitioner argued that the centralization to Mumbai would cause serious financial, managerial, and logistic stress, especially when their corporate office is in Hyderabad. The court acknowledged that centralization and transfer would result in some hardship but stated that such hardship is unavoidable. The court pointed out that the petitioner had previously shifted their registered office to Pune to bid for infrastructure projects in Maharashtra, indicating that they could manage such logistical changes. The court held that the hardship argument could not take precedence once the statutory requirements were complied with.Conclusion:The court concluded that the respondents followed the prescribed procedure and acted within their authority. The reasons for the transfer were adequately justified, and the petitioner was given a fair opportunity to object. The court dismissed the writ petition, stating that the decision to transfer the case to Mumbai was neither arbitrary nor in violation of statutory requirements.