2020 (3) TMI 287 - HC - Income Tax

Court dismisses writ petition challenging transfer order under Income Tax Act. Compliance with procedures upheld.

V.V. Minerals Versus The Principal Commissioner of Income Tax, The Assistant Commissioner of Income Tax, The Deputy Director of Income Tax

The court dismissed the writ petition challenging the transfer order under Section 127(2) of the Income Tax Act. It held that the transfer complied with ... Transfer of case u/s 127 - centralization of case after search - delayed challenge to the order passed u/s 153A - transferring the cases to the Deputy Commissioner of Income Tax (DCIT), Central Circle-2, Madurai, as violative of the principles of natural justice - HELD THAT:- In the case on hand, the impugned order came to be passed on 19.02.2019 and till the issuance of the assessment notices dated 15.07.2019 under Section 153A of the Act, the petitioner did not challenge the order of transfer and there is no explanation for the delay in challenge. Hence, the petitioner is barred from challenging the same in exercise of jurisdiction by a new authority and this Court need not exercise the extraordinary jurisdiction under Article 226 of the Constitution to interfere with the impugned order. Though the other grounds raised by the petitioner have also no merit-acceptance, without delving further into those grounds, this Court is of the view that this writ petition is liable to be dismissed on these grounds. Writ petition is dismissed as devoid of merits. Issues Involved:1. Validity of the transfer order under Section 127(2) of the Income Tax Act, 1961.2. Compliance with the principles of natural justice.3. Requirement to provide documents for objections.4. Justification for centralization of cases.5. Delay in challenging the transfer order.Detailed Analysis:1. Validity of the Transfer Order under Section 127(2) of the Income Tax Act, 1961:The petitioner, a partnership firm in the mineral industry, challenged the order dated 19.02.2019, transferring its cases to the DCIT, Central Circle-2, Madurai. The transfer was proposed under Section 127(2) of the Act for effective and coordinated investigation. The petitioner contended that the transfer order did not comply with the mandatory requirements of Section 127(2), which necessitates recording reasons for the transfer and providing a reasonable opportunity of being heard.2. Compliance with the Principles of Natural Justice:The petitioner argued that the transfer order violated the principles of natural justice as it was passed without providing the requested documents necessary for filing objections. The petitioner was given a show cause notice on 28.01.2019 and a hearing was fixed for 18.02.2019. Despite requesting documents on 16.02.2019, the impugned order was passed without fulfilling this request. The petitioner relied on the decision in MRL Postnet Private Ltd. V. Principal Commissioner of Income Tax, which emphasized the need for recording reasons and providing an opportunity to be heard.3. Requirement to Provide Documents for Objections:The respondents countered that there is no provision in the Act mandating the furnishing of documents seized during a search for the purpose of Section 127 proceedings. The standard procedure involves the centralization of cases post-search, with proposals moving from the DGIT to the CCIT and then to the PCIT for final transfer. The respondents argued that the petitioner was given an opportunity to object, but instead sought documents, which is not a requirement under the Act.4. Justification for Centralization of Cases:The respondents justified the transfer on the grounds of interlacing and intermixing of business activities among the petitioner’s group companies, which required centralized investigation. They cited undisclosed income of Rs. 2,262 Crores unearthed during the search as a significant reason for centralization. The petitioner contested this, arguing that the transfer was irrelevant for detailed investigation and coordination. The court noted that centralization for effective investigation is a valid reason but emphasized that specific reasons must be recorded and communicated.5. Delay in Challenging the Transfer Order:The court observed that the petitioner did not challenge the transfer order until the issuance of assessment notices on 15.07.2019, despite the order being passed on 19.02.2019. Citing the Supreme Court’s decision in Patel KNR JV Vs. Commissioner of Income Tax, the court held that the delay in challenging the order without a valid explanation barred the petitioner from contesting the transfer.Conclusion:The court dismissed the writ petition, holding that the transfer order complied with the procedural requirements under Section 127(2) of the Act. The petitioner was provided with an opportunity to object, and the reasons for transfer were adequately communicated. The court also noted the delay in challenging the transfer order and found no merit in the other grounds raised by the petitioner. Consequently, the writ petition was dismissed without costs, and the connected miscellaneous petitions were closed.