Invalid transfer of jurisdiction under Income Tax Act, 1961 Section 127 without hearing.

The Court found the transfer of jurisdiction under Section 127 of the Income Tax Act, 1961 invalid due to the failure to provide the assessee with an opportunity of being heard before the transfer. The lack of reasons for dispensing with the hearing led to the remand of the matter for a fresh decision by the assessing authority. Reassessment proceedings in Kanpur were ordered to be kept in abeyance pending the new decision by the Principal Commissioner of Income Tax in Kolkata. The Court did not award costs but directed the urgent furnishing of a certified copy of the order to the parties.

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Issues:

1. Validity of transfer of jurisdiction under Section 127 of the Income Tax Act, 1961.
2. Observations regarding pendency of writ petition and assessment proceedings.
3. Requirement of opportunity of being heard before transfer of jurisdiction.
4. Compliance with statutory provisions in transferring assessment jurisdiction.
5. Prima facie case for entertaining the writ petition.
6. Remand of the matter for a fresh decision by the assessing authority.
7. Abeyance of reassessment proceedings pending fresh decision.
8. Costs and furnishing of certified copy of the order.

Issue 1: Validity of transfer of jurisdiction under Section 127 of the Income Tax Act, 1961

The appellant challenged the transfer of jurisdiction based on the failure to follow the mandatory procedure under Section 127 of the Act, which necessitates providing the assessee with an opportunity of being heard before transferring assessment jurisdiction. The order impugned in the writ petition lacked reasons for dispensing with the opportunity of a personal hearing, as no show cause notice was issued to the assessee prior to the transfer.

Issue 2: Observations regarding pendency of writ petition and assessment proceedings

The appellant was aggrieved by the part of the order stating that the pendency of the writ petition would not hinder the authority from proceeding with the assessment proceedings. The Court noted that if the assessment proceedings were to continue at Kanpur, the writ petition would become infructuous. However, since no reasons were recorded for dispensing with the opportunity of being heard, the authority was directed to issue a notice to the appellant and provide a reasonable opportunity of being heard before making a decision.

Issue 3: Requirement of opportunity of being heard before transfer of jurisdiction

Section 127 of the Income Tax Act, 1961 provides the power to transfer cases, emphasizing the importance of giving the assessee a reasonable opportunity of being heard before invoking this power. The statute mandates that reasons must be recorded if the opportunity of hearing is to be dispensed with, which was found lacking in the impugned order.

Issue 4: Compliance with statutory provisions in transferring assessment jurisdiction

The Court emphasized that the authority must follow the statutory provisions by giving the assessee a fair opportunity of being heard before transferring assessment jurisdiction. Failure to adhere to this requirement renders the transfer of jurisdiction invalid and necessitates a fresh decision by the authority.

Issue 5: Prima facie case for entertaining the writ petition

The Court acknowledged that the appellant had made out a prima facie case for entertaining the writ petition, leading to the decision to remand the matter back to the authority for a fresh decision. The order passed by the Principal Commissioner of Income Tax was to be treated as a show cause notice, and the appellant was directed to submit objections within a specified timeline.

Issue 6: Remand of the matter for a fresh decision by the assessing authority

In light of the lack of reasons for dispensing with the opportunity of being heard, the Court directed the matter to be remanded back to the authority for a fresh decision. The appellant was instructed to treat the previous order as a show cause notice and submit objections for further consideration.

Issue 7: Abeyance of reassessment proceedings pending fresh decision

The Court ordered that the reassessment proceedings and notice issued by the assessing authority in Kanpur be kept in abeyance pending the fresh decision to be made by the Principal Commissioner of Income Tax in Kolkata in accordance with the Court's direction.

Issue 8: Costs and furnishing of certified copy of the order

The Court made no order as to costs and directed that an urgent photostat certified copy of the order be furnished to the parties upon compliance with all legal formalities.

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