2023 (10) TMI 658 - HC - Income Tax

Transfer orders set aside for lack of reasons and missing Document Identification Numbers under Section 127(1)

Delhi HC set aside transfer orders directing petitioners' cases from local jurisdiction to DCIT Mumbai. The orders were non-speaking, failed to provide ... Non-speaking order - recording of reasons under Section 127(1) of the Income-tax Act - transfer of cases for administrative convenience and coordinated investigation - Document Identification Number (DIN) requirement under CBDT Circular No. 19/2019Non-speaking order - recording of reasons under Section 127(1) of the Income-tax Act - transfer of cases for administrative convenience and coordinated investigation - Impugned transfer orders under Section 127(2) were non-speaking for failure to record reasons and are therefore unsustainable. - HELD THAT: - The impugned orders effecting transfer under Section 127(2) do not state the reasons which prevailed with the Principal Commissioner when directing transfer to DCIT, Mumbai. The orders merely reproduce the transfer format and refer to concurrence with a letter, but do not advert to or discuss the petitioners' specific objections (residence in Delhi, companies and books of account located in Delhi, need for authorised representative in Delhi) nor do they explain why the stated reasons for transfer - namely search on the Suumaya group, administrative convenience and coordinated investigation - governed the decision. Section 127(1) mandates recording of reasons in the order so as to enable effective challenge; reasons recorded only in the file cannot substitute for reasons stated in the order itself. Reliance on Ajantha Industries establishes that non-communication or non-inclusion of reasons in the order is a serious infirmity rendering the order invalid. Applying that principle, the court set aside the transfer orders and directed that any fresh steps by the PCIT must, in law, record and communicate reasons and address the petitioners' apprehensions rather than rely on formulaic statements of 'administrative convenience and coordinated investigation.' [Paras 11, 12, 13, 14, 16]The transfer orders are set aside for being non-speaking and failing to record reasons; the PCIT may take further steps only after recording and communicating reasons and addressing the petitioners' objections.Document Identification Number (DIN) requirement under CBDT Circular No. 19/2019 - Impugned orders are invalid also because they do not bear a Document Identification Number (DIN) as required by CBDT Circular No. 19/2019. - HELD THAT: - The orders challenged in these petitions do not show a DIN. The court treated absence of DIN, in combination with the failure to record reasons, as compounding the legal infirmity of the orders. The requirement of affixing a DIN under the cited CBDT circular was taken as a mandatory administrative prescription whose non-compliance supports setting aside the impugned orders in the facts of these cases. [Paras 7, 15]The absence of a DIN furnishes an additional ground for setting aside the impugned transfer orders.Final Conclusion: Writ petitions allowed; the transfer orders dated 06.09.2023 are set aside for being non-speaking and for lacking a DIN; the Principal Commissioner is at liberty to proceed afresh in accordance with law, recording and communicating reasons and addressing the petitioners' specific apprehensions if transfer is reconsidered. Issues involved:The judgment involves challenges to two separate orders under Section 127(2) of the Income-tax Act, 1961. The primary issues raised are that the impugned orders are non-speaking orders and do not bear a Document Identification Number (DIN).Issue 1: Non-speaking ordersThe writ petitions challenge the impugned orders on the grounds that they are non-speaking orders. The petitioners argue that the orders fail to provide any reasoning or justification for transferring the cases from one Assessing Officer to another. The petitioners contend that the lack of reasoning violates the requirement under Section 127(1) of the Income Tax Act, which mandates the recording of reasons for such transfers. The petitioners cite the Supreme Court's decision in Ajantha Industries v. Central Board of Direct Taxes, emphasizing the importance of communicating reasons to the assessee. The court agrees with the petitioners and sets aside the impugned orders due to the absence of proper reasoning.Issue 2: Lack of Document Identification Number (DIN)Another ground for challenging the impugned orders is the absence of a Document Identification Number (DIN). The petitioners argue that the orders being non-speaking and lacking a DIN render them invalid. The court notes that the DIN is a requirement under CBDT Circular No. 19/2019 and finds that the impugned orders do not comply with this essential administrative procedure. Consequently, the court directs the setting aside of the impugned orders based on this deficiency.Conclusion:In conclusion, the High Court of Delhi, comprising Hon'ble Mr. Justice Rajiv Shakdher and Hon'ble Mr. Justice Girish Kathpalia, grants relief to the petitioners by setting aside the impugned orders. The court emphasizes the importance of providing proper reasoning in official orders and complying with administrative requirements such as the Document Identification Number. The Principal Commissioner of Income Tax is directed to address the concerns raised by the petitioners if considering a reevaluation of the transfer process. The writ petitions are disposed of accordingly, and pending applications are closed.