2024 (1) TMI 760 - HC - Income Tax

Petition to quash transfer under Section 127 dismissed; transfer upheld after notice, objections, and survey evidence

M/s Akshara Enterprises Private Limited Versus The Principal Commissioner of Income Tax

The HC dismissed the petition challenging transfer of the petitioner's assessment from one ITO jurisdiction to another DCIT under Section 127. The court ... DCIT Jurisdiction to pass order u/s 127 - transferring the case of the petitioner from the jurisdiction of respondent No. 2[ITO, Ward 4(1), Hyderabad] to the jurisdiction of respondent No. 4 [DCIT, Central Circle 4(4), Mumbai] - as per petitioners the action is without jurisdiction, the action being one which has been passed in mechanical and arbitrary manner without providing justifiable reasons and is violative of the principles of natural justice - HELD THAT:- As before passing of the impugned order, the respondent authorities did issue notice to the petitioner making their intentions clear so far as the requirement of transferring the case of the petitioner from the jurisdiction of respondent No. 2[Income Tax Officer, Ward 4(1), Hyderabad] to the jurisdiction of respondent No. 4[Deputy Commissioner of Income Tax, Central Circle 4(4), Mumbai]. The petitioner also have responded to the notices and have submitted their objections, and thereafter only, the impugned order has been passed. This by itself gives a clear picture of the petitioner being given reasonable opportunity of hearing. As regards the second rider of reasons being provided in the impugned order, the authorities concerned while passing the impugned order, have considered the objections raised by the petitioner, as would be evident from the contents of paragraphs 3, 3.1 and 4. The reason which necessitated the authorities to pass the impugned order is to have a coordinated investigation. The instant Writ Petition is the one which has been filed on 22.12.2023, whereas the impugned order under Section 127 of the Act was passed about one moth back i.e., on 20.11.2023. The consequential proceedings subsequent to the matter being transferred to respondent No. 4 also had begun, as would be evidence from the notice dated 30.11.2023 issued under Subsection (1) of Section 142 of the Act. Also in the consequential notice u/ss (1) of Section 142 of the Act, there is a clear elaboration of cash transactions between the petitioner’s establishment with M/s. IRIS Group. To make the things bad, there is a statement of Accountant, who in the course of survey, has not been able to give proper and satisfactory explanation and also did not provide cogent material in respect of so called commercial transactions done between the petitioner’s establishment with M/s. IRIS Group. There was also no sufficient supporting documentary evidence with the petitioner’s establishment or with their officials at the time of survey to establish that the said transactions were genuine and they were done strictly in accordance with the provisions of law. A plain reading of the impugned order itself would clearly indicate that the petitioner was in fact given an opportunity of hearing which the petitioner did avail and finally, while passing the impugned order, the authority concerned has mentioned the reasons which necessitated them to transfer the case from the jurisdiction of respondent No. 2 to the jurisdiction of respondent No. 4. Considering the fact that all the companies are located at different places like Bombay, Delhi and Hyderabad, for administrative convenience and also for betterment of the proper investigation, Section 127 of the Act was invoked. Later, opportunity of hearing was given to the petitioner and reasons for the transfer of the case from Hyderabad to Bombay have also been mentioned. Thus, this Court is of the view that the requirement under statute i.e., Section 127 of the Act has been complied with while passing the impugned order. Paragraph No. 4 of the impugned order read with paragraph Nos. 3 and 3.1 would clearly speak of the reason which necessitated the authorities to pass the impugned order is centralized and coordinated investigation. This Court does not find that a strong case is made out by the petitioner for interference to the impugned order passed under Section 127 of the Act by respondent No. 1 - WP dismissed. Issues Involved:1. Jurisdiction of the transfer order under Section 127 of the Income Tax Act, 1961.2. Allegations of mechanical and arbitrary action without justifiable reasons.3. Violation of principles of natural justice.Summary:Jurisdiction of the Transfer Order:The petitioner challenged the order dated 20.11.2023 passed by respondent No. 1 under Section 127 of the Income Tax Act, 1961, which transferred the case from the jurisdiction of The Income Tax Officer, Ward 4(1), Hyderabad to The Deputy Commissioner of Income Tax, Central Circle 4(4), Mumbai. The petitioner argued that the transfer lacked jurisdiction as there was no agreement between respondent Nos. 1 and 3, and the transfer was based on mere asking by respondent No. 3 without thorough scrutiny.Mechanical and Arbitrary Action:The petitioner contended that the impugned order was passed in a mechanical and arbitrary manner without justifiable reasons, and it lacked application of mind. The petitioner argued that the order was passed without valid grounds, as no search and seizure proceedings were conducted at the petitioner's establishment, contrary to what the impugned order suggested.Violation of Principles of Natural Justice:The petitioner argued that the action was violative of the principles of natural justice, as the impugned order was passed without providing a reasonable opportunity of being heard. The petitioner claimed that the reasons for the transfer were vague and not specific, failing to enable the petitioner to make an effective representation.Court's Analysis:The court noted that Section 127 of the Act grants wide and administrative powers to transfer cases, with the only requirements being a reasonable opportunity of being heard and recording of reasons. The court found that the petitioner was given a reasonable opportunity of hearing and that the reasons for the transfer, namely the need for a coordinated investigation, were recorded in the impugned order.Judicial Precedents:The court referred to several judgments, including Noorul Islam Educational Trust, Vijayasanthi Investments Pvt. Ltd., Hindusthan M-I Swaco Ltd., and Kamal Nath, which emphasized that the power to transfer cases under Section 127 is administrative and should be exercised based on material facts, ensuring public interest over personal inconvenience.Conclusion:The court concluded that the impugned order complied with the statutory requirements under Section 127 of the Act, as the petitioner was given an opportunity of hearing, and reasons were recorded for the transfer. The court found no arbitrariness or mala fide in the decision-making process and dismissed the Writ Petition, stating that the transfer was justified for a coordinated investigation.Order:The Writ Petition was dismissed, and there was no order as to costs.