Transfer orders quashed for violating Section 127 consent requirements and improper delegation to subordinate officer

The Allahabad HC set aside transfer orders dated 10.01.2024 and 11.01.2024 regarding assessment jurisdiction transfer from Kanpur to Mumbai under Section 127. The court held that consent for transfer must come from officers of equal rank as per Section 127(2)(a), and the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand should have issued the show cause notice and considered the petitioner's reply before granting consent, rather than delegating this function to a subordinate officer in Kanpur.

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Issues involved:
The issues involved in this case are the transfer of assessment jurisdiction under Section 127 of the Income Tax Act, 1961 without granting an opportunity to the assessee and the requirement of obtaining consent from the appropriate authorities before transferring the case.

Issue 1: Opportunity before transfer of assessment jurisdiction

The petitioner challenged the transfer of assessment jurisdiction from Kanpur to Mumbai without being granted an opportunity as required by Section 127(2) of the Act. The petitioner argued that the show cause notice issued was non-speaking and failed to disclose the reasons for the transfer. The petitioner contended that the violation of principles of natural justice occurred as the reasons for the transfer were not disclosed, despite specific requests. The petitioner also highlighted the lack of consent from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand, which was necessary before transferring the jurisdiction.

Issue 2: Consent requirement for transfer of assessment jurisdiction

The revenue argued that the transfer of jurisdiction was necessary due to simultaneous search proceedings against the petitioner and Ravi Omprakash Agarwal, who was involved in illegal activities. The revenue claimed that unaccounted revenue was discovered during the search of Agarwal, necessitating the centralization of the petitioner's assessment cases in Mumbai. However, the Court noted that the consent for transfer was required from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand, which had not been obtained. The Court emphasized the importance of obtaining consent from officers of equal rank for such transfers, as mandated by Section 127(2)(a) of the Act.

Judgment:

The Court found merit in the petitioner's arguments regarding the lack of opportunity and consent for the transfer of assessment jurisdiction. The Court observed that the show cause notice was non-speaking and failed to provide adequate reasons for the transfer. Additionally, the consent from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand was deemed necessary but had not been obtained. Therefore, the Court set aside the orders of transfer dated 10.01.2024 and 11.01.2024.

In the interest of justice, the Court issued directions for the petitioner to treat the impugned order as a final show cause notice, allowing the petitioner to file a final reply within ten days. The Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand was directed to schedule a hearing within one week of receiving the reply. The petitioner undertook to appear before the authority for further proceedings in accordance with the law.

This judgment underscores the importance of providing opportunity to the assessee and obtaining consent from appropriate authorities before transferring assessment jurisdiction, as mandated by the Income Tax Act, 1961.

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