2009 (12) TMI 73 - HC - Income Tax

Court quashes transfer order under Section 127 of Income Tax Act citing procedural lapses

The court quashed the transfer order under Section 127 of the Income Tax Act due to procedural lapses, including the lack of agreement between ... Transfer of case – section 127 of the income tax act, 1961 – held that – The general principles with regard to the application of Section 127 of the Act, has been stated in the judgment reported in [2008 -TMI - 12514 - PUNJAB AND HARYANA High Court], in the case of Rajesh Mahajan and others vs. Commissioner of Income Tax - As stated supra, in this case, it is not disclosed in the impugned order that the undisclosed income submitted by the A.P.Majeed Khan, in the Block assessment discloses any transaction with the assessee trust. Therefore, there is no need for transfer the assessment from Nagercoil to Thiruvananthapuram. - In the impugned order, 10 reasons were stated for justifying the transfer and the reasons are not legally sustainable for the reasons stated below. - the impugned order of transfer passed in this case is not justifiable and it is quashed Issues Involved:1. Legality of the transfer of the case under Section 127 of the Income Tax Act, 1961.2. Compliance with procedural requirements under Section 127(2)(a) and (b).3. Validity of the reasons for the transfer of the case.4. Whether the petitioner acquiesced to the jurisdiction of the transferee authority.5. Relevance of the block assessment of A.P.Majeed Khan to the transfer of the assessee trust's case.Issue-Wise Detailed Analysis:1. Legality of the Transfer of the Case under Section 127 of the Income Tax Act, 1961:The petitioner challenged the order of the first respondent under Section 127, transferring the case from the Income Tax Officer, Ward No.I(2), Nagercoil to the Deputy Commissioner of Income Tax, Circle-I, Division-I, Thiruvananthapuram. The court noted that the initial transfer order was quashed due to the lack of opportunity given to the assessee trust, as required by law.2. Compliance with Procedural Requirements under Section 127(2)(a) and (b):The court emphasized that Section 127(2)(a) requires an agreement between the Commissioners of the transferring and receiving jurisdictions. The court found that no such agreement was evident in the original or the impugned order. The absence of an agreement between the Commissioners of Madurai and Thiruvananthapuram was a critical procedural lapse, rendering the transfer invalid.3. Validity of the Reasons for the Transfer of the Case:The court scrutinized the reasons provided for the transfer:- The first reason cited was the search conducted under Section 132, which the court found insufficient unless it showed inter-lacing and inter-connecting transactions.- The second reason was the necessity for an Assistant Commissioner to handle the block assessment, which the court dismissed since the block assessment of A.P.Majeed Khan was already completed.- The third and fourth reasons related to procedural actions taken by the Assistant Commissioner, which were deemed irrelevant.- Other reasons provided were either irrelevant or insufficient to justify the transfer.The court concluded that none of the ten reasons stated in the impugned order justified the transfer as per the criteria laid down by various High Courts.4. Whether the Petitioner Acquiesced to the Jurisdiction of the Transferee Authority:The respondents argued that the petitioner acquiesced to the jurisdiction by filing a block return in response to the notice issued by the Assistant Commissioner of Income Tax, Central Circle, Thiruvananthapuram. The court rejected this argument, noting that the petitioner had objected to the transfer order at the earliest opportunity and that filing a block return in response to a notice did not constitute acquiescence.5. Relevance of the Block Assessment of A.P.Majeed Khan to the Transfer of the Assessee Trust's Case:The court noted that the block assessment of A.P.Majeed Khan, which disclosed an undisclosed income of Rs.70,17,400/-, had become final. There was no evidence that this undisclosed income had any connection with the income of the assessee trust. Therefore, the court found no justification for transferring the assessee trust's case to Thiruvananthapuram based on the block assessment of A.P.Majeed Khan.Conclusion:The court quashed the impugned transfer order, citing the lack of agreement between the Commissioners, insufficient and irrelevant reasons for the transfer, and the absence of any connection between the undisclosed income of A.P.Majeed Khan and the assessee trust. The writ petition was allowed, and the connected miscellaneous petition was closed.