2025 (4) TMI 296 - HC - Income Tax

Income Tax Department's transfer orders under Section 127 upheld for centralized investigation of group companies

M/s. M and C Property Development Private Limited, M/s. Arise Industries and Agency Private Limited, Arjun Ponding Promoters LLP, Sweety Pie Promoters LLP, M/s. Arise Investments and Capital Private Limited, Highpowerv Florists and Decorators LLP, M/s. Alpina Real Estates LLP, M/s. Affluent Towers LLP, M/s. Ecola Entertainments LLP And M/s. Delight Townships LLP Versus The Principal Commissioner of Income Tax Central - 2, Chennai, The Deputy Commissioner of Income Tax Central Circle 2, Coimbatore And M/s. Fortune Media Private Limited Versus The Principal Commissioner of Income Tax Central - 2, Chennai, The Deputy Commissioner of Income Tax Non Corporate Circle 10 (1), Chennai

Madras HC upheld transfer orders under Section 127 of Income Tax Act, 1961, transferring assessment files of group companies from Tamil Nadu to Kolkata ... Transfer order u/s 127 - first respondent, had transferred the income tax assessment files pertaining to the appellants from the office of the second respondent to the office of the Deputy Commissioner of Income Tax, Circle-4(4), Kolkata ('Central Circle'), to centralise the case of the appellants for effective and co-ordinated investigation along with other cases - appellants in all these appeals are either private limited company or limited liability partnership or partnership concern or individuals, who are having business only in Tamil Nadu HELD THAT:- The show-cause notice refers to incriminating documents seized from the various premises of the appellants by the authorised officer under the control of Principal Director of Income Tax (Investigation), Kolkata. The documents seized would also affect the assessment in respect of the respective appellants. When the documents are seized from different premises of a group of companies/concerns, it is necessary for all the cases to be centralised or considered together at one place, so that there will be a coordinated investigation. The object of Section 127 is to meet situations as in the present case. The appellants admit that they are a group of companies may be carrying on different business. There is no mala fides alleged in this case as against the first respondent in any of the cases for passing the impugned order for transferring the cases from the office of the second respondent to the office of the Deputy Commissioner of Income Tax, Circle-4(4), Kolkata under Section 127 of the Income Tax Act, 1961. The power u/s 127 is not circumscribed or limited by express language. We find no reasons to doubt the bona fides in this case. Therefore, we do not find any error or infirmity in the order of the learned single Judge and the same deserves to be confirmed and all the writ appeals fail. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered in this judgment is whether the transfer of income tax assessment files under Section 127 of the Income Tax Act, 1961, from the appellants' local jurisdiction to the Deputy Commissioner of Income Tax, Circle-4(4), Kolkata, was justified. The appellants challenged this transfer on several grounds, including violation of natural justice, lack of reasonable opportunity to be heard, and the inconvenience caused by the transfer.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:Section 127 of the Income Tax Act, 1961, empowers the transfer of cases between Assessing Officers for coordinated investigation and assessment. The provision requires that the assessee be given a reasonable opportunity to be heard and that the reasons for such transfer be recorded.Court's interpretation and reasoning:The Court interpreted Section 127 as an administrative power that allows for the transfer of cases to ensure effective tax administration. It emphasized the importance of coordinated investigations, especially when incriminating documents are involved, which necessitate a centralized assessment.Key evidence and findings:The Court noted that the appellants were part of a larger group involved in a search and seizure operation conducted by the Directorate of Investigation, Kolkata. Incriminating documents were found that were interconnected with the appellants, justifying the need for a centralized investigation.Application of law to facts:The Court applied Section 127 to the facts, concluding that the transfer was necessary for a coordinated investigation of the lottery group, which included the appellants. The Court found that the procedural requirements of Section 127, including the opportunity to be heard, were met.Treatment of competing arguments:The appellants argued that the transfer violated principles of natural justice and caused undue inconvenience. The Court addressed these concerns by emphasizing the administrative nature of the transfer and the necessity for a coordinated investigation. It found no mala fides or procedural irregularities in the transfer process.Conclusions:The Court concluded that the transfer of cases under Section 127 was justified and necessary for effective tax administration. It dismissed the appellants' objections, finding them without merit.SIGNIFICANT HOLDINGSThe Court upheld the power of tax authorities under Section 127 to transfer cases for coordinated investigation, emphasizing the administrative nature of such transfers. It confirmed that procedural requirements, including the opportunity to be heard, were satisfied in this case.Preserve verbatim quotes of crucial legal reasoning:'The power and scope of Section 127 shows that it is an administrative power. Of course, the authorities exercising the power has to give an opportunity, wherever it is possible in adherence to principles of natural justice.'Core principles established:The judgment reinforced the principle that transfers under Section 127 are primarily administrative and necessary for coordinated investigations, particularly when dealing with interconnected incriminating documents.Final determinations on each issue:The Court determined that the transfer of cases was justified, dismissing the appellants' claims of procedural violations and inconvenience. It confirmed that the authorities acted within their powers under Section 127, and the transfer was necessary for a coordinated investigation.The appeals were dismissed, and the Court upheld the transfer orders, emphasizing the need for centralized assessment in cases involving interconnected entities and documents.