2025 (7) TMI 1596 - HC - Income Tax

Transfer of Assessment Proceedings Under Section 127 Upheld; Reasonable Hearing Opportunity Sufficient for Valid Transfer

The HC upheld the transfer of the assessment proceedings from Hyderabad to Delhi under Section 127, finding no violation of procedural requirements. The ... Transfer of case u/s 127 - transferring the case file from Hyderabad to Delhi - violations whatsoever of any provisions of the Act in the course of passing of the transfer order - eligible officer to give transfer orders - HELD THAT:- Section 127(1) only mandates giving an assessee a reasonable opportunity of hearing. It does not anywhere enshrine granting of personal hearing. Moreover, Sub-Section (1) of Section 127 would also show that this opportunity also has to be given only wherever it is possible to do so which otherwise would mean that, if it were not possible, the granting of an opportunity of hearing can also be skipped or waived. In the instant case, admittedly an opportunity of hearing was given to which the petitioners have responded to. Thus, the first objection of the petitioners assailing the impugned order does not find force and the same is negated. Officer proposing and the Officer accepting the proposal of transfer being of different rank - A plain reading of Clause (a) of Sub-Section (2) of Section 127 would go to show that Clause (a) does not require of the two officers to be of the same rank rather if we read it with a pragmatic view it only indicates as to which of the officers who can propose and who can accept the proposal for transfer. Now, when we see that the proposal has come from the Chief Commissioner, Delhi and acceptance has been made by the Principal Commissioner, it would meet the requirement as is meant under Clause (a). Hence, the second objection raised by the learned Senior Counsel does not find force by this Court to interdict the impugned transfer order. Sufficient reasons disclosed in the course of passing of the order of transfer or not? - For the reasons stated in the preceding paragraphs and because of certain incriminating materials found by the authorities at Delhi in the course of search and seizure operations conducted under Section 132 against one of the industries at Delhi, some incriminating information was found so far as the petitioners were concerned; and therefore, for the purpose of a coordinated investigation and also for better administrative convenience strictly in accordance with the guidelines and circulars issued by the Central Board of Direct Taxes from time to time, it was decided to transfer the assessment proceedings pertaining to the petitioners to the Deputy Commissioner of Income Tax, Central Circle-20, New Delhi. No strong case made out by the learned Senior Counsel for the petitioners calling for interference to the impugned order. ISSUES: Whether the transfer of assessment proceedings under Section 127 of the Income Tax Act, 1961, was without jurisdiction, illegal, arbitrary, or violative of Article 14 of the Constitution of India.Whether the petitioners were denied a fair opportunity of hearing as required under Section 127 of the Income Tax Act, 1961.Whether the transfer order was invalid due to the proposing officer and accepting officer being of different ranks, contrary to Section 127(2)(a) of the Income Tax Act, 1961.Whether sufficient reasons were disclosed for the transfer of assessment proceedings.Whether interference with the impugned transfer order is justified after the order has been acted upon and assessment proceedings have been completed or are ongoing. RULINGS / HOLDINGS: The transfer order under Section 127 was not without jurisdiction, illegal, or arbitrary and did not violate Article 14 of the Constitution; it was passed strictly in accordance with the provisions of Section 127 of the Income Tax Act.The petitioners were given a 'reasonable opportunity of hearing' as mandated by Section 127(1), and the Act does not require a personal hearing; hence, there was no denial of fair opportunity.Section 127(2)(a) does not require the proposing and accepting officers to be of the same rank; the transfer proposal by a Chief Commissioner and acceptance by a Principal Commissioner complies with the statutory requirement.The impugned order disclosed 'sufficient reasons' for transfer, including the need for 'coordinated investigation' due to incriminating materials found during search and seizure operations and administrative convenience, as reflected in paragraphs 3.1 and 3.2 of the order.Interference with the transfer order is not justified at this stage since the order has been acted upon, assessment proceedings have been completed for one year, and statutory remedies (appeal) are available and pending. RATIONALE: The Court applied the statutory framework of Section 127 of the Income Tax Act, 1961, which governs transfer of assessment proceedings, emphasizing that the provision mandates a 'reasonable opportunity of hearing' but does not explicitly require a personal hearing.The Court interpreted Section 127(2)(a) pragmatically, holding that the rank difference between the officers proposing and accepting the transfer does not invalidate the transfer order.The Court relied on the principle of 'coordinated investigation' to justify the transfer, consistent with precedents recognizing the necessity of harmonizing investigations where incriminating materials are found across jurisdictions.The Court considered prior case law emphasizing that transfer orders are administrative tools to facilitate efficient assessment and do not themselves impose tax liability, balancing inconvenience to the assessee against public interest.The Court noted the petitioners' conduct in allowing the assessment proceedings to continue post-transfer without prompt challenge, leading to an inference of acquiescence and weakening the basis for writ relief at this stage.Reliance was placed on precedents that highlight the discretionary nature of writ jurisdiction under Article 226, especially where statutory procedures have been followed and no prejudice is demonstrated.