2005 (4) TMI 24 - HC - Income Tax

High Court invalidates transfer order under Income-tax Act for lack of reasons and failure to address objections.

The High Court set aside the transfer order of assessment cases from Kanpur to Mumbai under section 127(2) of the Income-tax Act due to the absence of ... Order of transfer of case - As in the impugned order, no mention has been made to Circular No. 225 dated September 20, 2001, and the various objections raised by the petitioner had not been dealt with, the impugned order cannot be sustained on the basis of the said circular also. In view of the foregoing discussions we set aside the order dated June 18, 2004, leaving it open to the Commissioner of Income-tax-II, Kanpur, to pass a fresh order in accordance with law Issues:Challenge to the order transferring assessment cases under section 127(2) of the Income-tax Act without recording reasons or addressing objections.Analysis:The petitioners, a public limited company and its directors, challenged the order transferring their assessment cases from Kanpur to Mumbai under section 127(2) of the Income-tax Act. The petitioners objected to the transfer, citing lack of reasons provided by the Commissioner of Income-tax for the transfer. The petitioners argued that the order violated the provisions of section 127(2) as it did not record any reasons for the transfer, despite giving the petitioners an opportunity to be heard. The respondents justified the transfer based on search and seizure activities at the petitioners' business premises, citing guidelines for centralization of cases in search situations.The High Court analyzed the requirements of section 127(2) of the Act, emphasizing that when the Assessing Officers involved are not subordinate to the same authority, reasons must be recorded for the transfer, along with providing a reasonable opportunity of hearing to the assessee. In this case, the assessing authorities were located in Kanpur, while the cases were transferred to Mumbai, indicating a need for reasons to be recorded. The Court noted that although the petitioners were given a hearing, the transfer order lacked any recorded reasons, rendering it invalid.Referring to a previous case, the Court highlighted the importance of addressing objections raised by the assessee in the transfer order. Since the current order failed to provide any reasons and did not address the petitioners' objections, the Court held it to be unsustainable. The Court also dismissed the argument based on Circular No. 225 dated September 20, 2001, stating that the order must stand on the reasons mentioned therein and cannot be supported by additional grounds like circulars. Therefore, the Court set aside the transfer order, allowing the Commissioner of Income-tax to issue a fresh order in compliance with the law.In conclusion, the writ petition was successful, and the order transferring the assessment cases was set aside due to the lack of recorded reasons and failure to address the petitioners' objections. The judgment emphasized the necessity of complying with statutory requirements and ensuring that transfer orders are supported by valid reasons to withstand legal scrutiny.