TaxTMI 
TaxTMI 
2023 (1) TMI 328
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....rincipal Commissioner of Income Tax, Kolkata - 9 [hereinafter referred to as 'PCIT Kolkata/respondent no. 1'] vide which the petitioner's income tax assessment was transferred from Kolkata to New Delhi under Section 127 of the Act. Relevant Facts 4. A search operation under Section 132(1) of the Act and survey under Section 133A of the Act was conducted on Praveen Kakkar, Rajendar Miglani, Lalit Chhallani, Prateek Joshi and Himanshu Sharma [hereinafter collectively referred to as 'involved persons'] at Kolkata, Indore, Bhopal and other places by the Investigation Wing, Delhi. The operation was conducted on April 7, 2019 and subsequent dates. 5. The tax authorities purportedly found certain materials which indicated a nexus of the petitioner with the involved persons in large scale collection of illegal money and desired to centralise the assessment of the petitioner. On September 5, 2019, a show-cause notice [hereinafter referred to as 'the first notice'] was issued with the proposal to transfer the petitioner's case to New Delhi. The petitioner submitted its replies dated September 18, 2019 and October 3, 2019 which specifically denied all such allegations and requested f....
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....ollections and payments. iii. Prateek Joshi's diary indicates cash payments made and collected. It is contended to be a subset of Lalit Chhallani's file. iv. Himanshu Sharma's laptop and chats had a file which contained details of cash payments made and collected. It is stated to be a subset of Lalit Chhallani's file. It is further mentioned in the second notice that there are receipts and payments of such transactions, the details of which were also mentioned on Whatsapp and SMS, which have also been recovered. c) Suspicious cash transaction linking the Petitioner - In further investigation, Mr. Syed Mohd, in his statement under Section 132(4) of the Act identified himself as the Chief Accountant cum Administrative Officer of the All India Congress Committee. He, under oath, submitted that Rajendra Miglani and Mr. Vijay Damodaran are associates of the petitioner. Furthermore, he submitted that Rajendra Miglani had sent Vijay Damodaran to deposit unaccounted cash (Rs. 20 crores) in the All India Congress Committee's office. Vijay Damodaran confirms, under oath, that Rajendra Miglani had instructed him to collect cash from the petitioner's residen....
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....y financial nexus. Reliance has been placed upon R.K. Agarwal v. CIT (2006 SCC OnLine All 1386), Dilip Kumar Agarwal v. Income Tax (2009 SCC OnLine Cal 702), P.S. Housing Finance Ltd. v. Union of India (2006 SCC OnLine Cal 830), Anil Kumar Kothari v. Union of India ([2010] 232 CTR 104 [Gau]) and Global Energy v. Commissioner of Income Tax (2013 SCC OnLine Bom 296) to substantiate the contention that financial nexus with persons from whom incriminating materials are found along-with adequate reasons are prerequisites for a transfer of the Impugned order under Section 127 of the Act, notwithstanding the fact that the order is for the purpose of a co-ordinated and effective investigation. b. Mere speculation or apprehension, though bona fide, cannot be sufficient grounds for transfer under Section 127 and there has to be a financial nexus with the involved persons. Reliance was placed on Rajesh Mahajan v. CIT (2002 SCC OnLine P & H 1533) for the said argument. c. Neither a search or survey was conducted on the petitioner, nor were incriminating documents found with the petitioner which would require any coordinated investigation and such a transfer under Section 127 ....
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....ing that the petitioner's assessment should be transferred since he has no earnings or bank account in Kolkata; C. introducing new correspondence and evidence in relation to the Rs. 20 crores transferred to the All India Congress Committee. 12. The tax authorities submitted the following arguments: a. The transfer order under Section 127 of the Act is more in the nature of an administrative order rather than a quasi-judicial order. The Impugned Order was passed after adhering to the provisions of the Act and requirements of the law. The petitioner was granted sufficient opportunity to present his case and the issues raised by him were thoroughly considered. A well-reasoned order was passed only after following the due procedure and having found a nexus. The petitioner cannot have a right to choose his assessing authority. Reliance has been placed upon Chaudhary Skin Trading Company v. Pr. Commissioner of Income Tax-21 ([2016] 290 CTR 533), Charan Pal Singh v. Commissioner of Income Tax and Another (2008 307 ITR 132), Kamlesh Rajnikant Shah v. Principal Commissioner of Income Tax ([2022] 138 Taxmann.com 59 [Gujarat]), Pannalal Binjraj and Another v. Union of Ind....
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.... where its exercise would frustrate the core object of the Act. 14. The Apex Court in Ajantha Industries distinguished Pannalal (supra) as Section 127 had been introduced. The relevant paragraphs are extracted below: "9. This judgment was rendered by this Court on 21-12-1956, and we find that in the 1961 Act Section 127 replaced Section 5(7-A) where the legislature has introduced, inter alia, the requirement of recording reasons in making the order of transfer. It is manifest that once an order is passed transferring the case file of an assessee to another area the order has to be communicated. Communication of the order is an absolutely essential requirement since the assessee is then immediately made aware of the reasons which impelled the authorities to pass the order of transfer. It is apparent that if a case file is transferred from the usual place of residence or office where ordinarily assessments are made to a distant area, a great deal of inconvenience and even monetary loss is involved. That is the reason why before making an order of transfer the legislature has ordinarily imposed the requirement of a show-cause notice and also recording of reasons. The quest....
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....by an order under Section 127 is the transfer of one or several assessments from one circle to another, to that extent inconvenience undoubtedly ensue; however, to say that this leads to grave prejudice if detailed reasoning were not given is something that the Court cannot countenance. The consequence would only be that the assessees' contentions would have to be taken into account by another Assessing Officer who would also have before him or her all other related assessments. In these circumstances, the Court is unprepared to hold that the brief reasons relied upon by the revenue does not amount to reasons at all or that they are vague. In such exercise in every case where an order under Section 127 is challenged, there are two interests - those of the assessees who invariably plead inconvenience and hardship and that of the revenue which would inevitably cite public interest. The Court's task is to unravel whether in fact the revenue's contentions are correct and if so reject the assessees' contentions. On the other hand, if there is no real public interest and if there are no reasons even the briefest one, the order cannot be sustained. Conversely, if there is ....
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....g Authority altogether. The assessee need not even know the name of the Assessing Authority who will deal with his case. * * * 26. Having regard to the position of law as discussed above and also the other materials on record, we are of the view that we should not interfere with the impugned order of transfer passed by the respondent in exercise of powers under Section 127(2) of the Act. The power of transfer of cases may have to be exercised in proper cases when sufficient materials on record justify such action. As held by this Court in the case of Hindustan M.I. Swaco Limited MANU/GJ/1013/2016MANU/GJ/1013/2016: (2016) 72 taxmann.com 14 (Guj.), "this is, however, not to suggest that the transfer of cases for effective investigation and coordination can be resorted to only in cases of assessee, who are subjected to search operation. Such requirement may arise in other circumstances also". 27. Before we close this judgment, we must observe that the question whether circumstances warrant transfer or not is a matter for consideration and the decision by the Commissioner. The Commissioner in the case on hand upon due consideration of all the relevant aspects....
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....ies from whom incriminating materials were found in addition to the fact that nothing was unearthed from the assessee itself. In Dilip Kumar Agarwal (supra), while the tax authorities transferred the assessment for the purposes of co-ordinated and effective investigation, the notice did not mention such reasons. Furthermore, no evidence existed to establish a business connection of the assesses to their father. The onus was put upon the assessees to prove their lack of connection. On such facts, the Courts have quashed transfer orders passed under Section 127 of the Act. 21. The other judgements cited by the petitioners are also legally sound but distinguishable on facts. In Global (supra), the Court found that no reasons existed beyond the mere mentioning of the ground of 'coordinated investigation' and hence quashed the transfer order. Again, in Rakesh Mahajan (supra), nothing was found to confirm a financial connection between two family groups. The transfer order also did not deal with the objections raised to the allegations in the show-cause notice. Reasons given were irrelevant to the object sought to be achieved. In light of such factors, the court set aside the transfer....
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.... granted to the petitioner to represent their case and a reasoned order has been communicated. 25. Upon perusal of the records before me, I find that the respondent no.1 has clearly delineated the reasons of the transfer under Section 127 of the Act in the Impugned Order for a detailed and coordinated investigation of the petitioner. It is to be noted that the files of several other persons have also been transferred under Section 127 of the Act. The petitioner is the only one whose file is still not being transferred because of the writ petition filed before the Calcutta High Court. The various reasons provided are based on concrete material that have been mentioned in the Impugned Order in paragraph 7. 26. One cannot say that the present transfer is based only on surmises and conjectures as it is evident that the name of the petitioner has been taken by some of the persons on whom investigation, search and survey was carried out. Furthermore, the statement of certain persons also indicates that there was transfer of cash to the tune of almost Rs. 20 crores from the residence of the petitioner at Delhi. This money trail raises suspicion. Even though the said cash has been sh....