TaxTMI 
TaxTMI 
2023 (1) TMI 328
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 for copies of all documents in relation to the search ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llected. 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 residence in Delhi (1, Tughlak Road, New Delhi) and was accompanied by Mr. R. Viswanathan (stated to be the petitioner's sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inance 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 is based on extraneous materials. The petitioner's capacity to the investigation can merely be seen as that of a witness. Therefore, the transfer based on vague pleas of 'coordinated inv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 India (1957 SC 397), ATS Infrastructure Ltd. v. CIT (2009 SCC OnLine 1627) and The Commissioner of Income Tax Raipur v. Union of India & Ors. ([2013] 358 ITR 341) to buttress the submission that the impugned order is valid and as per principles established in law. b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 question then arises whether the reasons are at all required to be communicated to the assessee. It is submitted, on behalf of the Revenue, that the very fact that reasons are recorded in the file, although these are not communicated to the assessee, fully meets the requirement of Section 127 (1)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 reasoning and the public interest is discernable, as in this case, the only result can be rejection of the assessees' contentions." Emphasis Added 16. The tax authorities further relied on ATS (supra), wherein the Delhi High Court has also averred along similar lines as Chaudhary Skin Trading Company (supra).....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 of the matter is satisfied that the case of the writ applicant should be transferred for the purpose of effective and coordinated investigation and assessment. Thus, we are of the opinion that looking at facts and circumstances of the case, where administrative exigencies can be adequately/comprehensively addressed, such a discretion should not be interfered w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 order. In R.K. Agarwal (supra) the court found the transfer order to suffer from a manifest error on the face of the record. The rationale for the same was the lack of application of mind by the authorities as barely any reason was given behind the decision to transfer the assessment, rather than centralisation of assessment of other entities, one of whose director's sister was married to the petitioner.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ose 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 shown in the books of the All India Congress Committee, the source of the funds from the Madhya Pradesh Congress Committee is required to be looked into by the tax authorities. Furthermore, the recording in the books of the All India Congress committee was done subsequent to the raids conducted by the tax authorities. 27. Moreover, unaccounted cash transactions have been clearly found in the Whatsapp chats and accompanying documents obtained from several persons wherein the term 'KN' h....