2003 (3) TMI 77 - HC - Income Tax

Centralization of the cases - we may point out that in this case we are not going into the merits of the case. The only narrow issue which we have to decide is whether the court should interfere under article 226 of the Constitution in this case in which the Department has centralised the cases concerning various companies. We are not inclined to interfere. Firstly the statement given by Manoj Agarwal director of Friends Portfolio Pvt. Ltd. has an evidentiary value. A weightage is required to be given to such statement by the assessing authorities in proceedings under the Income-tax Act. The statement incriminates several companies. The statement shows that Shri Manoj Agarwal was an entry operator. That his company Friends Portfolio Pvt. Ltd. was the client of the petitioners. Therefore we do not wish to interfere under article 226 of the Constitution. - The writ petition is rejected

Summary

Issues:
Centralization of income tax cases under section 127 - Challenge to the order of centralization - Evidentiary value of a statement given by a director - Interference under article 226 of the Constitution.

Centralization of Income Tax Cases under Section 127:
The case involved a search and seizure operation under section 132 in the matter of a taxpayer and his associate concerns. The Commissioner of Income-tax, Central-II, New Delhi, addressed a letter alleging that the taxpayer provided accommodation book entries to various beneficiaries, including the petitioner. The petitioner contended that it acted as a sub-broker in transactions resulting in profits for its clients. The Commissioner granted concurrence for centralization of cases, including the petitioner, based on a statement by the taxpayer. The petitioner challenged the centralization order under section 127 of the Income-tax Act, arguing that there was no reason for transferring its assessments to New Delhi.

Challenge to the Order of Centralization:
The petitioner's counsel argued that the block assessment proceedings against the taxpayer had been completed without any notice to the petitioner. He contended that there were no allegations against the petitioner in those proceedings. The counsel further asserted that the transfer of profits by the taxpayer and his concerns occurred after the profits from the petitioner's transactions. He challenged the centralization order, stating that it would cause unnecessary expenditure and inconvenience to the petitioner.

Evidentiary Value of a Statement Given by a Director:
The court emphasized that it was not delving into the merits of the case but focusing on whether to interfere under article 226 of the Constitution regarding the centralization of cases involving various companies. The court noted the statement made by the taxpayer, which incriminated several companies and indicated his role as an entry operator. The statement revealed that the taxpayer's company was a client of the petitioner. The court highlighted the evidentiary value of the statement and the need for assessing authorities to consider it in Income-tax Act proceedings. Based on the statement's weightage and implications, the court declined to interfere under article 226 of the Constitution.

Interference under Article 226 of the Constitution:
The court ultimately rejected the writ petition challenging the centralization order, with no order as to costs. However, it extended the time for the petitioner to file returns until March 31, 2003. The judgment underscored the significance of the statement by the taxpayer and its relevance in the assessment proceedings, leading to the decision not to intervene under article 226 of the Constitution.