1997 (4) TMI 65 - HC - Income Tax

Summary

Issues:
Transfer of income-tax file without notice under section 127(1) and (2) of the Income-tax Act, 1961.
Interplay between Chapter XIV-B and section 127 in the context of transfer of files for search cases.

Analysis:
The petitioner challenged the transfer of her income-tax file without prior notice under section 127(1) and (2) of the Income-tax Act, 1961. The petitioner contended that the transfer was made without issuing a notice, as required by the Act. The respondent argued that the transfer was justified due to the initiation of proceedings under Chapter XIV-B based on materials connecting the petitioner to suppressed income found during a raid on her father's premises. The respondent claimed that the file was transferred to the Assistant Commissioner under section 158BG for assessment of the block period, which required a higher-ranking officer than the Income-tax Officer. The respondent also argued that the reference to section 127(2) in the transfer order was erroneous as Chapter XIV-B provided a specific procedure for such cases.

The court analyzed the provisions of section 127(2) and Chapter XIV-B concerning the transfer of files in search cases. It noted that while section 158BD required handing over search-related papers to the Assessing Officer, the assessment for the block period under section 158BG was to be done by an officer higher than the Income-tax Officer. The court emphasized the need for a formal order designating the Assessing Officer under section 158BG before transferring records to a higher-ranking officer. The court concluded that section 127 filled the procedural gap between sections 158BD and 158BG, making it applicable even in cases falling under Chapter XIV-B.

The court rejected the argument that issuing a notice under section 127 in Chapter XIV-B proceedings was a mere formality, highlighting that it provided an opportunity for the assessee to contest their connection to the search case. The court held that compliance with section 127 was necessary, even when transferring records to an officer of the same or higher rank than the initial Assessing Officer. As the petitioner was not granted an opportunity before the transfer, the court directed the Commissioner of Income-tax to hear the petitioner on the matter and pass appropriate orders. The petitioner was instructed to make a representation to the Commissioner, who was required to dispose of the matter within four weeks of the representation.

In conclusion, the court disposed of the writ petition in favor of the petitioner, emphasizing the importance of following procedural requirements under section 127 for transferring income-tax files, even in cases falling under Chapter XIV-B.