2014 (9) TMI 1027 - HC - Income Tax

Transfer of cases - Held that - Section 127(2) makes it explicit that in case of inter-jurisdiction transfer, first there has to be an agreement regarding transfer of an assessment case between the Directors General or Chief Commissioners of two jurisdictions. Thereafter the assessee has to be given hearing by the Director General or Chief Commissioner or Commissioner of the transferor jurisdiction. If not actual hearing, an opportunity of hearing has to be given. Then the file can be transferred, recording reasons for the transfer. These stipulations are not empty formalities. When the assessee s case is transferred from Kolkata to Bhubaneshwar great inconvenience is caused to them. Their officers have to go from Kolkata to Bhubaneshwar to attend to the officers, carry documents, to be produced before them, answer interrogatories etc. There must be compelling reasons before such a transfer is made. For example, in this case if the department is referring to the assessment of Ganesh Sponge Pvt. Ltd., at least the relationship of the petitioner with Ganesh has to be mentioned. How the petitioner appears to be connected with the financial transactions of Ganesh has also to be mentioned. Even a reasonable suspicion of connection is enough. But, unfortunately, in this case there are no reasons. In those circumstances, the order dated 12th September, 2013 is set aside with a direction upon the Chief Commissioner to pass a fresh order with reasons after giving an opportunity of hearing to the writ petitioner within three months from the date of communication of this order.

Summary

Issues: Lack of reasons in transfer order under Section 127(2) of the Income Tax Act, 1961

The judgment delivered by Justice I. P. Mukerji addresses the issue of flawed orders due to lack of reasons, specifically focusing on a transfer order under Section 127(2) of the Income Tax Act, 1961. The judge highlights the importance of providing reasons for transfer orders, emphasizing that such orders must be based on compelling reasons to justify the inconvenience caused to the assessee. The judge notes that in cases of inter-jurisdiction transfer, there must first be an agreement between the Directors General or Chief Commissioners of the relevant jurisdictions, followed by a hearing or an opportunity for the assessee to be heard before the transfer. The judge points out that the lack of reasons in the transfer order dated 12th September, 2013, which was made due to a search and seizure operation against another entity, Ganesh Sponge Pvt. Ltd., is a significant flaw. The judge sets aside the order and directs the Chief Commissioner to pass a fresh order with reasons after providing an opportunity of hearing to the writ petitioner within three months. The judge also emphasizes the need to maintain the status quo regarding the location of the file and the assessment until the fresh order is passed.

The judge underscores that the stipulations regarding transfer orders are not mere formalities but serve a crucial purpose in safeguarding the rights of the assessee. The judge stresses that transferring a case from one jurisdiction to another can cause great inconvenience to the assessee, necessitating compelling reasons for such transfers. In this case, the judge notes the absence of reasons linking the writ petitioner to the assessment of Ganesh Sponge Pvt. Ltd., highlighting the lack of explanation regarding the connection between the petitioner and the financial transactions of Ganesh. The judge emphasizes that even a reasonable suspicion of connection should be mentioned in the transfer order. However, since no such reasons were provided in the order under scrutiny, the judge deems it necessary to set aside the order and instructs the Chief Commissioner to issue a fresh order with detailed reasons after granting an opportunity of hearing to the writ petitioner.

In conclusion, the judgment scrutinizes the flawed transfer order under Section 127(2) of the Income Tax Act, 1961, due to the absence of reasons. The judge emphasizes the significance of providing detailed justifications for transfer orders to mitigate the inconvenience caused to the assessee. The judge's decision to set aside the order and mandate a fresh order with reasons, along with maintaining the status quo, underscores the importance of procedural fairness and transparency in administrative actions related to tax assessments and transfers.