2010 (11) TMI 1001 - HC - Income Tax

Summary

Issues Involved:
1. Validity of transfer of assessment proceedings u/s 127 of the Income Tax Act, 1961.
2. Adequacy of reasons provided for the transfer.
3. Compliance with the requirement of giving a reasonable opportunity to the assessee.

Summary:

1. Validity of Transfer of Assessment Proceedings u/s 127 of the Income Tax Act, 1961:
The petitioners challenged the transfer of their assessment proceedings from Kanpur to Allahabad. The transfer was initiated following a search and seizure operation conducted by the Income Tax Department u/s 132 at the business premises of M/s. Bhola Food Product Pvt. Ltd., belonging to the Kesarwani Group. The petitioners argued that they had no business or family connections with the Kesarwani Group and were regularly assessed at Kanpur.

2. Adequacy of Reasons Provided for the Transfer:
The petitioners contended that the notices issued did not contain any material or reasons for the transfer, thus preventing them from filing effective objections. The respondents justified the transfer citing 'administrative convenience and coordinated investigation'. However, the court noted that the show cause notice did not disclose any material linking the petitioners with the Kesarwani Group or any undisclosed income. The court held that merely stating the need for coordinated investigation without specific reasons was insufficient.

3. Compliance with the Requirement of Giving a Reasonable Opportunity to the Assessee:
The court emphasized that u/s 127, it is mandatory to give the assessee a reasonable opportunity of being heard and to record reasons for the transfer. The court found that the petitioners were not given a proper opportunity as the notices lacked specific reasons and material. The court concluded that the transfer orders were passed in a mechanical manner without addressing the objections raised by the petitioners.

Conclusion:
The court set aside the impugned orders of transfer dated 30.3.2010 and the consequential notices dated 16.4.2010 issued u/s 153-C. The petitions were allowed, and the rule was made absolute in terms of the prayer clauses, quashing the transfer orders and prohibiting the respondents from proceeding with the assessment at Allahabad. No order as to costs was made.