2016 (7) TMI 1386 - HC - Income Tax

Transfer of cases u/s 127 - case of the petitioner is transferred from IT ward 3(3)(3), Ahmedabad to DCIT,Central Circle-3, Surat - non-compliance of principles of natural justice - Held that - The notice of hearing dated 14.10.2015 fixing the date of hearing on 26.10.2015 came to be received by the petitioner on 27.10.2015 i.e. after the actual date of hearing. It also emerges from the record that within a very short period, reply came to be prepared on 29.10.2015 and submitted before the authority on 30.10.2015. But by that time, it was informed that order has already been passed and therefore, it clearly establishes from the record that no opportunity in actual terms is afforded to the petitioner. It is also required to be noticed that immediately upon noticing effect of order having been passed, repeatedly a request was made in protest of the same, but having been not paid any heed, the petitioner was constrained to approach this Court by way of the present petition. From the chronology of the events, it clearly reflects from the record that the impugned order dated 14.10.2015 is passed in defiance of principles of natural justice and therefore, in true sense, compliance of section 127 of the Act is not made by the respondent no.1 and therefore, this being the position on record, on this ground alone, the order impugned deserves to be quashed. The petitioner has specifically pointed out that he has even no remote connection with said M/s. HVK International Group, Surat. In the detailed reply submitted before the authority, it was brought to the notice that the petitioner is not at all directly or indirectly connected nor having any financial transactions with the said group. It was also specifically asserted that search operation was under mistaken belief. From the record of the case, even a certificate is issued by the said M/s. HVK International Group dated 3.12.2015 in which it was specifically submitted that there is no business or financial transaction or any connection with the present petition. For the reasons recorded above, this petition is allowed. The impugned order of tranfer passed by respondent no.1 authority is hereby quashed and set aside.

Summary

Issues Involved:
1. Compliance with principles of natural justice.
2. Validity of the transfer order under section 127(2) of the Income Tax Act, 1961.
3. Connection between the petitioner and HVK International Group, Surat.
4. Adequacy of the reasons provided for the transfer.
5. Procedural irregularities in the issuance and receipt of the notice.

Detailed Analysis:

1. Compliance with Principles of Natural Justice:
The petitioner argued that the impugned order was passed without affording any opportunity of hearing. The notice dated 14.10.2015 was received by the petitioner on 27.10.2015, a day after the scheduled hearing on 26.10.2015. Consequently, the petitioner could not make an effective representation. The petitioner submitted a reply on 30.10.2015, but by then, the order had already been passed. The court emphasized that Section 127 of the Act mandates giving a reasonable opportunity of being heard. The failure to provide such an opportunity violates the principles of natural justice, rendering the order invalid.

2. Validity of the Transfer Order under Section 127(2) of the Income Tax Act, 1961:
Section 127(2) of the Act allows the transfer of cases for effective and coordinated investigation and assessment. However, the court noted that the statutory provision requires the authority to afford a reasonable opportunity of being heard before passing such an order. The court cited previous judgments, including those from the Calcutta and Bombay High Courts, which reinforced the necessity of providing a hearing. The court found that the transfer order was passed in defiance of these principles, thus invalidating the order.

3. Connection between the Petitioner and HVK International Group, Surat:
The petitioner contended that there was no direct or indirect connection with HVK International Group, Surat. The search operation was conducted under a mistaken identity. The petitioner provided a certificate from HVK International Group and an affidavit from Sanjay Dhanak, asserting no business or financial transactions with the petitioner. The court found no tangible material linking the petitioner to HVK International Group, Surat, and noted that the authority had not considered these submissions adequately.

4. Adequacy of the Reasons Provided for the Transfer:
The respondent authority justified the transfer for effective and coordinated investigation and assessment. However, the court found that this reason was not backed by cogent material. The court emphasized that merely stating administrative convenience or effective investigation does not fulfill the criteria of recording reasons. The court held that the order lacked a proper application of mind and was based on conjectures and surmises.

5. Procedural Irregularities in the Issuance and Receipt of the Notice:
The notice dated 14.10.2015 was dispatched through speed post and received by the petitioner on 27.10.2015, after the scheduled hearing date of 26.10.2015. The court noted that the petitioner immediately sought to make a representation but was informed that the order had already been passed. This sequence of events demonstrated procedural irregularities, further invalidating the order.

Conclusion:
The court concluded that the impugned order dated 14.10.2015 was passed in violation of the principles of natural justice and without proper application of mind. The order was quashed, and the case was ordered to be transferred back to the office of ITO Ward 3(3)(3), Ahmedabad. The court emphasized the necessity of affording a reasonable opportunity of being heard and the importance of adhering to statutory provisions.