2009 (8) TMI 779 - HC - Income Tax

Transfer of cases - Provision of section 127 - The petitioner has argued that section 127 of the Act imposes an obligation on the Commissioner of Income-tax to pass an order supported with reasons while exercising power of transfer - Since, the reasons have been recorded in a separate order would not satisfy the requirement of section 127 of the Act because the reasons have to be part of the order and recording of separate reasons on file without communicating the same to the assessee has been considered to be unfair and unwarranted - the recording of separate reasons which are not part of the impugned order and their non-communication to the petitioners would not be sustainable in the eyes of law - Therefore,petition succeeds and the same is allowed - However,leave it open to the Commissioner to pass a fresh order in accordance with the law laid down by the hon ble the Supreme Court in Ajantha Industries 1975 -TMI - 6462 - SUPREME Court .

Summary

Issues:
1. Jurisdictional transfer under section 127(2) of the Income-tax Act, 1961.
2. Compliance with the requirement of recording reasons for transfer.
3. Interpretation of section 127(1) and (2) based on legal precedents.

Issue 1: Jurisdictional transfer under section 127(2) of the Income-tax Act, 1961:
The petitioners sought the quashing of an order transferring jurisdiction of certain cases to the Assistant Commissioner/Deputy Commissioner of Income-tax, Central 7, New Delhi, issued by the Commissioner of Income-tax, Bhatinda. The petitioners, involved in wine contracting business, contested the transfer based on their residential and business locations in Faridkot, Punjab, emphasizing that they did not have any business in Delhi. The respondents, however, argued that the transfer was justified due to the petitioners' alleged business activities in Delhi and Mussoorie. The issue revolved around the authority of the Commissioner to transfer cases under section 127(2) of the Act.

Issue 2: Compliance with the requirement of recording reasons for transfer:
The crucial contention was whether the Commissioner had complied with the statutory requirement of recording reasons for the transfer under section 127 of the Act. The petitioners argued that the order lacked reasons, rendering it liable to be set aside. The respondents maintained that reasons were recorded on August 13, 2008, justifying the transfer. The court examined the mandatory nature of recording reasons, citing legal precedents such as Ajantha Industries' case, Lt. Col. Paramjit Singh's case, and Rajesh Mahajan's case. The judgment emphasized that the failure to communicate reasons to the assessee would render the order invalid.

Issue 3: Interpretation of section 127(1) and (2) based on legal precedents:
The court delved into the interpretation of section 127(1) and (2) of the Act, highlighting the mandatory requirement of recording reasons for transfer. Legal precedents, including the Supreme Court's decision in Ajantha Industries' case, underscored the significance of communicating reasons to enable judicial review. The judgment reiterated that the reasons must form part of the order itself, not as separate documents, to ensure fairness and compliance with the law. The court's decision to set aside the order was grounded in upholding the statutory mandate of recording reasons for jurisdictional transfers under section 127 of the Act.

In conclusion, the judgment addressed the issues of jurisdictional transfer under section 127(2) of the Income-tax Act, compliance with the requirement of recording reasons for transfer, and the interpretation of relevant legal provisions based on established precedents. The court's decision to set aside the order highlighted the importance of procedural adherence and transparency in administrative actions, emphasizing the mandatory nature of recording reasons and communicating them to the concerned parties.