2012 (9) TMI 520 - HC - Income Tax

Power to transfer cases - Shift of registered office from Delhi to the State of Maharashtra - Held that - The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him - the word may in Section 127 should be read as shall . The requirement of giving an assessee a reasonable opportunity of being heard wherever it is possible to do so, is mandatory. The discretion of the authorities is only as to what is a reasonable opportunity in a given case and on the question, whether it is possible in a given case to provide the opportunity. As in the present case assessee on several occasions had appeared before respondent no.1 who had passed the impugned order - the petitioners objections were filed on 19.12.2011 and the impugned order was passed on 05.01.2012 i.e. within 16 days as the Paragraphs 6 & 7 of the affidavit in rejoinder refer to the petitioner s letter dated 19.12.2011 and the impugned order dated 05.01.2012 respectively. No details have been furnished as to when the petitioner s Counsel were heard. Paragraph 8 merely states that the sequence of facts and correspondence indicate that sufficient opportunities of being heard were given to the petitioner without furnishing details in respect of the alleged hearing. Paragraph 8 of the rejoinder further states that the petitioner had indicated in its letter that it preferred to submit its objection in writing and that the same were therefore considered before passing the impugned order. This is incorrect. In the correspondence which we have already referred to the petitioner had expressly requested for a personal hearing, thus he impugned order is liable to be set aside on the ground that the petitioner had not been heard - in favour of assessee.

Summary

Issues Involved:
1. Whether the requirement under Section 127(1) and (2) of the Income Tax Act, 1961 of granting an assessee a reasonable opportunity of being heard is mandatory.
2. Whether the impugned order transferring the petitioner's case from Mumbai to New Delhi was valid without granting a personal hearing to the petitioner.

Issue-wise Detailed Analysis:

1. Mandatory Nature of Granting a Reasonable Opportunity of Being Heard under Section 127(1) and (2):
The court addressed whether the requirement under Section 127(1) and (2) of the Income Tax Act, 1961 to grant an assessee a reasonable opportunity of being heard is mandatory. The court affirmed this requirement on both principle and authority grounds. It cited various judgments, including those from the Supreme Court and High Courts, which supported the mandatory nature of this provision. The court emphasized that the word "may" in Section 127 should be read as "shall," making the provision obligatory wherever it is possible to provide such an opportunity. The court referenced the judgments of the Madhya Pradesh High Court in Sagarmal Spinning & Weaving Mills Ltd. v. C.B.D.T., the Andhra Pradesh High Court in Vijayasanthi Investments Pvt. Ltd. v. Chief Commr. of I.T., and the Supreme Court in Kashiram Aggarwalla v. Union of India, which all underscored the necessity of granting a reasonable opportunity of being heard. The court concluded that the legislative intent behind Section 127(1) and (2) was to provide an assessee with a reasonable opportunity of being heard, and this requirement is mandatory.

2. Validity of the Impugned Order without Granting a Personal Hearing:
The court examined the specific circumstances of the case where the petitioner's case was transferred from Mumbai to New Delhi without a personal hearing. The petitioner had explicitly requested a personal hearing, but the respondent did not grant one. The court noted that the petitioner's registered office had shifted to Maharashtra, and the tax returns were filed and assessed in Mumbai. However, the respondent proposed to transfer the case to New Delhi for administrative convenience and coordinated investigation, citing the petitioner's financial transactions with the Sahara Group. The court found that the respondent's letter did not mention a personal hearing, and the petitioner's objections were not adequately considered. The court highlighted that the respondent's affidavit in surrejoinder failed to provide details or evidence of any personal hearing granted to the petitioner. Consequently, the court set aside the impugned order on the ground that the petitioner had not been heard, as required under Section 127(1) and (2). The court directed respondent no.1 to pass a fresh order after granting the petitioner a reasonable opportunity of being heard.

Conclusion:
The court ruled that the requirement under Section 127(1) and (2) to grant a reasonable opportunity of being heard is mandatory wherever possible. The impugned order transferring the petitioner's case was set aside due to the lack of a personal hearing, and the respondent was directed to pass a fresh order after hearing the petitioner. The writ petition was disposed of with no order as to costs.