2014 (1) TMI 659 - HC - Income Tax

Centralization of search cases - Powers u/s 127(2) - Held that - The petitioner Company had fully understood the object and purpose of centralizing the cases at Varanasi - It could not place sufficient facts and material which were relevant for the purpose of supporting the objection - The Company is carrying its entire business activity at Varanasi - Apart from Didwania brothers the Company has two other directors who have not disclosed their connection with Didwania brothers - They hold one-third share in the Company and that one of the directors Sri Atul Kumar Didwania surrendered Rs.60 lacs and another Rs.15 lacs during search - In the circumstances in the interest of revenue it was found necessary to centralize the petitioner assessment at Varanasi Decided against petitioner.

Summary

Issues:
1. Centralization of search cases relating to Didwania Group of cases.
2. Jurisdiction for assessment proceedings.
3. Compliance with principles of natural justice in transfer of assessment proceedings.

Detailed Analysis:
1. Centralization of search cases relating to Didwania Group of cases:
The petitioner, a Private Limited Company registered in Kanpur with a biscuit manufacturing unit in Varanasi, received a notice for centralization of its case with the Deputy Commissioner of Income Tax in Varanasi. The petitioner objected, stating its independence from the Didwania Group and lack of financial involvement with them. The Commissioner of Income-Tax-II, Kanpur, centralised the cases at Varanasi citing the presence of Didwania brothers as directors and their connection to a search under Section 132 of the Income Tax Act. The Commissioner relied on a High Court judgment stating the authority's discretion in choosing the place for assessment of group companies. The petitioner challenged the centralization, arguing lack of relevant reasons and prejudice due to the transfer.

2. Jurisdiction for assessment proceedings:
The petitioner contended that the centralization at Varanasi was arbitrary and prejudicial as its operations were primarily in Kanpur, where it was assessed, and had no significant presence in Varanasi. The petitioner's representative referenced a Division Bench decision emphasizing the importance of providing grounds for transfer, allowing the assessee to rebut and establish the transfer's lack of merit. However, the Court found the petitioner's objections insufficient and upheld the centralization at Varanasi due to the Company's business activities and financial connections in Varanasi, especially with the Didwania brothers.

3. Compliance with principles of natural justice in transfer of assessment proceedings:
The petitioner argued that the search at its Varanasi manufacturing unit did not warrant the transfer of assessment proceedings to Varanasi, emphasizing the need for adherence to principles of natural justice in quasi-judicial decisions. Despite the petitioner's objections and reliance on legal precedents regarding the right to be informed of grounds for transfer, the Court upheld the centralization, considering the Company's business activities and financial transactions in Varanasi as justifying the transfer. The Court found no grounds to interfere with the Commissioner's decision, dismissing the writ petition.

In conclusion, the Court dismissed the petitioner's challenge to the centralization of assessment proceedings at Varanasi, emphasizing the Company's business activities and financial connections in Varanasi as justifying the transfer, despite objections raised regarding lack of relevant reasons and potential prejudice.