2014 (3) TMI 430 - HC - Income Tax

Validity of order u/s 127 of the Act - Power to transfer cases - Transfer of Jurisdiction Held that - An order of transfer is passed for the purpose of assessment of income - It serves a larger purpose - Such an order has to be passed in public interest - The purpose of a Section 127 transfer is not to subject the petitioner to any tax liability, or even undergo any other obligation onerous or otherwise, but rather, only to direct that the regular assessment (as is carried out in the usual course of events) will be conducted by an AO other than the jurisdictional AO in order to ensure coordinated investigation. Revenue does not rely on the mere plea or assertion of coordinated investigation Rather provided a context of the need for such a coordinate investigation, given the various limbs and branches of the entities involved in the Eldeco Group and their varying business connections - the very purpose of the Section 127 order in the case is to ensure than an orderly and coordinated investigation takes place while conducting the assessment of the various entities involved - the Supreme Court has also recognized that a Section 127 order does not by itself cause any prejudice to the assesee, and given that due deference must be granted to the Revenue in such matters, the limits of review of such orders is narrow. In Kashiram Agarwala v. Union of India, 1964 (10) TMI 8 - SUPREME Court . The assessee also has the opportunity to present his case, and be subject to a regular assessment, in front of the AO to whom jurisdiction has been transferred - No prejudice is caused by the mere fact of a Section 127 order, such that detailed reasons and specific grounds are required to be provided, as the petitioner today argues - the show-cause notice granted the petitioner in the case an opportunity of being heard - No oral representation was made by the petitioner on that date, nor was any request for another date made to the Commissioner - thus, the argument that no chance to effectively represent the case was provided has no merit Decided against Assessee.

Issues Involved:
1. Legality of the transfer order under Section 127 of the Income Tax Act, 1961.
2. Adequacy of reasons provided for the transfer.
3. Opportunity of being heard under Section 127.
4. Alleged prejudice due to the transfer from one state to another.

Issue-wise Detailed Analysis:

1. Legality of the Transfer Order under Section 127 of the Income Tax Act, 1961:
The writ petition challenges an order under Section 127 of the Income Tax Act, 1961, passed by the CIT (XVI), New Delhi, which transferred jurisdiction over the petitioner from the DCIT, Circle 48(1), New Delhi to the ACIT, Central Circle, Noida. The petitioner argued that the transfer lacked cogent reasons and was based on mere suspicion without any material evidence. The Court, however, noted that the transfer was part of a larger investigation into the Eldeco Group of Companies, with which the petitioner had business connections, thereby justifying the need for coordinated investigation.

2. Adequacy of Reasons Provided for the Transfer:
The petitioner contended that the impugned order did not provide sufficient reasons for the transfer, as required by Section 127. The Court observed that the transfer was necessitated by the need for a coordinated investigation into the Eldeco Group of Companies, which involved multiple entities and business connections. The Court held that the facts presented a clear nexus between the petitioner and the Eldeco Group, thereby justifying the transfer for a coordinated investigation. The Court emphasized that it is not within its domain to second-guess the Revenue's reasoning or sit in appeal, and the conspectus of facts satisfied the scrutiny under Article 226.

3. Opportunity of Being Heard under Section 127:
The petitioner argued that a reasonable opportunity of being heard was not provided, as no specific reasons for the proposed transfer were recorded, nor was any material communicated to the petitioner. The Court noted that the show-cause notice dated 9.10.2013 granted the petitioner an opportunity of being heard, and written objections were furnished and considered. The Court found that the petitioner had the opportunity to present his case and that the argument of not being provided a chance to effectively represent the case had no merit.

4. Alleged Prejudice Due to the Transfer from One State to Another:
The petitioner argued that the transfer from one state to another required stricter considerations and that the impugned order was contrary to the show-cause notice, which proposed transferring the case to Faridabad but ultimately centralized it in Noida. The Court held that an order of transfer under Section 127 serves a larger public interest and does not subject the petitioner to any tax liability or other obligations. The Court emphasized that the purpose of the transfer was to ensure an orderly and coordinated investigation, and no prejudice was caused by the mere fact of the transfer. The Court cited Supreme Court precedents to support its position that a Section 127 order does not cause any prejudice to the assessee and that the limits of review of such orders are narrow.

Conclusion:
The Court dismissed the writ petition, finding it meritless, and upheld the transfer order under Section 127 of the Income Tax Act, 1961. The Court concluded that the transfer was justified for conducting a coordinated investigation into the Eldeco Group of Companies, with which the petitioner had business connections, and that the petitioner was provided an adequate opportunity to be heard.

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