2014 (8) TMI 637 - HC - Income Tax

Transfer to different jurisdiction u/s 127(1) - opportunity of being heard Held that - The show-cause notice of January 9, 2014, called upon the first petitioner to present its objections to the proposed transfer of the account from Kolkata to the Kanpur Central region The notice expressed the tentative opinion that the transfer of the petitioner s account to Kanpur was necessary for a co-ordinated investigation - the Commissioner relied on a report, the contents were not made known to the assessee and the order does not indicate any reasons in support of the decision to transfer the account despite the objection of the petitioner company, the order cannot be accepted - the order of transfer passed u/s 127(1) is set aside Decided in favour of assessee.

Summary

Issues: Challenge to order under section 127(1) of the Income-tax Act, 1961 transferring the assessee's account to a different jurisdiction based on lack of opportunity of being heard and breach of principles of natural justice.

Analysis:
1. The assessee challenged the order under section 127(1) of the Income-tax Act, 1961, which transferred the assessee's account to a different jurisdiction. The grounds raised were related to the lack of a personal hearing before the final order and reliance on undisclosed material by the Commissioner, breaching the principles of natural justice.

2. The show-cause notice issued on January 9, 2014, informed the petitioner about a search and seizure operation revealing connections with a group of concerns. The notice proposed transferring the account to Kanpur for a coordinated investigation. The petitioner responded, highlighting potential financial burdens due to ongoing assessments.

3. The impugned order of February 2, 2014, stated that the assessee was given an opportunity to be heard, but it did not provide reasons for the transfer decision. The order quoted the objections raised by the petitioner but did not disclose a report that influenced the decision-making process, which was not made available to the assessee.

4. Section 127(1) of the Act mandates a reasonable opportunity of being heard and requires recording reasons for transferring a case to another Assessing Officer. The order lacked substantive reasons, only stating that the objections raised did not convince the Revenue's interests.

5. The judgment emphasized the importance of reasons in judicial or quasi-judicial orders, highlighting that reasons should establish a link between facts and conclusions drawn. The absence of reasons supporting the decision to transfer the account, coupled with reliance on an undisclosed report, rendered the order unacceptable.

6. The judgment allowed the petition, setting aside the transfer order of February 2, 2014, and nullifying any actions taken based on that order. The respondent authorities were granted the liberty to reconsider the transfer in compliance with the law, emphasizing the necessity of providing a fair opportunity and recording proper reasons in such decisions.