2015 (3) TMI 810 - HC - Income Tax

Power to transfer cases - impugned transfer has been made from the file of second respondent to the file of third respondent - whether the order of transfer dated 16.12.2008 made by the first appellant/first respondent is valid as per law or the same is liable to be quashed? - Held that - It is true that the respondent/petitioner is having separate educational institutions in and around Thuckalay, Kanyakumari District. It is also true that the Chairman of the respondent/ petitioner is running several educational institutions in Kerala in his individual capacity. But no-one can say that the said A.P.Majeed Khan is not getting income from the institutions which are being run by the trust as well as from the institutions which are being run by him in his individual capacity. Under the said circumstances for making effective assessment and also for having coordinate enquiry and investigation, such transfer is must and the same would not create any prejudice to the respondent/petitioner. Since Section 127(2)(a) is nothing, but a machinery provision and since no serious allegations have been levelled against the appellants/respondents, this Court is of the considered view that the first respondent/first appellant is having power of transfer even without assigning any reason and therefore the order passed by the first appellant/first respondent is perfectly valid in law and the same need not be quashed. The learned Single Judge has simply observed that such transfer is not factually justifiable and consequently allowed the writ petition. In view of the discussion made earlier, this Court has received considerable force in the contention putforth on the side of the appellants/ respondents and therefore the impugned order passed by the learned Single Judge is liable to be quashed.

Summary

Issues:
Challenge to order transferring a case under the Income Tax Act, 1961.

Analysis:
The respondent filed a writ petition under Article 226 challenging the transfer of their case from one income tax officer to another. The petitioner, an educational trust, argued that the transfer was unjustified and should have been made to an Assistant Commissioner within Tamil Nadu. The counter-argument cited Section 127(2)(a) of the Income Tax Act, 1961, granting the first respondent the power to transfer cases after due formalities. The Single Judge allowed the writ petition, leading to the current appeal.

The main issue in the appeal was whether the transfer order was valid under Section 127 of the Act. The provision allows for transfer after giving the assessee a reasonable opportunity to be heard, without specifying any reasons for the transfer. The appellant argued that the transfer was necessary for coordinated investigation due to undisclosed income detected in the case.

The appellant relied on a Supreme Court decision emphasizing that transfer orders are for the purpose of assessment and serve a larger public interest. The Court noted that Section 127 is a machinery provision for collecting income tax, and the first respondent had the power to transfer cases without specifying reasons.

The respondent contended that the Chairman's institutions in Kerala were separate from those of the trust, but the Court found that effective assessment required coordinated investigation due to shared income sources. The Single Judge's decision to quash the transfer order was deemed erroneous as Section 127 did not require reasons for transfer.

Ultimately, the Court allowed the appeal, setting aside the Single Judge's order and dismissing the writ petition. The decision highlighted the first respondent's power to transfer cases under Section 127 without the need for specific reasons, emphasizing the machinery nature of the provision for effective income tax assessment.