2015 (7) TMI 807 - HC - Income Tax

Transferring and centralizing all the cases of the petitioners at Agra - Validity of order under Section 127 transferring the case of petitioners - Held that - Since four of the petitioners are located in Delhi and three of the petitioners are located in Bulandshahar, it was essential that the assessment proceedings with regard to the search and seizure is centralized, which in the instant case has been done pursuant to the proposal of the Commissioner of Income Tax (Central) Kanpur. We find that there has been no arbitrariness in the decision taken by the respondents in the instant case. The contention of the petitioner that their reply was not considered is incorrect. We find from the reply of the petitioners that they themselves consented for centralization of the case but contended that instead of centralizing them at Agra it should be centralized at Delhi. We find from the draft show cause notice that most of the business activities including the corporate office of the petitioners are at Agra and though the residential premises of petitioner nos. 3 and 4 is at Delhi, their residential premises is being used as a registered office of petitioner nos. 1 and 2 nonetheless, no business activities of substantial nature is being carried out from this premises, whereas substantial business activities are being done through Agra only. In the light of the aforesaid, we are of the opinion that no prejudice is being caused to the petitioners in the transferring and centralizing all the cases of the petitioners at Agra. - Decided against assessee.

Summary

Issues: Violation of principles of natural justice in centralization of income tax assessment cases, Requirement of reasons for transferring cases under Section 127 of the Income Tax Act, Arbitrariness in decision-making process

Violation of Principles of Natural Justice:
The case involved a search and seizure operation at the business premises of the petitioners, located in Delhi and Bulandshahar. The Commissioner of Income Tax proposed centralization of cases at Agra, leading to orders transferring the cases of the petitioners to Agra. The petitioners contended that principles of natural justice were violated as they were not provided an opportunity of hearing and the orders lacked reasons, as mandated under Section 127 of the Income Tax Act. Citing a Supreme Court decision, the petitioners argued that reasons should be recorded in the order, even if brief, to help the assessee understand the necessity of transferring the case.

Requirement of Reasons for Transferring Cases:
The petitioners challenged the orders transferring their cases, emphasizing the mandatory requirement of recording reasons under Section 127(1) of the Income Tax Act. The court examined the order of the Income Tax Commissioner, Delhi, and found that the reason for transfer was communicated as "coordinated investigation and meaningful assessment." The court held that this brief reason was sufficient for compliance with Section 127, emphasizing the importance of centralized assessment proceedings due to the locations of the petitioners' business activities.

Arbitrariness in Decision-Making Process:
The court rejected the petitioners' argument that their reply was not considered, noting that the petitioners had consented to centralization but preferred Delhi over Agra. The court observed that while some petitioners were based in Delhi, most business activities were conducted in Agra, justifying the centralization of cases at Agra. It was determined that centralizing all cases at Agra would not prejudice the petitioners. Ultimately, the court found no arbitrariness in the decision to transfer and centralize the cases at Agra, dismissing the writ petition.