2018 (11) TMI 1616 - HC - Income Tax

Transfer of cases u/s 127 - reasons for centralisation and transfer of cases to Hyderabad from Bhimavaram - relative hardship - HELD THAT - We find that the procedure prescribed in Section 127(1), viz., that of giving an opportunity of being heard, has been complied with. The argument revolving around the necessity of an agreement as required by Section 127(2)(a) has also failed on factual grounds. Therefore, what is left is only the question of relative hardship. It is clear that the centralisation and transfer of cases to Hyderabad may prove to be futile, as the Department may not be able to summon all the witnesses from Bhimavaram. Even if they have the power to summon, the same will inconvenience hundreds of persons residing in Bhimavaram, provided they are actually in existence. As already given a tabulation of the number of assessees (17 in number), their present jurisdiction and the reasons for centralisation as given by the Department in an Annexure to the counter affidavit. The same discloses that the hardship that would be caused to the witnesses and the inconvenience that would be caused to the Department in dealing with these cases at Hyderabad are far more than that of the assessees. Therefore, even on the question of relative hardship, it is not possible to interfere with the impugned orders. There are four writ petitions on hand. The first petitioners on the file of the Income Tax Officer at Bhimavaram, West Godavari District. Therefore, they cannot have a grievance about the transfer of cases to Rajamahendravaram in East Godavari District, which is a neighbouring district. Similarly, the second petitioners are assessees on the file of the jurisdictional officer at Visakhapatnam. Therefore, they cannot also have a grievance about the transfer of the cases to East Godavari District, as both the districts are located in the State of Andhra Pradesh and even the contention revolving around Section 127(2)(a) will not apply to their cases. Rajamahendravaram is closer to Visakhapatnam than to Hyderabad. That leaves us only with the remaining two writ petitions for the reasons stated above, we find that the petitioners in these two cases also may not suffer as much hardship as the one that the witnesses may undergo and the difficulties that the Department may suffer if the transfer is not ordered to Rajamahendravaram.

Summary

Issues Involved:
1. Legality of centralization and transfer of cases under Section 127 of the Income Tax Act, 1961.
2. Compliance with procedural requirements under Section 127(1) and Section 127(2)(a) of the Income Tax Act.
3. Relative hardship and convenience to the assessees and the Income Tax Department.

Detailed Analysis:

1. Legality of Centralization and Transfer of Cases:
The assessees challenged the orders passed under Section 127 of the Income Tax Act, 1961, which centralized and transferred their cases to the Assistant Commissioner of Income Tax, Central Circle-I, Rajamahendravaram. The assessees argued that the transfer from one state to another (Telangana to Andhra Pradesh) required a written agreement between the Principal Chief Commissioners of both states, which was allegedly not obtained.

2. Compliance with Procedural Requirements:
The court examined whether the procedural requirements under Section 127(1) and Section 127(2)(a) were met. Section 127(1) mandates an opportunity of being heard, which was provided to the assessees. The assessees had requested centralization at Hyderabad due to the location of their registered offices and maintenance of books of accounts. However, the competent authority transferred the cases to Rajamahendravaram.

The assessees contended that the transfer from one state to another required an agreement under Section 127(2)(a). The court referred to the Supreme Court's decision in Noorul Islam Educational Trust v. Commissioner of Income-Tax, which emphasized the necessity of such an agreement. However, the Department stated on oath that the Assessing Officers in both Rajamahendravaram and Hyderabad were subordinate to the same Principal Chief Commissioner of Income Tax, Hyderabad, thereby negating the need for an agreement.

3. Relative Hardship and Convenience:
The court considered the relative hardship to the assessees and the Department. The assessees argued that centralization at Hyderabad would be more convenient due to the location of their registered offices and books of accounts. The court acknowledged that, in normal circumstances, the centralization should result in the least inconvenience to both parties. However, the Department's counter-affidavit highlighted significant issues, including unexplained share capital and cash deposits, primarily involving individuals and entities in Bhimavaram. The Department argued that centralization at Hyderabad would hinder the investigation, as it would be challenging to summon witnesses from Bhimavaram.

The court noted that the cases involved a large number of bogus shareholders and benamidars, primarily located in and around Bhimavaram. The centralization at Hyderabad would inconvenience hundreds of persons and impede the Department's investigation. The court emphasized the need to balance private and public interests, as highlighted in Devidas v. Union of India.

Conclusion:
The court found that the procedural requirements under Section 127(1) were met, and the argument regarding the necessity of an agreement under Section 127(2)(a) failed on factual grounds. The court determined that the relative hardship to the Department and witnesses outweighed the inconvenience to the assessees. Therefore, the court upheld the transfer orders and dismissed all writ petitions, stating that the centralization and transfer to Rajamahendravaram were justified and necessary for effective investigation. Pending applications were also closed, with no costs awarded.