2015 (4) TMI 1305 - HC - Indian Laws

Search and seizure - survey - It is the contention of the Revenue that since the assessee as well as its directors have a close and live link with Purti Group of companies, therefore, a survey under Section 133 A was carried at the business/factory premises of the assessee at Alwar simultaneously - HELD THAT - The exercise of power under sub-section (1) and sub-section (2) of Section 127 of the Act comes with certain procedural requirements, namely, of granting a reasonable opportunity of being heard in the matter, of recording of reasons for passing such order and communicating such reasons to the assessee. Subject to fulfillment of such procedural requirements, the authority under Section 127 enjoys considerable discretion while exercising the power contained in sub-section (1) or sub-section (2) thereof. Such discretion, in our view, of-course has to be exercised for achieving the public purpose and not for any arbitrary or irrelevant consideration. On the other hand, it can also be seen that transfer of a pending case from one AO to another AO outside the State is likely to cause considerable inconvenience to an assessee. Therefore, even though an assessee may not have a vested right to insist that his assessment be completed only at one place or by a particular AO, nevertheless, the reasons for transfer must be weighty enough to offset against such personal inconvenience of an assessee. It is well settled that judicial review against the administrative orders in exercise of writ jurisdiction, the court is concerned with the decision making process and not the final decision itself. Unless the reasons which prompted the competent authority to transfer the case can be stated to be wholly irrelevant or arbitrary, the Court would not interfere with such reasons. There are no infirmity in the order impugned passed by the ld. Single judge so as to call for interference by this Court in the instant intra-court appeal - appeal dismissed.

Summary

Issues Involved:
1. Legitimacy of the transfer of the appellant's case from Alwar to Kolkata.
2. Existence of a "live link" between the appellant and Purti Group of Companies.
3. Adequacy of the opportunity to be heard and reasons provided for the transfer.
4. Judicial review of administrative decisions under Section 127 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of the transfer of the appellant's case from Alwar to Kolkata:
The appellant, a private limited company, contended that the transfer of its case from Alwar to Kolkata was unjustified. The Revenue argued that incriminating material found during a search and seizure operation linked the appellant with the Purti Group of Companies, necessitating centralized and coordinated investigation. The Commissioner of Income Tax-III, Kolkata, and the Commissioner, Alwar, provided opportunities for the appellant to respond to the proposed transfer, which was ultimately upheld by the ld. Single Judge. The High Court concurred with the ld. Single Judge's conclusion that coordinated investigation was appropriate given the material evidence linking the appellant to the Purti Group.

2. Existence of a "live link" between the appellant and Purti Group of Companies:
The Revenue's contention was based on transactions between the appellant and Purti Group of Companies, including sales and purchases, as well as the fact that the directors of the appellant were brothers of the main director of Purti Group and were assessed in Kolkata. The appellant argued that these transactions were minimal and in the ordinary course of business. However, the High Court found that the presence of transactions and shared directorships established a "live link," justifying the transfer for coordinated investigation. The court noted that the appellant's directors admitted to purchasing and selling oil with Purti Vanaspati Pvt. Ltd. and that their residential addresses were in Kolkata.

3. Adequacy of the opportunity to be heard and reasons provided for the transfer:
The appellant was given opportunities to object to the transfer, and the reasons for the transfer were communicated. The High Court emphasized that, under Section 127, once reasons are recorded and communicated, courts should not typically interfere with administrative decisions. The court found that the procedural requirements of granting a reasonable opportunity to be heard, recording reasons, and communicating those reasons were fulfilled in this case.

4. Judicial review of administrative decisions under Section 127 of the Income Tax Act:
The High Court reiterated that judicial review focuses on the decision-making process rather than the merits of the decision itself. The court cited precedents, including the Supreme Court's ruling in K.P Mohammed Salim v. Commissioner Of Income Tax, Cochin, emphasizing that Section 127 is a machinery provision meant to facilitate effective tax administration. The court upheld the transfer, noting that it was based on material evidence and aimed at coordinated investigation, aligning with public interest and the interest of revenue. The court also referenced other judgments supporting the centralization of cases for effective investigation.

Conclusion:
The High Court dismissed the intra-court appeal, affirming the ld. Single Judge's decision to uphold the transfer of the appellant's case from Alwar to Kolkata. The court found that the transfer was justified based on the existence of a live link with the Purti Group of Companies, the procedural adequacy in granting the opportunity to be heard, and the legitimate administrative purpose of coordinated investigation. The court emphasized the limited scope of judicial review in such administrative decisions, as long as they are made bona fide and for public purpose.