2021 (3) TMI 1410 - HC - Income Tax

Correctness/validity of an order u/s 127 - power of transfer of case - Department proposes to transfer the PANs of the petitioners from Income Tax Officer, NCW 5(2) to Deputy Commissioner of Income Tax/Assistant Commissioner of Income Tax, Central Circle 18, New Delhi - As per petitioner request for the supply of reasons for transfer were never considered - HELD THAT - The files were thus called for and the reasons have been supplied in a sealed cover. A perusal of the same would indicate that the transfer is to facilitate a proper assessment of all the group entities that were subject to search proceedings and this is in line with Board's Instruction bearing No.8 dated 14.08.2002. As a matter of policy, the Central Board of Direct Taxes has decided upon centralisation of all search assessments in one charge granting discretion to the concerned Director General of Income Tax (Inv.)/Chief Commissioner of Income-Tax (Central) to deviate from such a decision (not to centralize a search case) on account of work load, low investigation potential or tax impact of any of the entities of the group. A policy decision such as the above, is in public interest and intended to facilitate proper assessment of search cases, as it is expected that the issues arising from these matters may be intertwined or inter-connected, thus find no reason to interfere in this policy. As far as post search assessments are concerned, I am given to understand that the assessments will continue to be framed by the Officer to whom charge is entrusted upon centralization. It stands to reason that the central charge is decentralised as soon as possible in order that normalcy may resume. Reasonable opportunity of being heard in order to effectively show cause against the proposed transfer - It is a settled proposition that in case of transfer, such opportunity has to be extended. However, two distinguishing factors would be that in the case of Vijayasanthi ( 1990 (11) TMI 139 - ANDHRA PRADESH HIGH COURT entity in question was not part of the group of entites searched but a standalone assessee whose assessment was proposed to be transferred. The second distinguishing factor is the decision was rendered on 15.11.1990 prior to the issuance of instructions by the Central Board of Direct Taxes in the year 2002. WP dismissed.

Summary

Issues:
1. Transfer of PAN from one Income Tax Officer to another without providing reasons.
2. Challenge to the transfer orders based on the lack of reasons provided.
3. Centralization of search assessments by the Central Board of Direct Taxes.
4. Policy decision regarding centralization of search assessments.
5. Compliance with principles of natural justice in transfer cases.

Analysis:
1. The petitioners, who are family members, challenged the transfer of their PANs from one Income Tax Officer to another without being provided with reasons for the transfer. The transfer was part of search proceedings initiated by the Income Tax Department in connection with certain individuals associated with Amira Food Pvt. Ltd. The petitioners raised objections to the transfer, seeking reasons, but the impugned orders confirming the transfer did not provide any reasons for the same.

2. The petitioners contended that their request for reasons for the transfer was not considered. Upon court's intervention, the reasons were supplied in a sealed cover, revealing that the transfer aimed to facilitate a proper assessment of all group entities subject to search proceedings. This transfer was in line with the Central Board of Direct Taxes' policy decision on centralization of search assessments, as per Instruction No. 8 dated 14.08.2002.

3. The Central Board of Direct Taxes had centralized search assessments to ensure proper assessment of cases involving interconnected issues. The policy allowed for discretion to deviate from centralization based on workload, investigation potential, or tax impact. The court found this policy decision to be in public interest and crucial for the effective handling of search cases.

4. The court noted that post-search assessments would continue to be conducted by the officer in charge of centralization. It was emphasized that decentralization should occur promptly to resume normal assessment procedures. The court highlighted the importance of maintaining efficiency in the assessment process post-centralization.

5. While acknowledging the requirement to provide a reasonable opportunity for the assessee to be heard in cases of transfer, the court distinguished a previous judgment where the entity being transferred was not part of the searched group. The court also noted that the previous judgment was rendered before the issuance of instructions by the Central Board of Direct Taxes in 2002. Ultimately, the court dismissed the writ petitions, upholding the transfer orders without imposing any costs.