2009 (1) TMI 109 - HC - Income Tax

Orders of transfer of case passed under section 127 assessee was given opportunity of hearing reasons were also duly recorded for transfer i.e. for the purpose of co-ordinated investigation - as evidently facts have gone uncontroverted and unchallenged and as the twin requirements under section 127 have been complied with order of transfer can not be faulted

Issues Involved:
1. Whether the issues and facts in the writ petition are similar to Sahara Airlines.
2. Whether the order directing transfer only on the ground of interlacing and interconnection of funds and business activities of the Sahara group is sufficient to warrant transfer.
3. Whether the petitioner in principle had agreed to the transfer of files.
4. Whether in the facts and circumstances respondent No. 1 was justified in passing the order of transfer.

Issue-wise Detailed Analysis:

1. Similarity of Issues and Facts to Sahara Airlines:
The court examined whether the issues and facts in the current writ petition were similar to those in Sahara Airlines, decided by the Allahabad High Court. The petitioner argued that the transfer of cases was a concerted move by the Income-tax Department to cause harassment and inconvenience, similar to the Sahara Airlines case. The court noted that the petitioner relied heavily on interim orders from the Allahabad High Court, which had stayed the transfer of cases. The court found that the issues and facts in the current case were indeed identical to those in Sahara Airlines, as both involved the centralization of cases for coordinated investigation due to interlacing and interconnection of funds and business activities within the Sahara group.

2. Sufficiency of Grounds for Transfer:
The court considered whether the order directing transfer solely on the ground of interlacing and interconnection of funds and business activities was sufficient. The petitioner argued that such observations were sweeping and not substantiated. However, the court found that the financial transactions, including intercorporate transactions and interlacing of funds among Sahara group entities, justified the need for coordinated investigation. The court emphasized that coordinated investigation under a single Assessing Officer was crucial for a correct assessment of the transactions. The court upheld the validity of the transfer order, noting that the twin requirements of section 127 of the Income-tax Act-reasonable opportunity of hearing and recording of reasons-had been complied with.

3. Petitioner's Agreement to Transfer:
The court examined whether the petitioner had, in principle, agreed to the transfer of files. The petitioner had suggested that if transfer was necessary, it should be centralized at Kolkata or Lucknow, where the command office of the group was situated. The court found that the petitioner was not averse to transfer and centralization at Lucknow. However, since the challenge to the transfer of files from Lucknow to New Delhi by other entities of the Sahara group had failed in Sahara Airlines, the court found no merit in the petitioner's objection to the transfer to New Delhi.

4. Justification for the Order of Transfer:
The court considered whether respondent No. 1 was justified in passing the order of transfer. The court noted that section 127 of the Income-tax Act does not specify the class or grounds for transfer but requires compliance with reasonable opportunity of hearing and recording of reasons. The court found that both requirements had been met in this case. Given the similarity of issues to Sahara Airlines and the unchallenged observations and findings in the impugned order, the court concluded that respondent No. 1 was justified in passing the order of transfer from Kolkata to New Delhi.

Conclusion:
The writ applications were dismissed, and the interim orders were vacated. The court found that the transfer of files for coordinated investigation was justified and in compliance with the statutory requirements. The petitioner's objections were found to be without merit, and the transfer order was upheld.

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