2017 (4) TMI 665 - HC - Income Tax

Validity of order of transfer a case u/s 127 - in all 48 companies of the group were involved, all of whom have their head offices in Delhi and out of which, 40 companies were filing returns in Delhi. - Held that - The case of the petitioner cannot be separated from the other cases of the aforesaid group of companies and that the petitioner is one of the directors, who had admitted undisclosed income. The holding of the office of a director by the petitioner and his admission to the undisclosed income, if any, is not at all relevant for transfer of the case. The petitioner had not demanded separation of his case from other cases rather wanted all of them to be proceeded in Delhi, but no reason was assigned for shifting it from Delhi to Noida. The reply of the petitioner was not dealt with either by the two authorities in their report, which forms the basis for transfer of the case or by the Principal Commissioner in passing the impugned order. Moreover, there is no categorical consent or agreement of the Principal Commissioner, C.I.T. (Central), Kanpur, for the transfer of the case. The aforesaid reasons have been recorded by the two authorities by simply stating that the objections/reply of the petitioner are not satisfactory. There is no whisper with regard to contention/objection of the petitioner that all the companies of the group are having Head Office in Delhi and that most of them at least 40, are filing the returns in Delhi. There is no mention of any reason as to why case of the petitioner or any other case of the aforesaid group of companies requires to be transferred outside New Delhi to NOIDA. The aforesaid two reasons are not relevant for the transfer of the petitioner s case from one Assessing Officer(s) to one or more Assessing Officer(s) either subordinate to the same competent authority or outside his jurisdiction. - Transfer order cancelled.

Summary

Issues Involved:
1. Legality of the transfer order under Section 127 of the Income Tax Act, 1961.
2. Adherence to principles of natural justice in the transfer process.
3. Validity of the assessment order post-transfer.

Detailed Analysis:

1. Legality of the Transfer Order under Section 127 of the Income Tax Act, 1961:
The petitioner challenged the transfer order dated 20th October 2016, issued by the Principal Commissioner of Income Tax, New Delhi, which transferred the petitioner’s case from ITO, New Delhi, to the Deputy Commissioner/Assistant Commissioner, Income Tax, Central Circle, NOIDA. The petitioner argued that the transfer was done without a personal hearing and without considering the objections raised. The Principal Commissioner relied on a report from the Deputy Director of Income Tax, NOIDA, which found the objections unsatisfactory. The court noted that the Principal Commissioner did not provide specific reasons for the transfer, nor did he independently assess the objections raised by the petitioner.

2. Adherence to Principles of Natural Justice in the Transfer Process:
Section 127 of the Act mandates that the Principal Commissioner must give the assessee a reasonable opportunity of being heard and record reasons for the transfer. The court emphasized that these principles of natural justice were not followed. The Principal Commissioner did not provide a personal hearing to the petitioner, despite a specific request, and failed to state that it was not possible to do so. The court found that the objections raised by the petitioner were not independently considered, and the reasons provided for the transfer were not relevant or adequate. The court highlighted that the petitioner’s objections, particularly regarding the practical difficulties of pursuing the case in NOIDA, were not addressed.

3. Validity of the Assessment Order Post-Transfer:
The petitioner participated in the assessment proceedings under protest, asserting that the transfer order was illegal. The court acknowledged the petitioner’s protest, which was documented before the assessment order was passed. The court found that the transfer order was illegal due to the failure to adhere to the principles of natural justice. Consequently, the assessment order, which was based on the illegal transfer order, also fell to the ground. The court quashed the transfer order and, by extension, the assessment order, allowing the writ petition with no order as to costs.

Conclusion:
The court concluded that the transfer order was issued without following the necessary legal procedures and principles of natural justice. The Principal Commissioner failed to provide a reasonable opportunity of hearing to the petitioner and did not record specific reasons for the transfer. As a result, the transfer order was deemed illegal, leading to the quashing of both the transfer and the subsequent assessment orders. The court allowed the writ petition, granting liberty to the authority to pass a fresh order in accordance with the law, if permissible.