2017 (11) TMI 66 - HC - Income Tax

Validity of order of transfer u/s 127 - whether the respondents could have transferred the files from Chennai to Mumbai? - whether the petitioner is entitled for refund of the excess tax paid by them, as per the provisions of the Act? - Held that - As referring to the instructions given by the Central Board of Direct Taxes No.1739, dated 19.12.1986 it is evidently clear that the instructions would apply to cases, where, there is a change of residence or place of business of the assessee. The instructions (referred to above) would not apply to petitioner s case for more than one reason. Firstly, there is no allegation against the petitioner that there is any avoidance of scrutiny. Secondly, there is no change of business place of the petitioner, and only their registered office has been changed and the same has been intimated to the Department, which shows the bona fide on the part of the petitioner. Though it is the contention of the respondent that, they have obtained the consent from the Income Tax Department at Mumbai regarding transfer of the petitioner s file, they cannot take shelter on the aforesaid instructions, as the petitioner s case does not fall within any one of two categories (mentioned above). The transfer of the files of the petitioner to Mumbai is completely flawed, and it is contrary to statutory provisions and the same should be set aside. Further, it is not disputed that the petitioner has not been put on notice, prior to transfer of their files and straightaway the impugned communication dated 18.07.2017 has been issued intimating that the transfer has been effected and he may contact the Income Tax Office, Mumbai for any queries. Therefore, by the quashing the impugned communication dated 18.07.2017, it has to be necessarily held that the order of transfer, if any, is also un-sustainable. As a consequence thereof, necessary directions are required to be issued in first set of Writ Petitions where, the petitioner seeks for a direction for refund of the excess tax paid by them. In this regard, it is submitted that, several representations and letters have been sent by the petitioner, but the petitioner was not favoured with any reply. When the Act provides for a remedy for refund, in case of excess tax paid or collected, it is bounden duty for the respondent to pass orders on the petitioner s refund claim without delay.

Summary

Issues:
1. Transfer of files from Chennai to Mumbai
2. Entitlement for refund of excess tax paid

Analysis:

Issue 1: Transfer of files from Chennai to Mumbai
The case involved two sets of Writ Petitions. The first set sought a direction for a refund of income tax returns, while the second set challenged a communication transferring the petitioner's cases to Mumbai. The petitioner had informed the Deputy Commissioner of Income Tax about a change in their registered office to Mumbai but requested all communications to be sent to the Chennai address. The court found that the communication transferring the files to Mumbai was based on a misreading of the petitioner's letters and lacked proper application of mind. The transfer was deemed unsustainable as it violated statutory provisions, specifically Section 127 of the Income Tax Act, which requires a reasonable opportunity for the assessee to be heard before transfer. The court also highlighted that the transfer was flawed as not all files were transferred, and the petitioner was not given prior notice.

Issue 2: Entitlement for refund of excess tax paid
The petitioner contended that the transfer of files was an attempt to delay or defeat their refund claim. The court agreed that the transfer was an improper method to circumvent the refund request. It was noted that the petitioner had made several representations for refund, but no action was taken. The court emphasized the duty of the respondent to process refund claims promptly under the Act. The judgment directed the Deputy Commissioner of Income Tax to consider the petitioner's refund claim, provide a personal hearing, and pass orders within three months from the date of the order.

In conclusion, the court allowed the second set of Writ Petitions, setting aside the communication transferring files to Mumbai and directing re-transfer to Chennai. The first set of Writ Petitions was disposed of with directions for the Deputy Commissioner to process the petitioner's refund claim promptly.