2017 (12) TMI 412 - HC - Income Tax

Transfer of case u/s 127 - Centralization of Search and Seizure cases - violation of principles of natural justice - recording of reasons - Held that - Sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but rather it excludes certain procedure contemplated under sub-section (1) and sub-section (2) of Section 127 of the Act, when both the transferee and transferor officers are situated in the same city, locality or place. The provision commences by stating nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given . Therefore, when there is a total exclusion of an opportunity, the question of communicating the reasons to the assessee cannot be insisted upon and that is not required under the statute. Therefore, the assessee cannot seek to read something into the statute, which is not found therein Sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but rather it excludes certain procedure contemplated under sub-section (1) and sub-section (2) of Section 127 of the Act, when both the transferee and transferor officers are situated in the same city, locality or place. The provision commences by stating nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given . Therefore, when there is a total exclusion of an opportunity, the question of communicating the reasons to the assessee cannot be insisted upon and that is not required under the statute. Therefore, the assessee cannot seek to read something into the statute, which is not found therein.As pointed out earlier, sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but it is a clause providing for exclusion of certain procedures, which are required to be adhered to under circumstances not mentioned in sub-section (3) of Section 127 of the Act. Therefore, the theory of harmonious construction cannot be applied to the facts of this case, nor sub-section (3) of Section 127 of the Act, can be construed as a non-obstante clause, but a clause providing for exclusion of certain procedure in certain contingencies. The fact that the transferee and transferor officers are within the same city is not in dispute. This Court has found that there has been an agreement between the two Heads of Department and the petitioner cannot plead for an opportunity to be granted before an order of transfer, as there is no such statutory requirement under the Act, rather, the said procedure has been specifically excluded. Furthermore, the Court is satisfied that there are reasons recorded, as has been mentioned by referring to the chain of events. In such circumstances, the impugned notification cannot be faulted on the grounds raised by the petitioner. A contention was advanced on behalf of the petitioner that the exercise of the power of jurisdiction was a mala fide exercise based on newspaper gossips and made to appear as an innocuous order of transfer. In this regard, reference was made to the observations contained in an interim order passed on 19.02.2016, especially in paragraph 4 therein, find what has been recorded by the Court is the submission made on behalf of the petitioner and not a finding rendered by the Court. In any event, the observations contained in the order dated 19.12.2016, was an order recording reasons while granting an interim order, which can hardly have any impact when the case is heard and decided finally. Thus, for all the above reasons, the petitioner has not made out any case for interference. Accordingly, the Writ Petition fails and the same is dismissed.

Issues Involved:
1. Quashing of Notification under Section 127 of the Income Tax Act, 1961.
2. Challenge to the notice under Section 148 and consequential notice under Section 142(1) of the Income Tax Act, 1961.
3. Challenge to the order under Section 263 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Quashing of Notification under Section 127 of the Income Tax Act, 1961:

The petitioner sought to quash the notification dated 24.06.2016, issued by the Principal Commissioner of Income Tax, Chennai-1, transferring the petitioner’s cases from the Deputy Commissioner of Income Tax, Corporate Circle-1(1), Chennai to Deputy Commissioner of Income Tax, Central Circle-2(1), Chennai. The petitioner argued that the notification was ultra vires under Section 127(2) of the Income Tax Act, 1961, issued without giving a reasonable opportunity of being heard and without recording reasons, thus violating principles of natural justice.

The petitioner contended that they were not connected with the search and seizure cases of Shri A.M. Arun and M/s. Vasan Health Care (P) Ltd., except for owning certain shares, and there was no material to warrant clubbing their cases with those of Vasan Health Care. The petitioner also argued that the notification was issued without independent application of mind by the first respondent and was based on directions from superior officers.

The respondents argued that under Section 127(3) of the Act, no opportunity is required to be given when the transfer is within the same city. They contended that the notification was for administrative convenience to facilitate coordinated investigation and that there was an agreement between the concerned Commissioners.

The court examined the organizational setup and found that the Principal Chief Commissioner of Income Tax, Tamil Nadu, and Puducherry, under whom both the Corporate Circle and Central Circle fall, had concurred with the transfer. The court held that the agreement between the two Heads of Department was explicit and satisfied the requirement under Section 127(2)(a) of the Act.

The court also held that Section 127(3) obviates the need for providing an opportunity to the assessee and recording reasons when the transfer is within the same city. The court found that the reasons for transfer were recorded in the note file, and the transfer was for administrative convenience to facilitate coordinated investigation.

2. Challenge to the notice under Section 148 and consequential notice under Section 142(1) of the Income Tax Act, 1961:

This issue was not directly addressed in the judgment as the court focused on the first issue, which had a direct impact on the other two writ petitions. The petitioner had challenged the notice issued under Section 148 and the consequential notice under Section 142(1) on the grounds of violation of principles of natural justice and lack of bona fides.

3. Challenge to the order under Section 263 of the Income Tax Act, 1961:

Similarly, this issue was not directly addressed in the judgment. The petitioner had challenged the order under Section 263 for the assessment year 2012-13 on the grounds of gross violation of principles of natural justice, legal malafides, and abuse of authority.

Conclusion:

The court dismissed the writ petition challenging the notification under Section 127, holding that the transfer was valid, for administrative convenience, and in compliance with the statutory requirements. The court found no merit in the petitioner’s contentions and upheld the impugned notification. Consequently, the connected miscellaneous petitions were also closed.

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