2018 (12) TMI 1400 - HC - Income Tax

Transfer of cases u/s 127(1) - reasons for transfer - Held that - There is no quarrel that a case can be transferred for coordinated investigation. At the same time, it is also necessary for the authority to say that on what reasons, such coordinated investigation is required and that statement is to be clearly spelt out in the order transferring the case from one Officer to another Officer. When such reasoning is not available in the present case, this Court is inclined to set aside the impugned order and remit the matter back to the first respondent to pass a fresh order expressing the reasons for transfer. At this juncture, this Court makes it very clear that it is not expressing any view on the merits of the reasons stated in the show cause notice as well as the objections raised by the petitioner opposing such transfer, as it is for the first respondent to consider the matter afresh and pass order by stating reasons. Accordingly, the writ petition is allowed and the impugned order dated 26.06.2018 is set aside. Consequently, the matter is remitted back to the first respondent to pass a fresh order on merits and in accordance with law

Issues Involved:
1. Validity of the transfer order under Section 127 of the Income Tax Act.
2. Adequacy of reasons provided for the transfer.
3. Compliance with the principles of natural justice.

Detailed Analysis:

1. Validity of the Transfer Order under Section 127 of the Income Tax Act
The petitioner challenged the transfer order dated 26.06.2018 issued by the first respondent, which transferred the petitioner’s case from ITO, Corporate Ward 4 (1), Chennai to DCIT, Central Circle-1(1), Bangalore. The petitioner argued that the order did not comply with Section 127 of the Income Tax Act, which mandates recording reasons for such a transfer.

2. Adequacy of Reasons Provided for the Transfer
The petitioner contended that the show cause notice dated 04.06.2018 issued by the first respondent only vaguely mentioned "substantial linkages" between the petitioner and Satish P Chandra and his company M/s.GTPL, without specifying the exact nature of these linkages. The petitioner responded on 13.06.2018, stating that since Worldline Singapore became the 100% owner, there was no connection with Satish P Chandra, Kishore K Kothapalli, and M/s.GTPL.

The respondents argued that the notice itself clearly indicated the need for coordinated investigation due to the linkages between entities in Bengaluru, Chennai, and Hyderabad. They maintained that the reasons provided were sufficient for the transfer.

3. Compliance with the Principles of Natural Justice
The petitioner’s counsel argued that the first respondent failed to provide specific reasons for the transfer in the impugned order, merely stating that the objections raised by the petitioner could not be the basis for not centralizing the case. This, according to the petitioner, did not satisfy the requirement under Section 127(1) of the Income Tax Act, which mandates recording reasons for the transfer.

The respondents countered that the reasons for the transfer were adequately communicated in the show cause notice and that the necessity for coordinated investigation justified the transfer. They cited a decision from the Madras High Court, General Exporters vs. Commissioner of Income Tax, to support their argument.

Court’s Observations and Decision
The Court observed that while the show cause notice did state some reasons for the proposed transfer, the impugned order failed to record specific reasons for the transfer, merely rejecting the petitioner’s objections in a single line. The Court emphasized that reasons stated in the show cause notice are preliminary and subject to change based on the objections raised. The final order must reflect a thorough consideration of both the reasons and the objections.

The Court referenced the Supreme Court’s decision in Ajantha Industries vs. CBDT, which underscored the necessity of recording and communicating reasons for transfer orders under Section 127(1). The Court also cited the Chhattisgarh High Court's decision in Ram Gopal Agrawal vs. UOI, which criticized vague reasons like "coordinated investigation" without specific details.

Given the lack of detailed reasoning in the impugned order, the Court set aside the transfer order and remitted the matter back to the first respondent to pass a fresh order with specific reasons within two weeks.

Conclusion
The writ petition was allowed, and the impugned order dated 26.06.2018 was set aside. The matter was remitted back to the first respondent to pass a fresh order on merits and in accordance with law, with reasons, within two weeks. No costs were imposed, and the connected miscellaneous petitions were closed.

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