2019 (12) TMI 321 - HC - Income Tax

Transfer of case u/s 127(2)(a) - proper and satisfactory reasons - service of notice - requirement of proper notices and the opportunities of being heard - Held that - It is clear that an agreement between the two jurisdictional authorities is an essential pre-requisite to be complied with to transfer a case between them. In case of absence of such agreement, the provision of clause (b) of Section 127(2) is to be complied with for passing of an order of transfer where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director or Director General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners. It appears that prior to sending the notice dated 07.12.2017, there was agreement between the Director General of Income Tax (Inv), Kochi and the Principal Chief Commissioner of Income Tax, NER, Guwahati belonging to the two jurisdictions. It is neither a pleaded case of the petitioners nor it is submitted by the learned counsel for the petitioners that there was lack of agreement or there was disagreement between the two respective jurisdictional authorities for the purpose of transferring the cases of the petitioners from Dimapur, Nagaland to Kollam, Kerala. From the conspectus of facts, it, thus, transpires that it is not a case that all the cases of the petitioners were only assessed with the ACIT, Circle - Dimapur and the ITO, Ward - I, Dimapur with no financial interests and presence in the State of Kerala. It is not a case of the petitioners that there are only 7 (seven) cases of assessment for them and all those were being assessed at Dimapur taking into consideration their financial dealings only in the State of Dimapur and with no connection whatsoever in the State of Kerala. Rather, it goes to show that a substantial part of their financial and business dealings are being carried out in the State of Kerala through various entities. The respondent authorities are found to have provided adequate reasons in the notices dated 23.05.2018 expressly as to why the cases of the petitioners are required to be transferred to the ACIT, Central Circle - Kollam in the State of Kerala which, in turn, have explained the situation implied as to why the cases of the petitioners should not be considered for assessment in the State of Nagaland. Thus, this Court is of the considered view that the notices dated 23.05.2018 did not suffer from absence of reasons. Regarding service of notice - Held that - A plea has been raised by the petitioners that the first notice escaped their attention which resulted into denial of reasonable opportunity to respond to the said notice, more particularly, for the fact that the first notice did not stipulate any time period within which the objections to the proposal of transfer were to be filed. At the same time, the petitioners have averred in the writ petition that they having received the notice at a much belated stage, were thinking of filing replies to the same and had sent the same to their attorney on record, but by that time, the impugned orders dated 18.07.2018 were served on them. But the petitioners are again conspicuously silent as to when the copies of the first notice were served on them and have not stated anything in rebuttal to the claim of the sender. To raise a credible plea of not being afforded reasonable opportunity to them to respond to the said notice, it entails a disclosure on the part of the petitioners as regards the date of receipt of the said notice by them. But no such disclosure has been made by the petitioners. Considering the time periods, indicated above, it cannot be said that the respondent authorities had fallen short of on that count in adhering to the principles of natural justice. Regarding assigning of reasons - Held that - there was no denial of affording reasonable opportunity of being heard in the cases of the petitioners. By assigning adequate reasons therein, the petitioners were given adequate opportunities to respond to the two notices containing the proposal to transfer their cases of assessment - the petitioners did not avail the opportunity so granted to them by submitting their responses and, as such, the plea of denial of the principles of natural justice is found to be not tenable and sustainable. Petition dismissed.

Summary

Issues Involved:
1. Transfer of assessment cases under Section 127(2)(a) of the Income Tax Act, 1961.
2. Adequacy of notice and opportunity to be heard.
3. Validity of reasons for transfer.
4. Service of notice and procedural compliance.
5. Alleged violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Transfer of assessment cases under Section 127(2)(a) of the Income Tax Act, 1961:
The petitioners challenged the transfer of their income tax assessment cases from Dimapur, Nagaland to Kollam, Kerala. The transfer was ordered by the Principal Commissioner of Income Tax, Jorhat, exercising powers under Section 127(2)(a) of the Income Tax Act, 1961. The petitioners argued that the transfer was done without proper notice and an opportunity to be heard, thus violating principles of natural justice. The court noted that a search and seizure operation was conducted on the petitioners' premises, revealing significant financial interests in Kerala, justifying the need for coordinated investigation and administrative convenience.

2. Adequacy of notice and opportunity to be heard:
The petitioners contended that the notices dated 23.05.2018 and 26.06.2018 were either not served or served at incorrect addresses, denying them a reasonable opportunity to respond. The court examined the notices and found that they contained sufficient reasons for the proposed transfer, allowing the petitioners to make effective representations. The court also noted that the petitioners did not provide specific dates of receipt of the notices, which weakened their claim of inadequate opportunity.

3. Validity of reasons for transfer:
The court found that the notices provided adequate reasons for the transfer, including the need for centralized investigation due to substantial financial interests and business activities of the petitioners in Kerala. The court held that the reasons given were sufficient to justify the transfer under Section 127(2)(a) of the Act, facilitating coordinated investigation and administrative convenience.

4. Service of notice and procedural compliance:
The petitioners argued that the notices were not served at their registered addresses in Nagaland but at addresses in Kerala. The court held that the addresses in Kerala were not incorrect, as they were the same addresses used in previous communications. The court also referred to Section 27 of the General Clauses Act, 1897, which presumes proper service of notice when sent to the correct address. The court found that the petitioners' claim of non-service was not substantiated, and the procedural requirements were substantially complied with.

5. Alleged violation of principles of natural justice:
The court concluded that there was no violation of the principles of natural justice. The petitioners were given reasonable opportunities to respond to the notices, which they failed to utilize. The court emphasized that the discretion to transfer cases under Section 127 of the Act is vested in high-ranking officials and should not be interfered with unless it is arbitrary, perverse, or mala fide. The court found that the transfer orders were not arbitrary or perverse and were based on valid reasons.

Conclusion:
The court dismissed the writ petitions, upholding the transfer orders dated 18.07.2018 and the consequent notices issued under Section 153A of the Income Tax Act, 1961. The court found no merit in the petitioners' claims of inadequate notice, improper service, or violation of natural justice principles. The interim order was recalled, and no costs were awarded.