2021 (2) TMI 650 - HC - Income Tax

Transfer of case u/s 127(2) - Jurisdiction in case of partners of partnership firm - jurisdictional change from New Delhi to Faridabad - centralization of the case of the petitioner - As argued neither the notice preceding the impugned order nor the impugned order containing any reasons for transfer - HELD THAT - Vide the notice dated 8th October, 2020, issued in exercise of power under Section 127(2) petitioner was informed of the proposal received from the Principal Commissioner of Income Tax (Central) Gurugram regarding the centralization of the case of the petitioner from ITO Ward 29(1), New Delhi to ACIT/DCIT, Central Circle-II, Faridabad and the petitioner asked to submit its objections, if any and to participate in the hearing granted. Undoubtedly, the said notice did not set out any reasons for transfer. However, a perusal of Section 127(2)(a) shows the same to be requiring only giving the assessee a reasonable opportunity of being heard in the matter, that too wherever it is possible to do so and only requires reasons to be recorded, if directing transfer. Though there is no specific requirement for the notice to set out the reasons but the principles of natural justice require reasons to be stated, to enable the assessee to make effective use of the opportunity granted of hearing. The present is however not a case where though no reasons were set out in the notice but the petitioner was unaware of the reasons for proposed transfer. The petitioner, in its reply dated 26th October, 2020 to the notice referred to an earlier reply (but which has not been produced) and contended that the petitioner firm had been searched under Section 132A by the Investigation Wing, Faridabad on 19th February, 2020 and the department was in the process of jurisdictional change from New Delhi to Faridabad for centralization of the cases belonging to it; that Devender Kumar Gupta who on behalf of the petitioner was replying to the notice, was also a Director in five other private limited companies all of which also had their registered office at Delhi, at the same address in Delhi which was the address of the petitioner and all the said companies were also being assessed at Delhi; that since the material collected during the raid had not been disclosed, the notice was void. The petitioner was thus aware of the reason for which notice had been issued. Principles of natural justice been violated - The impugned order thereafter proceeds to record the response of the Principal Commissioner of Income Tax, Gurugram to the objections of the petitioner, to the effect that (i) the petitioner is a key concern of the Chairman of the Group i.e. Devender Kumar Gupta; (ii) during the course of search proceedings, certain incriminating documents/materials found and seized, related to the petitioner; and, (iii) therefore for purposes of administrative convenience, better coordination, meaningful assessment, achieving uniformity of action and for effective and coordinated investigation, the case of the petitioner was required to be centralized in Central Circle-II Faridabad, wherein maximum number of cases related to this group had already been centralized at one place. Thereafter, the impugned order records that the objections of the petitioner had been duly addressed and there was no justifiable reason for not centralizing the assessment. The impugned order also reasons that Faridabad was within Delhi-NCR Region and in close proximity with Delhi and large number of people working in Delhi are residing in Faridabad or visa-versa. It thus cannot be said that the impugned order is without any reason. The counsel for the petitioner has also not contended, what prejudice has been suffered by the petitioner from the notice not setting out any reasons for transfer. There is thus no merit in the contention of the counsel for the petitioner, of the statutory requirement of giving opportunity and the principles of natural justice having been violated. Even otherwise, an order of transfer is more in the nature of an administrative exercise of power and the scope of interference wherein in any case is limited and unless the administrative power is shown to have been exercised without authority under the law and/or for mala fide reason, no case for interference is made out. Once we find the partners of the petitioner to be residents of Faridabad and assessed at Faridabad, we agree with the reasoning given in the impugned order, of administrative convenience for exercise of the power of transfer. It is not the case that the partners of the petitioner residing at Faridabad are assessed at Delhi. If the partners for their own assessment have to participate in the proceedings at Faridabad and Chandigarh, we see no prejudice from the firm of the said partners also being assessed at Faridabad. We are also of the view that the petitioner was required to disclose that its partners were residing at Faridabad and the same was a relevant fact. We do not agree with the counsel for the petitioner that the petitioner was not required to disclose the residence of its partners. The petition is supported by the affidavit of Devender Kumar Gupta, where he has given his address of Delhi, when it is admitted that he is residing at Faridabad. Once the matter concerns territoriality, the place of residence cannot be said to be not relevant. The petitioner, to that extent has indulged in suppression of material facts and for this reason alone is not entitled to any equitable relief from this Court. Suppression of material facts, in Kishore Samrite Vs. State of U.P. 2012 (10) TMI 1097 - SUPREME COURT has been reiterated to be an abuse of the process of the Court. The petition is liable to be dismissed on this ground alone.

Summary

Issues involved:
1. Impugning an order under Section 127 of the Income Tax Act, 1961 for transfer of jurisdiction.
2. Lack of reasons provided in the notice and impugned order for transfer.
3. Compliance with statutory provisions and principles of natural justice.
4. Administrative exercise of power in the order of transfer.
5. Relevance of partners residing in Faridabad for jurisdictional transfer.
6. Disclosure of relevant facts by the petitioner.
7. Equitable relief sought by the petitioner.

Detailed Analysis:
1. The petition challenged an order under Section 127 of the Income Tax Act, 1961, transferring jurisdiction from ITO, Ward-29(1), Delhi to Deputy Commissioner of Income Tax, Central Circle-2, Faridabad. The petitioner contended lack of reasons provided in the notice and the impugned order for the transfer.

2. The High Court analyzed the compliance with statutory provisions and principles of natural justice. While the notice did not specify reasons for transfer, the Court held that the petitioner was aware of the reasons due to prior communication. The Court emphasized that the requirement of giving an opportunity for a hearing was met, and the lack of specified reasons did not prejudice the petitioner.

3. The Court discussed the nature of an order of transfer as an administrative exercise of power, limiting interference unless exercised without authority or for mala fide reasons. Citing relevant case law, the Court highlighted the importance of balancing the convenience of the assessee with the exigencies of tax collection in determining jurisdiction.

4. The relevance of partners residing in Faridabad for jurisdictional transfer was a key issue. The Court noted that the partners' residence in Faridabad was a material fact for administrative convenience and coordination in assessment. The petitioner's failure to disclose this fact was considered mala fide and an attempt to gain an unfair advantage.

5. The Court emphasized the importance of disclosing all relevant facts, including the residence of partners, in matters of territorial jurisdiction. The petitioner's suppression of material facts was deemed an abuse of the court process, leading to the dismissal of the petition.

6. Ultimately, the Court dismissed the petition, concluding that there was no merit in the petitioner's claims and denying any equitable relief sought. The decision was based on the petitioner's failure to disclose relevant facts and the necessity for administrative convenience in jurisdictional transfers.