2022 (2) TMI 1147 - HC - Income Tax

Transfer of case u/s 127 - transferring the case from Nagaland to Kerala - HELD THAT - Since the business interest of this particular group was located in Kerala as well as in Nagaland and purely for administrative exigencies and in order to have a better control, powers under Section 127 of the Act were exercised by the Revenue authorities. Section 127 of the Act gives power to transfer a case from one jurisdictional assessing authority to another. The very purpose of the powers, which have been given to the authorities under Section 127 of the Act, are the powers to be exercised in public interest. It has a larger public purpose as observed by the Hon ble Apex Court in the case of K.P. Mohammed Salim vs. Commissioner of Income Tax, Cochin 2008 (4) TMI 30 - SUPREME COURT The purpose of transferring the case is to facilitate the Revenue authorities in doing an effective and coordinate investigation and assessment. We have absolutely no doubt in our mind that the reasons were assigned by the authorities as it was required under Section 127 of the Act. Service of the notice - It is not a case where notice was sent at a wrong address. The notice was sent at an address of the company at Kerala which has also been received by the appellants/petitioners although they do not categorically refute that they did not receive the said notice. It is therefore sufficient compliance under Rule 127 as the notice was sent at the registered office of the company. Revenue department has categorically stated that the appellants/petitioners had received the notice dated 23.05.2018 on 26.06.2018, a fact which has been reiterated over and again by the Revenue department, and has not been negated by the appellants/ petitioners. All the same, since no response was filed before the Revenue authorities, another notice was sent on 26.06.2018. Unlike the first time, this time it came with an endorsement of the postal authority that it is unclaimed . A presumption can very well be drawn here that when the first notice was received at the same address, how can the second notice remain unclaimed and therefore, this plea of the petitioners/appellants that the second notice was never received by them has been rightly rejected by the learned Single Judge. As no objection was filed under the proceeding under Section 127 of the Act, the Revenue had no alternative but to pass the order which was ultimately done on 18.07.2018. As far as merits of the order dated 18.07.2018 is concerned, we are of the considered view that such a transfer has to be made on administration exigencies and for better assessment by the Revenue department. The Revenue authorities are the best judge in this matter and they have assigned clear and cogent reasons as to why the transfer is being made. The only requirement of the law is that while passing an order of transfer, the reasons must be assigned. We have absolutely no doubt in our mind that cogent reasons have been assigned by the Revenue for transferring the case from Dimapur to Kollam and therefore, it does not call for our interference. We find absolutely no reason to interfere with the finding of the learned Single Judge. The writ appeals are devoid of merit and the same are accordingly dismissed.

Summary

Issues Involved:
1. Legality of the transfer of the case under Section 127 of the Income Tax Act, 1961.
2. Adequacy of notice and reasons provided for the transfer.
3. Compliance with Section 282 of the Income Tax Act and Rule 127 of the Income Tax Rules regarding service of notice.

Issue-wise Detailed Analysis:

1. Legality of the Transfer of the Case under Section 127 of the Income Tax Act, 1961:
The primary issue was whether the transfer of the case from Dimapur, Nagaland to Kollam, Kerala, under Section 127 of the Income Tax Act, 1961, was lawful. The Revenue authorities exercised their power under Section 127 to centralize the process for assessment, transferring the case to facilitate better control and effective investigation. Section 127 grants the Principal Director General or Director General the authority to transfer cases after giving the assessee a reasonable opportunity to be heard and recording the reasons for the transfer. The court found that the transfer was justified for administrative exigencies and better assessment, aligning with the public interest as observed by the Supreme Court in K.P. Mohammed Salim vs. Commissioner of Income Tax.

2. Adequacy of Notice and Reasons Provided for the Transfer:
The petitioners argued that the transfer order was issued without proper notice and without assigning reasons, violating Section 127. Initially, the learned Single Judge found merit in this argument and allowed the writ petitions, mandating the Revenue to issue a fresh notice with reasons for the proposed transfer. Subsequently, a fresh notice was issued on 23.05.2018, detailing the reasons for the transfer, including the petitioners' significant financial interests and business activities in Kerala. The court held that the reasons provided in the notice were credible and justified the transfer, fulfilling the requirement to assign reasons under Section 127.

3. Compliance with Section 282 of the Income Tax Act and Rule 127 of the Income Tax Rules Regarding Service of Notice:
The petitioners contended that the notice was not properly served, as it was sent to their Kollam address where they did not reside frequently. However, the court noted that the notice was served at the registered office of the companies in Kerala, where the petitioners were directors or partners. Rule 127 allows service of notice at the registered office of the company. The court observed that the first notice was received by the petitioners, and the second notice, although returned as "unclaimed," was presumed to be properly served. The court concluded that there was sufficient compliance with Rule 127, and the service of notice was valid.

Conclusion:
The court concluded that the transfer of the case from Dimapur to Kollam was lawful, justified by credible reasons, and complied with the procedural requirements of Section 127 and Rule 127. The writ appeals were dismissed as devoid of merit, affirming the findings of the learned Single Judge. The judgment emphasized the importance of administrative exigencies and effective assessment in the public interest, upholding the transfer order issued by the Revenue authorities.