2022 (3) TMI 160 - HC - Income Tax

Power to transfer cases u/s 127 - transfer from Bhopal to Hyderabad - Revenue filed preliminary submission on behalf of respondents along with certain correspondences between the transferring and the transferee authority in support of his contention that there was agreement between both the authorities before passing of impugned order of transfer - As in the show cause notice that the PAN of the petitioner which is presently at Bhopal is proposed to be centralized by the Pr. CIT (Central) Hyderabad and therefore if petitioner has any objection then he may say so - HELD THAT - As day light that petitioner was though afforded an opportunity of being heard by issuance of the aforesaid show cause notice dated 16.07.2021 (Annexure P/3) but the reason assigned in the show-cause notice for transfer was not the same as assigned in the impugned order of transfer. Thus this Court has to consider as to whether the variance in the reason assigned in the show-cause notice and the impugned order of transfer can be of any assistance to the petitioner or not. The clause of reasonable opportunity engrafted in any statutory provision is intended to afford opportunity of being heard to a person against whom an adverse decision is likely to be taken. Meaning thereby that the reasons for proposed transfer of a case are to be informed to the affected person or the affected person should be in the knowledge of the actual reason of the intended transfer. In the instant case the variance of reasons assigned by the Revenue in the show cause notice and the impugned order of transfer ostensibly reveals breach of the reasonable opportunity clause. However if things are scrutinized minutely especially contents of para-2 of the reply of petitioner to the show cause notice it is vivid that petitioner knew about the search being conducted against the principal contractors i.e. M/s HES Infra Pvt. Ltd. and M/s Mantena Constructions Pvt. Ltd. with whom petitioner s firm had close business sub-contracts. Thus the petitioner was well aware of the fact that the transfer of his case is taking place in public interest to ensure smooth and uninterrupted search operation being conducted by the Revenue which is only possible when records of the principal contractors and the sub-contractor (petitioner) are at the same place. Consequently as a necessary fallout of the aforesaid discussion the ground of ostensible variance between the reason assigned for transfer in the show-cause notice and the impugned order of transfer does not actually exist in substance and essentiality. The simple reason being that petitioner knew that the case is being transferred for consolidating the records of the principal contractors and the sub-contractor (petitioner) at one place (Hyderabad). The principle of audi alteram partem thus stands complied with by implication. The principles of natural justice cannot be applied mechanically. It is trite law that the principle of natural justice (audi alteram partem) is to be applied in each case depending upon the facts and circumstances and the compelling situations. Public interest is one of those compelling factors which can absolve following of audi alteram partem principle as is the case herein where consolidation of records of principal contractors and subcontractor at Hyderabad was necessary and in public interest for a proper and lawful search operation. This case is an example of the paramount public interest of facilitating smooth and effective search operation being conducted in larger public interest of ensuring increase in revenue by striking at tax evasion.From the aforesaid discussion this Court is not impressed with any of the grounds raised by petitioner.

Summary

Issues Involved:
1. Non-prompt supply of the impugned order to the petitioner.
2. Lack of reasonable opportunity of being heard.
3. Irrelevance and insufficiency of reasons for the transfer order.
4. Violation of mandatory provisions of Section 127 of the Income Tax Act, 1961.

Detailed Analysis:

1. Non-prompt supply of the impugned order to the petitioner:
The petitioner contended that the impugned order dated 26.10.2021 was not promptly supplied. However, the judgment does not delve deeply into this issue, focusing instead on the procedural and substantive aspects of the transfer.

2. Lack of reasonable opportunity of being heard:
The petitioner argued that the impugned order was passed without affording a reasonable opportunity of being heard, as the show cause notice did not contain the reasons for the transfer. The court acknowledged that Section 127 of the IT Act mandates giving the assessee a reasonable opportunity of being heard and recording reasons for the transfer. The court noted that a show cause notice dated 16.07.2021 was issued, and the petitioner replied on 26.07.2021, raising objections primarily based on inconvenience due to the distance between Bhopal and Hyderabad and personal circumstances. Despite the variance in reasons between the show cause notice and the impugned order, the court found that the petitioner was aware of the search operations against the principal contractors and the need for consolidation of records, thus satisfying the principle of audi alteram partem by implication.

3. Irrelevance and insufficiency of reasons for the transfer order:
The petitioner claimed that the reasons cited in the impugned order were irrelevant and insufficient to justify the transfer under Section 127. The court examined the reasons provided in the order, which included the seriousness of allegations against the principal contractors and the need for consolidation of records to ensure smooth and uninterrupted search operations. The court found these reasons to be cogent and relevant, supporting the transfer in the public interest.

4. Violation of mandatory provisions of Section 127 of the Income Tax Act, 1961:
The petitioner argued that there was no agreement between the transferring and transferee authorities, violating Section 127. The court scrutinized the correspondences between the Bhopal and Hyderabad authorities, which demonstrated that both authorities were aware of and consented to the transfer. The court concluded that there was an agreement between the authorities, fulfilling the statutory requirement.

Conclusion:
The court dismissed the writ petition, finding no merit in the grounds raised by the petitioner. The court emphasized the paramount public interest in facilitating smooth and effective search operations and ensuring increased revenue by addressing tax evasion. The principles of natural justice were deemed to have been complied with, given the petitioner's awareness of the reasons for the transfer and the necessity of consolidating records for a lawful search operation.