2023 (1) TMI 223 - HC - Income Tax

Transfer of case u/s 127 - Denial of natural justice - non providing any opportunity of hearing - grievance of the petitioner is that by order Annexure-7, the assessment file of the petitioner has been transferred to the Deputy/ACIT, Central Circle-14, New Delhi, without providing any opportunity of hearing - HELD THAT - Whenever it is proposed to transfer the case of assessee from one assessing authority to another, providing opportunity of hearing to the assessee is essential and can be circumvented only if the competent authority feels, for reasons to be recorded in writing, that it is not possible to do so. In the present case, the respondents have neither setup any such case that it was not possible to provide opportunity of hearing to the assessee, nor any reasons to do so were recorded before taking the decision to transfer the case from Circle Udaipur to Circle New Delhi. The assessment proceedings under the Income Tax Act, have now become faceless, it cannot be denied that the assessee would be entitled to engage Counsel/ Advisors of his choice to defend himself even in the faceless proceedings and thus, the requirement of following the principles of natural justice cannot be evaded in a casual manner. In the case of Advantage Strategic Consulting (P) Ltd. 2020 (12) TMI 1361 - MADRAS HIGH COURT relied upon by counsel Shri Bissa, the factual situation was totally different because transfer had been made from one Circle to another in the same city. Furthermore, during pendency of the proceedings, the assessment order had been passed. In that situation, Hon ble Division Bench went on to hold that proceedings before the High court, had become infructuous. In the present case, the transfer order and the notices issued in furtherance thereof, have been stayed by this Court and as such, the facts of the case at hand are totally distinguishable. A Division Bench of this Court in the case of Smt. Jeewan Kumari 1979 (4) TMI 27 - RAJASTHAN HIGH COURT has held that as per Section 127(1) of the Income Tax Act, it was incumbent for the Board to have provided opportunity of hearing to the assessee before ordering transfer of her case. Similar view was taken by Hon ble the Supreme Court in the case of Noorul Islam Educational Trust 2016 (10) TMI 982 - SUPREME COURT Consequently, we are of the opinion that the impugned transfer order and the notices as a consequence thereof, do not stand to scrutiny and hence, the same are declared invalid and set aside. The respondents are permitted to resume the proceedings from the stage former to the transfer order (Annexure-7) dated 21.11.2019, was passed.

Summary

Issues:
- Transfer of assessment file without providing opportunity of hearing.
- Interpretation of Section 127(1) of the Income Tax Act.
- Violation of statutory provision and principles of natural justice.
- Impact of faceless assessment proceedings on the right to a fair hearing.
- Comparison with a previous judgment regarding the requirement of providing an opportunity of hearing before transferring a case.

Analysis:
The High Court considered a writ petition challenging a transfer order of an assessment file without providing an opportunity of hearing to the petitioner. The petitioner argued that under Section 127(1) of the Income Tax Act, a case can only be transferred without a hearing if it is not possible to do so, with reasons recorded. The petitioner relied on legal precedents emphasizing the importance of providing an opportunity of hearing before transferring a case. The respondent, however, argued that faceless assessment proceedings eliminate the need for a physical hearing, citing a judgment from the High Court of Madras. The Court noted that adherence to the principles of natural justice is essential in adversarial proceedings like tax assessments.

The Court highlighted that the transfer of an assessee's case should involve providing an opportunity of hearing unless specific reasons prevent it. In this case, the respondents failed to establish any such reasons or record them before transferring the case. Despite the faceless nature of current assessment proceedings, the Court emphasized the right of the assessee to engage legal representation and the importance of following natural justice principles. The Court differentiated this case from the precedent cited by the respondent, where the transfer was within the same city and after the assessment order was passed, making the current situation distinguishable.

Referring to previous judgments, the Court reiterated that Section 127(1) of the Income Tax Act mandates providing an opportunity of hearing before transferring a case. Based on the analysis, the Court declared the transfer order and subsequent notices invalid and set them aside. The Court allowed the respondents to resume proceedings from the stage before the transfer order, emphasizing the need to provide an opportunity of hearing if a future transfer is proposed. The Court directed the proceedings to be concluded within three months from the judgment date, allowing the writ petition in favor of the petitioner without imposing any costs.