2023 (1) TMI 328 - HC - Income Tax

Transfer u/s 127 - whether proper opportunity has been granted to the petitioner to represent their case? - case of petitioner s income tax assessment was transferred from Kolkata to New Delhi - stating and communicating the reasons for transfer - HELD THAT - Upon perusal of the records we find that the respondent no.1 has clearly delineated the reasons of the transfer under Section 127 in the Impugned Order for a detailed and coordinated investigation of the petitioner. It is to be noted that the files of several other persons have also been transferred u/s 127 - The petitioner is the only one whose file is still not being transferred because of the writ petition filed before the Calcutta High Court. The various reasons provided are based on concrete material that have been mentioned in the Impugned Order in paragraph 7. One cannot say that the present transfer is based only on surmises and conjectures as it is evident that the name of the petitioner has been taken by some of the persons on whom investigation, search and survey was carried out. The statement of certain persons also indicates that there was transfer of cash to the tune of almost Rs. 20 crores from the residence of the petitioner at Delhi. This money trail raises suspicion. Even though the said cash has been shown in the books of the All India Congress Committee, the source of the funds from the Madhya Pradesh Congress Committee is required to be looked into by the tax authorities. The recording in the books of the All India Congress committee was done subsequent to the raids conducted by the tax authorities. Unaccounted cash transactions have been clearly found in the Whatsapp chats and accompanying documents obtained from several persons wherein the term KN has been referred to. These persons were either known to the petitioner or were associates of persons who seem to be extremely close to the petitioner. It is clear that the present transfer is based on cogent material that requires further investigation by the tax authorities. The argument of the petitioner that they are willing to cooperate in the investigation, thereby negating the requirement of the transfer, is of no relevance as the officer conducting the coordinated search in my opinion, is best suited to investigate and carry out the assessment of the petitioner. It is to be noted that at the stage of passing an order u/s 127, after considering objections of the petitioner, the authorities are not required to give out the entire case of the tax authorities. Even if the additional information shared vide the affidavit-in-opposition and compilations are not considered, this Court finds the Impugned Order to satisfy the threshold of an administrative/quasi-administrative order. Thus, i t would be incontestable and sufficient to conclude that as long as cogent materials are present, the transfer that has been sought for cannot be held to be mala fide or based on extraneous circumstances . The administrative/quasi-administrative order passed under Section 127 of the Act does not need to give a detailed explanation and a concrete financial nexus, but is required to bring out certain facts that could indicate that the case warrants further investigation to be carried out by the tax authorities. The petitioner is a highly influential person with significant presence in Delhi including an official residence and bank accounts. While his inconvenience would have anyway been overshadowed by the revenue interest in the facts of this case, it would be pertinent to mention the lack of any inconvenience whatsoever. Though the assessments of some of the involved persons are complete, that cannot itself be a bar for a transfer order under Section 127 of the petitioner s assessment. Nor can the fact that he has not been subjected to any search or seizure be a bar to transfer. There is enough material garnered from other persons to establish a nexus, concrete enough to seize the judicial hands of this court from entering into the realm of reasonable executive discretion. The Impugned Order is unimpeachable and has been done so after following the principles established in law. In light of the same, we find no reason to interfere with the Impugned Order, and accordingly, the present writ petition is dismissed. All interim orders stand vacated. The tax authorities are directed to complete the assessment of the petitioner within the time frame allowed in accordance with law.

Issues Involved:
1. Validity of the transfer order under Section 127 of the Income Tax Act, 1961.
2. Alleged violation of principles of natural justice.
3. Presence of financial nexus and cogent material for transfer.
4. Inconvenience to the petitioner versus public interest.

Detailed Analysis:

1. Validity of the Transfer Order under Section 127 of the Income Tax Act, 1961:
The petitioner challenged the transfer of his income tax assessment from Kolkata to New Delhi, arguing that the transfer order was arbitrary, lacked adequate reasoning, and violated principles of natural justice. The court, however, emphasized that the transfer order under Section 127 is more administrative than quasi-judicial. The court cited precedents including *Pannalal Binjraj v. Union of India* and *Ajantha Industries v. Central Board of Direct Taxes*, asserting that the power to transfer is guided by the purpose of the Act and is not arbitrary. The court concluded that the transfer order was valid, as it was based on concrete material and was necessary for coordinated investigation.

2. Alleged Violation of Principles of Natural Justice:
The petitioner claimed that the transfer order was issued without considering his objections and without providing an opportunity for a fair hearing. The court noted that the petitioner had been given ample opportunity to present his case, and the tax authorities had followed due process as required under Section 127 of the Act. The court highlighted that the principles of natural justice were adhered to, as the petitioner was granted sufficient opportunity to make his case, and a reasoned order was communicated.

3. Presence of Financial Nexus and Cogent Material for Transfer:
The court examined whether there was a financial nexus between the petitioner and the incriminating materials found during the search operations. The tax authorities had linked the petitioner to suspicious cash transactions and unaccounted money trails, including a significant sum of Rs. 20 crores allegedly transferred from the petitioner's residence. The court found that there was enough material to establish a nexus, including documents and statements from involved persons, which justified the need for a coordinated investigation. The court held that the transfer was based on cogent material and not mere conjectures.

4. Inconvenience to the Petitioner versus Public Interest:
The petitioner argued that the transfer would cause him significant inconvenience, as his assessments had always been done in Kolkata, where his permanent residence and accounts staff were located. The court, however, emphasized that the inconvenience to the petitioner was outweighed by the public interest in effective tax collection and coordinated investigation. The court noted that the petitioner was a highly influential person with significant presence in Delhi, including an official residence and bank accounts, and thus, the inconvenience claimed was unsubstantiated.

Conclusion:
The court concluded that the transfer order under Section 127 was valid and justified, as it was based on concrete material and necessary for coordinated investigation. The court dismissed the writ petition, finding no reason to interfere with the impugned order, and directed the tax authorities to complete the assessment within the legally allowed timeframe. The court also rejected the petitioner's request for a stay of the judgment.

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