2023 (2) TMI 866 - HC - Income Tax

Transfer of case u/s 127 - nexus established between the assessee on whom search and survey operation - Transfer of jurisdiction of the case from ACIT / Deputy Commissioner of Income Tax, Circle 13(1), Kolkata to Deputy Commissioner of Income Tax, Central Circle 1, Kanpur - HELD THAT - Language of Section 127 is clear that the assessee should be given a reasonable opportunity of being heard in the matter before the power u/s 127 is invoked. The statute is also clear that such opportunity of being heard is to be given wherever it is possible to do so. If the authority proposes to dispense with the opportunity of hearing, the statute states that reasons have to be recorded for not providing such an opportunity. On perusal of the order impugned in the writ petition we find that no such reasons have been recorded by the authority for dispensing with the opportunity of personal hearing as no show cause notice was issued to the assessee prior to order of transfer. In any event, Single Bench was of the opinion that the appellant had made out a prima facie case for entertaining the writ petition. But, however, if the assessment proceedings are to be proceeded by the assessing authority at Kanpur, then the writ petition itself would become infructuous. In any event, we are of the view that since no reasons have been recorded by the authority for dispensing with the opportunity of being heard, we find that there are no such reasons to do so. Therefore, the authority is bound to issue notice to the appellant and afford them a reasonable opportunity of being heard before a decision is taken. We are inclined to remand the matter back to the authority for a fresh decision - appeal stands disposed of along with the writ petition by directing the appellant to treat the order passed by the PCIT-5, Kolkata as a show cause notice and the appellant shall submit their objection within fifteen days from the date of receipt of the server copy of this judgment and order after which the PCIT shall afford an opportunity of hearing to the authorised representative of the assessee and pass a speaking order on merit and in accordance with law. It appears that consequent upon the order, AO in Kanpur has taken up the re- assessment proceedings and has passed an order under Section 148A(d) of the Act and also issued a notice u/s 148. The order passed u/s 148A(d) and the notice issued u/s 148 shall be kept in abeyance and shall abide by the fresh order that may be passed by the Principal Commissioner of Income Tax 5, Kolkata in terms of the above direction.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Validity of jurisdiction transfer under Section 127 of the Income Tax Act, 1961.
3. Opportunity of being heard before transfer of assessment jurisdiction.
4. Observations regarding pendency of writ petition and assessment proceedings.
5. Remand of the matter for a fresh decision.
6. Stay on re-assessment proceedings and notice issued under Section 148.

Analysis:
1. The High Court of Calcutta, in a judgment delivered by Justice T.S. Sivagnanam, allowed the application for condonation of delay in filing an appeal, noting sufficient cause shown by the appellant, thereby condoning the delay and granting the application.

2. The appeal challenged an order transferring assessment jurisdiction from Kolkata to Kanpur, following a search and survey operation. The appellant contended that the transfer was flawed due to failure in following the mandatory procedure under Section 127 of the Income Tax Act, 1961. The Court noted the absence of reasons recorded for not providing the appellant with an opportunity of being heard before the transfer.

3. Section 127 of the Act mandates that the assessee must be given a reasonable opportunity of being heard before transferring the case to a different assessing officer. The Court emphasized the necessity of affording such an opportunity and highlighted the lack of reasons for not doing so in the present case.

4. The Court observed that the pendency of the writ petition should not bar the assessing authority from proceeding with the assessment. However, it directed the authority to issue a notice to the appellant, allowing them a reasonable opportunity of being heard before making a decision, ultimately remanding the matter for a fresh decision.

5. Consequently, the Court disposed of the appeal and the writ petition by instructing the appellant to treat the previous order as a show cause notice, submit objections within fifteen days, and receive a hearing before a decision is made by the Principal Commissioner of Income Tax.

6. The Court ordered a stay on the re-assessment proceedings and notice issued under Section 148 until a fresh decision is made by the Principal Commissioner of Income Tax, Kolkata, in accordance with the directions provided in the judgment. No costs were awarded, and parties were to receive a certified copy of the order promptly upon completion of legal formalities. Justice Hiranmay Bhattacharyya concurred with the judgment.