2024 (3) TMI 383 - HC - Income Tax

Transfer of case u/s 127 - proposal to transfer the assessment jurisdiction of the petitioner from Kanpur to Mumbai - whether Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand appear to have given his consent? - HELD THAT - It cannot be denied at this stage that the show cause notice issued to the petitioner was rather non-speaking. Other than containing the proposal to transfer the assessment jurisdiction of the petitioner from Kanpur to Mumbai occasioned by the search conducted against it, it makes no reference of the necessity to transfer the same for reason of parallel search proceedings against Ravi Omprakash Agarwal. Again, petitioner is right in his contention, since consent to transfer the case from Kanpur to Mumbai was desired from the Principal Chief Commissioner, Uttar Pradesh (West) and Uttrakhand, it is that authority that may have given the consent after issuing appropriate show cause notice to the petitioner after considering its reply thereto. In any case, it may not have been opened either to the Chief Commissioner of Income Tax, Mumbai or the Principal Chief Commissioner Uttar Pradesh (West) and Uttrakhand to delegate that function to the Principal Commissioner of Income Tax, Kanpur. The language of Section 127 (2) (a) of the Act is pretty much clear in that regard. The consent has to emerge amongst two superior officers heading two different Commissionerate etc. with respect to the transfer sought. It is in that context that the designations have been expressed in the plural in the first part of Section 127 (2) (a) and in the singular in the later part. Thus, for the purpose of obtaining the views of the assessee , notice is required to be issued by the appropriate authority i.e. the officer who may express his consent to his counterpart being the officer under whose jurisdiction the case may eventually be transferred. At the same time, by virtue of first part of the Section 127 (2) (a) the consent must emerge amongst officers of equal rank. In the hierarchy of officers provided under Section 116 of the Income Tax Act, once the request is received from the higher ranked officer even if outside the jurisdiction ( of the officer from whom the case is to be transferred) indifference to that higher authority (making the request), the officer placed lower in rank may feel compelled to express his consent. Similarly, within the jurisdiction if the consent is accorded by the higher rank officer and the function of obtaining the assessee's objection is delegated to a subordinate officer, that opportunity to the assessee may remain an illusory remedy, of no avail. Once the consent may have been expressed by the higher ranked officer within the jurisdiction, his subordinate may not look to take a different view and render infructuous the consent given by his superior. Thus both on the plain language used by the statute as also for functional test, noted above, it commends acceptance that the consent sought by the Chief Commissioner of Income Tax Mumbai ought to have been considered and if necessary granted by an officer of equal rank, here the Principal Chief Commissioner of Uttar Pradesh (West) and Uttrakhand. For that reasons it is that authority that may have issued the show cause notice to the petitioner and considered its reply before granting consent. Order - The order dated 10.01.2024 and 11.01.2024 is set aside.The petitioner may treat the impugned order to be the final show cause notice issued to it by the Principal Chief Commissioner of Income Tax Uttar Pradesh (West) and Uttrakhand. The petitioner may file its final reply to the said show cause notice within a period of ten days from today.

Issues involved:
The issues involved in this case are the transfer of assessment jurisdiction under Section 127 of the Income Tax Act, 1961 without granting an opportunity to the assessee and the requirement of obtaining consent from the appropriate authorities before transferring the case.

Issue 1: Opportunity before transfer of assessment jurisdiction

The petitioner challenged the transfer of assessment jurisdiction from Kanpur to Mumbai without being granted an opportunity as required by Section 127(2) of the Act. The petitioner argued that the show cause notice issued was non-speaking and failed to disclose the reasons for the transfer. The petitioner contended that the violation of principles of natural justice occurred as the reasons for the transfer were not disclosed, despite specific requests. The petitioner also highlighted the lack of consent from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand, which was necessary before transferring the jurisdiction.

Issue 2: Consent requirement for transfer of assessment jurisdiction

The revenue argued that the transfer of jurisdiction was necessary due to simultaneous search proceedings against the petitioner and Ravi Omprakash Agarwal, who was involved in illegal activities. The revenue claimed that unaccounted revenue was discovered during the search of Agarwal, necessitating the centralization of the petitioner's assessment cases in Mumbai. However, the Court noted that the consent for transfer was required from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand, which had not been obtained. The Court emphasized the importance of obtaining consent from officers of equal rank for such transfers, as mandated by Section 127(2)(a) of the Act.

Judgment:

The Court found merit in the petitioner's arguments regarding the lack of opportunity and consent for the transfer of assessment jurisdiction. The Court observed that the show cause notice was non-speaking and failed to provide adequate reasons for the transfer. Additionally, the consent from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand was deemed necessary but had not been obtained. Therefore, the Court set aside the orders of transfer dated 10.01.2024 and 11.01.2024.

In the interest of justice, the Court issued directions for the petitioner to treat the impugned order as a final show cause notice, allowing the petitioner to file a final reply within ten days. The Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand was directed to schedule a hearing within one week of receiving the reply. The petitioner undertook to appear before the authority for further proceedings in accordance with the law.

This judgment underscores the importance of providing opportunity to the assessee and obtaining consent from appropriate authorities before transferring assessment jurisdiction, as mandated by the Income Tax Act, 1961.

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