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2024 (8) TMI 1304 - HC - Income TaxValidity of transfer order u/s 127 - petitioner case was transferred from CIT Mumbai to be centralized with Central Circle 20, Range-5, PCIT (Central) 2, New Delhi - breach of the principles of natural justice, in as much as no hearing was granted to the petitioner. HELD THAT - In the facts of the present case, it cannot be said that there was no material which would lay down a foundation for the respondents to exercise powers u/s 127. Moreover, substantive material justifying the transfer was disclosed to the petitioner in the show cause notice dated 19 March 2021 issued to the petitioner. The receipt of such show cause notice is not denied by the petitioner. The search/survey on such related entities/parties and the pre- search and post-search investigations as undertaken by the department revealed that the petitioner, who is an Indian citizen but based in UAE, Dubai, had multiple financial interests in India and abroad. Such material also revealed the petitioner s involvement in evasion of taxes, abetment and facilitation of the evasion of taxes by various other individuals and companies and that the petitioner had many transactions with persons whose names are set out in the show cause notice. The cases of such related parties/persons were covered separately under Section 132 and their cases were also centralized in Central Circle, Delhi and it is for such reason, the petitioner s case was proposed to be centralized with Delhi charge for coordinated investigation. It is in such context and reasons the petitioner was called upon to reply to the show cause notice. As noted above, the petitioner responded to the show cause notice by his letter dated 01 April 2021, however, except for a vague denial and some health ground, the petitioner appears to have not made out any case against transfer of the said proceedings. It is most significant that on such show cause notice and even assuming that the reply of the petitioner was to be taken into consideration, an order on the show cause notice transferring the petitioner s case to Delhi Circle was passed on 14 June 2021 and what is further noteworthy is as to what transpired after the transfer of the petitioner s case from Mumbai Authority to the Delhi Circle. Throughout the flow of all these events after the transfer of jurisdiction under Section 127, the petitioner did not think it necessary to challenge the order dated 14 June 2021. These events being accepted by the petitioner gives an impression of the petitioner having acquiesced with the order of transfer, as the petitioner, after a period of more than one year after the impugned order being passed has moved this petition on 05 June 2022. The argument that the petitioner was unaware of the transfer proceedings does not inspire confidence since the very show cause u/s 127 had indeed been received and was also responded to. Therefore, even while the impugned order erroneously states that the petitioner had not replied to the show cause notice, in our opinion, the error of the Revenue does not turn the needle in the petitioner s favour. Thus, the impugned transfer order cannot be faulted on the ground that it is in breach of the principles of natural justice for several reasons. In such context the petitioner s contention that the impugned order furnishes no reasons or has insufficient reasons, or it furnishes incorrect reasons, in a decision being taken by the respondents to transfer the proceedings from Mumbai to the Delhi jurisdiction cannot be accepted on the face of the impugned order. This more pertinently when the petitioner has admitted that the petitioner had transactions with the persons whose cases are already centralized with the Delhi Authority. For such reason the respondents found it necessary, appropriate and in the eminent interest of the revenue that the petitioner s case is considered by the Central authorities at Delhi, who were seisin of the investigation, materials from the search and seizure operations, carried out not only in respect of the petitioner s premises, but also the premises of the related parties. As the impugned order transferring the proceedings in the petitioner s case from the Mumbai to Delhi Authority was passed on 14 June 2021 and as noted above, much water has flown under the bridge, namely after such order was passed, the petitioner was issued notices under Sections 153A, 143 (2), 142 (1) and 142 (2A) of the Act, as also an order of penalty under Section 270 of the Act was passed. These proceedings cannot be discarded and overlooked as these are substantial events which have transpired after passing of the impugned order dated 14 June 2021, till the filing of the petition. Thus, post transfer of the petitioners case to the Delhi authorities, it is implicit in the receipt of such notices and the several proceedings initiated against the petitioner under such notices, including an order passed against the petitioner of imposing penalty, that the petitioner has certainly acquiesced in the order dated 14 June 2021 passed under Section 127 of the Act, which was already implemented and acted upon. WP dismissed. No case for interference in exercise of our jurisdiction under Article 226 of the Constitution of India is made out by the petitioner, in assailing the impugned order passed u/s 127.
Issues Involved:
1. Legality of the transfer order under Section 127 of the Income Tax Act, 1961. 2. Alleged breach of principles of natural justice. 3. Adequacy of reasons provided for the transfer. 4. Timeliness and delay in challenging the transfer order. 5. Impact of subsequent actions taken post-transfer. Issue-wise Detailed Analysis: 1. Legality of the Transfer Order under Section 127 of the Income Tax Act, 1961: The petitioner challenged the order dated 14 June 2021, which transferred their case from Mumbai to Delhi under Section 127 of the Income Tax Act, 1961. The court examined whether the transfer order was legally justified. Section 127 allows the transfer of cases after giving the assessee a reasonable opportunity of being heard and recording reasons for the transfer. The court found that the transfer was justified due to the petitioner's involvement in evasion of taxes and transactions with other individuals whose cases were centralized in Delhi. The court concluded that there was substantive material justifying the transfer, disclosed in the show cause notice. 2. Alleged Breach of Principles of Natural Justice: The petitioner argued that the transfer order was issued without granting a reasonable opportunity of being heard, thus breaching the principles of natural justice. The court noted that the petitioner had received the show cause notice and responded to it. The court observed that Section 127 (1) does not mandate a personal hearing in every case and that a written reply suffices. The court held that the petitioner's response was considered, and the absence of a personal hearing did not constitute a breach of natural justice, especially given the petitioner's failure to demonstrate any real and substantial prejudice. 3. Adequacy of Reasons Provided for the Transfer: The petitioner contended that the reasons provided for the transfer were vague and insufficient. The court reviewed the show cause notice and the transfer order, which cited the petitioner's involvement in tax evasion and transactions with individuals whose cases were centralized in Delhi. The court found that these reasons were adequate and justified the transfer for coordinated investigation and assessment. The court emphasized that the reasons were sufficiently detailed to meet the requirements of Section 127. 4. Timeliness and Delay in Challenging the Transfer Order: The court noted that the petitioner filed the writ petition on 5 July 2022, more than a year after the transfer order was issued on 14 June 2021. The court considered this delay significant, especially since the petitioner had participated in subsequent proceedings initiated by the Delhi authorities. The court concluded that the petitioner's delay in challenging the transfer order indicated acquiescence to the transfer, undermining their claim. 5. Impact of Subsequent Actions Taken Post-Transfer: The court observed that after the transfer, the Delhi authorities issued multiple notices and initiated proceedings against the petitioner, including under Sections 153A, 143(2), 142(1), and 142(2A) of the Income Tax Act. The petitioner's participation in these proceedings further indicated acceptance of the transfer. The court held that the petitioner's challenge to the transfer order, filed significantly after these actions, lacked merit and was an attempt to avoid the ongoing proceedings. Conclusion: The court rejected the petitioner's challenge to the transfer order, finding no illegality or breach of natural justice. The court emphasized the adequacy of the reasons for the transfer, the petitioner's delay in challenging the order, and the subsequent actions taken post-transfer. The writ petition was dismissed, and the request for continuation of ad-interim relief was denied.
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