2024 (12) TMI 509 - HC - Income Tax

Transfer of the Petitioner's assessment records to the Assistant Commissioner of Income Tax, Central Circle, Dhanbad from Principal Commissioner of Income Tax (Pr. CIT), Kolkata-5 - as alleged transfer being procedurally flawed and in violation of the principles of natural justice - HELD THAT - This Court allows the writ petition on the grounds that the transfer order issued u/s 127 (2) of the Income Tax Act, 1961, is found to be procedurally flawed. The respondent no. 3 herein the Principal Commissioner of Income Tax, Kolkata-5, failed to adhere to the principles of natural justice. Despite the Petitioner s detailed objections to the proposed transfer and a request for the disclosure of incriminating material, no opportunity of being heard was provided and the requested material was not furnished. Such omissions violate the procedural safeguards enshrined u/s 127 (2), rendering the transfer order invalid. The impugned order lacks cogent reasons to justify the necessity of transferring the Petitioner s case. The reasons cited, such as the presence of incriminating material and reliance on CBDT instructions, are vague and unsubstantiated. Moreover, no supporting documentation or prima facie evidence was provided to demonstrate the relevance or existence of such material. The statutory mandate for the application of mind and proper reasoning u/s 127 (2) was not fulfilled. Respondents failed to demonstrate compliance with the requirement of agreement between the jurisdictional Principal Commissioners, as required by law. The absence of documented concurrence between the respondent no. 3 herein the Principal Commissioner of Income Tax, Kolkata-5, and respondent no. 4 herein the Principal Commissioner of Income Tax, Central Patna, is a significant procedural lapse, vitiating the legality of the transfer order. Respondents argument that the transfer was necessitated for coordinated investigation and meaningful assessment holds merit only when supported by valid reasons and material evidence. In the present case, the purported need for coordination is not substantiated by specific or credible evidence linking the Petitioner s assessment to the alleged concealment of income by the partnership firm.

Summary

Issues:
Challenging transfer based on procedural flaws and violation of natural justice principles; Transfer of assessment records from Kolkata to Dhanbad under Section 127 (2) of the Income Tax Act, 1961; Lack of opportunity to be heard and disclosure of incriminating material; Compliance with statutory provisions and procedural safeguards; Jurisdictional grounds for transfer; Coordination of cases for investigation; Validity of transfer order under Section 127 (2); Compliance with principles of natural justice; Judicial precedents on transfer orders; Procedural fairness and substantive requirements under Section 127 (2).

Analysis:
The petitioner challenged the transfer of assessment records from Kolkata to Dhanbad, citing procedural flaws and violation of natural justice principles. The petitioner, a resident of Kolkata, objected to the transfer based on lack of incriminating material and the absence of valid grounds for the transfer. The respondent failed to provide an opportunity to be heard or disclose the incriminating material, contrary to procedural requirements under Section 127 (2) of the Income Tax Act, 1961.

The petitioner contended that the transfer lacked valid justification and procedural compliance, emphasizing the necessity of substantive material to support the transfer. The respondent's failure to adhere to statutory provisions and provide a valid reason for the transfer rendered the action legally unsustainable. The petitioner raised objections to subsequent notices issued by the Dhanbad Assessing Officer on jurisdictional grounds, highlighting the lack of compliance with legal provisions.

The respondent argued that the transfer was part of a coordinated effort to centralize related cases for meaningful assessment, supported by incriminating material discovered during searches at the firm's offices in Kolkata and Dhanbad. The respondent asserted that the transfer order was administrative and not quasi-judicial, with sufficient opportunity provided to the petitioner to present their case.

Upon thorough examination, the Court found the transfer order procedurally flawed, as the respondent failed to adhere to natural justice principles and provide cogent reasons for the transfer. The absence of documented concurrence between the jurisdictional Principal Commissioners and the lack of substantive material supporting the transfer order rendered it invalid. The Court emphasized the importance of complying with statutory provisions and principles of natural justice, setting aside the transfer order and declaring subsequent actions based on it as lacking jurisdiction.

In conclusion, the Court allowed the writ petition, noting the legal unsustainability of the transfer order and the lack of jurisdiction in subsequent actions. The Court emphasized the need for procedural fairness and substantive justification in transfer orders under Section 127 (2) of the Income Tax Act, 1961, in line with judicial precedents and statutory requirements.