2025 (3) TMI 604 - HC - Income Tax

Transfer order u/s 127 (2) - transferring the petitioner s case from the jurisdictional officer in Mumbai to his counterpart in New Delhi - HELD THAT - Here the records show that the proposal for transfer was first received from the PCIT Central -II New Delhi on 7 October 2022. Based on such a proposal a show cause notice was issued by the PCIT Mumbai on 24 January 2023. After that as discussed in our order dated 7 January 2025 there were consultations followed by agreement even between the Chief Commissioners. Thus records substantially bear out that there were agreements between the Principal Commissioners inter se and the Chief Commissioners inter se. The other requirements of section 127 (2) were also complied with. Besides in this case we cannot lose sight of the fact that centralisation was deemed essential in matters belonging to the Pacific Group or in matters where parties had nexus with the evasion carried out by the Pacific Group resulting in considerable loss of revenue to the Exchequer. Therefore consolidation was necessary on merits and transfers were ordered with a view to such consolidation. By attempting to elevate the plea now raised to the status of the jurisdictional bar we are not persuaded to exercise our extraordinary jurisdiction under Article 226 and stall or interfere with the transfer. Apart from the fact that the jurisdictional parameters have been complied with in this case we must add that our extraordinary and discretionary jurisdiction under Article 226 is generally not exercised merely upon making out of some legal points. Such jurisdiction is to be exercised only to promote justice. If justice is a by-product or even an erroneous exercise it is not necessary that in every case the writ court must interfere. Reliefs under Article 226 of the Constitution are essentially ex-debito justitiae. WP dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal issue considered was whether the transfer of the petitioner's case from the jurisdictional officer in Mumbai to New Delhi under section 127(2) of the Income-tax Act, 1961, was valid. This involved examining whether there was a requisite agreement between officers of equal rank as a condition precedent for such a transfer, and whether the absence of disagreement between officers of coordinate rank suffices as an agreement under the relevant legal framework.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

Section 127(2) of the Income-tax Act, 1961, governs the transfer of cases between jurisdictional officers. The legal requirement under this provision is that there must be an agreement between officers of equal rank for such a transfer to occur. The petitioner relied on precedents such as Herambh Shelke v. ML Karmarkar and Noorul Islam Educational Trust v. Commissioner of Income-tax-I to argue that an explicit agreement between officers of equal rank is necessary.

Court's Interpretation and Reasoning

The Court referred to its previous decision in Laxminath Investment & Management Consultants Pvt. Ltd., where it was determined that consolidation of cases was necessary and that the legal requirements for transfer under section 127(2) were met. The Court found that the rationale in Laxminath Investment applied to the present case, as the facts were similar, and there was no substantive reason to deviate from this precedent.

Key Evidence and Findings

The records indicated that the proposal for transfer was initiated by the Principal Commissioner of Income Tax (PCIT), Central-II, New Delhi, and a show cause notice was issued by the PCIT, Mumbai. There were consultations and agreements between the Principal Commissioners and the Chief Commissioners, which satisfied the requirements of section 127(2). The Court found that the records demonstrated compliance with the necessary procedural requirements for the transfer.

Application of Law to Facts

The Court applied the legal framework of section 127(2) and the precedent set in Laxminath Investment to the facts, determining that the agreement between the Principal Commissioners and Chief Commissioners was sufficient for the transfer. The Court also noted the necessity of centralization due to the involvement of the Pacific Group, which had implications for revenue collection and justified the consolidation of cases.

Treatment of Competing Arguments

The petitioner argued that there was no agreement between officers of equal rank, as required by section 127(2). However, the Court dismissed this argument by referencing its previous decision, which had been upheld by the Supreme Court. The Court emphasized that the absence of a disagreement between officers of coordinate rank could be interpreted as an agreement, especially in light of the necessity for consolidation and the potential revenue implications.

Conclusions

The Court concluded that the transfer order was valid, as the procedural requirements under section 127(2) were met, and there was no legal infirmity in the impugned order. The necessity for consolidation due to the involvement of the Pacific Group further justified the transfer. The Court dismissed the petition, finding no merit in the arguments presented by the petitioner.

SIGNIFICANT HOLDINGS

The Court reaffirmed the principle that an agreement between officers of equal rank is a condition precedent for the transfer of cases under section 127(2) of the Income-tax Act, 1961. However, it also held that the absence of disagreement between officers of coordinate rank could be interpreted as an agreement when the facts and circumstances necessitate such an interpretation. The Court emphasized the importance of consolidation in cases involving significant revenue implications and upheld the validity of the transfer order.

The Court's final determination was to dismiss the petition without costs, reinforcing the precedent set in Laxminath Investment & Management Consultants Pvt. Ltd. and highlighting the necessity of centralization in matters with substantial revenue impact. The Court also noted that its extraordinary jurisdiction under Article 226 of the Constitution is not to be exercised merely on legal technicalities but to promote justice, which in this case, supported the transfer order.

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