1991 (3) TMI 134 - HC - Income Tax

Summary

Issues involved:
The issues involved in this case are the transfer of a taxpayer's case from one jurisdiction to another u/s 127(2) of the Income-tax Act, 1961, and the requirement of providing a reasonable opportunity to the taxpayer to be heard and the communication of reasons for the transfer.

Judgment Details:

Transfer of Taxpayer's Case:
The Commissioner of Income-tax, Guntur, transferred the case of the petitioner to the Assistant Commissioner of Income-tax, Central Circle II(8), Madras, citing the need for detailed and coordinated investigation. The petitioner objected, stating convenience in retaining the file at Chittoor, where their establishment is located. The court emphasized the necessity of providing a reasonable opportunity to the taxpayer to be heard before such transfers are made u/s 127(2) of the Act.

Reasons for Transfer:
The show-cause notice and final order of transfer lacked specific reasons for the transfer, merely stating it was for a coordinated investigation. The court reiterated the importance of disclosing specific and intelligible reasons for the transfer to enable the taxpayer to effectively challenge the decision. Vague reasons such as "coordinated investigation" were deemed insufficient to meet the requirements of providing a reasonable opportunity to the taxpayer.

Procedural Safeguards and Communication of Reasons:
The court highlighted the procedural safeguards provided to taxpayers, including the recording and communication of reasons for transfer. It emphasized that the disclosure of reasons is not a mere formality but a crucial aspect of natural justice. Failure to communicate reasons may lead to inherent prejudice to the taxpayer, hindering their ability to challenge the transfer effectively.

Decision and Conclusion:
The court quashed the impugned order of transfer, emphasizing the need for specific reasons and a reasonable opportunity for the taxpayer to be heard. It clarified that the Commissioner could proceed with the transfer afresh in compliance with the legal principles outlined in the judgment. The court rejected the argument that non-communication of reasons did not cause prejudice to the taxpayer, emphasizing the importance of transparency and procedural fairness in such matters.