2013 (6) TMI 252 - HC - Income Tax

Transfer of case - section 127(2) - held that - the petitioners had made investment by way of share capital and unsecured loans with the Brahmaputra group of companies whose cases are being investigated and are related to the Commonwealth games. In view of the nexus of the petitioners with the said company, for co-ordinated and effective investigation centralization of assessment was necessary. Undoubtedly, transfer of assessment may cause inconvenience and monetary loss to the assessee and the power to transfer is not mere administrative power but quasi-judicial powers as observed in the judgments relied upon on behalf of the petitioners but in public interest such transfer is statutorily permissible with the object of co-ordinated and effective investigation. It is not necessary that in the show-cause notice or in the order of transfer any deficiencies in the assessment of the assessee are to be pointed out. The grounds for transfer should have nexus with the object of co-ordinated and effective investigation calling for centralization of assessment. Once such grounds exist, there is no ground to interfere with the transfer. It cannot be held that the ground for transfer is non-existent or mala fide. There is material showing investment of the petitioners with the Brahmaputra group of companies in whose cases investigation is being carried out at New Delhi. - Decided against the assessee.

Summary

Issues:
Transfer of assessment cases under section 127 of the Income-tax Act, 1961 from Guwahati to Delhi based on involvement in receipt of bogus share capital by the Brahmaputra group without providing a valid reason or opportunity to be heard.

Analysis:
The petition sought to quash the order transferring assessment cases from Guwahati to Delhi under section 127 of the Income-tax Act, 1961, related to the receipt of bogus share capital by the Brahmaputra group. The petitioners argued that they were regularly assessed in Guwahati, and no valid reason was provided for the transfer, violating the statutory requirement of providing an opportunity to be heard. The only reason given for transfer was factually incorrect, mentioning their cases were related to the Commonwealth games, which was baseless and beyond the scope of statutory power under section 127.

The court considered the arguments presented by both parties. The petitioners relied on judgments from various High Courts to support their case, emphasizing the genuineness of their income and challenging the transfer based on public interest for coordinated investigation without irregularities in their accounts. On the other hand, the respondents supported the transfer order, citing the power of transfer under section 127 to centralize assessments for coordinated investigations, referencing relevant judgments from the Supreme Court and the High Court.

The court, after due consideration, upheld the impugned order of transfer, stating that the petitioners were given a reasonable opportunity to be heard, and the transfer was justified based on the nexus of the petitioners with the Brahmaputra group under investigation related to the Commonwealth games. The court emphasized that the power to transfer assessments is quasi-judicial and can be exercised in public interest for effective investigations, even without pointing out deficiencies in the assessee's assessment. The grounds for transfer should be linked to the objective of coordinated and effective investigation, which was deemed present in this case due to the investment of the petitioners with the Brahmaputra group.

In conclusion, the court found no grounds to interfere with the transfer order, dismissing the petition. However, it allowed the Department to consider transferring the assessment back to Guwahati after completing the assessment of the Brahmaputra group of companies in Delhi.