2013 (10) TMI 289 - HC - Income Tax

Transfer of case - Reasonableness of order passed by Commissioner u/s 127 of the Income Tax Act Held that - While exercising its power of transferring proceedings under Section 127(2) of the Act, the Commissioner of Income Tax has exercised the discretionary power vested in him to transfer the case from one Assessment Officer to another - Section 127 of the Act itself does not circumscribe/limit the power of a Commissioner of Income Tax to transfer Assessment Proceedings from one Assessing Officer to another but has left it to the judgment of the Commissioner of Income Tax to exercise his discretion in a reasonable manner. To ensure that the Commissioner of Income Tax exercises his discretion in a just and reasonable manner he has to record reasons for doing so. If the reasons are arbitrary, the Court will set aside the order of transfer. In the present case, Commissioner of Income Tax has so recorded reasons while exercising his powers and these reasons are that the substantial transactions of petitioner with related parties i.e. entities belongs to Sahara Group of Companies. Therefore, so long as reasons indicated in the order are neither arbitrary and/or unreasonable, Court would not be justified in setting aside the impugned order passed by the Commissioner of Income Tax under Section 127(2) of the Act. Therefore, reason/purpose for coordinated investigations and assessments viz the substantial financial transactions of the petitioner with the various entities within the Sahara Group of Companies is not perverse or arbitrary Decided against the Assessee.

Summary

Issues:
1. Transfer of Income Tax Proceedings from Mumbai to New Delhi under Section 127(2) of the Income Tax Act, 1961.
2. Breach of natural justice in passing the transfer order.
3. Justification of the transfer based on substantial financial transactions within the Sahara Group of Companies.
4. Petitioner's objection to the transfer and its impact on operations.
5. Participation of the petitioner in proceedings before the Deputy Commissioner of Income Tax, New Delhi.
6. Jurisdictional acceptance by the petitioner of the Assessing Officer at New Delhi.
7. Timeliness and completeness of information provided in the petition.

Transfer of Income Tax Proceedings:
The petitioner sought to quash an order transferring their case from Mumbai to New Delhi under Section 127(2) of the Income Tax Act, 1961. The transfer was based on the Commissioner's discretion to centralize assessments due to substantial financial transactions within the Sahara Group of Companies.

Breach of Natural Justice:
The petitioner argued that the transfer order breached natural justice as it was passed without considering their objections. They contended that being part of the Sahara Group did not warrant the transfer, especially since no significant financial transactions existed within the group entities.

Justification of Transfer:
The respondents justified the transfer citing substantial financial transactions between the petitioner and Sahara Group entities. The Commissioner's discretion to transfer cases was upheld, provided reasons were reasonable and not arbitrary.

Petitioner's Objection and Impact:
The petitioner objected to the transfer due to operational disruptions in Mumbai. They highlighted the lack of significant financial transactions within the group, arguing against the necessity of centralization in New Delhi.

Participation in New Delhi Proceedings:
The petitioner participated in proceedings before the Deputy Commissioner of Income Tax, New Delhi, for the Assessment Year 2010-11, indicating acceptance of jurisdiction.

Jurisdictional Acceptance:
The petitioner's participation in New Delhi proceedings and lack of protest indicated acceptance of the Assessing Officer's jurisdiction in New Delhi.

Timeliness and Completeness of Information:
The Court noted the petitioner's failure to mention ongoing proceedings in New Delhi in their initial petition, emphasizing the importance of providing complete and timely information.

In conclusion, the High Court dismissed the petition, finding the transfer order neither arbitrary nor unreasonable. The Court upheld the Commissioner's discretion in transferring cases based on substantial financial transactions within related entities. The petitioner's participation in New Delhi proceedings and lack of protest indicated acceptance of jurisdiction, leading to the dismissal of the petition. The Court emphasized the importance of providing complete and timely information in legal proceedings.