2014 (1) TMI 1236 - HC - Income Tax

Validity of order passed u/s 127(2) - Held that - The power to transfer proceedings from one place to another under Section 127 of the Act cannot be exercised arbitrarily - Neither any notice was issued to the Petitioner nor was any personal hearing was granted to the Petitioner before passing the impugned order of transfer - Decision in Shikshan Prasarak Mandali vs. CIT 2013 (3) TMI 153 - BOMBAY HIGH COURT followed - Giving of notice of the proposed transfer and hearing before passing any order of transfer under section 127 of the Act is necessary otherwise it is in breach of audi alteram partem rule - The notice should also give reasons of the proposed transfer - In the case of assessee order passed was in breach of natural justice i.e. not giving of notice, not giving a personal hearing and passing the order without reasons - Decided in fvaour of petitioner.

Summary

Issues:
Challenge to order of transfer of proceedings under Section 127(2) of the Income Tax Act, 1961 from Mumbai to Bangalore without reasons, notice, or personal hearing.

Analysis:
The petitioner challenged the order transferring their case from Mumbai to Bangalore under Section 127(2) of the Income Tax Act, 1961. The impugned order dated 13 April 2012 was issued without providing reasons, notice, or a personal hearing. The petitioner contended that the transfer lacked sustainability due to the absence of these crucial procedural aspects. The respondent argued that the transfer was necessary for coordinated investigation and assessment, as the petitioner was non-cooperative in responding to a summons related to questionable transactions. However, the court emphasized that while an assessee does not have the right to choose the assessing officer or location, the power to transfer proceedings cannot be exercised arbitrarily. Referring to previous judgments, the court highlighted the importance of issuing notice, conducting a hearing, and providing reasons before transferring a case under Section 127 of the Act.

The court noted that the impugned order failed to meet these requirements, breaching the principles of natural justice. Citing the case law of Shikshan Prasarak Mandali vs. CIT and Global Energy Pvt. Ltd. Vs. Commissioner of Income Tax, the court emphasized the necessity of indicating reasons for transfer, especially for coordinated investigation purposes. The court set aside the impugned order dated 13 April 2012 due to the lack of notice, absence of a personal hearing, and the failure to provide reasons for the transfer. However, it allowed the Commissioner of Income Tax to pass a new order under Section 127 of the Act, provided that the principles of natural justice and the prescribed procedure are followed.

In conclusion, the petition was allowed, and no costs were imposed. The judgment highlighted the significance of procedural fairness in transferring proceedings under the Income Tax Act, ensuring that the rights of the assessee are upheld through the proper application of legal principles and due process.