2015 (4) TMI 872 - HC - Income Tax

Power to transfer cases - order passed by the authorities transferring the file of the assessee to the Hyderabad - Held that - Managing Director of the assessee has paid money for purchase of 10 plots, out of which, two are registered in his name and 8 are registered in his wife s name and the seller - Sri Syed M. Mehdi was paid the money by cheques from the account of the assessee and the partnership firm where he and wife are partners. It is asserted that the cheques given to Sri Mehdi on various dates and the cheques were drawn from the bank account of the assessee and the partnership firm and also of his and his wife s personal account at Kotak Mahendra Bank, ITPL Branch, Whitefield, Bangalore. From this answers, it is clear that the 10 plots were purchased in Hyderabad, two in the name of the Managing Director and 8 in the name of his wife. The consideration for these 10 plots was paid to the purchaser from the account of the assessee and from the account of the partnership firm and the individual account of the Managing Director and his wife. That is why it is necessary to centralize all the returns in order to find out the true nature of the transaction - from which account, how much account is paid? and how the documents came to be registered in the name of husband and his wife? The Managing Director is fully acquainted with all these facts. It is he, who has given all these information and he has no difficulty in going to Hyderabad for being present during the assessment proceedings of his, individual account and his wife s account. We do not see what difficulty he would have, if the assessee s account, of which he is the Managing Director, is also processed at the same time where his individual and his wife is processed. The order passed by the authorities transferring the file of the assessee to the Hyderabad is just and proper and without any justification the learned Single Judge has interfered with the well considered order passed. Therefore the impugned order cannot be sustained. Hence, Appeal is allowed, the impugned order passed by the learned Single Judge is hereby set aside and the order of transfer is restored.

Summary

Issues:
Appeal against transfer of assessment jurisdiction from Bengaluru to Hyderabad based on a search operation under Section 132 of the Income Tax Act, 1961.

Detailed Analysis:

1. Background and Search Operation:
The case involves an appeal by the revenue challenging the transfer of the assessee's case to the Deputy Commissioner of Income Tax, Central Circle-3, Hyderabad. The search operation under Section 132 of the Income Tax Act was conducted at M/s. Bibi General Hospital, resulting in the seizure of cash handed over by the Managing Director of the assessee. Subsequent investigations revealed transactions between the assessee and other individuals, prompting the proposal for centralized assessment in Hyderabad.

2. Transfer of Assessment and Objections:
A show cause notice was issued under Section 127 of the Act to the respondent, who objected to the transfer of assessment jurisdiction from Bengaluru to Hyderabad. The Assessing Officer concluded assessments for multiple years, leading the assessee to challenge the transfer order before the Single Judge of the High Court.

3. Single Judge's Decision:
The Single Judge held that the notice under Section 127 lacked essential particulars related to the search and seizure in Hyderabad, depriving the assessee of the opportunity to respond adequately. Consequently, the order of transfer was quashed on the grounds of violating principles of natural justice, prompting the revenue's appeal.

4. Arguments and Counter-arguments:
The revenue contended that the notice sufficed as the assessee had submitted detailed objections before the transfer order was issued. On the other hand, the assessee argued that without a clear connection to the Hyderabad search, the transfer was unjustified. The Managing Director's statements during investigation indicated his involvement in transactions related to Hyderabad properties.

5. Appellate Decision and Rationale:
The appellate court found that the Managing Director's statements established a clear link to the Hyderabad transactions, justifying the transfer of assessment jurisdiction. The court emphasized the need for centralized assessment to ascertain the nature of transactions and funding sources accurately. Consequently, the Single Judge's decision was overturned, and the transfer order was reinstated.

6. Conclusion:
The High Court allowed the appeal, setting aside the Single Judge's order and restoring the transfer of assessment jurisdiction from Bengaluru to Hyderabad. The parties were directed to bear their own costs, affirming the validity of the centralized assessment decision based on the Managing Director's involvement in the transactions under scrutiny.