2016 (4) TMI 594 - HC - Income Tax

Transfer u/s 127 - Held that - Section 127 of the Act permits certain classes of officials indicated therein to transfer a case upon affording the concerned assessee a reasonable opportunity of being heard, wherever it is possible to do so, and after recording the reasons for doing so. The provision does not expressly provide for a copy of the order to be made over to the assessee. The order of transfer is also not appellable under the said Act. However, insofar as the provision requires reasons to be recorded in writing, it cannot be said that such reasons would not be justiciable. In order that such condition of the provision is not reduced to a dead letter, it is desirable that orders passed under Section 127 of the Act for transferring a case should be forwarded to the concerned assessee, if only for the assessee to understand the circumstances in which the transfer takes place. Tested on the anvil of what is required under Section 127 of the Act, the reasons indicated in the order impugned dated September 10, 2015, or the complete lack thereof, do not pass muster. Accordingly, the order of transfer dated September 10, 2015 is set aside and the concerned official is requested to reconsider the matter upon affording the petitioning assessee a further opportunity of hearing. The further order of the official should disclose the reasons in brief that would indicate the application of the mind to the matters in issue so that the conclusion reflected therein appeals to the senses.

Issues:
1. Transfer of assessee's case to Kanpur by Principal Commissioner of Income Tax without providing a copy of the order to the assessee.
2. Compliance with Section 127 of the Income Tax Act regarding transferring a case and recording reasons for the transfer.
3. Adequacy of reasons provided in the order of transfer dated September 10, 2015.
4. Judicial review of the decision to transfer the case and setting aside the order of transfer.
5. Consequences of not following statutory provisions in transferring a case.

Analysis:

1. The petitioners challenged the decision of the Principal Commissioner of Income Tax to transfer the assessee's case to Kanpur without providing them with a copy of the transfer order. The petitioners only became aware of the transfer through a notice received from the Kanpur office, causing procedural irregularities and lack of transparency in the transfer process.

2. Section 127 of the Income Tax Act allows officials to transfer a case after affording the assessee a reasonable opportunity of being heard and recording reasons for the transfer. The provision does not explicitly require providing a copy of the transfer order to the assessee. However, the requirement to record reasons ensures justiciability, and orders should be communicated to the assessee for understanding the basis of the transfer.

3. The order of transfer dated September 10, 2015, lacked adequate reasons as mandated by Section 127 of the Act. The reasons provided, such as "for coordinated and meaningful assessment," were deemed insufficient as they did not establish a clear link between the issues in question and the decision to transfer the case. The court emphasized the importance of meaningful reasons to support such decisions.

4. Judicial review of the transfer decision revealed that the reasons in the impugned order did not meet the statutory requirements. As a result, the court set aside the order of transfer and directed the official to reconsider the matter, providing the petitioning assessee with a further opportunity of hearing. The new order should include concise reasons demonstrating the application of mind to the relevant issues.

5. The court acknowledged the department's concern regarding the potential need to undo actions taken following the transfer order. However, the consequences of not adhering to statutory requirements, such as providing adequate reasons for transfer, were deemed unavoidable. The judgment emphasized the importance of following due process to maintain the integrity and fairness of administrative actions.

In conclusion, the High Court of Calcutta allowed the petitions, directing a reconsideration of the transfer decision with proper reasons provided to the assessee. The judgment highlighted the significance of transparency, reasoned decision-making, and adherence to statutory provisions in administrative actions to uphold the principles of natural justice and procedural fairness.

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