2020 (3) TMI 970 - HC - Income Tax

Transfer of case u/s 127 - whether procedure prescribed under Section 127(2) was not complied ? - transfer assessment jurisdiction from Mumbai to Kochi - agreement between the two designated higher authorities - proposal for centralization of assessment in a group of cases - HELD THAT - There has to be a positive meeting of mind to the suggested proposed course of action. The dictionary meaning of the expression agreement is harmony in opinion or feeling; a manifestation of mutual assent by two or more persons. Therefore, furnishing of a proposal, in our view, may not amount to an agreement of the designated higher authorities as contemplated under clause (a) to sub-section (2) of Section 127 of the Act. In Noorul Islam Educational Trust Vs. CIT 2016 (10) TMI 982 - SUPREME COURT Supreme Court considered transfer of assessment jurisdiction under Section 127(2)(a). Supreme Court held that agreement between the two designated higher authorities was necessary. Revenue took the stand that there was no disagreement between the two Commissioners. Rejecting this stand, Supreme Court held that absence of disagreement cannot tantamount to agreement as visualized under Section 127(2)(a) of the Act which contemplates a positive state of mind of the two jurisdictional Commissioners. Before passing the impugned order u/s 127(2) on 09.08.2019, no opportunity of hearing was granted to the petitioner. Hearing was granted after the said decision was taken culminating in the second order dated 09.12.2019. That apart, from the second order it is discernible that there was no agreement between the two jurisdictional Principal Commissioners to transfer assessment jurisdiction from Mumbai to Kochi. Evidently, the procedure prescribed under Section 127(2)(a) of the Act has not been complied with. It is trite that when a statute requires a thing to be done in a particular manner, then it has to be done in that particular manner. In the light of the above discussions, we are of the view that the decision making process leading to passing of the two impugned orders has been vitiated for non-compliance to the statutory procedural requirements. Consequently, both the orders dated 09.08.2019 and 09.12.2019 passed by respondent No.1 cannot be sustained; those are hereby set aside and quashed. Since we have set aside the above two orders, all consequential actions shall also stand interfered with.

Summary

Issues Involved:

1. Validity of the transfer of assessment jurisdiction from Mumbai to Kochi under Section 127 of the Income Tax Act.
2. Compliance with procedural requirements under Section 127(2) of the Income Tax Act.
3. Whether the petitioner was given a reasonable opportunity of being heard.
4. Whether there was an agreement between the designated higher authorities for the transfer of jurisdiction.

Issue-wise Detailed Analysis:

1. Validity of the transfer of assessment jurisdiction from Mumbai to Kochi under Section 127 of the Income Tax Act:

The petitioner challenged the orders dated 09.08.2019 and 09.12.2019, which transferred the assessment jurisdiction from Mumbai to Kochi. The petitioner contended that the transfer was invalid due to non-compliance with Section 127(2) of the Income Tax Act. The court examined whether the impugned decision was in accordance with the law, specifically the requirements of Section 127 of the Act.

2. Compliance with procedural requirements under Section 127(2) of the Income Tax Act:

Section 127(2) requires that if the assessing officers are not subordinate to the same higher authority, there must be an agreement between the designated higher authorities, and the assessee must be given a reasonable opportunity of being heard. The court noted that the initial order dated 09.08.2019 did not disclose any agreement between the designated higher authorities and did not indicate that a reasonable opportunity of hearing was granted to the petitioner. The court emphasized that the requirement to provide a reasonable opportunity of hearing is fundamental and must be done before passing an order under Section 127(2)(a).

3. Whether the petitioner was given a reasonable opportunity of being heard:

The court found that the petitioner was not given a reasonable opportunity of being heard before the initial order dated 09.08.2019 was passed. The hearing was granted only after the decision was taken, which culminated in the second order dated 09.12.2019. The court held that this post-decisional hearing was not contemplated under the statute and was not sufficient to comply with the requirements of Section 127(2)(a).

4. Whether there was an agreement between the designated higher authorities for the transfer of jurisdiction:

The court scrutinized the requirement of an agreement between the designated higher authorities under Section 127(2)(a). The respondents contended that a proposal from the Principal Director of Income Tax (Investigation), Kochi, was construed as consent for the transfer. However, the court held that a proposal for centralization does not amount to an agreement as required by the statute. The court cited the Supreme Court's decision in Noorul Islam Educational Trust Vs. CIT, which clarified that absence of disagreement does not equate to an agreement. The court concluded that there was no positive meeting of minds between the designated higher authorities, and thus, the procedural requirements under Section 127(2)(a) were not met.

Conclusion:

The court concluded that the decision-making process leading to the impugned orders was vitiated due to non-compliance with statutory procedural requirements. Consequently, both orders dated 09.08.2019 and 09.12.2019 were set aside and quashed. The court allowed the Central Board of Direct Taxes to take action as per clause (b) to sub-section (2) of Section 127, if necessary, in accordance with the law. All consequential actions based on the quashed orders were also interfered with. The petitions were allowed without expressing any opinion on the merits of the case, leaving all contentions open for future consideration.