2020 (7) TMI 161 - HC - Income Tax

Power to transfer cases u/s 127 - Stay on transfer of case - Period of limitation for passing an assessment - intra-Court appeal - This is a case where the assessment files are being transferred from one city to a neighbouring city hardly 158 kms. away, in the same State. What inconvenience can this cause to V.V. Minerals No.2, especially when they have business and offices in several cities? Held That - We are aware that Section 127 of the IT Act does not create any geographical classification. Nevertheless, the judgments of Courts should not be read as Euclid's theorem, but, should be understood in the context in which they were rendered, and a blind and pedantic following of precedents is not expected of Constitutional Courts. First submission of Mr. Lakshmi Narayanan, Mr. Senthil Kumar submitted that V.V. Minerals No.2 had challenged only the transfer order, that too belatedly, and had obtained the order of stay and not the proceedings under Section 153-A of the IT Act and therefore, in the absence of stay of the proceedings under Section 153-A, ibid., the stay that has been granted in respect of transfer of proceedings will not save running of the period of limitation of the proceedings under Section 153-A of the IT Act. This Court finds sufficient substance and force in the submission of Mr. Senthil Kumar. The instant intra-Court appeal fails and is accordingly dismissed.

Summary

Issues Involved:
1. Legality and validity of the transfer of case order dated 19.02.2019.
2. Adequacy of reasons provided in the show cause notice for transfer under Section 127 of the Income Tax Act.
3. Concurrent powers of the Director General of Income Tax (Investigation) and the Principal Commissioner of Income Tax for transfer of cases.
4. Hardship caused to the appellant due to the transfer of cases.
5. Impact of the COVID-19 pandemic on the limitation period for proceedings under Section 153-A of the Income Tax Act.

Detailed Analysis:

1. Legality and Validity of the Transfer Order:
The intra-Court appeal challenged the order dated 28.02.2020, which refused to quash the transfer of case order dated 19.02.2019 by the Principal Commissioner of Income Tax, Madurai. The appellant contended that the show cause notice issued did not contain adequate reasons for the proposed transfer. However, the court found that the notice did state that "detailed, coordinated and centralized investigation is necessary," which was deemed sufficient. The court noted that the transfer was from Tirunelveli to Madurai, both within Tamil Nadu, and not to a different state, distinguishing it from other cases cited by the appellant.

2. Adequacy of Reasons in the Show Cause Notice:
The appellant argued that the show cause notice lacked sufficient reasons for the transfer, citing judgments from other High Courts which mandated that such notices should contain reasons to enable the assessee to make an effective representation. The court, however, found that the notice did contain reasons and that the sufficiency of these reasons could not be subject to judicial review. The court emphasized that the transfer was for "detailed, coordinated and centralized investigation," which was a valid reason under Section 127 of the Income Tax Act.

3. Concurrent Powers for Transfer of Cases:
The appellant contended that the Principal Commissioner of Income Tax, Madurai, acted on the letter from the Director General of Income Tax (Investigation), Chennai, and thus did not exercise independent judgment. The court clarified that Section 127(1) of the IT Act does not grant transfer powers to the Director General of Income Tax (Investigation). Even if concurrent powers existed, the Principal Commissioner acted independently, as evidenced by the approval from the Chief Commissioner of Income Tax, Madurai, and the subsequent issuance of the show cause notice.

4. Hardship Due to Transfer:
The appellant claimed that the transfer would cause hardship as their Chartered Accountant, domiciled in Tirunelveli, was elderly and it would be difficult for him to travel to Madurai. The court dismissed this argument, noting that income tax returns are filed online and the distance between Tirunelveli and Madurai is only 158 kilometers. The court also acknowledged the Department's need for better infrastructure available in Madurai for handling seized documents.

5. Impact of COVID-19 on Limitation Period:
The appellant argued that the stay granted by the court would halt the running of the limitation period for proceedings under Section 153-A of the IT Act and that the Central Government had extended the limitation period due to the COVID-19 pandemic. The court found that the stay on the transfer order did not affect the limitation period for proceedings under Section 153-A, as the appellant had not challenged the proceedings under this section. The court accepted the Department's argument that the stay was impeding the process and that the limitation period would not be extended due to the stay.

Conclusion:
The court dismissed the intra-Court appeal, upholding the transfer order dated 19.02.2019. The court found that the show cause notice contained adequate reasons for the transfer, the Principal Commissioner of Income Tax acted independently, and the alleged hardships were not substantial. The court also clarified that the stay on the transfer order did not affect the limitation period for proceedings under Section 153-A of the IT Act. Costs were made easy, and connected petitions were closed.