2022 (10) TMI 986 - HC - Income Tax

Transfer of case u/s 127 - transfer of the case from the present jurisdiction at Rajkot to DCIT/ACIT, Central Circle, Varanasi - HELD THAT - Section 127 of the Act expressly provides for affording opportunity of hearing to the concerned assessee when the powers to transfer the assessment is to be exercised by the competent authority under the said provision. When the petitioner is deprived of such opportunity, there is a statutory infraction in addition to the violation of natural justice operating to the prejudice of the petitioner as his case was not considered by the authority. In the impugned order also it is stated that the assessee did not file any reply against the proposed centralisation under section 127 of the Act. It also became undisputed that the petitioner has not been given any opportunity of hearing. Drawing of conclusion by the authorities that the assessee had no objection on such proposed transfer, not only violated the basic principle of natural justice which are incorporated in section 127 itself, under which the powers are exercised, but it also acted arbitrarily assuming that the petitioner had no objection to the proposed transfer. This petition is allowed to the extent by remitting back the case to the competent authority of the respondents. The competent authority shall decide on the issue of transfer of assessment of the petitioner from Rajkot to DCIT/ACIT, Central Circle, Varanasi afresh by giving opportunity of being heard to the petitioner after considering the objections raised by the petitioner The exercise shall be completed and necessary orders shall be passed in accordance with law within a period of four weeks from the date of receipt of copy this order. In order that the competent authority of the respondent is enabled to decide afresh, the impugned order dated 23.2.0221 passed u/s 127(2) of the Act is set aside.

Summary

Issues:
Challenge to show cause notice, Impugned order transfer, Violation of natural justice, Opportunity of being heard, Statutory infraction, Remitting the case back to competent authority.

Challenge to Show Cause Notice:
The petitioner filed a petition under Article 226 of the Constitution to set aside a show cause notice dated 8.2.2021, along with challenging an order dated 23.2.2021 and a letter dated 9.4.2021 transferring the assessment from Rajkot to Varanasi under section 127(2) of the Income Tax Act, 1961. The notice cited reasons for transfer based on a search warrant issued in Lucknow and the need for centralization as per CBDT guidelines.

Violation of Natural Justice and Opportunity of Being Heard:
The petitioner objected to the transfer, stating regular compliance with tax returns, residence in Rajkot, and lack of group search under section 132(1) at the assessee's location. The petitioner argued that the transfer order was passed without providing an opportunity to be heard, as the notice was not sent to the registered email address. The court found that the petitioner was deprived of the statutory right to a hearing, leading to a breach of natural justice.

Statutory Infraction and Remitting the Case:
The court noted discrepancies in the communication process, emphasizing the importance of affording the assessee an opportunity to be heard as mandated by section 127 of the Act. The impugned order transferring the assessment was set aside, and the case was remitted back to the competent authority for a fresh decision after considering the objections raised by the petitioner. The court clarified that the remand was solely based on the lack of opportunity for the petitioner to present their case.

Conclusion:
The petition was allowed, directing the competent authority to reevaluate the transfer of assessment from Rajkot to Varanasi while ensuring the petitioner's right to be heard. The court refrained from expressing any opinion on the case's merits, focusing solely on upholding principles of natural justice and statutory provisions regarding opportunity for the assessee to present their objections. The competent authority was instructed to complete the reevaluation process and issue necessary orders within four weeks from the date of the court's order.