2023 (1) TMI 1091 - HC - Income Tax

Transfer of Case / jurisdiction passed u/s 127 - Validity of Reopening of assessment notice - mandatory procedure to be followed u/s 127 by which the assessee is entitled to an opportunity of being heard before the assessment jurisdiction is transferred to the file of a different assessing officer - HELD THAT - The language of Section 127 is clear that the assessee should be given a reasonable opportunity of being heard in the matter before the power under Section 127 of the Act is invoked. The statute is also clear that such opportunity of being heard is to be given wherever it is possible to do so. If the authority proposes to dispense with the opportunity of hearing, the statute states that reasons have to be recorded for not providing such an opportunity. On perusal of the order impugned in the writ petition dated 29th June, 2021, we find that no such reasons have been recorded by the authority for dispensing with the opportunity of personal hearing as no show cause notice was issued to the assessee prior to order of transfer. In any event, the learned Single Bench was of the opinion that the appellant had made out a prima facie case for entertaining the writ petition. But, however, if the assessment proceedings are to be proceeded by the assessing authority at Kanpur, then the writ petition itself would become infructuous. In any event, we are of the view that since no reasons have been recorded by the authority for dispensing with the opportunity of being heard, we find that there are no such reasons to do so. Therefore, the authority is bound to issue notice to the appellant and afford them a reasonable opportunity of being heard before a decision is taken. We are inclined to remand the matter back to the authority for a fresh decision. In the result, the appeal stands disposed of along with the writ petition by directing the appellant to treat the order passed by the Principal Commissioner of Income Tax-5, Kolkata dated 29th July, 2021 as a show cause notice and the appellant shall submit their objection within fifteen days from the date of receipt of the server copy of this judgment and order after which the Principal Commissioner of Income Tax shall afford an opportunity of hearing to the authorised representative of the assessee and pass a speaking order on merit and in accordance with law. Consequent upon the order dated 29th July, 2021, the assessing authority in Kanpur has taken up the reassessment proceedings and has passed an order dated 30th July, 2022 under Section 148A(d) of the Act and also issued a notice under Section 148 dated 30th July, 2022. The order passed under Section 148A(d) of the Act dated 30th July, 2022 and the notice issued under Section 148 dated 30th July, 2022 shall be kept in abeyance and shall abide by the fresh order that may be passed by the Principal Commissioner of Income Tax 5, Kolkata in terms of the above direction.

Issues:

1. Validity of transfer of jurisdiction under Section 127 of the Income Tax Act, 1961.
2. Observations regarding pendency of writ petition and assessment proceedings.
3. Requirement of opportunity of being heard before transfer of jurisdiction.
4. Compliance with statutory provisions in transferring assessment jurisdiction.
5. Prima facie case for entertaining the writ petition.
6. Remand of the matter for a fresh decision by the assessing authority.
7. Abeyance of reassessment proceedings pending fresh decision.
8. Costs and furnishing of certified copy of the order.

Issue 1: Validity of transfer of jurisdiction under Section 127 of the Income Tax Act, 1961

The appellant challenged the transfer of jurisdiction based on the failure to follow the mandatory procedure under Section 127 of the Act, which necessitates providing the assessee with an opportunity of being heard before transferring assessment jurisdiction. The order impugned in the writ petition lacked reasons for dispensing with the opportunity of a personal hearing, as no show cause notice was issued to the assessee prior to the transfer.

Issue 2: Observations regarding pendency of writ petition and assessment proceedings

The appellant was aggrieved by the part of the order stating that the pendency of the writ petition would not hinder the authority from proceeding with the assessment proceedings. The Court noted that if the assessment proceedings were to continue at Kanpur, the writ petition would become infructuous. However, since no reasons were recorded for dispensing with the opportunity of being heard, the authority was directed to issue a notice to the appellant and provide a reasonable opportunity of being heard before making a decision.

Issue 3: Requirement of opportunity of being heard before transfer of jurisdiction

Section 127 of the Income Tax Act, 1961 provides the power to transfer cases, emphasizing the importance of giving the assessee a reasonable opportunity of being heard before invoking this power. The statute mandates that reasons must be recorded if the opportunity of hearing is to be dispensed with, which was found lacking in the impugned order.

Issue 4: Compliance with statutory provisions in transferring assessment jurisdiction

The Court emphasized that the authority must follow the statutory provisions by giving the assessee a fair opportunity of being heard before transferring assessment jurisdiction. Failure to adhere to this requirement renders the transfer of jurisdiction invalid and necessitates a fresh decision by the authority.

Issue 5: Prima facie case for entertaining the writ petition

The Court acknowledged that the appellant had made out a prima facie case for entertaining the writ petition, leading to the decision to remand the matter back to the authority for a fresh decision. The order passed by the Principal Commissioner of Income Tax was to be treated as a show cause notice, and the appellant was directed to submit objections within a specified timeline.

Issue 6: Remand of the matter for a fresh decision by the assessing authority

In light of the lack of reasons for dispensing with the opportunity of being heard, the Court directed the matter to be remanded back to the authority for a fresh decision. The appellant was instructed to treat the previous order as a show cause notice and submit objections for further consideration.

Issue 7: Abeyance of reassessment proceedings pending fresh decision

The Court ordered that the reassessment proceedings and notice issued by the assessing authority in Kanpur be kept in abeyance pending the fresh decision to be made by the Principal Commissioner of Income Tax in Kolkata in accordance with the Court's direction.

Issue 8: Costs and furnishing of certified copy of the order

The Court made no order as to costs and directed that an urgent photostat certified copy of the order be furnished to the parties upon compliance with all legal formalities.

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