2023 (5) TMI 420 - HC - Income Tax

Transfer of case u/s 127 - Transfer of the assessment jurisdiction of the Petitioner from DCIT- 19(3), Mumbai to the DCIT Central Circle-3, Jaipur - HELD THAT - The Instructions make it clear that while sending a proposal for centralization, reasons had to be reflected including the relationship of the petitioner with the main persons of the group. No such sustainable reasons are forthcoming from the records except speculation connecting the Petitioner and the subject material and a request from the Principal Commissioner of Income Tax, Jaipur for centralization of the case From a reading of the Order impugned passed under Section 127(2) of the Act, it can be seen that the same does not at all reflect as to why it was necessary to transfer the jurisdiction from DCIT- 19(3), Mumbai to DCIT Central Circle-3, Jaipur. None of the issues raised by the Petitioner have been dealt with either in the Order dated 21 November 2022 disposing of the objections raised by the Petitioner much less have the same been reflected in the Order impugned u/s 127(2) - AO appears to have acted very mechanically treating the request from DCIT Central Circle-3, Jaipur, as if it was binding upon him. In our opinion, the said request was not at all binding inasmuch as if it was so, then the agreement envisaged under Section 127(1)(a) would be rendered superfluous. Section 127(1) (b) contemplates a situation where in the event of a disagreement, the matter is referred to an officer as the Board may, by notification in the Official Gazette, authorise in that behalf. Not only this, if a request for transfer of jurisdiction was to be treated as binding, then it would have rendered otiose Section 127 to the extent the same envisages an opportunity of being heard to be provided to the Petitioner. The obligation on the part of AO to record reasons before ordering the transfer of the case and the right of the assessee to be heard in the matter are not hollow slogans but prescribed to achieve a particular purpose and the purpose is to remove any element of arbitrariness while exercising powers u/s 127 - If the request for transfer of jurisdiction was so sacrosanct as could not be refused, then the opportunity of being heard would be nothing but illusory rendering the request a foregone conclusion regarding its acceptance. We, therefore, are not convinced at all that the moment a request was made by the concerned officer from Jaipur, the same had necessarily to be allowed as per the Instructions dated 17 September 2008. We hold that the Order impugned is unsustainable in law and is, accordingly, set aside.

Summary

Issues Involved:
1. Validity of the transfer of assessment jurisdiction under Section 127 of the Income Tax Act, 1961.
2. Adequacy of reasons and material for such transfer.
3. Compliance with procedural requirements and opportunity of being heard.

Summary:

1. Validity of the Transfer of Assessment Jurisdiction:
The petitioner sought the issuance of a writ of Certiorari to quash the Order dated 21 November 2022, which transferred the assessment jurisdiction from DCIT-19(3), Mumbai to DCIT Central Circle-3, Jaipur under Section 127 of the Income Tax Act, 1961. The petitioner argued that he had been filing his income returns in Mumbai for the last 22 years and that there was no material found during the search operation connecting him with the Veto Group of Jaipur.

2. Adequacy of Reasons and Material for Transfer:
The petitioner contended that no incriminating material was found during the survey conducted on M/s Landmark Hospitality Pvt. Ltd., where he was a Director, nor during the search proceedings on the Veto Group. The show cause notice did not mention any material collected against the petitioner. The court noted that the reply affidavit from the Respondent-revenue did not provide specific averments of incriminating material found against the petitioner. The authorities seemed to be speculating that the documents and data found "may relate to the assessee as well as other assessees of this group."

3. Compliance with Procedural Requirements and Opportunity of Being Heard:
The court emphasized that Section 127 requires the Principal Chief Commissioner to transfer cases only after recording reasons and giving the assessee a reasonable opportunity of being heard. The instructions dated 17 September 2008 from CBDT were cited, which mandate that reasons and relationships with the main persons of the group be included in the proposal for centralization. The court found that the impugned order did not reflect why it was necessary to transfer the jurisdiction and that the assessing officer acted mechanically, treating the request from Jaipur as binding without an independent assessment.

Conclusion:
The court held that the order impugned was unsustainable in law and set it aside. It allowed the Principal Commissioner, Mumbai, to pass orders afresh if cogent material and reasons justifying the transfer to Jaipur were communicated within four weeks. The petitioner would be given an opportunity of being heard, and any requisite order should be passed within eight weeks. Consequently, the impugned notice dated 21 November 2022 was quashed, and the writ petition was disposed of on these terms.