2024 (10) TMI 1481 - HC - Income Tax

Transfer of case u/s 127 - sufficient material for transfer or not? - transfer from the Office of Income Tax, Corporate Ward-2(3), Chennai to the Office of the DCIT, Circle- 4(4), Kolkata ('Central Circle') - transfer order has been passed to centralize the case of the petitioner for effective and co-ordinated investigation along with other cases - HELD THAT - Though petitioner contended that the petitioner is having their registered office at Chennai and no business activities were carried out at Kolkata, but upon search and seizure carried out u/s 132 on 12.10.2023 by the Authorised Officer under the control of the Principal Director of Income Tax (Investigation), Kolkata, number of incriminating documents and materials came to be seized, which were directly connecting with the involvement of the petitioner in the business operation of Lottery in the state of West Bengal in different capacities such as Sub-distributors, Stockist, Printing press, etc. Since all the materials have been collected in Kolkata Central Circle, the 1st respondents, taking into consideration of the reply filed by the petitioner, decided to transfer the petitioner's case to the Central Circle, Kolkata. It is pertinent to note that apart from the petitioner case, there were eight other cases, which were found indulging similar activities as that of the petitioner in conducting the business operations of lottery, the 1st respondent ordered transfer of all cases to the Central Circle of Kolkata for the purpose of coordinated investigation in Lottery Group. No substance in the contentions raised by petitioner that the respondents failed either to provide an opportunity or lack of sufficient materials to transfer the case from ITO, Corporate Ward 2(3), Chennai to DCIT, Central Circle 4(4), Kolkata. Accordingly, the Issue Nos. 1 and 2 are answered. Whether the respondents have provided an opportunity for filing a reply and personal hearing before passing the impugned Notification? - The paramount consideration for transfer should be the public interest and the power is to be guided and controlled to serve the purpose of the Act. If the transfer is being made for the purpose of co-ordinated investigation for the purpose of assessment and collection of tax in a more convenient or efficient way, then it will be a good ground for transfer. In the present case, this Court does not find any irregularity or infirmity in passing the impugned Notification by the 1st respondent ordering transfer of the case of the petitioner to DCIT, Central Circle, Kolkata along with other cases only for the purpose of co-ordinated investigation in Lottery Group. No doubt, transfer of a case from the place where the assessee has its place of residence or business to another place causes inconvenience but if it is necessary in the public interest then the transfer on the ground of proper and co-ordinated investigation cannot be held to be impermissible in law. No prejudice that would be caused due to the present notification to the petitioner because no final assessment order adverse to the petitioner was passed, except the transfer of the petitioner's case by invoking Section 127 of the Act from ITO, Corporate Ward-2(3) to DCIT, Central Circle, Kolkata. Income Tax Act, being a taxing statute, very strict interpretation has to be given and in the absence of any prejudice caused to the petitioner, the challenge to the impugned notification has to be rejected. WP dismissed.

Summary

Issues Involved:

1. Whether the respondents have sufficient material for transfer of the case from Chennai to Central Circle, Kolkata?
2. Whether the respondents have provided an opportunity for filing a reply and personal hearing before passing the impugned Notification?

Detailed Analysis:

Issue 1: Sufficiency of Material for Transfer

The petitioner challenged the transfer of their income tax assessment file from Chennai to Kolkata, arguing that they have their registered office in Chennai and no business operations in Kolkata. The respondents, however, conducted a search and seizure operation under Section 132 of the Income Tax Act, 1961, which revealed incriminating documents directly affecting the petitioner's assessment. These documents were inter-connected and seized at various locations, necessitating a centralized investigation for a coordinated assessment. The court found that the respondents had sufficient grounds for the transfer, as the incriminating materials were linked to the petitioner's business operations in Kolkata, particularly in the lottery sector. The transfer was deemed necessary for a harmonious and coordinated investigation, aligning with the legal framework under Section 127 of the Act, which allows for such transfers in the public interest.

Issue 2: Opportunity for Reply and Personal Hearing

The petitioner contended that they were not afforded a personal hearing, violating the principles of natural justice as outlined in Section 127 of the Act. The respondents issued a show cause notice on 27.12.2023, detailing the reasons for the proposed transfer and inviting the petitioner to submit objections within five days. The petitioner submitted their reply on the same day, expressing concerns about the transfer's inconvenience and costs. The court noted that the respondents considered the petitioner's objections before issuing the Notification on 15.05.2024. Despite the petitioner's request for a personal hearing, the court found that the opportunity to file a written reply sufficed in this context, given the urgency and nature of the investigation. The court concluded that there was no violation of natural justice principles, as the petitioner was given a fair chance to present their case.

Conclusion:

The court dismissed the writ petition, affirming the transfer of the petitioner's case to the Central Circle in Kolkata. It emphasized that the transfer was justified by the need for a coordinated investigation, given the inter-connected nature of the seized documents and the petitioner's business operations in Kolkata. The court also held that the procedural requirements under Section 127 were met, as the petitioner was given an opportunity to respond to the show cause notice, and no prejudice was caused by the lack of a personal hearing. The decision underscored the importance of public interest and effective tax administration in the transfer of cases under the Income Tax Act.