2025 (1) TMI 461 - HC - Income Tax

Order u/s 127 (2) transferring the petitioner s case from the jurisdictional officer in Mumbai to the counterpart in New Delhi - HELD THAT - The impugned order notes that the cases are centralised with Central Circle for coordinated investigation in group cases to protect the interest of revenue. The convenience of the assessee is adverted to, but the impugned order observes that this aspect is secondary and may have to yield to the more significant interest of centralised and coordinated investigation. The order also records that the centralisation is for a limited period, and once the assessment concludes as per the norms, then there would be de-centralization. The impugned order also refers to certain precedents of the Hon ble Supreme Court and the jurisdictional High Courts. The impugned order reasons that the contentions of the inconvenience raised by the assessee can always be addressed through modern technological advances, thereby obviating the necessity of extensive travel by the assessee or its representatives. The impugned order also refers to protecting the revenue s interest, which a coordinated investigation could fairly achieve. The impugned order records that all cases of Pacific Group are being assessed at Delhi in a centralised place. Consequently, there would be no good reason to exclude only the case of the petitioner-assessee. The charge that the impugned order is unreasoned must fail. At least prima facie, the reasons cannot be considered irrelevant or extraneous. Therefore, we find no infirmity in the impugned order on the ground that it is bereft of reasons. Absence of agreement between the two Commissioners - As noted earlier, Section 127 (2) of the Income Tax Act contemplates granting the assessee a reasonable opportunity to be heard. Such opportunity was given to the petitioner-assessee. In the objections filed by the petitioner-assessee, specific issues were flagged. Therefore, by communication dated 29 December 2022, the Principal Commissioner of Income Tax-4, Mumbai, wrote to the Principal Commissioner of Income Tax (Central)-2, New Delhi, to provide evidence/documents so that the objections raised by the petitioner-assessee would be considered fairly and reasonably. By response dated 16 February 2023, the Principal Commissioner of Income Tax in New Delhi clarified the matter. Reference was made to the bogus transaction allegedly undertaken by the petitioner as a service provider to the extent of Rs.1 crore during FY 2021-22. Reference was also made to the entities belonging to Pacific Group having claimed bogus expenses in their transactions with the petitioner-assessee. This communication records that the transactions, if assessed without considering the modus of evasion carried out by the Pacific Group, may result in a loss of revenue. Thus, the communications dated 29 December 2022 and 16 February 2023 were in the context of the fair hearings offered to the petitioner. Based on these communications, we cannot sustain any argument regarding the alleged absence of agreement between the two Commissioners. Accordingly, we are satisfied that the impugned order is not vulnerable on the two grounds alleged by the petitioner. We see no infirmity in it that warrants interference in the exercise of our extraordinary jurisdiction.

Summary

1. ISSUES PRESENTED and CONSIDERED

The court considered the following core legal questions:

• Whether the impugned order dated 22 February 2023, transferring the petitioner's case from Mumbai to New Delhi under Section 127(2) of the Income Tax Act, 1961, is bereft of reasons and thus violates principles of natural justice.
• Whether there was an agreement between the Principal Commissioners of Mumbai and Delhi, as required under Section 127(2) of the Income Tax Act, for the transfer of jurisdiction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Adequacy of Reasons in the Impugned Order

• Relevant Legal Framework and Precedents: Section 127(2) of the Income Tax Act requires the recording of reasons when transferring a case, which is a statutory requirement and an essential facet of natural justice. The petitioner cited the Supreme Court's decision in Noorul Islam Educational Trust to support the argument that the absence of reasons invalidates the order.
• Court's Interpretation and Reasoning: The court examined the impugned order and determined that it contained sufficient reasons. The order addressed the petitioner's objections and provided clarifications received from the Commissioner at Delhi.
• Key Evidence and Findings: The impugned order justified the transfer for coordinated investigation and centralization of cases related to the "Pacific Group" to protect revenue interests.
• Application of Law to Facts: The court found that the reasons provided in the order were neither irrelevant nor extraneous, thus complying with the statutory requirement under Section 127(2).
• Treatment of Competing Arguments: The court acknowledged the petitioner's argument regarding inconvenience but noted that modern technology could mitigate such issues.
• Conclusions: The court concluded that the impugned order was not unreasoned and did not violate principles of natural justice.

Issue 2: Agreement Between Commissioners

• Relevant Legal Framework and Precedents: Section 127(2) requires an agreement between the Commissioners of the jurisdictions involved in the transfer. The petitioner argued the absence of such an agreement, citing the Noorul Islam Educational Trust case.
• Court's Interpretation and Reasoning: The court evaluated the communications between the Commissioners and found that there was a clear agreement regarding the transfer.
• Key Evidence and Findings: The court reviewed the correspondence, including the proposal by the Chief Commissioner of Income Tax (Central), New Delhi, and the subsequent approval by the Chief Commissioner of Income Tax-2, Mumbai.
• Application of Law to Facts: The court determined that the communications evidenced a positive agreement between the Commissioners, fulfilling the requirement under Section 127(2).
• Treatment of Competing Arguments: The petitioner's reliance on other correspondence was addressed by the court, which clarified that those communications were part of the fair hearing process.
• Conclusions: The court concluded that there was a valid agreement between the Commissioners, and the impugned order was not vulnerable on this ground.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The court noted, "At least prima facie, the reasons cannot be considered irrelevant or extraneous. Therefore, we find no infirmity in the impugned order on the ground that it is bereft of reasons."
• Core Principles Established: The judgment reinforced the principle that compliance with statutory requirements under Section 127(2), including recording reasons and obtaining agreement between Commissioners, is essential for the validity of a transfer order.
• Final Determinations on Each Issue: The court dismissed the petition, concluding that the impugned order was neither unreasoned nor lacking in the required agreement between Commissioners, thus upholding the transfer of jurisdiction.