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TMI Blog2024 (5) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... s the lead matter, is taken into consideration. The brief facts that are pertinent to decide the controversy at hand would reveal that on 11 April 2023, a search operation under Section 132 of the Act was conducted on the premises of M/s. Zee Lab Group which has its headquarters in Karnal, Haryana. 3. Pursuant to the aforementioned search, some incriminating material alluding to the assessee was discovered and therefore, on 26 April 2023, a notice under Section 131(1A) of the Act was issued to the assessee, whereby, the assessee was called on to furnish details of income earned by him since Assessment Year ['AY'] 2017-18 4. Thereafter, the assessee furnished a reply to the aforesaid notice, whereby, the financial statements of bank accounts, particulars of the investments made and details of the unsecured loan transactions etc. were provided to the Revenue. 5. Subsequently, on 2 February 2024, a show cause notice was issued to the assessee, whereby, for the purpose of an 'administrative, convenience, coordinated investigation and assessment', the case of the assessee was sought to be centralized at DCIT, Central Circle, Karnal, Haryana and the assessee was called upon to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions raised by the assessee. 12. Before adverting to the merits of the case, it is pertinent to refer to the scope and ambit of powers conferred upon the Revenue under Section 127 of the Act. Scope and ambit of Section 127 of the Act 13. Chapter XIII of the Act deals with the income tax authorities and their jurisdictional powers. Section 116 of the Act enlists the various classes of income tax authorities which are aimed to fulfil the objectives of the Act. Section 120 of the Act, which is another vital Section which talks about the jurisdiction of the income tax authorities and how the jurisdiction of the income tax authorities is inter alia based upon the territorial area, persons or classes of persons, income or classes of income and cases or classes of cases. Going on further, Section 124 of the Act deals with the jurisdiction of the AOs, whereby, he has been vested with the jurisdiction over any person carrying on business or profession over any prescribed territorial limit or where the principal place of business of persons is within such area and any person residing within such prescribed territorial limits. 14. Section 127 of the Act delineates the ambit of transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.-In Section 120 and this section, the word 'case', in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.' 15. Section 127 of the Act empowers the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to transfer any case from subordinate AOs after providing a reasonable opportunity of hearing to the assessee and recording reasons for the case of transfer. This power of transfer under Section 127(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here a transfer is made under the proviso to Section 127(1) from one Income Tax Officer to another in the same locality, it merely means that instead of one Income Tax Officer who is competent to deal with the case, another Income Tax Officer has been asked to deal with it. Such an order is purely in the nature of an administrative order passed for considerations of convenience of the department and no possible prejudice can be involved in such a transfer. Where, as in the present proceedings, assessment cases pending against the appellant before an officer in one ward are transferred to an officer in another ward in the same place, there is hardly any occasion for mentioning any reasons as such, because such transfers are invariably made on grounds of administrative convenience, and that shows that on principle in such cases neither can the notice be said to be necessary, nor would it be necessary to record any reasons for the transfer. The provisions contained in Section 124(3) of the Act deal with the same topic which was the subject-matter of Section 64(1) and (2) of the earlier Income Tax Act, 1922 (11 of 1922). There is, however this difference between these two provisions th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax collection so required, the Commissioner of Income Tax or the Central Board of Revenue had the power to transfer his case under Section 5(7-A) to some other officer outside the area where the assessee resided or carried on business. That is how Section 5(7-A) was sustained. 9. It is in the light of these considerations that we have to construe the proviso to Section 127(1). As we have already indicated, the construction for which Mr Jain contends is a reasonably possible construction. In fact, if the words used in the proviso are literally read, Mr Jain would be justified in contending that the requirement that reasons must be recorded applies even to cases falling under it. On the other hand, if the obvious object of the proviso is taken into account and the relevant previous background is borne in mind, it would also seem reasonable to hold that in regard to cases falling under the proviso, an opportunity need not be given to the assessee, and the consequential need to record reasons for the transfer is also unnecessary, and this view is plainly consistent with the scheme of the provision and the true intent of its requirements. We would according hold that the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Pannalal Binjraj v. Union of India, (1957) SCR 233 wherein, it was held that there is no fundamental right to be assessed at a particular place, has also held that when powers are invoked under Section 127 of the Act, territorial nexus becomes irrelevant and what becomes more prominent are the interests of adjudication and collection of taxes. The Court in the said decision held as follows:- '9. In Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC) the Constitution Bench had repulsed a siege laid to the vires of section 5 of the Indian Income-tax Act, 1922. The assessee had one of its branches in Calcutta where the karta of the Hindu undivided family resided and carried on business. The Hindu undivided family, however, was being assessed at Patna but the cases were transferred to Calcutta and subsequently to Circle-VI, New Delhi. Their Lordships observed thus (pages 580 and 587) : 'Prima facie it would appear that an assessee is entitled under those provisions to be assessed by the Income-tax Officer of the particular area where he resides or carries on business. Even where a question arises as to the place of assessment such question is under section 64(3) to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of this court in K. K. Loomba v. CIT [2000] 241 ITR152 applied Bidi Supply Co. v. Union of India [1956] 29 ITR 717 (SC) and Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC) to reject the challenge to the transfer of cases from Amritsar to Delhi. In K. P. Mohammed Salim v. CIT [2008] 300 ITR 302 (SC) their Lordships have clarified that: 'The power of transfer is in effect provides for a machinery provision. It must be given full effect. It must be construed in a manner so as to make it workable. Even section 127 of the Act is the machinery provision. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner wherefor the statute was enacted.' 11. In this conspectus and analysis of the law it will be relevant to note that, firstly, there is no fundamental right of an assessee to be assessed at a particular place. Under section 124, the assessment must be carried out at the principal place of business but when powers under section 127 are invoked, territorial nexus becomes irrelevant. Secondly, the determination of the venue of the assessment would be governed by the greatest exigencies for the collection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt scheme and notifications is a two-step process i.e. from faceless assessing officer to jurisdictional assessing officer and then from jurisdictional assessing officer to the transferee assessing officer, is untenable in law for the reason stated hereinabove that in clause (2) of Notification No. 62 of 2019, the Principal Chief Commissioner or Principal Director General in charge of National e-Assessment Centre has the power to transfer back the case to the jurisdictional assessing officer at any stage of the assessment to complete assessment, whereas the power under Section 127 of the Act can be exercised at any stage even when no assessment is pending. This is apparent from the definition of the expression 'case' in Explanation to Section 127 of the Act. For the sake of convenience the expression 'case' as defined in Section 127 of the Act is extracted as below: 'Explanation.-In Section 120 and this Section, the word 'case', in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndoubtedly exercised after following the principles of natural justice. However, the discretion of the authority to transfer a case has to be examined on the touchstone of the same not being arbitrary and/or perverse and/or mala fide. If there are reasons in the impugned order which indicates due application of mind to reach a view to transfer a case from one jurisdiction to another, then this court will not interfere with the discretion of the administrative authority who transfers the case. This discretion is vested by the Act in high ranking officer, viz., Commissioner of Income-tax, and the necessity to transfer a case from the jurisdiction of one officer to another officer for better administration of the Act could be diverse and impossible to enumerate. It is for the above reason that section 127 of the Act has not limited the exercise of jurisdiction by specifying any circumstances before the authority can exercise his powers to transfer the case. One more fact which cannot be lost sight of is that an assessee cannot choose his Assessing Officer and, therefore, if the transfer order does indicate some valid reasons to justify the transfer and such reasons are neither pervers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken, in a case like the present, only if there is a concurrence between the two Commissioners of Income-tax who may be concerned with the transfer. When such high functionaries agree to the transfer and a show-cause notice is issued and reasons are contained in the order of transfer and those reasons appear to be germane to the transfer and show that the transfer has been made in the public interest and for a proper adjudication under the Act, we do not see how the impugned provision can be said to be ultra vires.' 23. It is relevant to point out that the Division Bench of the Allahabad High Court in the case of Bhatia Minerals v. Commissioner of Income-Tax, 1992 SCC OnLine All 970 has also held that the 'coordinated investigation' is a good ground for transfer as it eases the administrative convenience of the income tax authorities. The relevant paragraph of the said decision is reproduced herein for reference:- "7. We are not inclined to interfere with the impugned order of trans-fer. As held by this court in Peacock Chemicals (P) Ltd. v. CIT, [1990] 182 ITR 98, proper and co-ordinated investigation is a good ground for transfer under section 127. Since the Bhatia family has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation in no way will help to achieve the object of the Act. 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. I find myself in disagreement with the view that co-ordinated or centralised investigation will not be a ground of transfer u/s 127 of the Act. I am in agreement with the view taken by the different High Courts as mentioned above holding that proper and co-ordinated investigation would be a relevant, ground to exercise the power u/s 127 of the Act.' 25. Therefore, it is evident from the legislative mandate and dictum laid down by the abovementioned judicial pronouncements on the scope and ambit of Section 127 of the Act, that it is a machinery provision which is aimed at larger public interest. On the touchstone of public interest, the powers under Section 127 of the Act can be exercised. Furthermore, the legislative mandate advises that the order of transfer under Section 127 of the Act ought to be passed after providing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon to furnish the ITR details and particulars of the unsecured loan transactions. 30. The assessee filed his response to the abovementioned notice on 7 June 2023 reiterating his ITR and details of the loan transactions from Financial Year ['F.Y.'] 2016-17 to F.Y. 2022-23. Thereafter, after considering the reply, a show cause notice was issued on 2 February 2024, whereby, the assessee's case was proposed to be centralized to the file of DCIT, Central Circle, Karnal, Haryana and objections were invited. Pursuant thereto, the assessee filed his objections on 03 February 2024. Having considered the reply, the Revenue on 11 March 2024 passed the impugned order under Section 127 of the Act. For the sake of convenience, the impugned order dated 11 March 2024 is reproduced herein:- 'A search & seizure action u/s 132 of the IT Act was carried out in the case of Zee Lab Group & Others on 11.04.2023. During the course of search proceedings, various incriminating registers & documents were seized from the premise bearing Villa no. 3004, Riviera Hermitage, Double Tree by Hilton, Arpora, Goa (owner Bharti Sehgal) and annexurised as A-1 to A-33. Details of expenses made by Sh. Dollar Gulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nience and will come into force with immediate effect." 31. As it is evident from an ex facie reading of the impugned order that an opportunity of hearing was given to the assessee and the Revenue has considered the objections raised by the assessee before passing the impugned order, and moreover, the case of the assessee was centralized on the grounds of 'coordinated enquiries, investigations and administrative convenience', therefore, the contention of the assessee that the impugned order reflects no application of mind and the Revenue had not considered the objections raised by the assessee holds no merit. 32. It is also pertinent to point out that the notice dated 26 April 2023 points out that due to the search conducted in the cases of Mr. Anil Chaudhary, Mr. Jitender Singh (alias Rakesh), Mr. Bharti Sehgal and Mr. Dheeraj Bakshi on 11 April 2023, the assessee was called upon to furnish the details. 33. It is the contention of the assessee that he was nowhere related to the abovementioned individuals and thus there was no need to centralize the cases of the assessee. We find no justification in that contention as the details furnished by the assessee in response to the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of expenses made by Sh. Mark Gulati (PAN - AZAPG9859N) are maintained in Annexures A-7, A-9,A-19, A-23, A-24, A-26,A-29 and A-32. Sh. Mark Gulati had invested INR 4,25,42,951/- (unaccounted expenditure) to construct/develop properties in Goa during the F.Y : 2018-19 to F.Y : 2022-23. This establishes the fact that Sh. Mark Gulati (PAN - AZAPG9859N) has made substantial unaccounted investment with the persons covered during the search proceedings. Details of expenses made by Sh. Navdeep Chhabra (PAN - ABDPC9877B) are maintained in Annexures A-3, A-21, A-22,A-28,A-30 and A-32. Sh. Navdeep Chhabra had invested INR 1,17,11,160/- (unaccounted expenditure) to construct/develop properties in Goa during F.Y : 2022-23. This establishes the fact that Sh. Navdeep Chhabra (PAN - ABDPC9877B) has made substantial unaccounted investment with the persons covered during the search proceedings. 4. The Appraisal report as well as the seized material has already been handed over to the Deputy Commissioner of Income Tax, Central Circle, Karnal. Therefore, for further co-ordinated investigation and enquiries with respect to Sh. Mark Gulati (PAN - AZAPG9859N) and Sh. Navdeep Chhabra (PAN - ABDPC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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