Bombay High Court
M/S.Zodiac Developers Pvt Ltd vs Principal Commissioner Of Income ... on 18 April, 2016
Bench: M.S. Sanklecha
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 869 OF 2016
M/s. Zodiac Developers Pvt. Ltd. .. Petitioner
v/s.
Principal Commissioner of Income Tax-8,
Mumbai .. Respondent
Mr. S.C. Tiwari a/w Ms. Rutuja Pawar for the petitioner
Mr. Nirmal Mohanty for the respondent
ig CORAM : M.S. SANKLECHA &
A.K. MENON, J.J.
DATED : 18 th APRIL, 2016.
Oral Judgment : - (Per M.S. Sanklecha, J.)
1. This petition was admitted and Rule issued on 14 th March, 2016.
At the request of the Counsel, the petition was expedited and fixed for
hearing on 16th April, 2016. Thus, the petition was partly heard on 16 th
April, 2016 and concluded today.
2. This petition under Article 226 of the Constitution of India
challenges the order dated 21st December, 2015 passed by the Principal
Commissioner of Income Tax. The impugned order passed under
Section 127(2) of the Income Tax Act, 1961 (the Act) transfers the
petitioner's case from an Income Tax Officer in Mumbai to A.C.I.T.
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Central Circle-1, Aurangabad.
3. Brief facts :-
(a) The petitioner carries on business of Builders and Developers i.e.
constructing flats for Sale in and around Mumbai. The petitioner is
being assessed to income tax in Mumbai since Assessment Year
1996-97.
(b) By a communication dated 6th January, 2015, the Commissioner
of Income Tax-8, Mumbai issued a show-cause notice to the petitioner
proposing to transfer the petitioner's case under Section 127(2) of the
Act from Mumbai to A-CIT, Central, Circle, Aurangabad. The basis for
the proposed transfer is centralization of Jhaveri Group for purposes of
co-ordinated investigation along with other cases and Administrative
convenience.
(c) On 27th January, 2015, the petitioner responded to the show-
cause notice inter alia pointing out that its principal place of business is
in Mumbai with even its Directors residing and being assessed to tax at
Mumbai. Further, it does not belong to Jhaveri Group of Companies.
Therefore, the petitioner's case need not be transferred from Mumbai to
Aurangabad. In any event, to respond more appropriately the details of
the evidence for transfer the petitioner's income tax proceedings from
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Mumbai to Aurangabad was sought.
(d) In response, the Commissioner of Income Tax by letter dated 6 th
February, 2015 inter alia pointed out during a search on the petitioner
by the Directorate of Income Tax (Investigation), Nagpur, documents
were recovered which would require further investigation along with
that of Jhaveri Group of Companies, Auranbagad who are assessed at
Aurangabad.
(e) On 16th February, 2015, the petitioner by its reply pointed out
that no search was carried out at its premises. Further, it did not
belong to the Jhaveri Group nor are they in any way related to them.
The only connection with the Jhaveri Group was the fact that flats in a
building constructed by them were booked by the members of the
Jhaveri Group. This would not make them a part of Jhaveri group. In
the above view, the petitioner requested for the withdrawal of the
proposal to transfer the petition's case to Aurangabad.
(f) On 18th February, 2015, the Principal Commissioner of Income
Tax passed an order under Section 127(2) of the Act transferring the
petitioner's case from from Mumbai to Aurangabad. The basis of the
transfer as recorded in the order dated 18 th February, 2015 was letter
from D.I.T. (Investigation) Nagpur, which purports to record that the
search and seizure was carried out in the premises of the petitioner,
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which is related to the Jhaveri Group. In the above view, for the
purpose of co-ordinated investigation, the petitioner's case was
transferred from Mumbai to A-CIT, Central Circle, Aurangabad.
(g) Being aggrieved, the petitioner challenged the order dated 18 th
February, 2015 before this Court by filing Writ Petition No.1204 of
2015. By an order dated 18 th June, 2015, this Court quashed and set
aside the order dated 18th February, 2015 passed by the Principal
Commissioner of Income Tax under Section 127(2) of the Act. This on
the ground that the order relied upon a letter from Directorate of
Income Tax (Investigation), Nagpur for the purposes of transferring the
petitioner's case from Mumbai to Aurangabad even without having
made the same available to the petitioner. This resulted in the
petitioner not making appropriate submissions with regard to the letter
from the Directorate of Income Tax (Investigation), Nagpur. Thus, in
breach of principles of natural justice. Further the order dated 18 th
February, 2015 was found by this Court to be a non-speaking order for
the reason it did not deal with the submissions made by the petitioner.
However, the Revenue was given liberty to pass a fresh order after
following the principles of natural justice.
4. Consequent to the above, on 2nd July, 2015 a notice was issued to
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the petitioner proposing to transfer the petitioner's case from Mumbai
to Aurangabad under Section 127(2) of the Act. The basis for the
transfer was co-ordinated investigation along with other connected
cases for Administrative convenience. No reference was made to the
letter from the Directorate of Income Tax (Investigation), Nagpur which
was relied upon earlier.
5. On 14th July, 2015, the petitioner filed its reply to the show-cause
notice inter alia pointing out as under :-
(a) It is in the process of constructing a building comprising of 78
flats at Vile Parle (W), Mumbai. Many of the flats are booked by during
the construction stage.
(b) 3 out of 78 flats in the building being constructed have been
booked for sale to the persons belonging to the Jhaveri Group. These
persons appear to reside in Mumbai but are assessed to tax in
Aurangabad due to business being at Aurangabad. Similarly, other flats
have been booked by the persons who have business interest at places
other than Mumbai such as Pune etc.
(c) It has no business connection with Jhaveri Group (i.e. purchasers
of 3 flats from Aurangabad) or does it have any business activity in
Aurangabad.
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(d) There is no relationship between the Jhaveri Group and the
petitioner, save and except the purchase of 3 flats in the building being
constructed by members of the Jhaveri Group.
(e) The transfer of the cases would cause them acute hardship as all
its activities are centered around Mumbai coupled with no connection
to Aurangabad.
(f) Lastly, the co-ordinated investigation and Administrative
convenience for transfer of the case from Mumbai to Aurangabad is
only for the purpose of sale of 3 flats out of 78 flats to persons
belonging to the Jhaveri Group who are assessed in Aurangabad. The
Assessing Officer situated in Bombay is competent to assess the
petitioner in respect of its income. Thus, no transfer of the case is
made out.
6. Thereafter, on 3rd November, 2015, at the personal hearing
granted to the petitioner by the Commissioner of Income Tax, two
pages of seized documents namely 72 and 74 along with the statements
of one Abhishek Jhaveri and one Mr. Vipul Rajnikant Khona dated 20 th
August, 2014 and 14th October, 2014 respectively were given to the
petitioner. Consequent to receipt of these documents on 24 th
November, 2015, the petitioner filed a further reply resisting the
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proposed transfer of the petitioner's case from Mumbai to Aurangabad.
In its reply the petitioner further pointed out that it appears that the
entire basis of transferring the case are two loose papers discovered
while carrying out search of the Jhaveri Group. In the circumstances,
it would be unreasonable to transfer the entire assessment jurisdiction
of the petitioner's to Aurangabad.
7. On 21st December, 2015, the Principal Commissioner of Income
Tax passed the impugned order transferring the petitioner's case from
Mumbai to Aurangabad. This essentially, on the ground that one of
the buyers namely Abhishek Jhaveri had become a witness for the
Department having admitted to paying cash money to the petitioner. It
is on the basis of the above admission that investigation is required to
be done in the case of the petitioner and for that purpose it would be
necessary to transfer the petitioner's case from Mumbai to Aurangabad.
8. The petitioner challenged the impugned order dated 21st
December, 2015 and in support thereof submits as under :-
(a) The impugned order dated 21st December, 2015 transferring the
petitioner's case from Mumbai to Aurangabad is an order in breach of
principles of natural justice inasmuch as the show-cause notice issued
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to the petitioner does not indicate the basis of the transfer save and
except stating that the same is necessary for co-ordinated investigation
and Administrative convenience.
(b) The impugned order dated 21st December, 2015 is a non-
speaking order inasmuch as it does not consider and deal with the
petitioner's objections as recorded in its letter dated 14th July, 2015.
(c) The impugned order dated 21st December, 2015 seeks to transfer
the petitioner's case from Mumbai to Aurangabad on a completely new
and different ground than that recorded in its show-cause notice dated
6th January, 2015 and 6th February, 2015 which led to the order dated
18th February, 2015. The order dated 18 th February, 2015 was set aside
by this Court as it relied upon a letter from D.I.T. (Investigation)
Nagpur to transfer the petitioner's case from Mumbai to Aurangabad,
without having given the petitioner's an opportunity to meet the
contents of the aforesaid communication.
9. Mr. Mohanty, learned Counsel for the Revenue submits as
under :-
(a) The order dated 21st December, 2015 is a speaking order as the
same has been passed after giving reasonable opportunity to the
petitioners and considering the submissions made by the petitioners;
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(b) The impugned order is of an administrative nature and it is
passed only after following the principles of natural justice. Thus, no
interference is called for, in support, reliance was placed upon the
decision of Punjab and Haryana High Court in the case of Kuantum
Papers Ltd. Vs. Union of India, 57 Taxmann 60.
(c) Lastly, a transfer of case would undoubtedly involve some
inconvenience of the assessee. However, such inconvenience cannot
over-ride the need of the Revenue for detailed and co-ordinated
investigation. In support, reliance was placed upon the decision of
Rajastan High Court in Rishikul Vidyapeeth Vs. Union of India, 136
ITR 139.
10. We have considered the rival submissions. We find that the
Commissioner of Income Tax had originally passed an order dated 18 th
February, 2015 transferring the petitioner's case from Mumbai to
Aurangabad on the basis of a letter of D.I.T. (Investigation), Nagpur
informing the Commissioner of Income Tax that a search and seizure
operation was carried out in respect of the petitioner who in turn is
related to the Jhaveri group of Aurangabad. The aforesaid order dated
18th February, 2015 of the Commissioner of Income Tax was set aside as
copy of the aforesaid intimation was not given to the petitioner by the
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Revenue. Further, the petitioner's submissions / objections to
the proposed transfer was not considered in the order dated
18th February, 2015. This Court while setting aside the order
dated 18th February, 2014 by an order dated 18th June, 2015 granted
liberty to the Revenue to pass a fresh order after following the
principles of natural justice.
11. We find that consequent thereto neither the show-cause notice
nor the impugned order dated 21st December, 2015 make any reference
to the communication received from D.I.T. (Investigation), Nagpur.
The Revenue has also filed its affidavit-in-reply and the respondent has
not mentioned the reason as to why no reliance is being placed upon
the communication received from D.I.T. (Investigation), Nagpur for the
purposes of transferring the petitioners' case from Mumbai to
Aurangabad. In the above circumstances, we asked Mr. Mohanty the
reason why the Revenue is not now placing reliance upon the letter
received from D.I.T. (Investigation), Nagpur. Mr. Mohanty informs us
that the letter from D.I.T. (Investigation), Nagpur was not correct and
therefore, not relied upon any further. We find this attitude of the
Revenue strange, as the letter from D.I.T. (Investigation), Nagpur was
the basis of seeking to transfer the petitioner's case from Mumbai to
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Aurangabad. In all fairness, once the letter from D.I.T. (Investigation),
Nagpur was incorrect, the proposal to transfer the proceedings ought to
have been withdrawn. Further, this should have been pointed out to
the Court when the order dated 18th June, 2015 was passed. Thus,
there would have been no occasion to leave the issue open for the
Revenue to pass a further order after following the principles of natural
justice. The attitude of the Revenue seems to be once a transfer under
Section 127(2) of the case is proposed, come what may, they would
transfer the case.
12. Further, we find that the notice dated 21st December, 2015 issued
consequent to the order of this Court dated 18 th June 2015 is bereft of
any particulars, save and except that the transfer is required for the
sake of co-ordinated investigation along with other connected cases for
administrative convenience. The show-cause notice does not indicate
the reasons for the proposed transfer. Thus, making it impossible for
the petitioners to effectively respond to the show-cause notice. Mr.
Mohanty, learned Counsel for the Revenue emphasized the fact that the
two seized documents were given to the petitioner before passing of
the impugned order and this was sufficient compliance with the
principles of natural justice. We are unable to appreciate the above
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submission. It is the show-cause notice which must refer to the
documents and the inferences drawn from the documents by the
Commissioner of Income Tax supporting the proposed transfer. By
mere giving of the documents relied upon without the party knowing
what inference is being drawn therefrom, the requirement of natural
justice is not met. This is so as the party is left guessing as to the
inference drawn by the Commissioner of Income Tax from documents
for proposing the transfer from Mumbai to Auranbagad. This itself
would lead to a breach of principles of natural justice.
13. Moreover, we find that the impugned order does not deal with
the petitioner's submissions as contained in its letter dated 14 th July,
2015 inter alia pointing out that only 3 flats out of 78 flats in the
building being constructed in Vile Parle had been sold by the petitioner
to the members of the Jhaveri Group. In case, the petitioner's
assessments are to be transferred to the places where its customers
(purchaser of its flats) are being assessed, then, the petitioner's cases
would have to be transferred to at various places where its customers
resides. This is an impossibility. Further, where transaction take place
in the course of its business and a search takes place on such other
persons at the place where such person is assessed, it would not
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necessarily result in the transfer of petitioner's case to the place where
the person it is dealing with in the normal course is being assessed.
The aforesaid submission as contained in letter dated 14 th July, 2015
has not even been adverted to in the impugned order dated 21 st
December, 2015. Nor was the fact that there would be inconvenience
to the petitioner as emphasized in its subsequent letter dated 24 th
November, 2015 even adverted to in the impugned order much less
dealt with. Thus, the order itself is a non-speaking order. The basic
and minimal requirement of the petitioner being given a personal
hearing and the opportunity to respond to the proposed transfer is to
enable the Authority to consider whether in the facts and circumstances
of the case, the transfer of the case from Mumbai to Auranbagad is
warranted. Particularly, bearing in mind that the petitioner has
otherwise no connection with Aurangabad except for having sold 3 out
of 78 flats in the building being constructed to the persons who are
being assessed at Aurangabad.
14. The reliance placed by the Revenue upon the order of the Punjab
and Haryana in Kuantum Papers Ltd. (supra) in which the Court
refused to stop the transfer as it had come to a finding that the order
sanctioning the transfer of the case under Section 127(2) of the Act
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was an speaking order and not mala fide and / or arbitrary is not
applicable in this case. This is so as in the present facts the impugned
order is not only a non-speaking order but is also arbitrary. Similarly,
the decision of Rajasthan High Court in Rishikul Vidyapeeth (supra)
relied upon by the respondent Revenue for sustaining the impugned
order under Section 127(2) of the Act is inappropriate. This for the
reason that it was passed in the above case in the context of the
petitioner therein not adverting in its objections to the reasons for the
transfer disclosed in the show-cause notice issued to it. This is not so
in the present case. In fact, in this case the show-cause notice is itself
bereft of particulars save and except merely co-ordinated investigation
and administrative convenience making it impossible to effectively
respond. Nevertheless, the petitioner had itself pointed out the
inconvenience which would be caused to it and the arbitrary nature of
the transfer of petitioner's assessment to Aurangabad. This objection
was not appropriately considered and dealt with in this case.
Therefore, the aforesaid decision also has no application to the present
facts.
15. In the above view, the petition succeeds. We set aside the
impugned order dated 21st December, 2015 passed by the Principal
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Commissioner of Income Tax, Mumbai.
16. Rule made absolute in the above terms. No order as to costs.
(A.K. MENON, J.) (M.S. SANKLECHA, J.)
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