Bombay High Court
Sudhir Ramswaroop Mundra & Others vs The Commissioner Of Income Tax-1 ... on 6 May, 2016
Bench: B.P. Dharmadhikari
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
(I) WRIT PETITION NO.2423 OF 2003
1) Ramswaroop s/o Parasram Mundra,
aged about 68 years, r/o Sindi
(Railway), Tahsil Seloo, District
Wardha.
2) M/s. Jagdishprasad Ramswaroop,
a partnership firm, through its
partner Mr. Ramswaroop s/o
Parasram Mundra, aged about
68 years, r/o Sindi (Railway),
Tahsil Seloo, District Wardha.
3) Nandkishore s/o Ramswaroop
Mundra, aged about 45 years,
r/o Sindi (Rly), Tahsil Seloo,
District Wardha and also at
37-A, Ajit Colony, Jodhpur
(Rajasthan).
4) Nandkishor Mundra (HUF),
through its Karta Nandkishore
s/o Ramswaroop Mundra,
aged about 45 years, r/o
Sindi (Rly), Tahsil Seloo,
District Wardha and also at
37-A, Ajit Colony, Jodhpur
(Rajasthan). ... Petitioners
- Versus -
The Commissioner of Income Tax-II,
Nagpur. ... Respondent
----------
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Shri M.G. Bhangde, Senior Advocate for petitioners.
Shri A. Parchure, Advocate and Shri B. Mohta, Advocate
for respondent.
----------------
(II) WRIT PETITION NO.1455 OF 2004
1) Sudhir s/o Ramswaroop Mundra,
aged about 43 years, r/o 20/3,
Priyadarshini Colony, near RTO,
Nagpur and c/o Aditya Chemicals,
Pipar City, District Jodhpur.
2) Sudhir Mundra (HUF), through
its Karta Sudhir s/o Ramswaroop
Mundra, aged about 43 years,
r/o 20/3, Priyadarshini Colony,
near RTO, Nagpur and c/o
Aditya Chemicals, Pipar City,
District Jodhpur.
3) M/s. Aditya Chemicals, a
partnership firm, having its
place of business at Pipar City,
Jodhpur, through its partner
Sudhir Mundra, aged about
43 years, r/o 20/3, Priyadarshini
Colony, near R.T.O., Nagpur
and c/o Aditya Chemicals,
Pipar City, District Jodhpur. ... Petitioners
- Versus -
The Commissioner of Income Tax-I,
Nagpur. ... Respondent
-----------------
Shri M.G. Bhangde, Senior Advocate for petitioners.
Shri A. Parchure, Advocate and Shri B. Mohta, Advocate
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for respondent.
----------------
Date of reserving the judgment : 22/03/2016
Date of pronouncing the judgment : 06/05/2016
CORAM : B.P. DHARMADHIKARI AND
P.N. DESHMUKH, JJ.
DATED : MAY 06, 2016
JUDGMENT (PER P.N. DESHMUKH, J.) :
Both these petitions having similar facts can
be disposed of by this common judgment.
2) In Writ Petition No. 2423/2003, challenge is to
order dated 10/4/2003 passed by respondent whereby
petitioners' cases under the Income Tax Act, 1961
(hereinafter referred to as "the Act") are transferred
from Wardha (Maharashtra) to Jodhpur (Rajasthan)
while in Writ Petition No. 1455/2004 challenge is to
similar orders passed on 15/12/2003 and 28/1/2004 by
respondent whereby income tax cases of petitioners
therein are transferred from Nagpur (Maharashtra) to
Jodhpur (Rajasthan).
In Writ Petition No. 2423/2003 by interim order
4 wp2423.03 & wp1455.04
dated 24/6/2003 and in Writ Petition No. 1455/2004 by
interim order dated 26/3/2004, the parties were
directed to maintain status quo.
3) Following facts would be necessary to reveal
the controversy involved in the petitions :
Facts in Writ Petition No. 2423/2003 are that
petitioner no.1 is the Managing Partner of the firm
M/s. Jagdishprasad Ramswaroop (petitioner no.2). The
petitioner no.1 controls overall financial and other
affairs of the firm as well as of the Mundra family and
all the connected family business concerns. The place
of residence of petitioner no.1 as well as the place of
business of petitioner nos.1 and 2 is at Sindi (Railway),
Tahsil Seloo, District Wardha (Maharashtra). The
petitioner no.2 firm consists of 3 partners, namely,
petitioner no.1 Mr. Ramswaroop Mundra, Smt. Vidya w/o
Nandkishore Mundra and Smt. Asha w/o Sudhir Mundra
and is engaged in the business of cotton ginning. The
factory of this firm is situated at village Sindi (Railway),
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Tahsil Seloo, District Wardha. This is the main and
oldest business of the Mundra family, which is being
carried on since 1947. For all these years, the
petitioner nos.1 and 2 are being assessed to Income
Tax at Wardha only. No part of activity of the said
business is carried on from any place other than
Wardha/Sindi (Railway). The petitioner nos.1 and 2 are
assessed under the Act by the Income Tax Officer, A-
Ward, Wardha and their assessments are finalized upto
31.3.2002. The return of Income Tax was due to be
filed in the month of October 2003.
4) The petitioner no.3 is the elder son of the
petitioner no.1. The petitioner no.3 resides at Sindi
(Railway) and also at Jodhpur for the purpose of
business. The petitioner no.4 is a Hindu Undivided
Family of which petitioner no.3 is the Karta. The
petitioner no.4 is running its business, namely,
manufacture of hydrated lime in the name and style of
M/s. Shivam Chemicals at Pipar City. The petitioner
6 wp2423.03 & wp1455.04
no.3 derives income by way of interest from
M/s. Shivam Chemicals. The petitioner nos. 3 and 4 are
being assessed under the Act since beginning by the
Income Tax Officer, A-Ward, Wardha. Their assessments
are finalised upto 31.3.2002 and the return of income
for the year 2002-03 was due to be filed in the month
of October 2003.
5) The Income Tax Department carried out search
and seizure operation under Section 132 of the Act at
the business/residential premises of the petitioners/
Mundra family, of which the petitioner no.1 is the Head
at Jodhpur and Sindi (Railway), on 20/21.12.2002.
6) Thereafter the Deputy Commissioner of
Income Tax-II (Hq.) for the respondent sent identical
letters dated 11.3.2003 to each of the petitioners
proposing to transfer the cases of petitioners from the
jurisdiction of the Income Tax Officer, Wardha to the
Assistant Commissioner of Income Tax, Central Circle-II,
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Jodhpur under the provisions of Section 127 of the Act.
It was stated in that letter that the cases of Mundra
group are to be centralised for the purpose of
coordinated investigations and assessments in Jodhpur
and objections, if any, were invited from the petitioners.
The petitioners vide separate, but identical replies
submitted in the office of the respondent on 19.3.2003,
objected to transfer of their cases from Wardha
(Maharashtra) to Jodhpur (Rajasthan). In short, the
petitioners contended that they were being regularly
assessed to Income Tax since beginning at Wardha, the
petitioner no.1 controls the overall financial and other
affairs of the family and resides at Sindi (Railway), it
would be highly inconvenient and difficult to attend
assessment proceedings at Jodhpur, which is at a
distance of 1100 kms. from Wardha and transfer of
cases to Jodhpur was not necessary for the alleged
coordinated investigation.
7) On 28/5/2003 a copy of the order dated
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10.4.2003 passed by the respondent is served upon the
petitioners. By that order passed under Section 127 of
the Act, the respondent has ordered transfer of Income
Tax cases of the petitioners from Wardha to Jodhpur.
According to respondent, transfer of these cases from
Wardha to Jodhpur is necessitated to centralise all the
cases of Mundra group for facilitating coordinated,
systematic and centralised investigation/enquiry. The
petitioners are aggrieved by this order and seek to
challenge the same by the instant petition.
8) Insofar as Writ Petition No. 1455/2004 is
concerned, facts are that petitioner no.1 is the Karta of
petitioner no.2 Hindu Undivided Family and the
Managing Partner of the firm (petitioner no.3), which is
registered with the Registrar of Firms, Nagpur vide
Registration No. NGP-516/1989-90. The place of
residence of petitioner no.1 is at Nagpur as well as at
Pipar City, District Jodhpur. Since beginning, the
petitioners are being assessed under the Act at Wardha
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and since the year 1996 at Nagpur. The assessment of
the petitioners is finalised upto 31.3.2002. The father
of the petitioner no.1 resides and carries on business at
Sindi (Railway), District Wardha. The father of
petitioner no.1 controls overall financial and other
affairs of Mundra family and all the connected family
business concerns. ig He also attends the Income Tax
cases of the petitioners and other family members and
family business concerns.
9) The petitioner no.1 derives income by way of
interest and his share of profit in the partnership firm,
namely, petitioner no.3 M/s. Aditya Chemicals. This
firm carries on the business of manufacture of Hydrated
Lime and Quick Lime. Raw material that is required for
this factory is Lime Stone, which is available at 5 places
only in the entire country. These places are Gotan
(Rajasthan), which is 40 kms. from the factory, (ii)
Dehradun, (iii) Katni, (iv) Veraval and
(v) Dronachalam. The quality of lime available at
10 wp2423.03 & wp1455.04
Gotan is very good among the aforesaid five places
and, therefore, factory run by the firm M/s. Aditya
Chemicals is situated at Pipar City, which is at a
distance of 40 kms. from Gotan. Although
manufacturing activity is done at Pipar city, sales of
the products of M/s. Aditya Chemicals are entirely
effected to various Industries in Maharashtra, Andhra
Pradesh, Karnataka, Tamil Nadu, Gujarat, etc. No part
of the product of M/s. Aditya Chemicals is sold
anywhere in the State of Rajasthan. The principal place
of business of this firm is located at Nagpur in
Maharashtra. The firm is registered with the Registrar
of Firms, Nagpur vide Registration No. NGP-516/1989-
90. Income from this business arises only upon sale of
the product, namely, Hydrated Lime, which is effected
in Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka
and Gujarat. The source of income is sale of the
product and not the manufacture of the product. Entire
income arises in Maharashtra, Andhra Pradesh, Tamil
Nadu, Karnataka and Gujarat according to well
11 wp2423.03 & wp1455.04
accepted principle of law of Income Tax, which says
that income accrues and arises on sale only. The audit
of the accounts of this firm is conducted at Nagpur and
the Auditors are stationed at Nagpur. The books of
accounts of this firm are maintained at Pipar City
because manufacturing activity is carried on at Pipar
City. The petitioner no.2 is doing the business of `Petro
Coke', which is manufactured by `Reliance Industries,
Gujarat' in the name and style of M/s. Sumedha
Enterprises'. The petitioner no.2 gets his commission
from manufacturer in respect of sales effected by him
to various purchasers. Entire transactions are done on
telephone. The income from these transactions
accrues in the States of Rajasthan, Gujarat, Uttar
Pradesh and Haryana. The petitioner no.2 is also doing
business of mining of lime stone under name and style
of Uttam Chuna Patthar Udyog at Gotan. The lime
stone obtained after mining is supplied to M/s. Aditya
Chemicals mainly. This business is on the verge of
closure due to exhaustion of the mines.
12 wp2423.03 & wp1455.04
10) The Income Tax Department carried out search
and seizure operation under Section 132 of the Act at
the business as well as the residential premises of the
petitioners/Mundra family at Jodhpur and Sindi
(Railway) on 20/21.12.2002.
11)
Thereafter, the Income Tax Department served
communications dated 9/4/2003 on the petitioners
proposing to transfer the cases of the petitioners from
the file of A.C.I.T. Circle-I, Nagpur to A.C.I.T. (Central)-II,
Jodhpur under the provisions of Section 127 of the Act.
The petitioners by their letters dated 16/4/2003
requested the Department to inform the reasons for
proposed transfer of their cases. The Department vide
communication dated 16/4/2003 informed the
petitioners that their cases are connected with the
Mundra Group of Jodhpur and, therefore, for
co-ordinated investigation, the cases of petitioners are
required to be transferred to Jodhpur. The petitioners
13 wp2423.03 & wp1455.04
then filed their objections to the proposed transfer vide
replies dated 22/4/2003. The respondent then by order
dated 25/4/2003 ordered transfer of the Income Tax
cases of the petitioners from Nagpur to Jodhpur.
12) It is also the case of the petitioners that order
dated 25/4/2003 was challenged in Writ Petition
No.2359/2003 wherein this Court directed parties to
maintain status quo and thereafter on hearing both
sides, admitted the petition and continued the interim
order. During pendency of the said petition, respondent
by his order dated 15/12/2003 withdrew the impugned
order dated 25/4/2003, which was assailed in Writ
Petition No. 2359/2003, upon which petitioners filed
their objections on 26/12/2003 contending that the
order as such was impermissible on the grounds as
enumerated in para 7 (i to iii) in the petition. However,
the objections came to be rejected and fresh notices
dated 18/12/2003 came to be issued by respondent to
petitioners transferring their income tax cases from
14 wp2423.03 & wp1455.04
Nagpur to Jodhpur.
13) Shri Bhangde, learned Senior Counsel for the
petitioners, has referred to the provisions of
Section 127(1) and (2) of the Act and contended that
order under Section 127(1) of the Act being quasi
judicial in nature is required to be issued by the
Authority exercising power under this Section by
passing speaking order regarding reasons for transfer
on dealing with objections made by the assessee to the
proposed transfer and that power under the said
provisions does not empower respondent to withdraw
the order passed by him also, more particularly in view
of order of status quo passed by this Court in Writ
Petition No. 2359/2003 as in that writ petition,
respondent was required to maintain status quo.
14) In the light of facts involved in the present
petitions, provisions of Section 127(1) and (2) of the
Act are reproduced hereunder :
15 wp2423.03 & wp1455.04
"Section 127(1) - The Director General or Chief
Commissioner or Commissioner may, after giving
the assessee a reasonable opportunity of being
heard in the matter, wherever it is possible to do so
and after recording his reasons for doing so,
transfer any case from one or more Assessing
Officers subordinate to him (whether with or
without concurrent jurisdiction) to any other
Assessing Officer or Assessing Officers (whether
with or without concurrent jurisdiction) also
subordinate to him.
Section 127(2) - Where the Assessing Officer or
Assessing Officers from whom the case is to be
transferred and the Assessing Officer or Assessing
Officers to whom the case is to be transferred are
not subordinate to the same Director General or
Chief Commissioner or Commissioner -
(a) where the Directors General or Chief
Commissioners or Commissioners to whom such
Assessing Officers are subordinate are in
agreement, then the Director General or Chief
Commissioner or Commissioner from whose
jurisdiction the case is to be transferred may, after
giving the assessee a reasonable opportunity of
being heard in the matter, wherever it is possible
16 wp2423.03 & wp1455.04
to do so and after recording his reasons for doing
so, pass the order;
(b) where the Directors General or Chief
Commissioner or Commissioners aforesaid are not
in agreement, the order transferring the case may
similarly be passed by the Board or any such
Director General or Chief Commissioner or
Commissioner as the Board may, by notification in
the Official Gazette authorise in this behalf."
15) From the aforesaid provisions, it is clear that
power to transfer cases from jurisdiction of one
Assessing Officer to other vests in the Commissioner of
Income Tax. The said provisions require an opportunity
of hearing to be given to the assessee. It is also
necessary that the show cause notice should contain
reasons why transfer of cases is required to be made
by the competent Authority and there is no provision for
delegation of power by the Commissioner of Income Tax
to issue such transfer order to any other Officer as such.
It was absolutely necessary as requirement of law that
the show cause notices issued to the petitioners had to be
17 wp2423.03 & wp1455.04
under the signature of Commissioner of Income Tax.
However, show cause notices involved in the petitions
are issued by and under the signature of Deputy
Commissioner of Income Tax-II (Headquarters) and not
under the signature of Commissioner of Income Tax.
We thus find that initiation of proceedings under
Section 127 of the Act in the instant cases was not by
the Authority competent to do so.
16) With reference to Writ Petition No. 1455/2004,
Shri Bhangde, learned Senior Counsel for the
petitioners, has submitted that it is stated in the
impugned order that the seized documents are in the
custody of A.C.I.T. (Central)-II, Jodhpur and it would be
convenient that search related assessments are
completed by the said Officer as he will also need to
cross-examine the assessees on the basis of seized
material. It is further contended that search was also
conducted at Sindi (Railway) and documents were
seized. These documents are in the custody of the
18 wp2423.03 & wp1455.04
Income Tax Authorities at Nagpur. Hence, custody of
part of the documents with A.C.I.T. (Central) II, Jodhpur
cannot be the reason for transfer of cases inasmuch as
there are equal number of documents in custody of
Income Tax Authorities at Nagpur. Secondly, the
custody of documents cannot be a consideration for
deciding whether a case should be transferred or not.
17) With reference to Writ Petition No. 2423/2003,
main contention of learned Senior Counsel Shri
Bhangde is that petitioners having been regularly
assessed to income tax since beginning at Wardha and
petitioner no.1 having overall control on financial and
other affairs of the family having their residence at
Sindi (Railway) in Wardha District, it would be highly
inconvenient and difficult to attend assessment
proceedings at Jodhpur, which is more than 1000 kms.
away from Wardha. It is thus the case of petitioners
that there is absolutely no necessity for transfer of
cases for the alleged coordinated investigation, which
19 wp2423.03 & wp1455.04
aspect has not been considered before passing the
impugned orders. In support of his submissions,
learned Senior Counsel Shri Bhangde has placed
reliance on the judgments in Vijayasanthi
Investments (P) Ltd. vs. Chief Commissioner of
Income Tax and others {(1991) 187 ITR 405(AP)},
Saptagiri Enterprises vs. Commissioner of Income
Tax and others {(1991) 189 ITR 705 (AP), Melco
India (P) Ltd. and others vs. Commissioner of
Income Tax and others {(2003) 260 ITR 450 (Delhi),
Global Energy (P) Ltd. vs. Commissioner of
Income Tax {(2013) 31 taxmann.com 183 (Bombay),
Sunisha Impex Pvt. Ltd. vs. Commissioner of
Income Tax-7, Mumbai and others {(2014) 363 ITR
220 (Bombay), Shyam & Company vs.
Commissioner of Income Tax and another {(1991)
192 ITR 387 (Allahabad) and Benz Corporation vs.
Income Tax Officer and others {(1998) 232 ITR 807
(Kerala).
20 wp2423.03 & wp1455.04
18) Shri Parchure, learned Counsel for the
respondents, has resisted the petitions contending that
petitioner no.1 has residence at Sindi (Railway), but he
is also residing at Pipar city along with his sons.
Although he is one of the partners in petitioner no.2
firm, other two partners of the petitioner no.2 firm are
his daughters-in-law Smt. Vidya Nand Kishore Mundra
and Smt. Asha Sudhir Mundra, both of whom reside at
Jodhpur along with their husbands. The petitioner no.1
keeps his main assets like jewellery, etc. at Jodhpur in
the residence of his son Shri Nand Kishore Mundra. It is
contended that petitioner no.1 does not control all
businesses and overall financial and other affairs of the
family from Sindi (Railway). On the other hand, it has
been found that even the affairs of the petitioner no.1
are controlled and carried out from Jodhpur. It is further
submitted that payment to the Public Provident Fund
Scheme from the account of petitioner no.1 has been
made at Jodhpur and self assessment challans of
petitioner no.1 are made from time to time at Jodhpur.
21 wp2423.03 & wp1455.04
19) The learned Counsel for the respondents has
also submitted that during the search and seizure
action at the residence of Shri Ramswaroop Mundra,
Shri Nand Kishore Mundra and Shri Sudhir Mundra,
certain loose papers were found, which indicated that
there was an agreement of partition between Shri
Ramswaroop Mundra and his sons Shri Nand Kishore
Mundra and Shri Sudhir Mundra. The terms of this
agreement show that Shri Sudhir Mundra was to pay
Rs.20 lakhs each to Shri Ramswaroop Mundra and
Shri Nand Kishore Mundra. In return, these persons
were to resign from the partnership firm M/s. Aditya
Chemicals. The business of M/s. Aditya Chemicals is
situated only at Pipar city/Jodhpur. This also shows that
the income of Shri Ramswaroop Mundra was from
sources situated at Pipar city/Jodhpur. It is also
submitted that in the course of the search and seizure
operation, account books pertaining to M/s. R.S. Mundra
(H.U.F.) were found at Jodhpur. This also indicates that
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the businesses of Shri R.S. Mundra were controlled from
Jodhpur.
20) The learned Counsel for the respondents has
further contended that petitioner no.3 is son of
petitioner no.1 and on the own showing of the
petitioners, petitioner no.3 resides at Jodhpur.
ig On
information received from the Deputy Director of
Income Tax, Jodhpur, it is found that children of
petitioner no.3 are studying at Jodhpur. The petitioner
no.3 in his capacity as Karta of petitioner no.4 carried
out business in the name of M/s. Shivam Chemicals.
M/s. Shivam Chemicals is a manufacturer of Hydrated
Lime and its factory is situated at Pipar city. All the
marketing operations are carried out from this factory-
cum-office premises. All books of accounts relating to
M/s. Shivam Chemicals were found either at the factory
or at the residence of the petitioner no.3 at 37-A, Ajit
Colony, Jodhpur. M/s. Shivam Chemicals also pays its
central sales tax at Jodhpur. The petitioner no.3 also
23 wp2423.03 & wp1455.04
pays his Public Provident Fund contribution at Jodhpur
and also submits his self-assessment challans from
time to time at Jodhpur. The petitioner no.3 is also the
Chairman of a Company Shri Chakra Housing Finance
Pvt. Ltd., Jodhpur whose registered and corporate Office
is shown as 37-A, Ajit Colony, Jodhpur. All the activities
of this Company, which are related to real estate, are
carried out at Jodhpur only. Hence, the Authority at
Jodhpur only has jurisdiction in respect of petitioner
nos.3 and 4.
21) So far as Writ Petition No.1455/2004 is
concerned, it is contended by learned Counsel for
respondents that a search and seizure operation was
carried out in the cases of M/s. Mundra group of Pipar
city/Jodhpur on 20/12/2002. The Mundra group consists
of Shri Ramswaroop Mundra and his sons Shri Nand
Kishore Mundra and Shri Sudhir Mundra along with their
family members. During the course of the search and
seizure action under Section 132 of the Act, it was
24 wp2423.03 & wp1455.04
found that most of the members of the Mundra group
and their family members are having a permanent
residence at Pipar city/Jodhpur. It was also found that
books of accounts of all the assessees were at Pipar
city/Jodhpur. It was also found that the sources of
income in respect of the individual assessees mostly fall
within the jurisdiction of the Commissioner of Income
Tax, Jaipur. The respondent has received information in
respect of the petitioners' activities at Pipar
city/Jodhpur from the Deputy Director of Income Tax,
Jodhpur.
22) It is also contended by learned Counsel for the
respondents that petitioner no.1 is a partner in the firm
Aditya Chemicals, which is situated in Pipar city. The
petitioner no.1 and his wife have 50% share in this firm.
This concern has two units that manufacture hydrated
lime from limestone. Both these manufacturing units
and the office are situated at Pipar city/Jodhpur. The
residence of petitioner no.1 is also located at the same
25 wp2423.03 & wp1455.04
place. All the books of accounts were also found at this
place during the search and seizure operation. The
petitioner no.1 along with his family is residing at Pipar
city and children of petitioner no.1 are residing at
Jodhpur. The petitioner no.1 has recently constructed
another house at Jodhpur. It is not correct to say that
income of the firm accrues and arises in Maharashtra,
Tamil Nadu, Andhra Pradesh, Karnataka and Gujarat.
The assessee is dealing in purchase and sale of
hydrated lime and quick lime. The business of
manufacture of this product is carried out at Pipar city
in Rajasthan.
23) The learned Counsel for respondents has
further submitted that the petitioner no.2, which is a
Hindu Undivided Family through its Karta (petitioner
no.1) is doing business of supply of petro coke under
the name of M/s. Sumedha Enterprises. The office of
M/s. Sumedha Enterprises is also located at the
residence of petitioner no.1 in Pipar city. The petitioner
26 wp2423.03 & wp1455.04
no.1 in his individual capacity is also doing business of
mining of limestone under the name of Uttam Chunna
Pathar Udyog of Borunda in Rajasthan. The petitioner
no.3 also has its entire work at Pipar city/Jodhpur.
24) Thus, it is the case of respondent Department
that petitioners are members of the same family having
involved in common business to a large extent, of which
most of the business is situated in Pipar city in Jodhpur
District and as such, proposal of Authorities of Income
Tax to have centralized investigation into the cases of
petitioners and also for action under Section 158BC for
block assessment and action under Section 158BD in
case undisclosed income of other person is found
cannot be effected unless all the cases of family
members of the petitioners are examined and
investigated together.
25) With reference to show cause notice involved,
it is the case of respondent Department that the show
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cause notice is issued on behalf of Commissioner of
Income Tax and is signed by the Deputy Commissioner
of Income Tax-II (Headquarters) on behalf of the
Commissioner of Income Tax. The show cause notice
itself states that the signature by the said Officer is for
and on behalf of the Commissioner of Income Tax.
There is no requirement under law that the show cause
notice must be signed by the Commissioner of Income
Tax himself. It is the established procedure in the office
of respondent that all such notices are signed on behalf
of the respondent by a senior Officer deputed in this
regard.
26) It is thus submitted that there are no defects
in the impugned orders issued under Section 127 of the
Act as same are speaking orders with reasons for
transfer of cases to Jodhpur, which also establish
necessity of centralizing all cases of petitioners for
facilitating coordinated and systematic investigation. In
support of his contentions, learned Counsel for
28 wp2423.03 & wp1455.04
respondents has relied upon judgments in Jharkhand
Mukti Morcha vs. Commissioner of Income Tax
{(1997) 95 Taxman 132 (Patna) and Aamby Valley
Ltd. vs. Commissioner of Income Tax-8 {(2014) 41
taxmann.com 15 (Bombay)}.
27) Having considered the provisions of Section
127(1) of the Act and submissions as aforesaid, we find
that it was absolutely necessary as requirement of law
that the show cause notices impugned in the present
petitions should have been under the signature of
Commissioner of Income Tax as under the provisions of
Section 127 of the Act, there is no provision of
delegation of power by the Commissioner of Income Tax
to any other Officer. As already stated above, the
impugned show cause notices are issued by and under
the signature of Deputy Commissioner of Income Tax-II
(Headquarters) and not under the signature of
Commissioner of Income Tax. On considering the show
cause notices together with the impugned orders as
29 wp2423.03 & wp1455.04
also reply submitted by the petitioners as a whole, we
find that the reason put forth by the respondents in
their communication dated 11/3/2003 is that cases of
petitioners' family have to be centralised for the
purpose of coordinated investigation and assessment in
Jodhpur. Except for this, we do not find any sufficient
reason put forth by respondents for transferring cases
of petitioners from Wardha and Nagpur (Maharashtra)
to Jodhpur (Rajasthan) and as such, the impugned
orders are not in compliance with provisions of law as
there are no specific reasons mentioned in the
impugned orders for effecting transfer of cases nor
there appears to be any material fact mentioned even
in show cause notices requiring transfer, which
otherwise could have given an opportunity to
petitioners/assessees to put forth the grounds, if any, in
a meaningful manner. In the absence of any such
reasons in the show cause notices, the petitioners
appear to be deprived of their right to have hearing.
According to relevant requirement of law, the show
30 wp2423.03 & wp1455.04
cause notices must reveal why coordinated
investigation and assessment cannot be carried out
either at Nagpur or Wardha, more particularly when
petitioners since beginning are being assessed at these
places. It is further noted that petitioners in Writ
Petition No.2423/2003 are residents of Sindi (Railway),
District Wardha. Their place of business is at the same
place and books of accounts of petitioner nos.1 and 2
were found at Sindi (Railway). Source of income of
petitioner no.1 is within the jurisdiction of
Commissioner of Income Tax, Nagpur while petitioner
no.2 is a resident of Sindi (Railway) as well as of Jodhpur
and has source of income from petitioner no.4.
Moreover, in the impugned order dated
10/4/2003 transferring petitioners' cases from ITO,
Ward Wardha to ACIT, Central Circle-2, Jodhpur apart
from expressing necessity to centralize all the cases of
petitioners for facilitating coordinated, systematic and
centralized investigation, the only reason put forth is
that the Commissioner of Income Tax, Central, Jaipur
31 wp2423.03 & wp1455.04
has "no objection" to transfer of cases to Jodhpur. In
that view of the matter, it is noted that there is lack
of "agreement between two competent Authorities"
as required under the statutory provisions.
Similarly, before passing impugned order
dated 28/1/2004 challenged in Writ Petition No.
1455/2004 transferring petitioners' cases from ACIT
Circle-I, Nagpur to ACIT, Central-II, Jodhpur, it is noted
that same came to be passed even without issuing
show cause notices to petitioner nos.2 and 3 therein.
28) On considering facts involved in these
petitions together with provisions of Section 127(1) and
(2) of the Act, it is noted that as per these provisions,
transfer of case can be effected only if the
Commissioner of Income Tax, Jaipur requests for
transfer. However, in these petitions, no such request
appears to have been made by the said Authority of
Jaipur, but the request is made by Deputy Director of
Income Tax/Additional Director of Income Tax.
32 wp2423.03 & wp1455.04
According to learned Senior Counsel for the petitioners,
function of said Authority is in respect of search and
seizure operations and to collect material and relevant
facts for assessment of undisclosed income. The
Deputy Director of Income Tax and Additional Director
of Income Tax are Authorities subordinate to
Commissioner of Income Tax. ig In that view of the
matter, we thus find that request made by Deputy
Director of Income Tax/Additional Director of Income Tax
cannot be equated with that of request of
Commissioner of Income Tax for transfer of cases as
contemplated in Section 127(2) of the Act. The
impugned orders dated 15/12/2003 and 28/1/2004 in
Writ Petition No.1455/2004 thus do not stand for any
reason. Even on considering show cause notices, which
came to be issued to petitioners before the impugned
orders of transfer of cases came to be passed, the said
show cause notices appear to be vague as there are no
specific reasons mentioned therein, which are found to
be considered by the Authorities before effecting
33 wp2423.03 & wp1455.04
transfer of cases for coordinated investigation. Thus,
as already stated above, the show cause notices, in
fact, should have contained specific reasons based on
material facts, which should be clear so that petitioners
in that case could exercise their right to have hearing
on substantial questions in a meaningful manner. The
show cause notices having been vague do not convey
for what reason cases came to be transferred nor there
is any reason as to why assessment cannot be done at
Wardha where petitioners are being assessed since
beginning, moreover, when all the income tax cases of
the petitioners are being assessed at Nagpur and none
of their cases is dealt with at Jodhpur.
29) In para 12 of the judgment in the case of
Jharkhand Mukti Morcha (supra) relied by
respondents, it is observed that for transfer of cases
from jurisdiction of one Commissioner to other, the
requirement is that there should be agreement
between two Commissioners. Similarly, in the case of
34 wp2423.03 & wp1455.04
Aamby Valley Ltd. (supra), objection was raised that
there was no evidence of any agreement between
Commissioner of Income Tax, New Delhi and
Commissioner of Income Tax, Mumbai that petitioners'
cases should be transferred from Mumbai to New Delhi
and on considering facts involved in that case, it was
noted that since there was an agreement between
Commissioners of Income Tax, New Delhi and Mumbai
as required in terms of Section 127(2)(a) of the Act, the
objection does not sustain.
30) As such, we find that for the purpose of
effecting transfer of cases from jurisdiction of one
Commissioner to other, requirement is agreement
between two Commissioners for effecting transfer of
cases, which aspect is lacking in the impugned orders.
31) In all the cases as referred in para (17) relied
on by learned Senior Counsel for the petitioners, it is
clear that in the matter of transfer of a case under
35 wp2423.03 & wp1455.04
Section 127 of the Act, it is necessary that the Authority
which proposes to transfer the case must, wherever it is
possible to do so, give the assessee a reasonable
opportunity of being heard with a view to enable him to
effectively show cause against the proposed transfer.
The notice must also propose to give a personal
hearing. It is also necessary to mention in the notice
the reasons for the proposed transfer so that the
assessee could make an effective representation with
reference to the reasons set out. It is not sufficient
merely to say in the notice that the transfer is proposed
"to facilitate detailed and coordinated investigation".
The reasons cannot be vague and too general in nature,
but must be specific and based on material facts. It is
again not merely sufficient to record the reasons in the
file, but it is also necessary to communicate the same
to the affected party.
32) Having considered the facts involved in the
petitions and law as aforesaid, the impugned order
36 wp2423.03 & wp1455.04
dated 10/4/2003 in Writ Petition No.2423/2003 and
impugned orders dated 15/12/2003 and 28/1/2004 in
Writ Petition No. 1455/2004 passed by the respondents
transferring cases of petitioners from Wardha
(Maharashtra) to Jodhpur (Rajasthan) and from Nagpur
(Maharashtra) to Jodhpur (Rajasthan) being arbitrary
and illegal are not sustainable and are thus quashed
and set aside.
33) The rule is made absolute in the above terms.
However, in the facts and circumstances, there shall be
no order as to costs.
JUDGE JUDGE
khj
