Darsan Jitendra Jhaveri vs Commissioner Of Income Tax And 2 ...
2021 Latest Caselaw 13636 Bom

          Digitally
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          signed by
GAURI     GAURI AMIT
          GAEKWAD
AMIT      Date:
GAEKWAD   2021.09.29
          14:47:20
          +0530             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                               ORDINARY ORIGINAL CIVIL JURISDICTION

                                   WRIT PETITION NO.1965 OF 2019
                Darshan Jitendra Jhaveri                      )
                Non-Resident Indian, residing at 20A, Block   )
                1, Caremen's Garden, 9, Cox Road, Cowloon,    )
                Hong Kong and presently in Mumbai at          )
                3/11, Sea View, Dongersi Road, Walkeshwar,    )
                Mumbai - 400 006                              ) ....Petitioner
                            V/s.
                1. Commissioner of Income Tax                 )
                (International Taxation) - 3 Mumbai, having   )
                his office at Room No.1601, 16th Floor, Air   )
                India Building, Nariman Point, Mumbai -       )
                400 021                                       )
                2. Income Tax Officer (HQ)                    )
                (International Taxation) - 3 Mumbai, having   )
                his office at Room No.1601, 16th Floor, Air   )
                India Building, Nariman Point, Mumbai -       )
                400 021                                       )
             3. Union of India                             )
                                   rd
             having its office at 3 Floor, Aayakar Bhavan, )
             M.K. Road, Mumbai - 400 020                   )
                            Also                           )
             through Secretary, Ministry of Finance, North )
             Block, New Delhi - 110 001                    ) ....Respondents
                                                ----
            Mr. Vikram Nankani, Senior Advocate a/w. Mr. Prithwiraj Choudhary,
            Ms. Divya Shah, Mr. Kinnar Shah and Mr. Jimish Shah i/b. Divya Shah
            Associates for petitioner.
            Mr. P. C. Chhotaray for respondents-Revenue.
                                                 ----
                                                   CORAM : K.R. SHRIRAM &
                                                           M.S. KARNIK, JJ.

DATED : 22nd SEPTEMBER 2021

ORAL JUDGMENT : (PER K.R. SHRIRAM, J.)

1 Since pleadings are completed, we decided to dispose this

petition at the admission stage itself.

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                  Rule.

Rule made returnable forthwith. Heard by consent of parties.

2 Petitioner is a non resident Indian since 2001 residing in Hong

Kong. Petitioner has been conducting business through and in the name of

various legal entities, of which petitioner was either the sole shareholder

and/or one of the shareholders. These corporate entities were set up either

in Hong Kong or in British Virgin Islands (BVI). It is stated in the petition

that since 2013-2014 petitioner's only source of income is out of

investments in India and outside India. Petitioner has been filing income tax

returns as NRI since 2001. According to petitioner, all assessments are

completed including in respect of the returns filed for Assessment Year

2018-2019.

3 Petitioner received an intimation dated 20th June 2019 under

Section 127 (1) of the Income Tax Act, 1961 (the Act) informing petitioner

that a search and seizure action under Section 132 of the Act was conducted

on 27th July 2017 in the case of Salagaocar Group of Companies by Pr. DIT

(Inv.) Panji and these cases are proposed to be centralized with ACIT

(Central) Circle, Goa. Paragraphs 1, 2 and 3 of the intimation dated

20th June 2019 read as under :

A Search & Seizure action u/s. 132 of the IT Act, 1961 was conducted on 27.07.2017 in the case of Salagaocar Group of Companies, by Pr. DIT (Inv.) Panji, and these cases are proposed to be centralized with ACIT (Central) Circle, Goa.

It is informed to this office that you are connected to this group therefore your case has been identified now for centralization. As per jurisdiction your case is lying with ITO(IT) 3(1)(1), Mumbai, which is also going to be

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centralized to ACIT Central Circle, Goa.

I am directed to request you to file your objections, if any to the proposed centralization, to this office either personally or through authorized representative or through a written submission on or before 25.06.2019.

This letter is an opportunity, prescribed u/s. 127(1) of the IT Act, 1961. As such, if nothing is heard from you till 01.07.2019, the matter would be decided on merits.

4 Petitioner filed a reply on 28th June 2019 stating that his only

transaction with Salagaocar Group is purchase of iron ore by his companies

based in BVI during the period before 2012, which iron ore were exported

from India by the Salagaocar Group to these BVI companies and all

payments were made by BVI companies through banking channels. He has

also stated that he has stopped dealing with Salagaocar Group in or about

June-July 2012 and his assessment has been completed until Assessment

Year 2018-2019. Petitioner has also brought to the notice of the show cause

notice issuing authority that he was at a loss to effectively defend his case in

the absence of any reasons or grounds disclosed in the show cause notice as

to how he was connected with the Salagaocar Group as alleged. Petitioner

also has reserved his rights to file a further and detailed reply, if so advised,

after reasons or grounds showing so called alleged connection between him

and Salagaocar Group companies are communicated to him. He has also

sought personal hearing before any decision was taken in the matter.

5 Respondent no.1, thereafter issued an order dated 3rd July

2019, which is impugned in this petition, in which respondent no.1 says that

he is passing the order in exercise of powers conferred by Sub Section 2 of

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Section 127 of the Act and at the same time, an opportunity was provided to

the assessee under Section 127 (1) of the Act regarding objections, if any. In

the impugned order, respondent no.1 only says petitioner has stated that

transferring his case to Goa will create genuine hardship in case any

compliance in future is required to be made and that objection raised by

petitioner is not acceptable since petitioner is connected with Salagaocar

Group of companies. Respondent no.1 has not dealt with any other points

that petitioner raised in his reply dated 28 th June 2019 like seeking details

as to how he was connected with Salagaocar Group, or that he has stopped

dealing with Salagaocar Group in 2012, or how could a buyer of goods, who

has no share holding in the seller organisation, can be stated to be

connected to the seller and, that a personal hearing is required to be

granted. The impugned order has been passed without granting a personal

hearing though petitioner had requested for the same.

Sub-Section 1 and 2 (a) of Section 127 which is relevant to the

case at hand read as under :

127. Power to transfer cases :

(1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal 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.

(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 Principal Director General or

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Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner -

(a) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal 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 to do so, and after recording his reasons for doing so, pass the order.

6 Sub Section (1) of Section 127 is not applicable to the case at

hand because the transfer proposed is from one commissionerate to another

commissionerate. Sub Section 1 applies only where a transfer is proposed to

be made from one Assessing Officer subordinate to the same Commissioner

to any other Assessing Officer also subordinate to the same Commissioner.

In this case, the transfer was proposed to be made by one Commissioner to

an Assessing Officer under another Commissioner and both Assessing

Officers are not subordinate to the same Commissioner. Sub Section 2 (a)

also requires that such an order can be passed after giving the assessee a

reasonable opportunity of being heard in the matter and after recording his

reasons for doing so. In our view, reasonable opportunity would mean that

the show cause notice or the intimation issued should contain such details

that would enable the assessee to know the reasons for which the case is

being transferred. In the intimation notice dated 20 th June 2019, apart from

stating "you are connected to this group" there are no other details as to

how petitioner is connected to the Salagaocar Group. The word "connected"

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has varied and a wide meaning. Respondents ought to have mentioned in

the show cause notice how petitioner was connected to Salagaocar Group of

companies. The purpose of show cause notice is to enable a party to

effectively deal with the case made out by respondent. If a vague show

cause notice is given without specifying anything or the grounds, then it can

be held that reasonable opportunity of showing cause against an order of

transfer being made by the Commissioner was not given, because the

assessee would be totally unaware of the grounds which prompted the

Commissioner to arrive at prima facie conclusion that the power under

Section 127 (2) of the Act was required to be exercised. Issuance of show

cause notice is the preliminary step which is required to be undertaken

before giving opportunity of hearing under Section 127 (2) of the Act. It is

not an empty formality. We find support for this opinion in Om Shri Jigar

Association V/s. The Union of India and Ors1.

We have to also note that the show cause notice issued is under

Section 127 (1) when all applicable provisions are under Section 127 (2)

(a) of the Act. Even in the order impugned, respondent no.1 states that the

assessee was provided opportunity under Section 127 (1) but he exercised

his powers under Sub Section 2 of Section 127. In our view, that also shows

non application of mind by respondent no.1. Respondent no.1 also should

have dealt with all the points raised by petitioner in his reply, which he has

failed to do. Moreover, the show cause notice has been issued by one

1. (1994) SCC Online Guj. 77

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Income Tax Officer (HQ), International Taxation - 3 and not by the

Commissioner of Income Tax, who was exercising his power. On that ground

also the show cause notice itself is defective.

7 Mr. Chhotaray states that petitioner had also been raided in

connection with the investigation against Salagaocar Group of companies

and therefore, he should be aware as to how he is connected to Salagaocar

Group of companies. In our view, when the statute states a reasonable

opportunity of being heard in the matter, the show cause notice should spell

out all details to enable the recipient of the show cause notice to effectively

respond to the show cause notice. We cannot accept that petitioner should

be aware in view of the past events as to what respondents mean by

"connected with the Salagaocar Group". In any event, petitioner had sought

a personal hearing, which has not been granted.

8 Therefore, in our view, the order impugned has to be quashed

and set aside and is hereby quashed and set aside. It is open to respondents

to take such steps as advised in accordance with law but in any show cause

notice they may issue, all details will have to be provided to petitioner and

once the reply is filed, petitioner shall also be given a personal hearing. All

rights and contentions of petitioner are also kept open.

9               Petition disposed.

10              Mr. Chhotaray states that the file has already been transferred

to Goa. Respondents are directed to re-transfer the file back to its original

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Assessing Officer on or before 27th September 2021. Mr. Nankani states that

even the PAN card of petitioner has been transferred to Goa. Even that shall

be transferred back to the original office on or before 27 th September 2021.

Until that is done, the concerned office in Goa shall not take any further

action on petitioner's case.

11 All to act on authenticated copy of this order.

(M.S. KARNIK, J.)                                            (K.R. SHRIRAM, J.)




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