Calcutta High Court (Appellete Side)
Kamal Nath vs The Principal Commissioner Of ... on 10 February, 2023
MAT NO. 40 OF 2023
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APPELLATE SIDE
RESERVED ON: 03.02.2023
DELIVERED ON:10.02.2023
CORAM:
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
M.A.T. NO. 40 OF 2023
(CAN NO. 01 OF 2023)
KAMAL NATH
VERSUS
THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA-9 AND
OTHERS
Appearance:-
Dr. Abhishek Manu Singhvi, Learned Senior Advocate
Mr. J.P. Khaitan, Ld. Senior Advocate
Mr. A. Agarwala, Advocate
Mr. Saurabh Bagaria, Advocate
Mr. Varun Chopra, Advocate
........For the Appellant
Mr. Tushar Mehta, Learned Solicitor General
Mr. Balbir Singh, Learned Additional Solicitor General
Mr. Dhiraj Trivedi, Learned Deputy Additional Solicitor General
Mr. Zoheb Hossain, Advocate
Mr. Tilak Mitra, Advocate
Mr. Soumen Bhattacharya, Advocate
Mr. Prasenjit Mahapatra, Advocate
........For the Respondents
Page 1 of 31
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JUDGMENT
(Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)
1. This intra Court appeal filed by the writ petitioner is directed against
the order dated January 6, 2023 in WPA No. 3868 of 2020. The appellant
had filed the said writ petition challenging the order passed by the
Principal Commissioner of Income Tax, Kolkata- 9 (PCIT) dated 23rd
February, 2022 under Section 127 of the Income Tax Act, 1961 (the Act for
brevity). The said writ petition was dismissed by the impugned order and
challenging the correctness of the said order the appellant has preferred
this appeal.
2. We have heard Dr. Abhishek Manu Singhvi, learned Senior Advocate
and Mr. J.P. Khaitan, learned Senior Advocate appearing for the appellant
and Mr. Balbir Singh, learned Additional Solicitor General of India
appearing for the respondent revenue.
3. The facts leading to the filing of the writ petition are as hereunder:-
4. The PCIT issued show-cause notice dated September 5, 2009 stating
that a search and seizure operation under Section 132(1) and survey under
Section 133A of the Act was conducted on Praveen Kakkar, Rajendra
Miglani and others on April 7, 2009 at different places in Kolkata, Delhi,
Indore, Bhopal and other places by the Investigation Department, Delhi. It
was stated that the appellant was also covered in the above search and
seizure operation under Section 132(1) and survey under Section 133A of
the Act. It was stated that the search and survey resulted in gathering of
evidences indicating as to how key persons were involved in large scale
collection of illegal money through various means/ entities and the same is
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being used in elections and hawala transactions. Evidences have also been
found indicating inter-linked transaction and close association of the
appellant with Praveen Kakkar, Rajendra Miglani and others. It was further
stated that in order to have coordinated investigation the entire group
including the appellant's case is required to centralize in Delhi. The
appellant was given an opportunity to show cause as to why the case
should not be centralized in the region of Chief Commissioner of Income
Tax (Central), New Delhi and was requested to submit the response either
personally or through his authorized representative in writing within 14
days from the receipt of the show-cause notice failing which, it was stated
that it would be presumed that the appellant has nothing to say in the
matter. The appellant through his authorized representative responded to
the show-cause notice by way of a preliminary response dated September
18, 2019 stating that the show-cause notice erroneously mentioned that
the appellant was covered in the search and seizure operation as the
appellant has never been part of the search, seizure and/or survey. The
appellant denied all the allegations in the show-cause notice in relation to
inter-linked transaction and those close associates with Praveen Kakkar,
Rajendra Miglani and others as being without any basis. It is further stated
that the appellant was at the relevant time not in Kolkata and was
extremely busy managing and monitoring places situated in Bhopal where
several thousands of people have been affected through flood and therefore,
requested to grant 3 to 4 weeks' time to submit his response to the show-
cause notice. The appellant after reiterating the stand in the letter dated
September 18, 2019 by letter dated October 3, 2019, stated that the alleged
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evidences/ documents based on which his case is proposed to be
transferred has not been shared with him and requested to provide copies
of all the statements recorded, evidence, information and documents
collected during survey, search and seizure operations on Praveen Kakkar,
Rajendra Miglani and others. Further, the appellant stated that he would
be able to furnish his comments/ submissions to the proposed transfer of
his case to New Delhi only after review of such evidences/ documents
collected during the survey, search and seizure and forming basis of the
proposed action by the Department. Further, it was stated that the
evidences/ documents should be shared with him in the larger interest of
justice, equity and fairness of things as the issues sought to be raised and
responded to or are not merely procedural but the same would have a
substantial bearing on the issues to be ultimately adjudicated. Without
prejudice to the aforementioned submission, it was stated that the
appellant understands that Mr. Praveen Kakkar has filed a writ petition
challenging the very basis of the search initiated by the Income Tax
Department thus, reserving the right to file a detailed reply to the show-
cause notice or to challenge the same from a legal stand point. Further, the
appellant stated that the contents of the letter dated October 3, 2019 are
without prejudice to his rights and contentions legally available to him and
requested the department that no presumption as suggested in the show -
cause notice should be arrived at till the appellant is able to respond to the
contents on substance after receipt of requisite underlying documents from
the department. The appellant stated that he would be able to respond to
the show-cause notice on substance within 2 to 3 weeks after receipt of the
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requisite underlying documents. The appellant upon coming to know from
the official portal of the Income Tax Department that his case has been
transferred from Kolkata to New Delhi under Section 127 of the Act filed a
writ petition in WPA 11901 of 2021 contending that the Income Tax
Department never furnished any statements, evidences, information and
documents to the appellant and there was no communication from the
department to the preliminary responses sent by the appellant and by
browsing the Income Tax Department web portal, the appellant was
shocked to find that his case has been transferred from Kolkata to New
Delhi. Thus, challenging the order of transfer the writ petition was filed. It
appears that the Department was not directed to file any affidavit-in-
opposition and the submissions of the Standing Counsel for the
Department and the Court proceeds to record stating that the learned
Counsel could not provide any information as to the fate of the
representatives given by the appellant on September 18, 2019 and October
3, 2019. After noting the same, the learned Single Bench took note of the
submission made on behalf of the appellant that without considering and
disposing of the letters/ representation and without giving any opportunity
of hearing and without communicating a formal order of disposal and/or
rejection of the appellant's prayer made in the said letters such decision of
transfer of the case of the appellant under Section 127(2) of the Act was n ot
sustainable. That apart, the appellant was not communicated about the
transfer and came to know only through the official portal of the Income
Tax Department about the transfer. The learned Single Bench had directed
the Department to produce the records, with regard to the receipt of the
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objections/ representations dated September 18, 2019 and October 3,
2019 and as to whether they were received by the Income Tax Department
and whether those were considered and disposed of by giving opportunity
of hearing to the appellant before passing the order of transfer and also
whether the order for transfer was served upon the appellant or not.
Pursuant to the said direction, the Income Tax Department placed the
records as well as the written instruction dated September 17, 2021 and
upon perusal of the same, the learned Writ Court has observed that it is an
admitted position that the objection/ representation of the appellant was
received by the office of the respondent concerned, the objections/
representations of the appellant against the proposed transfer was not
considered and not disposed of and without giving an opportunity of
hearing the case of the appellant has been transferred and the said order
was not even communicated with the appellant. The appellant filed a
supplementary affidavit challenging the transfer of the case by order dated
February 18, 2021 as also the intimation dated September 16, 2021, as
being invalid and without jurisdiction and in gross violation of principles of
natural justice and in violation of the statutory provisions since, the same
was passed by not considering and disposing the representations/
objections given by the appellant and without recording the reason for not
giving opportunity of hearing before passing such order of transfer and
without disposing of the reply/ objection to the show-cause notice, the
transfer of the case of the appellant is illegal, invalid and not sustainable in
law and accordingly, the order of transfer dated July 18, 2019 was
quashed. Further, the learned Writ Court observed that quashing of the
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impugned order of transfer of the case of the appellant will not prevent the
Income Tax Authority concerned from taking action of transfer in future
after it is found by the respondent concerned that there is cogent material
for doing so and by observing the statutory requirement under Section
127(2) of the Act. The learned Writ Court has further recorded that the writ
petition is being allowed without calling for counter-affidavit in view of the
submissions of the parties and admitted facts appearing from the records
available as well as the records submitted by the Income Tax Authorities.
5. The PCIT issued fresh show-cause notice dated January 11, 2022
under Section 127 of the Act. After referring to the order and direction
issued in WPA 11901 of 2021 dated September 27, 2021, the show -cause
notice proceeds to set out certain facts, which we shall advert in the later
part of the judgment, proposing that in view of the cogent materials
pertaining to the appellant and also statement of associated parties
recorded during search and seizure operations, linked to the appellant, it is
necessary to transfer the jurisdiction to a specific charge where other
related parties have been centralized for a concerted, deep investigation
and proper assessment. The appellant was a given an opportunity of being
heard to represent his case as to why the jurisdiction should not be
transferred. 10 days' time was granted to file the objections. The appellant
by reply dated February 7, 2022 stated that on going through the
annexures appended to the communication dated January 11, 2022, there
was no material whatsoever justifying the transfer of his personal income
tax assessment to Delhi more particularly, when no search or survey had
been conducted on the appellant or at any premises owned by him. In the
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show-cause notice names of 5 persons had been mentioned on whom
search/ survey operations were conducted and the appellant was sought to
be linked with those persons. The appellant in his reply though
acknowledged that one of the persons was his officer on special duty when
he was the Chief Minister of Madhya Pradesh and the other was the advisor
of the Chief Minister denied having known the other three persons.
Further, the appellant stated that he did not have any financial
transactions with Praveen Kakkar and three others whom he denied to
have known, but stated that he may have had financial transaction with
Rajendra Miglani before he became the Chief Minister of the State of
Madhya Pradesh which is not the period of consideration in the present
case. However, he has stated that he had no financial transaction with
Rajendra Miglani after he became the Chief Minister. Further, with regard
to the certain sums of money which was mentioned in the show-cause
notice, it was stated that those sums were shown in the books of the
political party received from a State Committee and they have nothing to do
with his personal income tax assessment. The appellant also stated as to
how he had fully cooperated with the investigation and had personally
appeared before the Deputy Director of Income Tax, Investigation, Unit
5(3), New Delhi on January 11, 2021. Further, it was stated that he reliably
understands that the search assessments were all completed on September
30, 2021 and if that be the case, there can be no question of any concerted
or coordinated investigation or assessment as alleged in the show-cause
notice. Further, the appellant stated that transfer of his case to Delhi
would cause inconvenience, harassment and hardship to him as his
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accounts staff and authorized representatives are located at Kolkata and it
would be practically impossible for them to participate in any proceedings
in Delhi or comply with any requisition made on Delhi without incurring
huge and unnecessary expenses. With these submissions, the appellant
requested to drop the proposal to transfer his case to Delhi as there is no
material or any justifiable reason to transfer his case from Kolkata to Delhi.
In addition to the reply, written note of submission dated February 17,
2022 was also filed.
6. The PCIT offered an opportunity of personal hearing to the assessee
which was fixed on February 9, 2022 however, it appears that the appellant
did not personally appear but his representative had appeared on the said
date and sought for adjournment and the request was accepted and the
hearing was fixed on February 17, 2022. On the said date the appellant
had submitted a letter sent through a messenger reiterating the stand
taken earlier in the written statement dated February 7, 2022 and in
addition stating that the appellant is an Indian politician who served as the
18th Chief Minister in Madhya Pradesh for approximately 15 months and
resigned after political crisis. He is the leader of the Madhya Pradesh
Legislative Assembly since 2020 and as a leader of the Indian National
Congress, the assessee has served as the Minister of Regional Development
and thus, he is the longest serving and senior most Member of the Lok
Sabha. Further, the assessee stated that he was appointed the pro tem
Speaker of the 16th Lok Sabha and he was elected 9 times to Chhindwara
Lok Sabha Constituency of Madhya Pradesh and was elected as President
of the Madhya Pradesh Congress Committee in May 2018, leading the party
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in the November- December 2018 Assembly Election. Further, it was stated
that the assessee resumed the office of the Chief Minister on 17th
December, 2018 and resigned on 20th March, 2020 due to lack of majority
in Government. The above submission made by the assessee in the letter
dated February 17, 2022 has been taken note of by the PCIT and recorded
together with the submission made by the appellant by way of additional
reply and the written submissions dated February 7, 2022.
7. The PCIT by order dated February 23, 2022 rejected the objections
raised by the appellant and ordered the appellant's case be transferred
from the jurisdiction of the ITO, 132(1) Kolkata 2, DCIT Central Circle- 19,
Delhi. This order was impugned in the writ petition.
8. The learned Writ Court by order dated March 8, 2022 directed the
department to maintain status quo with regard to the order of transfer till
March 16, 2022 or until further orders whichever is earlier. By order dated
March 10, 2022, the interim order was extended till March 28, 2022 or
until further orders whichever is earlier. The interim order was further
extended till June 30, 2022 or until further orders whichever is earlier by
order dated March 29, 2022 subsequently the interim order was extended
till August 30, 2022. By order dated July 5, 2022 the interim order was
extended till September 30, 2022. By order dated August 10, 2022, the
interim order was further extended till November 30, 2022, by order dated
September 28, 2022 and by order dated November 11, 2022 the interim
order was extended till one week after the winter vacation or until further
orders whichever is earlier. The writ petition was finally heard and
judgment was reserved on December 15, 2022 and the respondent
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department was injuncted from carrying out any assessment on the
appellant till the delivery of the judgment. In the writ petition, pursuant to
the leave granted by the Court the appellant had filed a supplementary
affidavit dated March 9, 2022 along with annexures. The department filed
an affidavit-in-opposition dated June 23, 2022 to which a reply affidavit
was filed on behalf of the appellant dated August 8, 2022.
9. It is a submission of the learned Senior Counsel for the appellant
that the entire proceedings commencing from the issuance of the show-
cause notice is wholly vitiated and the department has travelled beyond the
allegations in the show-cause notice and had pre-decided the entire issue.
Further, it was contended that the department should not be permitted to
set up a new case in the course of arguments of the writ petitioner stating
that the group of persons whose cases are to be centralized though
mentioned as five persons initially has been subsequently mentioned as
thirty four persons. After elaborately referring to the orders passed in the
earlier writ petition and as to how the Court came to the conclusion that
the first order of transfer, uploaded in the official web portal was set aside
as being illegal as the response given by the appellant to the show -cause
notice was not considered as to how the opportunity of hearing was not
offered and no order of transfer was communicated to the appellant. While
referring to the show-cause notice dated January 11, 2022 it is submitted
that there were certain details of cash transactions which were mentioned
in the show-cause notice since those allegations pertain to the merits of the
assessment which is yet to be made, we refrain from referring to those
details in this judgment but suffice to state that in the submissions made
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before the learned Writ Court the appellant has sought to explain those
transactions, the sum and substance being that such information/
transactions can have no bearing on the personal income tax assessment
of the appellant which has always been done in Kolkata.
10. The Learned Senior Advocate appearing for the appellant had
elaborately referred to certain information which are in the nature of
messages to explain as to how the appellant's name could never have been
drawn into controversy so as to justify the order of transfer. Further after
referring to Section 127 of the Act and the requirements which are to be
complied with therein, the learned senior advocate referred to the
explanation in Section 127 which defines the word "case". It is submitted
that the "case" comprises all proceedings under the Act in respect of any
year which may be pending or which may have been completed as also all
proceedings which may be commenced and transfer of such proceedings
under Section 127 is from one assessing officer to another assessing
officer, the proceedings adverted to in the explanation in respect of any
year or proceedings relating to determination of income and consequential
financial liability of the assessee under the Act which may be pending or
may have been completed or which may be commenced. It is further
submitted that the income tax department is an All-India body and has
officers all over the country in every state. The officer performs mostly
quasi-judicial functions independent of any interference unless the
statutes stipulate approval/sanction of an higher authority. The mere
desire of transferring authority to transfer the income tax case of an
assessee on the ground that the transferee officer will be the most suitable
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assessing officer cannot be the basis for transfer of the case from one
assessing officer to another. The choice of the assessing officer is neither
with the assessee nor with the revenue. Further it is submitted that while
the transfer is proposed under Section 127 of the Act, it has to be strictly
according to the statutory provisions, an order of transfer should not be
mala fide or arbitrary or based on irrelevant or extraneous consideration,
the reasons for transfer must be real and not illusory and mere suspicion
is not enough, reasons must show actual financial nexus which require
coordinated investigation and assessment to determine the income
correctly and consequent financial liability. Further it is submitted that
Section 127 does not provides for clubbing the case of a mere witness, like
the appellant with the case of persons on whom investigation and
assessment were made. This is because, such investigation and
assessment proceedings will have nothing to do with the personal income
and taxation of the witness like the appellant. Further it is submitted that
the foundation of the proceedings under Section 127 is the show cause
notice dated January 11, 2022 and the case in the show cause notice
cannot be improved upon. It is not the case of the revenue in the show
cause notice or the order of transfer that the appellant should not be
assessed at Kolkata because he has no earning or bank account at Kolkata
and allegations in that behalf has been made for the first time in the
affidavit-in-opposition which amounts to introducing new
material/allegations. Further it is reiterated that the appellant was not
subjected to any search or survey operations. The averments which were
raised in the writ petition were reiterated as also the explanation with
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regard to the financial transactions which were referred to in the show
cause notice were sought to be explained to state that there is nothing to
link the appellant with those financial transactions more particularly, with
regard to his personal income tax assessment. As mentioned earlier, we
refrain from going into those facts nor recording any of those facts in this
judgment as we are only required to decide the legal issue as to the scope
and power of the authority while invoking Section 127 of the Act qua the
facts which are germane for invoking such power.
11. The learned Additional Solicitor General after referring to the
necessity to centralize the cases of thirty four persons and the facts which
are relevant for such purpose submitted that few of those persons whose
cases have been centralized had filed the writ petitions before the High
Court of Madras in WP No. 12186 of 2020 etc. and they were dismissed by
order dated March 25, 2021 and as of now, the assessment of the appellant
has already commenced and the assessment is required to be completed
before 31.03.2023 or else it may become time barred subject to the
exclusion of the period during which an appropriate interim orders were
operating when the writ petition was pending. Further it is contended that
there is no fundamental right in assessee to be assessed in a particular
locality or area and it is incorrect to contend that the order of transfer is a
quasi-judicial exercise rather it is an administrative exercise resulting in an
administrative order which will seldom be referred and interfered by the
courts. Further it is submitted that the appellant has in his reply to the
show cause notice has accepted that he has had financial dealings with
one of the five persons who have been named in the show cause notice
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which would be sufficient to ground for centralizing the appellant's
assessment along with all such persons who have been searched which is
numbering about thirty four. Further it is submitted that the contention of
the appellant that the transactions which he might have had with one of
such persons is not relating to the period under consideration is an
incorrect submission because in a case of block assessment all previous
years are to be assessed and therefore the department was fully justified in
centralising the cases at Delhi. Further it is submitted that in terms of the
circular issued by the Central Board of Direct Taxes (CBDT) dated June 10,
2021 cases falling under Section 153C should be transferred to the Central
charge under Section 127 of the Act and this aspect was noted by the High
Court at Madras while dismissing the writ petitions filed by the three
assessees vide an order dated March 25, 2021.
12. The learned senior counsel appearing on behalf of the appellants
placed reliance on the decisions of the Hon'ble Supreme Court in Ajantha
Industries and Others Versus Central Board of Direct Taxes, New
Delhi and Others 1 and the decision in P.S. Housing Finance Private
Limited and Others Versus Union of India and Others 2 Dilip Kumar
Agarwal and Others Versus Commissioner of Income Tax 3 Rajesh
Mahajan and Others Versus Commissioner of Income Tax 4 Anil
Kumar Kothari Versus Union of India and Others 5, Global Energy
1976 1 SCC Page 1001
2007 290 ITR 316 (Cal)
2009 314 ITR 291 (Cal)
2002 257 ITR 577
2010 SCC Online Gauhati 775
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Private Limited Commissioner of Income Tax 6.
13. The learned Additional Solicitor General also referred to the decision
in Ajantha Industries and the decision of the Constitution Bench in
Pannallal Binjraj and Another Versus Union of India 7 and the decision
of the Constitution Bench in Kashiram Aggarwalla Versus Union of
India and Others 8.
14. In Pannalal Binjraj writ petitions were filed under Article 32 of the
Constitution before the Hon'ble Supreme Court raising a common question
of law whether Section 5(7-A) of the Indian Income Tax Act, 1921 is ultra
vires to the Constitution as infringing the fundamental rights enshrined in
Article 14 and Article 19(1)(g) of the Act. Section 5(7-A) of the 1922 of the
Act is akin to Section 121 of the 1961 Act which gave power to the
Commissioner of Income Tax to transfer any case from one income tax
officer subordinate to him to another and the Central Board of Revenue
may transfer any case from anyone income tax officer to another and such
transfer will be made at any stage of the proceedings and shall not render
necessary to reissue of any notice already issued by the Income Tax Officer
from whom the case is transferred. In the said decision, the Constitution
Bench pointed out that there is no fundamental right in the assessee to be
assessed in a particular area or locality. Even considering in the context of
Section 64(1)(2) of the 1922 Act this right which is conferred upon the
assessee to be assessed in a particular area or locality is not an absolute
right but is subject to the exigency of tax collection. It was further pointed
2013 356 ITR 502 (Bom)
AIR 1957 SC 397
AIR 1965 SC 1028
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out that there is a broad distinction between discretion which has to be
exercised with regard to the fundamental right guaranteed by the
Constitution and some other right which is given by the statute and if the
statute deals with the right which is not fundamental in character, the
statute can take it away but a fundamental right is a statute cannot take
away.
15. In Kashiram Aggarwalla the Constitution Bench dealt with a
challenge to an order passed by the High Court summarily dismissing the
challenge to an order of transfer under Section 127(1) of the Act. After
taking note of Section 124 of the Act which deals with the limits of the area
assigned to an income tax officer, the Hon'ble Supreme Court pointed out
that the said provision clearly indicates that where 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 and 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 transfer.
Thus, the decisions of the Constitution Bench clearly holds that the
assessee has no right to be assessed in a particular area or locality, if it is
not a fundamental right, the statute can take away such a right to be
assessed in a particular area in a manner provided for under the Act.
Though the decision in Pannalal was rendered in 1957 under the old act
still it continues to be of significance for the legal principle laid down
therein that there is no fundamental right in an assessee to be assessed in
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a particular area or locality. Furthermore, as held in Kashiram
Aggarwalla, an order of transfer is purely in the nature of an
administrative order passed for consideration of convenience of the
department and no possible prejudice can be involved when the cases have
been transferred.
16. As mentioned earlier, the decision in Ajantha Industries were relied
on by the learned Senior Counsel appearing for the appellant as well as by
the learned Additional Solicitor General. The following paragraphs of the
decision would be of significance:-
9. This judgment was rendered by this Court on
December 21, 1956, and we find that in the Act
Section 127 replaced Section 5(7A) where the
legislature has introduced, inter alia, the
requirement of recording reasons in making the
order of transfer. It is manifest that once an
order is passed transferring the case file of an
assessee to another area the order has to be
communicated. Communication of the order is
an absolutely essential requirement since the
assessee is then immediately made aware of
the reasons which impelled the authorities to
pass the order of transfer. It is apparent that if
a case file is transferred from the usual place of
residence or office where ordinarily
assessments are made to a distant area, a
great deal of inconvenience and even monetary
loss is involved. That is the reason, why before
making an order of transfer the legislature has
ordinarily imposed the requirement of a show
cause notice and also recording of reasons The
question then arises whether the reasons are at
all required to be communicated to the
assessee. It is submitted, on behalf of the
Revenue, that the very fact that reasons are
recorded in the file, although these are not
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communicated to the assessee, fully meets the
requirement of Section 127(1). We are unable to
accept this submission.
10. The reason for recording of reasons in the
order and making these reasons known to the
assessee is to enable an opportunity to the
assessee to approach the High Court under its
writ jurisdiction under Article 226 of the
Constitution to even this Court under Article
136 of the Constitution in an appropriate case
for challenging the order, inter alia, either on
the ground that it is malafide or arbitrary or
that it is based on irrelevant and extraneous
considerations. Whether such a writ or special
leave application ultimately fails is not relevant
for a decision of the question.
14. Mr. Sharma drew our attention to a decision
of this Court in Kashiram Aggarwalla v. Union
of India and Ors. (4), It is submitted that this
Court took the view that orders under Section
127(1) are held in that decision to be "purely
administrative in nature" passed for
consideration of convenience and no possible
prejudice could be involved in the transfer. It
was also held therein that under the proviso to
Section 127(1) it was not necessary to give the
appellant an opportunity to be held and there
was consequently no need to record reasons for
the transfer. This decision is not of any
assistance to the Revenue in the present case
since that was a transfer from one Income-tax
officer to another income tax officer in the same
city, or, as stated in the judgment itself, "in the
same locality" and the proviso to Section 127(1),
therefore, applied.
15. When Law requires reasons to be recorded
in a particular order affecting prejudicially the
interests of any person, who can challenge the
order in court, it cease to be a mere
administrative order and the vice of violation of
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the principles of natural justice on account of
omission to communicate the reasons is not
expiated.
17. The legal principle that could be culled out from the above decision is
that while making an order of transfer reasons have to be recorded and if
such an order is passed recording reasons it would provide an opportunity
to the assessee to approach the High Court under Article 226 of the
Constitution or the Hon'ble Supreme Court under Article 136 of the
Constitution in an appropriate case for challenging the order. The Hon'ble
Supreme Court while holding so, also holds that the challenge in an
appropriate case inter alia would be either on the ground that the order of
transfer is mala fide or arbitrary or that it is based on irrelevant and
extraneous consideration.
18. In Ajantha Industries, the decision of the Constitution Bench in
Kashiram Aggarwalla was referred wherein it was held that orders under
Section 127(1) are purely administrative in nature. Therefore, we are
required to examine the order of transfer of the case of the appellants from
Kolkata to New Delhi on the parameters as to how the administrative order
has to be tested for its validity and correctness. The test permissible to be
applied are whether there is an error in the decision-making process the
decision itself may not be open of being questioned by a court exercising
writ jurisdiction. The broad parameter is by applying the Wednesbury
principles, to see as to whether the aggrieved person had reasonable
opportunity to put forth his case, whether the authority exercised its
jurisdiction with due application of mind, whether the relevant factors were
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taken into consideration and nothing irrelevant was the basis of such
decision. If the administrative order passes this test, the Writ Court would
refuse to exercise their jurisdiction and interfere with those decisions as it
would amount to converting the jurisdiction of the Court to that of an
appellate authority over a decision of an administrative authority.
19. In Rajesh Mahajan and Others, the court pointed out that the
authority must not only take into consideration the objections raised by the
assessee but the reasons recorded in the order must also have direct
nexus/bearing to the object sought to be achieved and that suspicion even
though bona fide cannot be sufficient justification for taking recourse to any
action contemplated under Section 127 of the Act. In P.S. Housing Finance
Private Limited, the learned Writ Court had interfered with the order of
transfer after having found that there was no business connection between
the assessee company and the other entity and in the absence of any
findings that valuables or documents seized from the residence of the
assessee had any relationship with the other entity or any of its sister
concern, it was held that there is no question of transferring the case to
Mumbai. In Dilip Kumar Agarwal the order of transfer was set aside as it
did not disclose any nexus of the petitioners therein with the other group of
companies who had come under the scanner of the department. In Anil
Kumar Kothari it was held that merely by stating administrative
convenience and for coordinating effective investigation cannot be a reason
as envisaged under Section 127 of the Act for transfer of a case. In Global
Energy Private Limited, it was held that coordinating investigation can
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always be a good ground for transfer from one place to another and after
taking note of the decision in Ajantha Industries, it was held that while
transferring "case" on the ground of coordinated investigation, some reasons
has to be given by the Commissioner which reveals why it is necessary to
transfer the case for the purpose of coordinated investigation and in the said
case there was no reason given and therefore the order of transfer was
quashed. The decisions which we have noted above all revolve upon the
factual matrix in each of the cases. Therefore, no universal test can be made
applicable while considering the correctness/validity of an order under
Section 127 of the Act.
20. At this juncture, it would be relevant to refer to the decision of the
Hon'ble Supreme Court in K.P. Mohammed Salim Versus Commissioner
of Income Tax in Civil Appeal No. 2946-2956 of 2008 dated April 24,
2008 wherein it was held as follows:-
An order of transfer is passed for the
purpose of assessment of income. It serves
a larger purpose. Such an order has to be
passed in public interest.
Only because in the said provision the
words "any case" has been mentioned, the
same, in our opinion, would not mean that
an order of transfer cannot be passed in
respect of cases involving more than one
assessment year.
It would not be correct to contend that only
because eXplanation appended to Section
127 refers to the word 'case' for the
purpose of the said Section as also Section
120, the source of power for transfer of the
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case involving block assessment is
relatable only to Section 120 of the Act. It
is awell-settled principle of interpretation
of statute that a provision must be
construed in such a manner so as to make
it workable. When the Income Tax Act was
originally enacted, Chapter XIVB was not
in the statute book. It was brought in the
statute book only in the year 1996.
21. The Hon'ble Supreme Court held that the power of transfer is in
effect provides for machinery provision and it must be given its full effect
and must be construed in a manner so as to make it workable and that even
Section 127 of the Act is a machinery provision it should be construed to
effectuate a charging section so as to allow the authorities concern to do so
in a manner where for the statute was enacted.
22. Having noted the legal position that exercise of power under Section
127 of the Act is an administrative exercise with the ultimate object of
assessments and collection of taxes, an assessee cannot be heard to say
that it would adversely affect its interest. If reasons exist for transfer, the
scope of interference of the Writ Court against such an administrative
exercise is narrow and limited and the courts will exercise utmost restrain in
stepping into the realm of administrative matters which are best to be left to
the decision of the authorities. The learned single bench had elaborately
taken note of the factual position and upheld the order of transfer. It is the
submission of the learned senior counsel for the appellant that all the
findings rendered by the learned single bench makes deep in-road into the
merits of the matter and thereby grossly prejudicing the interest of the
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assessee. In our view partly the blame lies on the assessee himself as it was
the case of the assessee when he first approached this court by filing the
writ petition, contending that there has been flagrant violation of principles
of natural justice in as much as no reasons have been mentioned to justify
the invocation of the power under Section 127 of the Act. This submission
was accepted by the learned writ court which led to setting aside the earlier
order of transfer and giving liberty to the department to initiate fresh action.
The observations made by the learned writ court in this regard had been
referred to earlier. Thus, when the show cause notice dated January 11,
2022 was issued the Income Tax department was bound to disclose the
reasons for the proposed transfer which had been provided in the show
cause notice. The assessee has submitted his response as to how those
reasons may not be germane for exercise of jurisdiction under Section 127 of
the Act. The appellant assessee had been afforded effective opportunity to
place all materials including an opportunity of personal hearing which has
been availed. After considering the response given by the assessee, the PCIT
has passed the order of transfer with elaborate reference to all the factual
details which were brought on record by the appellant. In paragraph 13 of
the order of transfer dated February 23, 2022, the authority records that the
seized documents, recorded statements of parties indicating unaccounted
money was transferred from the assessee's official residence at Delhi. The
source of the said money is required to be properly established and can only
be identified by proper investigation and assessment. Further the claim of
the assessee that such transactions are not linked to his personal income
account cannot be taken at face value without proper investigation and
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assessment. Therefore, the authority opined that the assessing officer who is
entrusted with assessment of all other parties involved in the unaccounted
money transactions is the most suitable assessing officer to complete the
assessment as he is aware of the whole picture of the case and can do
justice to the revenue as well as to the assessee. Further in the order it has
been stated that contrary to the claim of the appellant, mobile phones of the
involved persons and the copy of its chat as was seized and subsequently
shared with the assessee, clearly identifies the appellant's active role in
unaccounted money transfer and also his links with the persons involved in
the unaccounted money transfer. The learned Senior Counsel of the
appellant submitted that no mobile phones chat was furnished or shared
with the assessee as set out in the order of transfer and only screen shot of
certain information appearing in the mobile phones had been shared. While
examining the correctness of the administrative action, we cannot be called
upon to do and hair-splitting exercise or else we would be converted to doing
the role of an assessing officer which is not permissible in a writ proceeding.
Several other factual details have been elaborately set out by the learned
single bench. These factual details which were set out by the learned single
bench are to justify the order of dismissal of the writ petition can at best be
construed to be reasons for refusing to exercise jurisdiction to interfere with
the order of transfer and nothing more, the findings rendered by the learned
writ court are only prima facie findings and they can never cause any dent
upon the ultimate decision which the assessing officer in the transferred
place would take after taking note of the relevant facts and documents
placed before it.
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23. It is submitted by the Learned Senior Counsel for the appellant that
"better coordination & investigation", as mentioned in the order of transfer
are vague, suitable to have the case transferred to Delhi cannot be a reason
for transfer under Section 127 of the Act. Further, merits cannot be reasons
for transfer, neither administrative conveyance could be a reason. It is
further submitted that the appellant does not claim any vested right to be
assessed at Kolkata, however, the transfer having been initiated by the
income tax department, onus is on them to justify the order, as, the income
tax department also cannot have a right to choose the place where the
assessment would be made. It is submitted that in Paragraph 28 of the
impugned order, it has been held that the income tax officer at Delhi is best
suited to investigate and carry out the assessment of the appellant. This
concept of "suitable boy" theory is unacceptable, it cannot be a valid ground
for transfer.
24. The learned Senior Counsel for the appellant contends that the
appellant is a witness, a person who was not searched nor any survey
conducted, hence there is no justification to transfer his personal income
tax assessment to Delhi. Further the income tax department is expanding
the scope by submitting a compilation, giving new facts that thirty four
cases are being contested.
25. Learned Additional Solicitor General would contend that there are two
sets of cases which have been centralized, those falling under Section 153A
and the other set falling under Section 153C, the appellant's case falls in the
second category. It is submitted that what is required to be considered is
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whether there is sufficient ground for transfer, the facts are not subject
matter of consideration in this litigation. It is submitted that Chapter XIII of
the Income Tax Act has four parts, Part (A) comprising of Sections 116 to
Section 119A, Part (B) Section 120 to Section 128, Part (C) Section 131 to
Section 136 and Part (D) Section 137 to Section 138. The assessee has no
right to question the jurisdiction of an officer under Chapter XIII of the Act.
It is further submitted that there is no allegation of mala fide and in the
absence of any such allegation/ pleading, paragraph 10 of the judgment in
Ajantha Industries would not be of assistance to the appellant. On the plea
of inconvenience as raised by the assessee, the learned Additional Solicitor
General would submit that there is no income for the assessee in Kolkata,
income of the assessee is from Delhi and other places, the bank account of
the assessee is in Delhi, thus no inconvenience can be pleaded by the
assessee on account of the transfer of his assessment. The travel of the
consultants or accountants from Kolkata to Delhi cannot be pleaded to be
an inconvenience.
26. By way of reply, the learned Senior Counsel for the appellant contended
that the impugned order is fully coloured on facts, the foundation of the
show-cause notice is also coloured on facts, as facts cannot be gone into the
impugned order would call for interference. It is reiterated that no right is
claimed under Section 127 of the Act. What the income tax department
seeks to do is to place a technical trap argument which is impermissible.
27. At the first instance, the assessee approached this Court challenging
the order of transfer as being devoid of reasons, the objections/ response of
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the assessee was no considered, the assessee was not heard, no order was
passed nor communicated to the assessee therefore, the order was in
violation of the statutory mandate apart from being in violation of the
principles of natural justice. This argument of the assessee was accepted by
the learned Single Bench, the order of transfer was quashed with liberty to
the income tax department to initiate fresh action. The natural corollary
which has to follow is that the income tax department was required to
assign reasons for proposing the transfer. These reasons were set out in the
show-cause notice dated 11.01.2022. The assessee is thus precluded from
stating that the show-cause notice is coloured on facts. This being a result
of the order obtained by the assessee in the earlier writ petition, the
assessee is barred from raising such a contention.
28. In Global Energy the Hon'ble Division Bench of the Bombay High
Court pointed out that coordinating investigation can always be a good
ground for transfer from one place to another. Relying on the judgment of
the Hon'ble Supreme Court in Ajantha Industries, it was pointed out that
while transferring the case on the ground of coordinated investigation, some
reason has to be given by the Commissioner which reveals why it is
necessary to transfer the case for the purpose of coordinated investigation.
The facts that emerge, shows there are sufficient reasons assigned in the
order of transfer. The sufficiency or insufficiency of such reasons is beyond
the pale of adjudication in the present litigation, lest it may prejudice the
assessee. We are of the clear view, upon appreciation of the facts, the onus
on the income tax department to justify the order of transfer has been
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proved/ established. In such circumstance the question of applying the
"suitable boy" theory would/ does not arise.
29. It was argued that the appellant is only a witness, not searched, no
survey on him, hence no jurisdiction for transfer. We find no material on
record to hold that the appellant is only a witness, such contention, being
self serving, is rejected.
30. Argument was made that the income tax department is expanding the
scope by submitting additional information, bringing on record new facts.
This again is on account of the facts that the assessee in the writ petition
has sought to justify his stand on the reasons recorded, this has
necessitated that income tax department to bring facts on record, thus the
assessee having invited such a response cannot be heard to raise any
complaint in this regard.
31. All that is required by the Writ Court is to consider as to whether there
are grounds for transfer as emanating from the reasons recorded. We are
satisfied there are adequate reasons. We refrain from commenting upon the
reasons as it would impinge upon the rights of the assessee during the
assessment proceedings at Delhi as a part of the centralization done by the
income tax department in the cases of thirty four other assessees.
32. The plea of mala fide exercise of power has not been pleaded (as
required), and from the facts placed by the learned Additional Solicitor
General it is clear that such a plea of assessee is specious.
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33. Once again it is reiterated that when the assessee himself complained
that no reasons were recorded in the show-cause notice dated 05.09.2019
and the order of transfer (quashed in the earlier writ proceedings), the
income tax department was duty bound to follow the directions in WPA
11901/2021 dated 27.09.2021. Therefore, to state the show-cause notice,
and order of transfer were coloured on facts is unacceptable. Further, it
appears that the assessee, before the learned Writ Court has embarked on
facts, as was done before us, this has resulted in the learned Writ Court to
consider the same and render a finding. In any event in this litigation
adjudication of the merits is out of bounds, hence any argument as
advanced on behalf of the appellant in that regard has to necessarily fail. If
the assessee states that he claims no right to be assessed at a particular
place while exercising the power under Section 127 of the Act, our task
becomes easier. This is so because the assessee had been provided with
adequate opportunity to put further his submissions on the proposal for
transfer, opportunity of personal hearing was granted and availed of,
reasons have been recorded by the department. There is no challenge to the
decision making process. The plea of mala fide has not been pleaded or
proved. The plea of inconvenience has been found to be not tenable. In the
net result, we have to necessarily uphold the order of transfer.
34. Therefore, we are of the clear view that the appellant has not been able
to make out any case for interference with the order of transfer on anyone of
the settled principles for interference of an administrative order. The learned
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single bench had made an elaborate exercise and upheld the order of
transfer and we find no good grounds to interfere with the same.
35. In the result, the appeal fails and the same is dismissed. No costs.
(T.S. SIVAGNANAM, J.)
I Agree.
(HIRANMAY BHATTACHARYYA, J.)
(P.A - PRAMITA/SACHIN)
