Telangana High Court
M/S Akshara Enterprises Private ... vs The Principal Commissioner Of Income ... on 8 January, 2024
Author: P.Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE N.TUKARAMJI
WRIT PETITION No.35029 OF 2023
ORDER:
(per Hon'ble Sri Justice P.SAM KOSHY)
Heard Sri A.V. Krishna Kaundinya, learned Senior
Counsel appearing on behalf of Sri A.V.A. Siva Kartikaya,
learned counsel for the petitioner and Smt.B.Sapna Reddy,
learned Standing Counsel for the respondents.
2. Aggrieved by the order dated 20.11.2023 passed by
respondent No.1 under Section 127 of the Income Tax Act, 1961
(for short, the Act) and the consequential notice dated
30.11.2023 issued by respondent No.3 under Sub-section (1) of
Section 142 of the Act, the present Writ Petition has been filed.
3. Vide the impugned order dated 20.11.2023, respondent
No.1 in a proceeding under Section 127 of the Act, transferred
the case of the petitioner from the jurisdiction of The Income Tax
Officer, Ward 4(1), Hyderabad (respondent No.2 herein) to the
jurisdiction of The Deputy Commissioner of Income Tax, Central
Circle 4(4), Mumbai (respondent No.4 herein). Upon the matter
being transferred, as a consequence, respondent No.4 issued the
notice dated 30.11.2023 under Sub-section (1) of Section 142 of 2 PSK,J & NTR,J Wp_35029_2023 the Act to the petitioner, which led to filing of the instant Writ
Petition.
4. The brief facts in nutshell are that the petitioner-assessee
is a private limited company engaged in the business of
Information Technology and Information Technology Enabled
Services. That search and seizure proceedings under the
provisions of the Act were drawn against a company named
M/s.Sumaya Group, based at Mumbai. In the course of search
and seizure, certain incriminating materials were found relating
to the transactions carried out by M/s.Sumaya Group with
another firm viz., M/s.IRIS Global Services Private Limited and
M/s.IRIS Computers Limited, both based at New Delhi.
5. Similar search and seizure proceedings were drawn
against said M/s.IRIS Group at New Delhi. In the course of
search and seizure of M/s.IRIS Group at New Delhi, certain
transactions with the petitioner's establishment were found from
the documents seized. Accordingly, survey of the petitioner's
establishment was also conducted, wherein certain cash
transactions were appeared to have been undertaken between
the petitioner's establishment and M/s.IRIS Global Services
Private Limited and M/s.IRIS Computers Limited. In those
circumstances, respondent No.3 sought permission from 3 PSK,J & NTR,J Wp_35029_2023 respondent No.1 under Section 127 of the Act seeking transfer
of the case of the petitioner from the jurisdiction of respondent
No.2 to the jurisdiction of respondent No.4 enabling them to
have a coordinated investigation and finalization of assessment.
It is this action which has been challenged by the petitioner
herein in the instant Writ Petition.
6. The contention of the petitioner is that the action of the
respondents is per se bad in law for more than one reason.
Firstly, the action is without jurisdiction. Secondly, the action
being one which has been passed in mechanical and arbitrary
manner without providing justifiable reasons. Thirdly, the
action is violative of the principles of natural justice.
7. In support of its contentions, learned Senior Counsel
argued on behalf of the petitioner that the impugned order dated
20.11.2023 passed by respondent No.1 under Section 127 of the
Act lacks reasons and without application of mind inasmuch as
they have not gone into the merits of the case requiring transfer
in the teeth of the provisions under Section 127 of the Act.
8. It was the further contention of the learned Senior
Counsel that the impugned order lacks jurisdiction for the
reason that it does not seem to be an agreement between 4 PSK,J & NTR,J Wp_35029_2023 respondent Nos.1 and 3 or at least, the said agreement is not
reflected in the impugned order, and therefore, the impugned
order is not sustainable. It was also his contention that the
impugned order has been passed on mere asking for transfer by
respondent No.3 which again is not proper, legal and justified as
it was incumbent upon respondent No.1 to have thoroughly
scrutinized the request for transfer by taking the entire pros and
cons into consideration before passing the impugned order
under Section 127 of the Act. It was also his contention that
there were no valid and justifiable grounds available with
respondent No.1 to transfer the case from the jurisdiction of
respondent No.2 to the jurisdiction of respondent No.4,
particularly for the reason that no search and seizure
proceedings were conducted at the premises of the petitioner's
establishment. That at the same time, the impugned order
seems to have been passed with an impression that search and
seizure proceedings were conducted at the premises of the
petitioner's establishment. Therefore, the impugned order and
the consequential notice both need to be interfered with.
9. Learned Senior Counsel further contended that the only
reason for the transfer of the petitioner's case from the
jurisdiction of respondent No.2 to the jurisdiction of respondent 5 PSK,J & NTR,J Wp_35029_2023 No.4 was the so called commercial transactions that the
petitioner had with M/s.IRIS Group. However, there is no
allegation or a complaint to the effect that the so called
commercial transactions between the petitioner and M/s.IRIS
Group are in any manner illegal or contrary to the provisions of
the Act. In the absence of the same, the order of transfer so far
as the petitioner's case is concerned was uncalled for and ought
to have been rejected.
10. On the contrary, learned counsel for the Department,
while opposing the petition, has drawn the attention of the
Bench to the observations made in the impugned order, whereby
it has been specifically stated that it has been passed so as to
centralize and facilitate coordinated investigation and to
finalization of assessment of the different companies which had
inter se link between each other. It was also the contention of
the learned counsel for the Department that in the course of
survey of the petitioner's establishment, it was revealed that
there were certain cash transactions between the petitioner and
M/s.IRIS Group.
11. Learned counsel for the Department referred to Section
127 of the Act and stressed on the fact that there are no pre-
conditions as such envisaged in the said section which need to 6 PSK,J & NTR,J Wp_35029_2023 be met or fulfilled before an order under Section 127 is passed
by the concerned authority. Hence, it was contended that the
action of the respondents is purely an administrative decision
for the convenience of the Department in order to have a proper
investigation ensuring that there is no violation of the provisions
of the Act by any person. On the above contentions, learned
counsel for the Department prayed for dismissal of the Writ
Petition.
12. Having heard the contentions put forth by either side, and
perusal of the record, in the opinion of this Court, it would be
more appropriate if the provision of Section 127 of the Act is
perused, and for the sake of convenience, it is being reproduced
hereunder.
"127. Power to transfer cases:-
(1) The 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 any Income-tax Officer or Income-tax Officers subordinate to him to any other Income-tax Officer or Income-tax Officers also subordinate to him and the Board may similarly transfer any case from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income tax Officers :
Provided that nothing in this sub-section shall be deemed to require any such opportunity to be given where the transfer is from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers and the Offices of all such Income-tax Officers are situated in the same city, locality or place :
Provided further that where any case has been transferred from any Income-tax Officer or Income-tax Officers to two or 7 PSK,J & NTR,J Wp_35029_2023 more Income-tax Officers, the Income-tax Officers to whom the case is so transferred shall have concurrent jurisdiction over the case and shall perform such functions in relation to the said case as the Board or the Commissioner (or any Inspecting Assistant Commissioner authorised by the Commissioner in this behalf) may, by general or special order in writing, specify, for the distribution and allocation of the work to be performed.
(2) The transfer of a case under sub-section (1) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer or Income-tax Officers from whom the case is transferred.
Explanation.--In this section and in sections 121, 123, 124 and 125 the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.
13. A plain reading of the aforesaid provision of law by itself
would clearly indicate that the power to transfer a case under
the statute is more of an administrative nature. The powers
conferred upon the authorities are vast and wide. There is no
condition or pre-condition which needs to be adhered to before
an order under Section 127 of the Act is passed. The only rider
reflected in the provision is granting the assessee a reasonable
opportunity of being heard, that too wherever it is possible to do
so. The second rider is that while passing an order, the
authority concerned has to record his reasons for doing so. But
for the aforesaid two riders, there does not seem to be any 8 PSK,J & NTR,J Wp_35029_2023 further requirement of law for the authorities to pass an order
under Section 127 of the Act.
14. If we look into the pleadings, which have been supported
with the Writ Petition, themselves would clearly give an
indication that before passing of the impugned order, the
respondent authorities did issue notice to the petitioner making
their intentions clear so far as the requirement of transferring
the case of the petitioner from the jurisdiction of respondent
No.2 to the jurisdiction of respondent No.4. The petitioner also
have responded to the notices and have submitted their
objections, and thereafter only, the impugned order has been
passed. This by itself gives a clear picture of the petitioner being
given reasonable opportunity of hearing.
15. As regards the second rider of reasons being provided in
the impugned order, the authorities concerned while passing the
impugned order, have considered the objections raised by the
petitioner, as would be evident from the contents of paragraphs
3, 3.1 and 4. The reason which necessitated the authorities to
pass the impugned order is to have a coordinated investigation.
16. The instant Writ Petition is the one which has been filed
on 22.12.2023, whereas the impugned order under Section 127 9 PSK,J & NTR,J Wp_35029_2023 of the Act was passed about one moth back i.e., on 20.11.2023.
The consequential proceedings subsequent to the matter being
transferred to respondent No.4 also had begun, as would be
evidence from the notice dated 30.11.2023 issued under Sub-
section (1) of Section 142 of the Act.
17. Another crucial aspect which needs to be appreciated is
that in the consequential notice under Sub-section (1) of Section
142 of the Act, there is a clear elaboration of cash transactions
between the petitioner's establishment with M/s.IRIS Group. To
make the things bad, there is a statement of Accountant namely
Sri Chennu Venkata Raghavendra, who in the course of survey,
has not been able to give proper and satisfactory explanation
and also did not provide cogent material in respect of so called
commercial transactions done between the petitioner's
establishment with M/s.IRIS Group. There was also no
sufficient supporting documentary evidence with the petitioner's
establishment or with their officials at the time of survey to
establish that the said transactions were genuine and they were
done strictly in accordance with the provisions of law.
18. Learned Senior counsel for the petitioner relied upon
Noorul Islam Educational Trust Vs. Commissioner of 10 PSK,J & NTR,J Wp_35029_2023 Income-Tax and Others 1, Vijayasanthi Investments Pvt. Ltd.
Vs. Chief Commissioner of Income-Tax and Others 2,
Hindusthan M-I Swaco Ltd. Vs. Principal Commissioner of
Income-tax, Vadodara 3 and Virbhadra Singh Vs.
Commissioner of Income-tax 4.
19. If we look into the facts and the factual backdrop under
which the aforesaid judgments were rendered, it would clearly
reflect that those judgments have been passed under entirely
different contextual backdrop. In catena of judgments, various
High Courts have held that an order under Section 127 of the
Act has to be judged on case to case basis.
20. As has been discussed in the preceding paragraph, a plain
reading of the impugned order itself would clearly indicate that
the petitioner was in fact given an opportunity of hearing which
the petitioner did avail and finally, while passing the impugned
order, the authority concerned has mentioned the reasons
which necessitated them to transfer the case from the
jurisdiction of respondent No.2 to the jurisdiction of respondent
No.4.
1 [2016] 388 ITR 489 (SC) 2 [1991] 187 ITR 405 (AP)
3 [2016] 72 taxmann.com 14 (Gujarat) 4 [2015] 60 taxmann.com 269 (Himachal Pradesh) 11 PSK,J & NTR,J Wp_35029_2023
21. In Vijayasanthi Investments Pvt. Ltd.'s case (supra), a
Division Bench of Andhra Pradesh High Court held as under:
"From the aforesaid decisions, it is clear that, in the matter of the transfer of a case under section 127 of the Act, it is necessary that the authority which proposes to transfer the case must, whenever 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."
22. So also, in the case of Hindusthan M-I Swaco Ltd.
(supra), a Division Bench of High Court of Gujrat held as under:
15. In the said decision thus, while recognizing wide discretionary powers of the competent Revenue Authorities to transfer assessment cases under section 127 of the Act in public interest, the Court also recognized a degree of prejudice or inconvenience that may be caused to the assessee whose assessment may be lifted from his principal place of business and may be put at the disposal of an assessing authority who may be situated at another place far away from the assessee's place of business. The power of transfer of cases therefore, would have to be exercised in proper cases when sufficient material on record justify such action. This is, however, not to suggest that transfer of cases for effective investigation and coordination can be resorted to only in cases assesses who are subjected to search operations. This requirement may arise in other circumstances also. However, the sufficiency of reasons would have to be judged from case to case basis."
12 PSK,J & NTR,J Wp_35029_2023
23. Similarly, in the case of Shree Ram Vessel Scrap P. Ltd.
Vs. Commissioner of Income-Tax 5, a Division Bench of the
Gujarat High Court, while dealing with the provision of Section
127 of the Act, held as under:
"20. Section 127 of the Act, as already noticed, pertains to power to transfer cases. Sub-section(1) empowers the Director General, Chief Commissioner or the Commissioner after giving the assessee a reasonable opportunity of being heard wherever it is possible to do so and after recording his reasons, transfer any case from one more or more Assessing Officers subordinate to him to any other Assessing Officer or Assessing Officers also subordinate to him. Like-wise, under sub-section(2) of Section 127 after following similar procedural requirements, it is open for the Director General, Chief Commissioner or Commissioner to transfer a case from one Assessing Officer to another who is not subordinate to him in agreement with the authority to whom he may be subordinate. Sub-section(3) of Section 127 provides that nothing contained in sub-section(1) or sub- section(2) shall be deemed to require giving of any such opportunity where the transfer is from any Assessing Officer to another and offices of all such officers are situated in the same city, locality or place. Sub-section(4) of Section 127 provides that the transfer of a case under sub-section(1) or sub-section(2) may be made at any stage of the proceedings and shall not render necessary the re-issuance of any notice already issued by the Assessing Officer from whom the case is transferred.
21. Exercise of power under sub-section(1) and sub- section(2) of the Act comes with certain procedural requirements namely, of granting a reasonable opportunity of being heard in the matter wherever it is possible to do so, of recording of reasons for passing such order and as provided by the Supreme Court in Ajanta Industries(supra) communicating such reasons also to the assessee. Subject to fulfillment of such procedural requirements, the authority under section 127 enjoys considerable discretion while exercising the power contained in sub-section(1) or sub-section(2) thereof. Such discretion of-course has to be exercised for achieving the public purpose and not for any arbitrary or irrelevant consideration. On the other hand, it
5 [2013] 355 ITR 255 (Guj) 13 PSK,J & NTR,J Wp_35029_2023 can also be seen that transfer of a pending case from one Assessing Officer to another outside of a city, locality or place is likely to cause considerable inconvenience to an assessee. Therefore, even though an assessee may not have a vested right to insist that his assessment be completed only at one place or by a particular Assessing Officer, nevertheless, the reasons for transfer must be weighty enough to off-set against such personal inconvenience of an assessee. In exercise of power under section 127 thus we are concerned with larger public interest on one hand and personal inconvenience on the other. However, as long as such powers are exercised bona fide, for public purpose and in the interest of Revenue, the role of the Court to dissect such reasons and to come to a different conclusion would be extremely limited. It is by now well settled that judicial review against the administrative order in exercise of writ jurisdiction, the Court is concerned with the decision making process and not the final decision itself. Unless the reasons which prompted the competent authority to transfer the case can be stated to be wholly irrelevant or arbitrary, the Court would not interfere with such reasons. Of-course an order of such nature can and need to be quashed if it is demonstrated that same is passed either without jurisdiction or is actuated by mala fide either in fact or in law.
24. Coming to the facts of the present case, if we look at the
impugned order, dated 20.11.2023, it is reflected that the
reasons have been spelt out in the said order. Though the
impugned order may not have elaborately dealt with the
reasons, nonetheless, the reasons specifically stand spelt out
i.e., in the course of search and seizure proceedings against
M/s.Sumaya Group, certain documents pertaining to M/s.IRIS
Group were found and that in the consequent search and
seizure proceedings against M/s.IRIS Group, certain financial
transactions between the said M/s.IRIS Group and the
petitioner were found, all of which require investigation.
14 PSK,J & NTR,J Wp_35029_2023 Therefore, considering the fact that all the companies are
located at different places like Bombay, Delhi and Hyderabad,
for administrative convenience and also for betterment of the
proper investigation, Section 127 of the Act was invoked. Later,
opportunity of hearing was given to the petitioner and reasons
for the transfer of the case from Hyderabad to Bombay have also
been mentioned. Thus, this Court is of the view that the
requirement under statute i.e., Section 127 of the Act has been
complied with while passing the impugned order.
25. From the judicial pronouncements referred in the
preceding paragraphs, it can be safely culled out that under the
scope of judicial review in exercise of its extraordinary powers
under Article 226 of the Constitution of India, the High Court is
only required to see (i) the decision making power, (ii) whether
the assessee has been granted opportunity of hearing before the
order of transfer was passed and (iii) whether reasons have been
given while passing the order under Section 127 of the Act.
26. So far as the decision making process is concerned, the
Court has to see (i) whether the order, which is impugned, has
been passed by an authority who does not otherwise has
authority to pass an order under Section 127 of the Act and 15 PSK,J & NTR,J Wp_35029_2023
(ii) whether there is any malafide or arbitrariness attributed
against any of the officials of the Department.
27. The case of the petitioner does not fall under any of the
aforesaid categories. Therefore, now what requires to be
ascertained is whether the petitioner was given an opportunity
of hearing. From the documents enclosed with the present Writ
Petition itself would show that the petitioner was indeed heard
before passing the impugned order. Finally, what needs to be
looked into is whether the reasons have also been given in the
order of transfer or not.
28. Paragraph No.4 of the impugned order read with
paragraph Nos.3 and 3.1 would clearly speak of the reason
which necessitated the authorities to pass the impugned order is
centralized and coordinated investigation.
29. Very recently in the case of Kamal Nath Vs. The Principal
Commissioner of Income Tax, Kolkata and Others 6, dealing
with the similar issue, the High Court at Calcutta held as under.
"22. The purpose of a transfer order under Section 127 is not to subject an assessee to tax liability. Its effect is only to subject an assessee to assessment under another jurisdictional officer. Therefore, such an order involves balancing of the inconvenience to the petitioner and revenue interests (public interest), which should tilt towards the
6 W.P.A.No.3868 of 2022, dated 06.01.2023 16 PSK,J & NTR,J Wp_35029_2023 latter if there is some nexus derivable from facts and not mere pleas based on conjecture.
23. The principles that emerge from a reading of the judgments above are as follows:
A. There is no absolute right to be assessed in a particular territory.
B. In a transfer order, the inconvenience of assessees is balanced against the right of the revenue to carry out effective tax collection (which is public interest).
C. The assessee does not possess the right to choose his/her assessing authority.
D. The scope of judicial review is limited to determining:
i) whether the decision making process was proper, which is to ascertain:
(a) if the principles of natural justice were followed, and
(b) the requirements of Section 127 were fulfilled,
ii) whether the reasons are not wholly irrelevant/ arbitrary,
iii) whether the order is passed without jurisdiction or actuated by mala fide, and
iv) whether there is any nexus of the assessee, whose assessment is being transferred, with the incriminating material and/or persons on whom incriminating material has been found.
24. In view of the above, it is clear that the present transfer is based on cogent material that requires further investigation by the tax authorities. The argument of the petitioner that they are willing to cooperate in the investigation, thereby negating the requirement of the transfer, is of no relevance as the officer conducting the coordinated search in my opinion, is best suited to investigate and carry out the assessment of the petitioner. It is to be noted that at the stage of passing an order under Section 127, after considering objections of the petitioner, the authorities are not required to give out the entire case of the tax authorities. Even if the additional information shared vide the affidavit-in-opposition and compilations are not considered, this Court finds the Impugned Order to satisfy the threshold of an administrative/quasi- administrative order.
25. Thus, it would be incontestable and sufficient to conclude that as long as cogent materials are present, the 17 PSK,J & NTR,J Wp_35029_2023 transfer that has been sought for cannot be held to be mala fide or based on extraneous circumstances. The judgements cited above clarify this point to the hilt. In my view, the administrative/quasi-administrative order passed under Section 127 of the Act does not need to give a detailed explanation and a concrete financial nexus, but is required to bring out certain facts that could indicate that the case warrants further investigation to be carried out by the tax authorities."
30. For all the aforesaid reasons, this Court does not find that
a strong case is made out by the petitioner for interference to
the impugned order passed under Section 127 of the Act by
respondent No.1. Hence, the Writ Petition is liable to be
dismissed.
31. Accordingly, the Writ Petition is dismissed. There shall be
no order as to costs. Consequently, miscellaneous
applications, if any pending, shall stand closed.
____________________ P.SAM KOSHY, J
____________________ N. TUKARAMJI, J Date: 08.01.2024.
TJMR
