Calcutta High Court
Lords Distillery Ltd. And Anr. vs Commissioner Of Income Tax And Ors. on 7 May, 2007
Equivalent citations: (2007)212CTR(CAL)66, [2007]294ITR147(CAL)
Author: Soumitra Pal
Bench: Soumitra Pal
JUDGMENT Soumitra Pal, J.
1. The petitioner No. 1 is a registered company having its registered office in Kolkata and the petitioner No. 2 is one of its directors. It is stated that the respondent No. 1 on 14th Nov., 2006 had served a notice under Section 127 of the IT Act, 1961 (for short the Act), intimating about the proposed transfer of the case under Section 127 of the Act for the reasons enumerated therein and had invited objections. The petitioner company filed a written objection. An opportunity of hearing was granted by the CIT, Kolkata-IV, the respondent No. 1. Thereafter, in exercise of powers under Section 127(1)/(2) of the Act on 30th Nov., 2006, order was passed transferring the case of the petitioners from Asstt. CIT, Circle-XI, Kolkata, to Dy. CIT, Central Circle, XIX, New Delhi. The said order of transfer is the subject-matter of challenge.
2. The grievance of the petitioners is that the notice proposing transfer was general in nature, vague and ambiguous, was issued mechanically and without any application of mind and, thus, there was no cogent reason for transfer. Further, while passing the order the respondent No. 1 had acted arbitrarily in ignoring the written objection and the books of account.
3. Learned advocate appearing on behalf of the respondent submitted that on 14th Feb., 2006, a search and seizure took place on the premises of M/s Radico Khaitan Limited and other companies and also at the residence of R.K. Miglani, secretary of Uttar Pradesh Distillery Association. During the course of search, various documents were seized and/or impounded and statements under Section 133(4)/133A were recorded. A survey under Section 133A of the Act was conducted at the office of the association. Scrutiny was carried out. It was found that illegal payments were made by various distilleries and there were transactions worth Rs. 18 crores between the petitioner and M/s Radico Khaitan Company. In this backdrop the respondent took steps for centralization of the case for a meaningful, co-ordinated and post-search investigation and, therefore, notice under Section 127 was issued. Thereafter, opportunity of hearing was granted, order for transfer was passed and, consequently, on 8th Dec, 2006, files were transferred to Dy. CIT, Central Circle-19, New Delhi.
4. It is not in dispute that a notice for transfer of the case of the petitioner was issued. Thereafter, hearing was granted and the impugned order was passed. The first issue is whether the notice discloses sufficient reason for transfer and secondly, whether the impugned order deals with the written objection filed by the petitioner. In order to address the issues, it is necessary to set out the notice dt. 14th Nov., 2006, proposing transfer which is as under:
Dt. 14th Nov., 2006 ...
Sub. : Transfer of jurisdiction over your case to Dy. CIT Central Circle-19, New Delhi.
Sir, CIT, Central-Ill, New Delhi, has proposed centralization of your case with Dy. CIT, Central Circle-19, New Delhi, for conducting co-ordinated investigation in connection with the search undertaken against Radico Khaitan Ltd. and other associated cases on 14th Feb., 2006.
You are requested to submit your objection, if any, either personally or through your Authorised Representative, in my office on 23rd Nov., 2006 at 12.00O' clock....
(Emphasis, italicised in print supplied) In reply, the petitioner filed the written objection, the relevant portion of which is as under:
Sub : Transfer of jurisdiction from Kolkata to New Delhi.
Sir, In response your letter dt. 14th Nov., 2006, we are submitting following objection regarding transfer of jurisdiction from Kolkata to New Delhi:
1. The aforesaid limited company is registered with West Bengal Registrar of Companies on 10th day of September, 1974, and from the beginning, all the ROC related work are done from Kolkata office.
2. Since the date of incorporation the company is filing the income-tax return before the jurisdiction of Kolkata West Bengal, and accordingly the assessment was completed by the AO.
3. It is very important to mention that the scrutiny proceeding for the financial year 2003-04 relevant to asst. yr. 2004-05 is undergoing before the Asstt. CIT and it is a time-bar assessment.
4. Finalization of the accounts of the company are completed from the office of Kolkata.
5. All the board meeting held at Kolkata, West Bengal.
6. For completing the aforesaid work, employees are appointed by the company at Kolkata, West Bengal.
7. All the employees who are doing the work are aware of each and everything about the company based at Kolkata, West Bengal.
8. The employees of the company are not willing to go to New Delhi, from Kolkata for conducting the income-tax cases and company law work. Moreover, this will consume lot of time and also monetary expenses required to be done.
9. In absence of any infrastructure of company at New Delhi it will create a lot of difficulties for conducting the income-tax cases and other legal matter. Moreover, only for income-tax matter the company is not willing to set up any office or infrastructure at New Delhi.
10. To prepare all the infrastructure at Delhi and to manage the employees at Delhi it will be highly expensive.
11. We have no connection with Radico Khaitan Ltd.
12. No search was conducted in our case at Delhi or in Uttar Pradesh or in Kolkata. If there is any information contrary to this, kindly let us know and we shall be glad to furnish any information in this regard.
13. It is requested before your honour that to avoid all the aforesaid problems it should not be transferred from Kolkata to New Delhi and I also assure that in case of any papers required by AO, Central Circle-19, New Delhi, we will provide immediately and co-operate them in all respect.
I pray before, your honour not to transfer the file from Kolkata to New Delhi and oblige....
In this regard reference may be made to the letter dt. 30th Nov., 2006, filed on behalf of the petitioner which is extracted hereunder:
Sir, We are submitting herewith the following facts/papers which is required by your goodself at the time of hearing on 23rd Nov., 2006.
1. No business activities are undertaken at 18, Community Center, New Friends Colony, New Delhi. Only the aforesaid office consisting with three people (including peon and typist) and has basically a co-ordinating office of factory
2. The statement of accounts of the parties, for the transactions made in the years 2005-06 and 2006-07 are enclosed. No transaction made in the year 2004-05.
Hope your honour will be satisfied....
5. Thereafter, the impugned order dt. 30th Nov., 2006, under Section 127 of the Act was passed by the respondent No. 1. The relevant portion is as follows:
Office of the CIT, Kol-IV P-7, Chowringhee Square, Kolkata-69.
No. CIT-IV/Jur-7/Centralisation/06-07/4518 Dt. 30th Nov., 2006.
Order under Section 127 In exercise of the powers conferred under Sub-sections (1) and (2) of Section 127 of the IT Act, 1961, and of all other powers enabling me in this behalf, I, CIT, Kol-IV, hereby transfer the case, particulars of which is mentioned in Col. 3 of the table given below from the AO mentioned in Col. 4 to the AO mentioned Col. 5 thereof.
The transfer is effected for co-ordinated investigation and assessment.
This order will take immediate effect.
It may be mentioned that this order has been passed on the request of CIT, Central-II, New Delhi, who informed me vide his letter dt. 18th Oct., 2006, that the case requires to be centralized at New Delhi along with other cases connected with Radico Khaitan Ltd. and its group of cases, which was searched by the IT Department on 14th Feb., 2006.
** ** ** The assessee's objection was considered by me and it was required to, inter alia, explain and furnish the business activity of the company at 18, Community Centre, New Friends Colony, New Delhi, and details of transactions between the assessee and Radico Khaitan Ltd. as well as other companies which were proposed to be centralized at New Delhi.
The assessee's representative appeared before me on 30th Nov., 2006, and filed necessary clarifications and information. As regards business activities at 18, Community Centre, New Friends Colony, New Delhi, it was stated that this was basically a co-ordinating office with only three staff members including P.A. and typist and no business activity was undertaken there. The details of transactions with Radico Khaitan Ltd. and other companies during the financial years 2004-05, 2005-06 and 2006-07 were also filed. It was seen from these details that the assessee regularly purchased country liquor from Rampur Distillery, which is a unit of Radico Khaitan Ltd. During the financial year 2005-06 total transactions between the two concerns aggregated to about Rs. 18 crores. It thus appears that the assessee company has close connection with Radico Khaitan Ltd. and in the interest of co-ordinated investigation as proposed by CIT (Central-III), New Delhi, it would be necessary to centralise the case with the case of Radico Khaitan Ltd. and other associated companies at New Delhi....
(emphasis, italicised in print, supplied)
6. It appears from the facts a notice for transfer was served for conducting "coordinated investigation in connection with the search undertaken against Radico Khaitan Limited and other associated cases." The notice, however, did not disclose the nature of investigation in connection with the search undertaken against Radico Khaitan Ltd. Since the notice did not disclose the nature of investigation and was bald, vague and general in nature, in such circumstances, in my view, it was not possible to file effective reply. Yet, on 14th Nov., 2006, the petitioner filed the written objection. Thereafter, on 30th Nov., 2006, statement of accounts was submitted. It appears from the order impugned that the petitioner had furnished necessary information and had clarified the issues raised by the Revenue. Since admittedly the petitioner had furnished written objection it is to be seen whether it was 'considered'. The word 'consider' means "to think seriously or carefully; to deliberate" (Chambers 20th Century Dictionary). Perusing the order impugned it appears purchase of liquor by the petitioner to the tune of Rs. 18 crores during the financial year 2005-06 from Rampur Distillery a unit of Radico Khaitan Ltd. was the sole criterion that had prompted the Revenue to issue the impugned order of transfer which, in my view, was more or less was a repetition of the impugned notice dt. 14th Nov., 2006. There was no deliberation on the written objection and accounts filed which was not an idle or empty formality. The impugned order is silent in that regard. Mere business transaction, whatever be the volume, cannot be the criterion for transfer in these days of brisk trade and commerce. Simply stating in the order that the transfer is for "co-ordinated investigation" does not fulfil the requirements of Section 127 as it neither deals with the evidence adduced nor contains reasons which are valid and specific. The principles of law laid down in the unreported judgment of the Allahabad High Court in Writ Petn. No. 5395 (MB) of 2005 Sahara Airlines Ltd. v. Director General of IT (Inv.) and Ors. reported at (2006) 202 CTR (All) 2-Ed., relied by the Revenue, are not applicable to the facts of the case as it appears from the facts of the said judgment that the reply of the petitioner was evasive. On the contrary in the case in hand, it is not even remotely argued on behalf of the Revenue that the petitioner had suppressed material facts or the reply was evasive.
7. Therefore, in my view, the impugned notice and the impugned order of transfer cannot be sustained and, thus, are set aside and quashed.
8. The writ petition, hence, is allowed. No order as to costs.