Gujarat High Court
Genus Electrotech Ltd vs Union Of India & 4 on 13 September, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
C/SCA/10328/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 10328 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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GENUS ELECTROTECH LTD....Petitioner(s)
Versus
UNION OF INDIA & 4....Respondent(s)
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Appearance:
MR NARESH JAIN WITH MR SP MAJMUDAR, ADVOCATE for the
Petitioner(s) No. 1
MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 2 - 3
NOTICE SERVED BY DS for the Respondent(s) No. 1 , 4 - 5
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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C/SCA/10328/2017 JUDGMENT
Date : 13/09/2017
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. This petition is filed by the petitioner to challenge an order dated 23.11.2016 passed by the Principal Commissioner of Incometax, Ahmedabad, transferring the petitioner's case for assessment from DCIT, Circle2, Ahmedabad to ACIT, Central Circle, Moradabad.
2. The petition arises in the following background. The petitioner is a company registered under the Companies Act and is engaged in manufacture of electronic items. The principal place of business of the petitioner is situated at Gandhidham, Gujarat and Corporate office is situated at Ahmedabad. Earlier, the Principal Commissioner of Incometax, Ahmedabad, had passed an order on 30.12.2015 transferring the petitioner's assessment from DCIT, Circle2, Ahmedabad to ACIT, Central Circle, at Moradabad.
3. The petitioner challenged such order before this Court by filing Special Civil Application No.9010/2016 mainly on the ground that the same was passed in breach of the principles of natural justice. It was argued that the notice issued by the Principal Commissioner did not contain any reasons why the assessment was proposed to be transferred. It was also contended on behalf of the Page 2 of 24 HC-NIC Page 2 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT petitioner that without supplying necessary information and documents though asked for and without even conveying the date of further hearing, the Principal Commissioner passed an exparte order transferring the assessment. It was also contended that transferring the assessment at a place nearly 700 kms away from Ahmedabad would cause great prejudice and inconvenience to the petitioner. On behalf of the Revenue, the petition was opposed contending that the authority passing the order of transfer had granted hearing to the petitioner and thereafter, passed the order recording proper reasons.
4. The Court allowed the petition by a judgment dated 18.7.2016 on the ground that the requirement of hearing before passing the order of transferring the assessment was not satisfied. It was held that mere issuance of notice inviting attendance of an assessee for hearing of a case for transfer, would not fulfill the requirement of hearing envisaged under section 127(1) of the Income Tax Act ("the Act" for short). It was held that on what prima facie grounds the case was to be transferred was not indicated leaving the petitioner to imagine such grounds and meet with them. Following observations of the Court may be noted :
"12. For multiple reasons, this notice would fail the test of granting reasonable opportunity of hearing. Mere issuance of notice inviting attendance of an assessee for hearing of a case for transfer of the assessment can hardly be stated to be fulfillment of requirement of hearing. On what prima facie grounds or reasons the case is to be transferred, was Page 3 of 24 HC-NIC Page 3 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT nowhere indicated in this notice. The petitioner was left to imagine such grounds and meet with them by making a representation in writing or orally if he so desired. By not indicating any reasons, why the authority proposed to transfer the case, the Principal Commissioner merely called upon the petitioner to attend his office for hearing. This notice gives not the slightest idea to the petitioner why the assessment which is otherwise competent at Ahmedabad is proposed to be transferred some 700 kms away at Moradabad in U.P. In other words, the authority asked the assessee to imagine the possible grounds why the case would be considered for transfer and then to meet such grounds by making representation. He thus made the procedure of giving hearing a mere formality."
5. After this judgment was passed, the authority issued a notice to the petitioner on 5.8.2016 informing the petitioner that hearing was fixed to consider the transfer of case from Ahmedabad to Moradabad to facilitate coordinated investigation in search and seizure cases along with the case of other group companies. Subsequently, the authority issued another communication dated 3.11.2016 in which the reasons, why such transfer of case was proposed, were indicated. In the communication after referring to the said judgment dated 18.7.2016, it was stated that :
"2. It is proposed to transfer your case to ACIT, Central Circle, Moradabad to facilitate coordinated investigation in Search Seizure Cases. It is noticed that a search and seizure action u/s. 132 of the I.T.Act was Conducted on 30/07/2015 and 31/07/2015 by the DDIT (Inv.), Moradabad in the case of M/s. Genus Paper & Board Group. The residential premises of the Director, your factory premises at Gandhidham and your Corporate Office at Ahmedabad were also covered in this proceeding.
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C/SCA/10328/2017 JUDGMENT
3. It is noticed from the Disclosure of Related Party Transactions made in your Audited Financial Report for F.Y.201112, that following transactions have been made by you with other members of the Genus group of companies:
(Rs. in Lakhs) Particulars Relation Nature of Amount of Balance Amount of Balance with your transaction transaction o/s. As on transaction o/s as company in F.Y. 31.03.2012 in F.Y. on 201112 201011 31.03.20 11 Genus Power Associated Sale 1237.69 399.54 1554.64 453.20 Infrastructure Party Dr. Dr. Advance 160.00 Pvt. Ltd.
Given/ Received Adjusted Genus Paper Associated Sale __________ 7.23 Products Ltd Party Purchase of 5.95 Dr. Raw Material Advance 295 Given/ Received Adjusted Kailash Coal & Associated Sale 0.14 0.14 Dr. Coke Co Ltd. Party Virtuous Urja Associated Advance 775.00 825.00 Ltd. Party Given/ Received Adjusted Mr Vishnu Managing Remuneration 23.085 23.85 Todi Director
4. It is also noticed that you are one of the companies of Genus group promoted by Shri I.C.Agrawal, his family members and business associates. A list of key persons of the Genus Group who are having major share holding in Page 5 of 24 HC-NIC Page 5 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT M/s. Genus Electrotech Ltd. are as under:
Sr.No Name of share holder No. of shares % of shares 1 Ishwar Chand Agrawal 879600 21.25 2 Vishnu Todi 696750 16.83 3 Narayan Prasad Todi (HUF) 325000 7.85 4 Ishwar Chand Agrawal (HUF) 303000 7.32 5 Banwari Lal Todi 297000 7.18 6 Phoos Raj Todi (HUF) 293000 7.08 7 Genus Power Transfer Ltd. 279500 6.75 8 Amrit Lal Todi (HUF) 226000 5.46
5. From the above, it is evident that business transactions of your company are interlinked with Genus Group of companies. Therefore, centralization of the cases with one assessing officer is essential for better co ordinated investigation. In view of the above facts, it is proposed to transfer your case from DCIT., Circle 2(1)(1), Ahmedabad to ACIT., Central Circle, Moradabad u/s.
127(2)(a) of the I.T.Act for coordinated investigation. A hearing in this regard is fixed at 11:00 A.M. On 11/11/2016 at the office of the undersigned. You are requested to attend the same either personally or through an authorized representative."
6. In response to the communication dated 5.8.2016, the petitioner replied on 16.8.2016 objecting to the transfer of case interalia contending that transferring the assessment at a distance of nearly 800 kms away from Ahmedabad would cause great prejudice to the petitioner. After receipt of the communication dated 3.11.2016, the petitioner made a detailed representation under letter dated 22.11.2016 mainly contending that there were insufficient grounds for transfer of the assessment; that no incriminating material was found during the search from Page 6 of 24 HC-NIC Page 6 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT the premises of the company or its directors; that the proposed transfer is opposed to the spirit of the judgment of the High Court dated 18.7.2016 and lastly, that the transfer of assessment at such a far away place would cause prejudice to the petitioner. Ignoring such pleas of the petitioner, the Principal Commissioner, Ahmedabad, passed the impugned order dated 23.11.2016 in which it was observed as under :
"4. The assessee company vide its various submissions has neither denied nor disowned the fact that there are common shareholders between itself and Genus Group. It has also emerged that the assessee company has intergroup transaction with Genus Group. Both the share holding, the intergroup transactions and other aspects of the case need to be investigated in coordination with other members of the Genus Group.
5. In view of the above facts, in exercise of the powers conferred under sub section 2(a) of Section 127 of the Income Tax Act, 1961 and all other powers enabling me in this behalf. I, the Pr. Commissioner of Incometax2, Ahmedabad hereby transfer the case mentioned in column No.2 of the Schedule hereunder from the Assessing Officer mentioned in column No.4 to the Assessing Officer mentioned in column No.5 thereof."
7. Appearing for the petitioner, learned counsel Shri Naresh Jain raised the following contentions :
1) The High Court having previously quashed the order of transfer of assessment, it was not open for the department to pass a fresh order.Page 7 of 24
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2) The transfer of assessment at a place nearly 800 kms away from Ahmedabad would cause great prejudice to the petitioner. The authority without considering such hardship passed the impugned order.
3) There was no agreement between the Principal Commissioner of Ahmedabad and Moradabad, as required under subsection(2) of section 127, before the transfer of assessment.
4) The authority did not apply mind to the various objections raised by the petitioner and proceeded in a mechanical manner. Mere recitation that for coordinated investigation and assessment, transfer of assessment was necessary, would not fulfill the requirement of fair hearing envisaged under section 127 of the Act.
Learned counsel relied on judgments to which we would refer to at an appropriate stage.
8. On the other hand, learned counsel Ms. Bhatt for the department contended that the High Court had quashed the earlier order of transfer of assessment only on the ground of non hearing which did not preclude the department from passing a fresh order after curing such defect. The Principal Commissioner of Ahmedabad had given a detailed hearing to the petitioner. After considering the objections, the order was passed which calls for no interference. She made available the departmental files to demonstrate that there was total agreement between the two Principal Commissioners that the assessment of the Page 8 of 24 HC-NIC Page 8 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT petitioner should be transferred. In support of this contention, reliance was placed on decision of Bombay High Court in case of Aamby Valley Ltd. v. Commissioner of Incometax reported in (2014) 41 taxmann. Com 15 (Bombay), wherein it was held as under :
"14. The last objection raised by Mr. Mistry is that there is no evidence of any agreement between Commissioner of Income Tax (Central 6) New Delhi, and Commissioner of Income Tax Mumbai that the petitioners case should be transferred from Mumbai to New Delhi. These proceedings for transfer of the petitioners case was initiated on report instituted by communication dated 30 August 2011 from the Commissioner of Income Tax (Central 6) New Delhi seeking to centralisation of the petitioners' case at Delhi. Thereafter by the impugned order dated 7 March 2013, the Commissioner of Income Tax8, Mumbai has transferred the petitioner's case from Mumbai to New Delhi. Thus, there is an agreement between the Commissioners of Incometax, New Delhi and Mumbai as required in terms of section 127(2)(a) of the Act was available. Therefore, this objection is not sustainable.
In view of all the above reasons, we do not find any reason to entertain this petition."
9. From the record it can be seen that earlier when the department had passed the order transferring the assessment of the petitioner, the same was struck down by the High Court on the ground that the requirement of hearing was not fulfilled. The Court noted that before passing the order, all that the Principal Commissioner had done was to issue the notice to the petitioner to attend his office and to state why the case should not be transferred. The Court was of the opinion that without indicating Page 9 of 24 HC-NIC Page 9 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT reasons why such proposal was being considered, it would not be possible for the petitioner to imagine the grounds and meet with them in anticipation. This was the basis on which the order of transfer was quashed. It is well settled that when an administrative action is struck down on the ground of breach of principles of natural justice, action does not stand terminated and it is always open for the authority to proceed further from the stage where the defect has been detected. In any case, we do not see any warrant in the judgment of the High Court by which the department was precluded from initiating a fresh procedure for transfer of the petitioner's assessment case after following the requirements of law.
10. In the present case what the department did was to supply tentative reasons why the authority was considering to transfer the petitioner's case to Moradabad. The petitioner was allowed to make a representation. Such representation was considered and a final order was passed. Insofar as the requirement of hearing is concerned, therefore, we see no breach.
11. This brings us to the merits of the order and the requirement of the agreement between the two Principal Commissioners as envisaged under subsection(2) of section 127 of the Act. In this context, we may refer to the statutory provisions.
12. Section 124 of the Act pertains to jurisdiction of Assessing Officer. Subsection(1) of section 124 reads as under :
Page 10 of 24HC-NIC Page 10 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT "124(1) Where by virtue of any direction or order issued under subsection(1) or subsection(2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and
(b) in respect of any other person residing within the area."
13. Section 127 of the Act pertains to power to transfer cases and reads as under :
"127. (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 Director General or Principal Chief Page 11 of 24 HC-NIC Page 11 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT 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;
(b) where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.
(3) Nothing in subsection (1) or subsection (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.Page 12 of 24
HC-NIC Page 12 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT (4) The transfer of a case under subsection (1) or sub section (2) may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.
Explanation.--In section 120 and this section, 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."
14. Section 124(1) of thus lays down the jurisdiction of the Assessing Officer, whereas under subsection(1) of section 127 of the Act, it is open to the concerned authority to transfer any case of an assessee from one Assessing Officer subordinate to him to any other Assessing Officer or Officers also subordinate to him. This power is hedged by two requirements which are that such order can be passed only after giving the assessee a reasonable opportunity of being heard and recording his reasons for doing so, wherever possible. As per subsection (3) of section 127 however, the opportunity of hearing would not be necessary where the transfer of a case is from an Assessing Officer to another Assessing Officer and such officers are situated in the same city, locality or place. Under clause(a) of subsection(2) of section 127, where the Assessing Officer or the officers from whom the case is to be transferred and the Assessing Officer or the officers to Page 13 of 24 HC-NIC Page 13 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT whom the case is to be transferred are not subordinate to the same Principal Directors General, Director General, Principal Chief Commissioners, Chief Commissioners or Principal Commissioners or Commissioners, the transfer of case would be only when such authorities to whom the Assessing Officers concerned are subordinate are in agreement. In such a case, the Principal Director General, Director General, Principal Chief Commissioner or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred would pass an order after giving the assessee a reasonable opportunity of being heard and after recording the reasons wherever it is possible.
15. Section 127 of the Act is founded on three principles. One is the requirement of transferring the assessment in appropriate cases which would have element of public interest. Second is that the assessee cannot choose his Assessing Officer. Section 124 of the Act which lays down the jurisdiction of the Assessing Officers ensures proper administration of assessments giving consistency, transparency and predictability on the question of which Assessing Officer would deal with which assessments. Nevertheless, an assessee cannot choose his Assessing Officer. At the same time, it is also recognised that transferring the assessment of an assessee at a far away place would lead to hardship and cause prejudice. It is in this context that the section requires giving of a reasonable opportunity of being heard to the assessee and to record reasons for transferring the assessment. The Courts have also recognised that transferring an assessment of an assessee at a far away distance would certainly cause Page 14 of 24 HC-NIC Page 14 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT inconvenience and prejudice. It is in this respect that under subsection(3) of section 127, the requirement of hearing and recording of reasons for transferring an assessment is not made applicable when the assessment is being transferred from one Assessing Officer to another Assessing Officer, both being situated in the same city, locality or place. The third important element of section 127 is when an assessment is being transferred from one Assessing Officer to another Assessing Officer, both of whom are not subordinate to the same head, the same could be done only with the agreement of the respective heads and if there is no such agreement, only by the Board or the authority that the Board may authorise in this behalf, by issuing notification in official gazette. This last requirement would ensure that there is no discordance between the heads of two Assessing Officers from where the assessment is transferred to where it is being transferred and in case there is a disagreement, such powers can be exercised only by the Board or an officer so authorised by the Board. While we are on the requirement of agreement between the two authorities, as referred to in clause(a) of subsection(2) of section 127, we may also notice that upon such agreement being achieved, it is the authority from whose jurisdiction the case is to be transferred, has to grant a reasonable opportunity of being heard to the assessee and then pass an order recording his reasons. This requirement would have two significant elements. One is that the authority under whose jurisdiction the assessment is being transferred has merely to show his agreement or disagreement, as the case may be. It is the authority from whose jurisdiction the case Page 15 of 24 HC-NIC Page 15 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT is being transferred, in addition to agreeing to transfer would have to grant an opportunity of hearing to the assessee and pass a reasoned order. The second element is that his agreement for transfer of the case cannot be equated with the decision to transfer. The decision can be reached only after hearing the assessee. He can form a final opinion that the case is to be transferred only after hearing the assessee, failing which, his decision would be exparte. Without the representation or involvement of the assessee, the requirement of hearing would then be rendered into an empty formality.
16. It is in this background that we would have to examine the question of agreement between the two Principal Commissioners. From the original files made available for our perusal by the counsel for the Revenue, we notice that on 21.9.2015, the Principal Director of Incometax(Investigation) Kanpur, had written to the Principal Commissioner of Incometax, Central, Lucknow, pointing out that search and seizure operations were carried out in Genus Paper and Board group of companies by the Dehradhun unit of Directorate on 30.7.2015. Subsequently, vide letter dated 14.9.2015, the Additional Director of Incometax, Dehradhun, had sent a proposal for centralisation of 42 cases of the group proposing to centralise them with the Assessing Officer, Central Circle, Moradabad. All the cases are covered under the warrant of authorisation under section 132(1) and 132A of the Act and books and documents were found and seized in such cases. These cases are directly connected to the said group and for proper and meaningful coordinated investigation, Page 16 of 24 HC-NIC Page 16 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT these cases were required to be centralised before one Assessing Officer. He was therefore, requested to consent for such centralisation of the cases.
17. On 14.9.2015, the Deputy Director of Incometax (Investigation) Moradabad, wrote to the Principal Director of Incometax (Investigation) Kanpur, sending a proposal for centralisation of all 42 assessment cases for the sake of better coordination and effective investigation of the group cases before the Assessing Officer, Central Circle, Moradabad. On 16.10.2015, the Principal Commissioner of Incometax, Central, Lucknow, wrote to the Principal Commissioner of Incometax, Ahmedabad, conveying his consent for centralisation of the cases of the petitioner before ACIT, Central Circle, Moradabad. He also endorsed a copy of letter dated 21.9.2015 from the Principal Director of Incometax (Investigation) Kanpur.
18. Thus clearly the Principal Commissioner of Income tax, Lucknow, had shown his agreement to the case of the petitioner being transferred and centralised before ACIT, Central Circle, Moradabad along with other group cases. It is true that no such formal letter has been written by the Principal Commissioner of Ahmedabad indicating his agreement. However, the record would suggest that previously he had passed the order dated 30.12.2015 transferring the assessment of the petitioner. Before passing this order, he issued a notice asking the petitioner to remain present. As noted, this order was struck down by judgment dated 18.7.2016. Thereafter, the said authority issued fresh notices dated 3.11.2016 and 23.11.2016 Page 17 of 24 HC-NIC Page 17 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT calling upon the petitioner to participate in the hearing and indicating the grounds on which he proposed to transfer the assessment. After considering the opposition of the petitioner, the said authority passed the order which is impugned in the present petition. The agreement of the Principal Commissioner, Ahmedabad, to transfer the case, therefore, can be culled out from the record. Clause(a) of subsection(2) of section 127 of the Act refers to the agreement of the two heads of the jurisdiction from where as assessment is transferred to where it is being transferred. There is no format in which such agreement must be recorded or conveyed. As noted, the additional duty of the authority from whose jurisdiction the assessment is being transferred is to give a reasonable opportunity of being heard to the assessee and then to pass an order citing reasons. This would necessarily be after he agrees to allowing the assessment to be transferred. When therefore, Principal Commissioner of Ahmedabad had issued notices to the petitioner on more occasions than one proposing to transfer the assessment, his agreement for such transfer was writ large on the face of the record. Had this been a case where the authority to whom the assessment was being transferred and whose agreement is not found on record, the issue would have to be seen in a different light. We cannot put the requirement of clause(a) to subsection(2) to section 127 of the Act in such a straightjacket formula that even when the competent authority grants a hearing to the assessee and, thereafter, passes a reasoned order transferring the assessment, his action would fail merely because in writing he did not record his agreement. Contrary to what was Page 18 of 24 HC-NIC Page 18 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT canvassed before us, decision of the Supreme Court in case of Noorul Islam Educational Trust v. Commissioner of Income tax and others reported in (2016) 388 ITR 489(SC) does not lay down any such proposition. It was a case where the affidavit filed on behalf of the Revenue did not disclose that there was any agreement as required under section 127(2)(a) of the Act. It was merely averred in the affidavit that there was no disagreement between the two Commissioners. In this background, the Supreme Court observed that absence of disagreement cannot tantamount to agreement as visualised under section 127(2)(a) of the Act which contemplates a positive state of mind of the two jurisdictional Commissioners of Income tax which is conspicuously absent in the said case. The Supreme Court has used the expression "positive state of mind" referring to the requirement of agreement contained in the said provision.
19. The decision of learned Single Judge of Madras High Court in case of Noorul Islam Education Trust v. Commissioner of Incometax and others reported in (2011) 332 ITR 97 (Mad) cited by the counsel for the petitioner, was in context of requirement of agreement between the two Commissioners. It was observed that for transferring the case, both the transferring Commissioner and the Commissioner within whose jurisdiction the case is being transferred must agree for the transfer.
20. The contention that such agreement should have been freshly arrived at after the High Court once quashed the order of transfer of assessment by judgment dated Page 19 of 24 HC-NIC Page 19 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT 18.7.2016, also cannot be accepted. The judgment of the High Court was not based on non compliance with the requirement of agreement between the two Principal Commissioners but was on the ground that the assessee was not granted reasonable opportunity of hearing. When the High Court therefore, set aside the order of transfer of assessment, it was not necessary that the proposal for transfer of case would have to be reinitiated from the very inception. If the two Principal Commissioners had already reached an agreement on the question of transfer of case, no such fresh agreement had to be arrived at, unless there was material change in circumstances.
21. We have noted the reasons for transfer of assessment. This Court in case of Shree Ram Vessel Scrap P. Ltd. v. Commissioner of Incometax reported in (2013) 355 ITR 255 (Guj) had upheld the Revenue's stand that for effective and coordinative investigation, if otherwise established on the record, was a good enough ground for transfer of a case. It was observed as under :
"20. Section 127 of the Act, as already noticed, pertains to power to transfer cases. Subsection(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. Likewise, under subsection(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 Page 20 of 24 HC-NIC Page 20 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT to whom he may be subordinate. Subsection(3) of Section 127 provides that nothing contained in subsection(1) or subsection(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. Subsection(4) of Section 127 provides that the transfer of a case under subsection(1) or subsection(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 subsection(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 subsection(1) or subsection(2) thereof. Such discretion ofcourse has to be exercised for achieving the public purpose and not for any arbitrary or irrelevant consideration. On the other hand, it 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 offset 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 Page 21 of 24 HC-NIC Page 21 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT 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. Ofcourse 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."
22. As pointed out by Ms. Bhatt in case of Aamby Valley Ltd.(supra), Division Bench of Bombay High Court held as under :
"8. We have considered the submissions. The power to transfer cases under Section 127 of the Act is to be undoubtedly exercised after following the principles of natural justice. However, the discretion of the authority to transfer a case has to be examined on the touchstone of the same not being arbitrary and/or perverse and/or mala fide. If there are reasons in the impugned order which indicates due application of mind to reach a view to transfer a case from one jurisdiction to another, then this Court will not interfere with the discretion of the administrative authority who transfers the case. This discretion is vested by the Act in high ranking officers viz. Commissioner of Income Tax and the necessity to transfer a case from the jurisdiction of one officer to another officer for better administration of the Act could be diverse and impossible to enumerate. It is for the above reason that Section 127 of the Act has not limited the exercise of jurisdiction by specifying any circumstances before the Page 22 of 24 HC-NIC Page 22 of 24 Created On Sat Sep 16 18:42:57 IST 2017 C/SCA/10328/2017 JUDGMENT authority can exercise his powers to transfer the case. One more fact which cannot be lost sight of is that an assessee cannot choose his Assessing Officer and, therefore, if the transfer order does indicate some valid reasons to justify the transfer and such reasons are neither perverse or arbitrary or mala fide this Court would not interfere with the reasonable exercise of discretion.
23. The Delhi High Court in case of Vishal Kumar v. Commissioner of Income reported in (2014) 44 taxmmann.com 180 (Delhi), observed as under :
"10. The assessee also has the opportunity to present his case and be subject to a regular assessment, in front of the Assessing Officer to whom jurisdiction has been transferred. No prejudice is caused by the mere fact of a Section 127 order, such that detailed reasons and specific grounds are required to be provided, as the petitioner today argues. Equally, the showcause notice dated 9.10.2013 granted the petitioner in this case an opportunity of being heard. No oral representation was made by the petitioner on that date, nor was any request for another date made to the Commissioner. Written objections, however, were preferred, which were considered and disposed off by the impugned notice in this case. The argument, thus, that no chance to effectively represent the case was provided has no merit."
24. In the present case, the petitioner is a part of group companies which were subjected to common search action. The assessments of all 42 group companies are being centralised at one place. In view of the judgment of this Court in case of Shree Ram Vessel Scrap P. Ltd.(supra), we find no reason to interfere.
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C/SCA/10328/2017 JUDGMENT
25. In the result, petition is dismissed.
(AKIL KURESHI, J.) (BIREN VAISHNAV, J.) raghu Page 24 of 24 HC-NIC Page 24 of 24 Created On Sat Sep 16 18:42:57 IST 2017