Delhi HC refuses to interfere with transfer order U/s 127

From Article 127 of the Income Tax Actthe (Chief Director General or Director General) or (Chief Commissioner or Chief Commissioner) or (Chief Commissioner or Commissioner), after giving the assessee a reasonable opportunity to be heard in the matter, where possible, and after explaining the reasons therefor has recorded, he transfers a case from one or more assessment officers subordinate to him (whether or not with concurrent jurisdiction) to another assessment officer or assessment officers (whether or not with concurrent jurisdiction) also subordinate to him.

The Division Bench consisting of Judge Yashwant Varma And Justice Purushaiindra Kumar Kaurav noted that “the transfer order shows ex facie that it was passed after having a reasonable opportunity of being heard in view of the Assessee’s objections and the Assessee’s case was centralized ‘for the purpose of coordinated investigations, investigations and administrative proceedings’. convenience’ adopted the contested decision”.

According to the brief facts of the case, as a result of a search conducted at the premises of Zee Lab Group, headquartered in Haryana, certain incriminating materials referring to the Assessee were found and, therefore, a notice under Section 131 (1A) was issued ) issued. to the Assessee asking for certain details. Subsequently, a notice was issued under Section 127(1) proposing to centralize Assessee’s case at DCIT, Central Circle, Haryana for the purpose of ‘administrative, convenient, coordinated investigation and assessment’.

Relying on the judgment of the Allahabad High Court in Bhatia Minerals v Commissioner of Income Tax and the judgment of the Patna High Court in Jharkhand Mukti Morcha v. Income Tax Commissioner, Ranchithe Bank reiterated that “the ‘coordinated investigation’ for the purpose of proper assessment, prevention of tax evasion, collection of tax is a good ground for transfer because it eases the administrative convenience of the income tax authorities”.

The Bench noted that the administrative convenience of the tax authorities and the need for ‘coordinated investigation’ would take precedence over the logistical issues faced by the Assessee and reiterated this. that Section 127, a machinery provision, the powers thereunder may be exercised for larger public interest and to fulfill the bona fide objects of the Act

Relying on the coordinated Bench judgment in Sameer Leasing Co. Ltd. v. Chairman, CBDT (1990) 185 ITR 129the Bank further reiterated that “Where such senior officials agree to the transfer and a notice is issued giving reasons in the order of transfer, and those reasons appear to be relevant to the transfer and demonstrate that the transfer has been made in the public interest and for a law, we do not see how the disputed provision can be said to be ultra vires”.

Referring to the judgment of the Apex Court in Pannalal Binjraj v. Union of India (1957) 31 ITR 565 (SC), the Bench also reiterated that “there is no fundamental right to be judged in a particular place” and when the powers of Article 127 are invoked “the territorial nexus becomes irrelevant and what becomes more prominent are the interests of adjudication and collection of taxes”.

At the same time, the Bench clarified that the order under Article 127 should reflect the state of mind and at the same time remove the objections of the Assessee and that despite being a machinery provision, the reasons contained in the transfer order are not capricious or mala fide may be and may not conflict with bona fide. reliable objectives of the law.

Finding that the information furnished by the Assessee showed that certain transactions relating to the unsecured loans existed between the Assessee and the searched persons, the Supreme Court upheld the impugned order which is purely administrative and does not require judicial review as it no matter is true”the exercise of legal powers by the authority may be said to be entirely arbitrary, irrational, without jurisdiction or to suffer from malafide intentions”.

Taxpayer Counsel: NP Shahi, Deepanshu Mehta & Kumail Abbas

Advisor to the department: Gaurav Gupta, Shivendra Singh & Namit Gupta

Case Title: Dollar Gulati vs. PCIT and Ors

Case number: WP(C) 4054/2024 & CM APPL 16537/2024

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