2007 (5) TMI 207 - HC - Income Tax

Order of transfer u/s 127 - notice for transfer served - transferring the case of the petitioners from the Asst. CIT, Kolkata to the Deputy CIT, New Delhi - HELD THAT - It appears from the facts a notice for transfer was served for conducting co-ordinated 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. Perusing the order impugned it appears purchase of liquor by the petitioner, during the financial year 2005-06 from Rampur Distillery an unit of Radico Khaitan Limited was the sole criterion that had prompted. Revenue to issue the impugned order of transfer which, in my view, was more or less was a repetition of the impugned notice dated November 14, 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 Sahara Airlines Ltd. v. Director General of Income-tax (Inv.) 2006 (2) TMI 128 - ALLAHABAD HIGH COURT , relied on 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. Therefore, in my view, the impugned notice and the impugned order of transfer cannot be sustained and, thus, are set aside and quashed. The writ petition, hence, is allowed.

Summary

Issues:
Challenge to transfer order under section 127 of the Income-tax Act, 1961 based on vagueness of notice and arbitrary action by the Commissioner of Income-tax, Kolkata-IV.

Analysis:
1. The petitioners contested the transfer order issued by respondent No. 1 under section 127 of the Income-tax Act, 1961. The petitioners argued that the notice proposing transfer lacked specificity, was general and ambiguous, issued mechanically without proper consideration, and failed to provide a cogent reason for transfer. They also claimed that respondent No. 1 acted arbitrarily by disregarding their written objection and accounting records.

2. The respondent, on the other hand, justified the transfer by explaining that a search and seizure operation conducted at various premises revealed illegal payments and significant transactions between the petitioners and another company. The respondent contended that centralization of the case was necessary for a coordinated post-search investigation. The respondent issued the transfer notice after granting an opportunity for hearing and subsequently transferred the case to the Deputy Commissioner of Income-tax, Central Circle, XIX, New Delhi.

3. The primary issues for consideration were whether the notice provided sufficient grounds for transfer and whether the order adequately addressed the petitioners' objections. The notice dated November 14, 2006, proposing transfer lacked specific details regarding the nature of the investigation related to the search against another company. The petitioners responded with a detailed written objection outlining reasons against the transfer, emphasizing their operational and administrative connections to Kolkata.

4. The High Court analyzed the impugned order dated November 30, 2006, under section 127 of the Act. The Court observed that the order did not sufficiently address the petitioners' objections and merely reiterated the reasons mentioned in the initial notice. The Court emphasized that the transfer based solely on business transactions, without a detailed consideration of the objections and evidence provided by the petitioners, was insufficient and arbitrary.

5. The Court referred to legal principles and emphasized the importance of a thorough consideration of objections and evidence before transferring a case. It highlighted the necessity for specific and valid reasons for transfer under section 127. The Court found that the impugned notice and order lacked the requisite specificity and deliberation, leading to the conclusion that the transfer could not be upheld. Consequently, the Court set aside and quashed the notice and order.

6. In conclusion, the Court allowed the writ petition, ruling in favor of the petitioners and directing that no costs be imposed. The Court emphasized the importance of providing detailed and specific reasons for transfer orders under the Income-tax Act, ensuring a fair and reasoned decision-making process.