2025 (5) TMI 1802 - HC - Income Tax

Transfer of the jurisdiction u/s 127 - Assessment of the petitioners as centralised with DCIT/ACIT (Central) Circle-01 Faridabad - As argued petitioners registered office is located at New Delhi and therefore the jurisdiction cannot be centralised with an income tax authority that does not exercise jurisdiction in New Delhi AND the impugned orders do not indicate any reason for transfer of the jurisdiction to the DCIT/ACIT Faridabad. HELD THAT - The case of the petitioners has been centralized with the relevant income tax authority as specified in the office order. The search was conducted in case of Shri Pavel Garg and other related persons in the State of Haryana and the petitioners case has been centralized in connection with the said search. Insofar as the reason for centralizing the assessments is concerned the same is clearly spelt out by the impugned orders. The impugned orders set out that the centralization is being done for the purpose of coordinated investigation and assessment proceedings. The same has been considered expedient on the ground that the search and seizure operations were conducted in the case of Shri Pavel Garg and Others on 29.06.2022 by the Investigation Wing of the Income Tax Department. And as noted above the contention that Shri Pavel Garg has no connection with the petitioners is not correct. No infirmity with the impugned orders.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

• Whether the centralisation of the petitioners' income tax assessment proceedings under Section 127(2) of the Income Tax Act, 1961, with the DCIT/ACIT (Central), Circle-01, Faridabad, was legally permissible despite the petitioners' registered office being located in New Delhi.
• Whether the impugned orders adequately disclosed the reasons for transferring jurisdiction to the Faridabad income tax authority.
• Whether the petitioners had any connection or nexus with the person (Shri Pavel Garg) in whose case the search and seizure operation was conducted, which justified the centralisation of their assessments with the Faridabad authority.
• Whether the centralisation of assessment proceedings caused undue inconvenience or was arbitrary, given the petitioners' establishments and registered office locations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legality of Centralisation of Assessment Jurisdiction under Section 127(2) of the Income Tax Act

Relevant Legal Framework and Precedents: Section 127(2) of the Income Tax Act permits the transfer of assessment proceedings from one income tax authority to another if deemed expedient for the proper and effective investigation and assessment. The provision is designed to facilitate coordinated and efficient tax administration, especially in cases involving multiple connected entities or persons.

Court's Interpretation and Reasoning: The Court examined the scope of Section 127(2) and recognized that the power to centralise assessments is discretionary and intended to enable coordinated investigation. The Court noted that the impugned orders were passed in exercise of this statutory power.

Key Evidence and Findings: The petitioners' registered office was in New Delhi, but they also had a factory unit in Sonipat, Haryana. The search and seizure operation was conducted in Haryana in the case of Shri Pavel Garg and others. The petitioners' assessments were centralised with the Faridabad income tax authority, which has jurisdiction over parts of Haryana, including Sonipat.

Application of Law to Facts: Given that the petitioners had an establishment in Haryana and the search operation was connected to a person who was a director of the petitioners, the Court found that centralisation was justified for coordinated investigation. The jurisdictional transfer was consistent with the office order delineating the territorial jurisdiction of income tax authorities in Haryana.

Treatment of Competing Arguments: The petitioners argued that their registered office was in New Delhi and that the Faridabad authority did not have jurisdiction over New Delhi, thus centralisation was improper. The Court rejected this argument on the ground that the petitioners had a factory in Sonipat, Haryana, and the search operation was conducted in Haryana, making Faridabad a relevant jurisdiction for centralisation. The Court also noted that the office order enumerated the jurisdiction of the Faridabad income tax authority to cover the relevant area.

Conclusions: The Court held that the centralisation of assessment proceedings under Section 127(2) with the Faridabad authority was legally permissible and appropriate in the facts of the case.

Issue 2: Adequacy of Reasons in the Impugned Orders for Transfer of Jurisdiction

Relevant Legal Framework and Precedents: Administrative orders transferring jurisdiction must state reasons to ensure transparency and prevent arbitrariness. The principle of reasoned orders is well-established in administrative law.

Court's Interpretation and Reasoning: The Court observed that the impugned orders clearly stated that the centralisation was done for the purpose of coordinated investigation and assessment proceedings following the search and seizure operation under Section 132 of the Act.

Key Evidence and Findings: The orders explicitly mentioned the search operation dated 29.06.2022 conducted in the case of Shri Pavel Garg and others and the need for coordinated proceedings.

Application of Law to Facts: The Court found that the reasons provided in the impugned orders were sufficient and met the requirement of reasoned administrative action.

Treatment of Competing Arguments: The petitioners contended that the orders did not indicate any reason for transfer. The Court rejected this, holding that the stated purpose of coordinated investigation and the connection with the search operation sufficed.

Conclusions: The Court concluded that the impugned orders adequately disclosed the reasons for centralisation, and there was no arbitrariness.

Issue 3: Connection between Petitioners and Shri Pavel Garg Justifying Centralisation

Relevant Legal Framework and Precedents: For centralisation under Section 127(2), a nexus or connection between the entities is relevant to justify coordinated assessment.

Court's Interpretation and Reasoning: The Court found that the petitioners' contention of no connection with Shri Pavel Garg was "clearly insubstantial."

Key Evidence and Findings: Shri Pavel Garg was a director on the board of the petitioner companies; he signed the return of petitioner no.1 for the relevant assessment year; he signed the board resolution authorising the filing of the petition; and he affirmed the supporting affidavit.

Application of Law to Facts: The Court held that these facts established a clear connection between the petitioners and Shri Pavel Garg, justifying the centralisation of their assessments with the authority handling the search operation against him.

Treatment of Competing Arguments: The petitioners' denial of any connection was rejected based on documentary evidence.

Conclusions: The Court concluded that the petitioners were sufficiently connected to Shri Pavel Garg to justify the transfer of jurisdiction for assessment.

Issue 4: Alleged Inconvenience Caused by Centralisation

Relevant Legal Framework and Precedents: While convenience is a relevant consideration, it does not override statutory powers to ensure proper investigation and assessment.

Court's Interpretation and Reasoning: The Court acknowledged the petitioners' submission regarding inconvenience but found that the statutory purpose of coordinated investigation took precedence.

Key Evidence and Findings: The petitioners had establishments in Haryana (Sonipat) besides New Delhi, and the search operation was conducted in Haryana.

Application of Law to Facts: The Court reasoned that inconvenience alone could not invalidate the centralisation, especially when the petitioners had a nexus with the jurisdiction where the assessment was centralised.

Treatment of Competing Arguments: The petitioners' argument on inconvenience was considered but held insufficient to overturn the impugned orders.

Conclusions: The Court dismissed the inconvenience argument and upheld the centralisation.

3. SIGNIFICANT HOLDINGS

The Court held:

"The contention that the petitioners have no connection with Shri Pavel Garg is clearly, insubstantial."

"The impugned orders set out that the centralization is being done for the purpose of coordinated investigation and assessment proceedings."

"The case of the petitioners has been centralized with the relevant income tax authority as specified in the aforementioned office order."

Core principles established include:

• Section 127(2) of the Income Tax Act empowers the income tax authorities to centralise assessment proceedings for coordinated investigation, especially where connected persons or entities are involved.
• Centralisation of jurisdiction is permissible even if the registered office is outside the jurisdiction of the transferee authority, provided there is a nexus such as an establishment or connection with persons under investigation.
• Reasoned administrative orders are required but the reasons need only be sufficient to explain