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2016 (5) TMI 491 - BOMBAY HIGH COURT

2016 (5) TMI 491 - BOMBAY HIGH COURT - [2016] 388 ITR 208 - Transfer of cases - scope of section 127 - Authority competent to do so. - purpose of effecting transfer of cases from jurisdiction of one Commissioner to other - Held that:- It is clear that power to transfer cases from jurisdiction of one Assessing Officer to other vests in the Commissioner of Income Tax. The said provisions require an opportunity of hearing to be given to the assessee. It is also necessary that the show cause notice .....

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puty Commissioner of Income Tax-II (Headquarters) and not under the signature of Commissioner of Income Tax. We thus find that initiation of proceedings under Section 127 of the Act in the instant cases was not by the Authority competent to do so. - It is clear that in the matter of transfer of a case under Section 127 of the Act, it is necessary that the Authority which proposes to transfer the case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being .....

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general in nature, but must be specific and based on material facts. It is again not merely sufficient to record the reasons in the file, but it is also necessary to communicate the same to the affected party. - Thus the impugned order passed by the respondents transferring cases of petitioners from Wardha (Maharashtra) to Jodhpur (Rajasthan) and from Nagpur (Maharashtra) to Jodhpur (Rajasthan) being arbitrary and illegal are not sustainable and are thus quashed and set aside. - Writ Petit .....

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er the Income Tax Act, 1961 (hereinafter referred to as the Act ) are transferred from Wardha (Maharashtra) to Jodhpur (Rajasthan) while in Writ Petition No. 1455/2004 challenge is to similar orders passed on 15/12/2003 and 28/1/2004 by respondent whereby income tax cases of petitioners therein are transferred from Nagpur (Maharashtra) to Jodhpur (Rajasthan). In Writ Petition No. 2423/2003 by interim order dated 24/6/2003 and in Writ Petition No. 1455/2004 by interim order dated 26/3/2004, the p .....

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ace of business of petitioner nos.1 and 2 is at Sindi (Railway), Tahsil Seloo, District Wardha (Maharashtra). The petitioner no.2 firm consists of 3 partners, namely, petitioner no.1 Mr. Ramswaroop Mundra, Smt. Vidya w/o Nandkishore Mundra and Smt. Asha w/o Sudhir Mundra and is engaged in the business of cotton ginning. The factory of this firm is situated at village Sindi (Railway), Tahsil Seloo, District Wardha. This is the main and oldest business of the Mundra family, which is being carried .....

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1. The petitioner no.3 resides at Sindi (Railway) and also at Jodhpur for the purpose of business. The petitioner no.4 is a Hindu Undivided Family of which petitioner no.3 is the Karta. The petitioner no.4 is running its business, namely, manufacture of hydrated lime in the name and style of M/s. Shivam Chemicals at Pipar City. The petitioner no.3 derives income by way of interest from M/s. Shivam Chemicals. The petitioner nos. 3 and 4 are being assessed under the Act since beginning by the Inco .....

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r the respondent sent identical letters dated 11.3.2003 to each of the petitioners proposing to transfer the cases of petitioners from the jurisdiction of the Income Tax Officer, Wardha to the Assistant Commissioner of Income Tax, Central Circle-II, Jodhpur under the provisions of Section 127 of the Act. It was stated in that letter that the cases of Mundra group are to be centralised for the purpose of coordinated investigations and assessments in Jodhpur and objections, if any, were invited fr .....

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nd assessment proceedings at Jodhpur, which is at a distance of 1100 kms. from Wardha and transfer of cases to Jodhpur was not necessary for the alleged coordinated investigation. 7) On 28/5/2003 a copy of the order dated 10.4.2003 passed by the respondent is served upon the petitioners. By that order passed under Section 127 of the Act, the respondent has ordered transfer of Income Tax cases of the petitioners from Wardha to Jodhpur. According to respondent, transfer of these cases from Wardha .....

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gpur vide Registration No. NGP-516/1989-90. The place of residence of petitioner no.1 is at Nagpur as well as at Pipar City, District Jodhpur. Since beginning, the petitioners are being assessed under the Act at Wardha and since the year 1996 at Nagpur. The assessment of the petitioners is finalised upto 31.3.2002. The father of the petitioner no.1 resides and carries on business at Sindi (Railway), District Wardha. The father of petitioner no.1 controls overall financial and other affairs of Mu .....

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nly in the entire country. These places are Gotan (Rajasthan), which is 40 kms. from the factory, (ii) Dehradun, (iii) Katni, (iv) Veraval and (v) Dronachalam. The quality of lime available at Gotan is very good among the aforesaid five places and, therefore, factory run by the firm M/s. Aditya Chemicals is situated at Pipar City, which is at a distance of 40 kms. from Gotan. Although manufacturing activity is done at Pipar city, sales of the products of M/s. Aditya Chemicals are entirely effect .....

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sh, Tamil Nadu, Karnataka and Gujarat. The source of income is sale of the product and not the manufacture of the product. Entire income arises in Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Gujarat according to well accepted principle of law of Income Tax, which says that income accrues and arises on sale only. The audit of the accounts of this firm is conducted at Nagpur and the Auditors are stationed at Nagpur. The books of accounts of this firm are maintained at Pipar City because .....

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petitioner no.2 is also doing business of mining of lime stone under name and style of Uttam Chuna Patthar Udyog at Gotan. The lime stone obtained after mining is supplied to M/s. Aditya Chemicals mainly. This business is on the verge of closure due to exhaustion of the mines. 10) The Income Tax Department carried out search and seizure operation under Section 132 of the Act at the business as well as the residential premises of the petitioners/Mundra family at Jodhpur and Sindi (Railway) on 20 .....

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their cases are connected with the Mundra Group of Jodhpur and, therefore, for co-ordinated investigation, the cases of petitioners are required to be transferred to Jodhpur. The petitioners then filed their objections to the proposed transfer vide replies dated 22/4/2003. The respondent then by order dated 25/4/2003 ordered transfer of the Income Tax cases of the petitioners from Nagpur to Jodhpur. 12) It is also the case of the petitioners that order dated 25/4/2003 was challenged in Writ Pet .....

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to iii) in the petition. However, the objections came to be rejected and fresh notices dated 18/12/2003 came to be issued by respondent to petitioners transferring their income tax cases from Nagpur to Jodhpur. 13) Shri Bhangde, learned Senior Counsel for the petitioners, has referred to the provisions of Section 127(1) and (2) of the Act and contended that order under Section 127(1) of the Act being quasi judicial in nature is required to be issued by the Authority exercising power under this S .....

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ction 127(1) and (2) of the Act are reproduced hereunder : Section 127(1) - The Director General or Chief 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 .....

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Chief 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 Directors General or Chief Commissioner or Commissioners aforesaid are not in agreement, the order transferring the case may similarly be passed by the Board or any such Director General or Chief Commissioner or Comm .....

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no provision for delegation of power by the Commissioner of Income Tax to issue such transfer order to any other Officer as such. It was absolutely necessary as requirement of law that the show cause notices issued to the petitioners had to be under the signature of Commissioner of Income Tax. However, show cause notices involved in the petitions are issued by and under the signature of Deputy Commissioner of Income Tax-II (Headquarters) and not under the signature of Commissioner of Income Tax .....

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cross-examine the assessees on the basis of seized material. It is further contended that search was also conducted at Sindi (Railway) and documents were seized. These documents are in the custody of the Income Tax Authorities at Nagpur. Hence, custody of part of the documents with A.C.I.T. (Central) II, Jodhpur cannot be the reason for transfer of cases inasmuch as there are equal number of documents in custody of Income Tax Authorities at Nagpur. Secondly, the custody of documents cannot be a .....

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Jodhpur, which is more than 1000 kms. away from Wardha. It is thus the case of petitioners that there is absolutely no necessity for transfer of cases for the alleged coordinated investigation, which aspect has not been considered before passing the impugned orders. In support of his submissions, learned Senior Counsel Shri Bhangde has placed reliance on the judgments in Vijayasanthi Investments (P) Ltd. vs. Chief Commissioner of Income Tax and others {(1991) 187 ITR 405(AP)}, Saptagiri Enterpr .....

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Tax Officer and others {(1998) 232 ITR 807 (Kerala). 18) Shri Parchure, learned Counsel for the respondents, has resisted the petitions contending that petitioner no.1 has residence at Sindi (Railway), but he is also residing at Pipar city along with his sons. Although he is one of the partners in petitioner no.2 firm, other two partners of the petitioner no.2 firm are his daughters-in-law Smt. Vidya Nand Kishore Mundra and Smt. Asha Sudhir Mundra, both of whom reside at Jodhpur along with their .....

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of petitioner no.1 has been made at Jodhpur and self assessment challans of petitioner no.1 are made from time to time at Jodhpur. 19) The learned Counsel for the respondents has also submitted that during the search and seizure action at the residence of Shri Ramswaroop Mundra, Shri Nand Kishore Mundra and Shri Sudhir Mundra, certain loose papers were found, which indicated that there was an agreement of partition between Shri Ramswaroop Mundra and his sons Shri Nand Kishore Mundra and Shri Su .....

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peration, account books pertaining to M/s. R.S. Mundra (H.U.F.) were found at Jodhpur. This also indicates that the businesses of Shri R.S. Mundra were controlled from Jodhpur. 20) The learned Counsel for the respondents has further contended that petitioner no.3 is son of petitioner no.1 and on the own showing of the petitioners, petitioner no.3 resides at Jodhpur. On information received from the Deputy Director of Income Tax, Jodhpur, it is found that children of petitioner no.3 are studying .....

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als also pays its central sales tax at Jodhpur. The petitioner no.3 also pays his Public Provident Fund contribution at Jodhpur and also submits his self-assessment challans from time to time at Jodhpur. The petitioner no.3 is also the Chairman of a Company Shri Chakra Housing Finance Pvt. Ltd., Jodhpur whose registered and corporate Office is shown as 37-A, Ajit Colony, Jodhpur. All the activities of this Company, which are related to real estate, are carried out at Jodhpur only. Hence, the Aut .....

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ion under Section 132 of the Act, it was found that most of the members of the Mundra group and their family members are having a permanent residence at Pipar city/Jodhpur. It was also found that books of accounts of all the assessees were at Pipar city/Jodhpur. It was also found that the sources of income in respect of the individual assessees mostly fall within the jurisdiction of the Commissioner of Income Tax, Jaipur. The respondent has received information in respect of the petitioners' .....

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so located at the same place. All the books of accounts were also found at this place during the search and seizure operation. The petitioner no.1 along with his family is residing at Pipar city and children of petitioner no.1 are residing at Jodhpur. The petitioner no.1 has recently constructed another house at Jodhpur. It is not correct to say that income of the firm accrues and arises in Maharashtra, Tamil Nadu, Andhra Pradesh, Karnataka and Gujarat. The assessee is dealing in purchase and sa .....

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individual capacity is also doing business of mining of limestone under the name of Uttam Chunna Pathar Udyog of Borunda in Rajasthan. The petitioner no.3 also has its entire work at Pipar city/Jodhpur. 24) Thus, it is the case of respondent Department that petitioners are members of the same family having involved in common business to a large extent, of which most of the business is situated in Pipar city in Jodhpur District and as such, proposal of Authorities of Income Tax to have centralize .....

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y Commissioner of Income Tax-II (Headquarters) on behalf of the Commissioner of Income Tax. The show cause notice itself states that the signature by the said Officer is for and on behalf of the Commissioner of Income Tax. There is no requirement under law that the show cause notice must be signed by the Commissioner of Income Tax himself. It is the established procedure in the office of respondent that all such notices are signed on behalf of the respondent by a senior Officer deputed in this r .....

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nd Aamby Valley Ltd. vs. Commissioner of Income Tax-8 {(2014) 41 taxmann.com 15 (Bombay)}. 27) Having considered the provisions of Section 127(1) of the Act and submissions as aforesaid, we find that it was absolutely necessary as requirement of law that the show cause notices impugned in the present petitions should have been under the signature of Commissioner of Income Tax as under the provisions of Section 127 of the Act, there is no provision of delegation of power by the Commissioner of In .....

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have to be centralised for the purpose of coordinated investigation and assessment in Jodhpur. Except for this, we do not find any sufficient reason put forth by respondents for transferring cases of petitioners from Wardha and Nagpur (Maharashtra) to Jodhpur (Rajasthan) and as such, the impugned orders are not in compliance with provisions of law as there are no specific reasons mentioned in the impugned orders for effecting transfer of cases nor there appears to be any material fact mentioned .....

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when petitioners since beginning are being assessed at these places. It is further noted that petitioners in Writ Petition No.2423/2003 are residents of Sindi (Railway), District Wardha. Their place of business is at the same place and books of accounts of petitioner nos.1 and 2 were found at Sindi (Railway). Source of income of petitioner no.1 is within the jurisdiction of Commissioner of Income Tax, Nagpur while petitioner no.2 is a resident of Sindi (Railway) as well as of Jodhpur and has sou .....

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there is lack of agreement between two competent Authorities as required under the statutory provisions. Similarly, before passing impugned order dated 28/1/2004 challenged in Writ Petition No. 1455/2004 transferring petitioners' cases from ACIT Circle-I, Nagpur to ACIT, Central-II, Jodhpur, it is noted that same came to be passed even without issuing show cause notices to petitioner nos.2 and 3 therein. 28) On considering facts involved in these petitions together with provisions of Sectio .....

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and to collect material and relevant facts for assessment of undisclosed income. The Deputy Director of Income Tax and Additional Director of Income Tax are Authorities subordinate to Commissioner of Income Tax. In that view of the matter, we thus find that request made by Deputy Director of Income Tax/Additional Director of Income Tax cannot be equated with that of request of Commissioner of Income Tax for transfer of cases as contemplated in Section 127(2) of the Act. The impugned orders date .....

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notices, in fact, should have contained specific reasons based on material facts, which should be clear so that petitioners in that case could exercise their right to have hearing on substantial questions in a meaningful manner. The show cause notices having been vague do not convey for what reason cases came to be transferred nor there is any reason as to why assessment cannot be done at Wardha where petitioners are being assessed since beginning, moreover, when all the income tax cases of the .....

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Income Tax, New Delhi and Commissioner of Income Tax, Mumbai that petitioners' cases should be transferred from Mumbai to New Delhi and on considering facts involved in that case, it was noted that since there was an agreement between Commissioners of Income Tax, New Delhi and Mumbai as required in terms of Section 127(2)(a) of the Act, the objection does not sustain. 30) As such, we find that for the purpose of effecting transfer of cases from jurisdiction of one Commissioner to other, requ .....

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