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HINDUSTHAN M-I SWACO LTD Versus PR COMMISSIONER OF INCOME TAX, VADODARA - 3

2016 (7) TMI 212 - GUJARAT HIGH COURT

Transfer of assessment cases - Power of the Principal Commissioner of Income-tax to transfer the case u/s 127(2) - Held that:- While recognizing wide discretionary powers of the competent Revenue Authorities to transfer assessment cases under section 127 of the Act in public interest, the Court also recognized a degree of prejudice or inconvenience that may be caused to the assessee whose assessment may be lifted from his principal place of business and may be put at the disposal of an assessing .....

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ncy of reasons would have to be judged from case to case basis. In the present case, we find no such justification. Entire approach of the Principal Commissioner, was erroneous since he proceeded on an incorrect premise that the petitioner also was subjected to search operation. There being no further reliable material justifying such consolidation of cases, impugned order is set aside. - SPECIAL CIVIL APPLICATION NO. 1195 of 2016 - Dated:- 28-6-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. .....

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r is a company registered under the Companies Act and is engaged in the activity of manufacturing chemicals. The petitioner has two manufacturing units in Gujarat. A search and seizure operation was carried out by the investigation wing of the Income-tax department at Kolkata on 23.12.2014 in case of one Hindusthan Engineering & Industries Ltd. group (hereinafter to be referred to as the 'searched person'). Later, the petitioner was subjected to survey operations by the Income-tax au .....

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ce, it was conveyed that the transfer of the case was for centralization of the assessment under the charge of the Principal Commissioner of Income-tax, Kolkata. In response to such notice, petitioner made a detailed representation dated 26.08.2015, raising six specific points why the petitioner's assessment should not be transferred to Kolkata. The respondent issued yet another notice dated 15.09.2015, conveying that the reasons putforth by the petitioner for non centralization of the case .....

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ed. It will be presumed that you have no objection to centralize your case to Kolkata and the necessary action will be taken accordingly. 5. In response to such further communication of the respondent, the petitioner under a letter dated 22.09.2015 raised detailed objections to transfer the cases relying upon and referring to several decisions of different High Courts. 6. The respondent was however unmoved. By impugned order dated 09.12.2015, he ordered transfer of the assessment cases of the pe .....

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rder is thus based on factually incorrect premise. II. The CBDT's circular referred to in the impugned order is for consolidation of search cases and the reliance on such instructions by the respondent authority in the present case is wholly unjustified. III. Mere declaration that for effective and coordinate investigation it is necessary to consolidate cases is not sufficient for transfer of assessment proceedings without there being any material on record justifying the transfer. IV. No in .....

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justify transfer of the assessment of the petitioner. 8. In support of his contention, the counsel placed reliance on the judgment of Division Bench of this Court in case of Shree Ram Vessel Scrap P. Ltd. v. Commissioner of Income-tax, reported in 355 ITR 255, in which, referring to large number of judgments from different Courts in context of the powers of the income tax authorities to transfer assessment cases under section 127 of the Act, this Court had made certain observations. Counsel sub .....

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ssment proceedings. Whether the petitioner was subjected to search or not is not important at this stage. It was found that the petitioner had transactions with the searched persons. To avoid conflict of opinions and for coordinated and centralized investigation therefore, the petitioner's cases were also transferred which causes no prejudice. 10. Having heard learned counsel for the parties, we may notice that the respondent authority had referred to following objections raised by the petit .....

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A Bella Goid, Kalyan Shil Road, Palav City, Dombivali, Mumbai, 421 203. The directors other than Mr.Nikunj Mehta are the nominees of the Investor Groups. The day to day operations of the Company are managed by Shri Nikunj Mehta (who is based at Bharuch and Mumbai) with the assistance of the other staff based at Bharuch. The Company is thus professionally managed and operates independently under the supervision of the Board. (ii) In the course of survey at the company's premises, no incrimina .....

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us, the company requests your kindself to provide the material/documents available with the Department to justify the centralization as the provisions contained in section 127(2) mandate the recording of reasons for transfer of case. It is reiterated and for the purpose of record, it is submitted that the company has no transaction with any of the group concerns or persons where search is conducted, except for the transaction of investment and loan which is accounted in the regular books of acco .....

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. The company is regularly filing its return of income in the Income tax office at Bharuch and is assessed there. The company's accounts, finance and taxation matters are attended by the Finance Officer based at Bharuch. The shifting of the assessment jurisdiction to Kolkata as proposed would cause undue hardship and difficulty to the company in terms of compliance with the regular requirements of the Income tax Office at Kolkata. (iv) As already stated, the various affairs of finance, accou .....

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idable. 11. The Principal Commissioner repelled these objections in following manner: 8.1 From the submissions, with regard to the point No.(i) above, it is learnt that two directors of the assessee company are permanently based at Kolkata and therefore contrary to assessee's contention, there is no undue hardship and difficulty to the company in terms of compliance with the regular requirements of the Income tax Office at Kolkata. Moreover, the assessee has not denied the fact that it had t .....

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material to indicate any transaction with the group concerns or the persons of the group which can be said to be incriminating so as to require centralization of the assessee's case at Kolkata, cannot be considered as it is not mandatory or a precondition that there has to be seizures of valuable or incriminating documents etc. for every action to follow actions u/s. 153A / 153C for the purpose of consideration of cases u/s. 127 of the I.T.Act. 8.3 Moreover, at this stage, for the purpose o .....

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mentioned above at (iii) & (iv) the same has already been discussed in para8.1 and hence no further comments are required at this stage. However, it is pertinent to mention here that there is no compulsion of personal attendance of the directors at any stage. The assessee can authorize any person as per law to attend the case on behalf of the assessee with the help of the directors who have already establishment at Kolkata. He further observed as under: 9. Further, for making any comment on .....

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ted investigation and assessments. There is nothing on merit which the assessee could contest on the issues of transfer, and hence it has taken various irrelevant pleas that have no nexus with reference to section 127 for the purpose of transfer of the case. … 13. The kind of web which has been woven by the tax payers and the discrepancies in valuation of inventory that will require detailed and coordinated investigation to be conducted centrally with the group cases and therefore, it wil .....

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T, CC1( 4), Kolkata, there can hardly be any merit in the case of the assessee on given facts and circumstances. 12. From the perusal of the above quoted portion of the impugned order, it can be seen that the Principal Commissioner has proceeded on the footing that like the searched person, the petitioner is also subjected to search operations. In the preamble portion of the impugned order also after referring to the search operations in case of Hindusthan Engineering & Industries Ltd. group .....

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r alia; Instances have come to notice of the Board that Search cases are not being centralized promptly, thereby causing delay in initiation of the search assessment proceedings, deferment of payment of taxes and finally resulting in completion of search assessments at the fag end of the limitation period. 2. In supersession of existing Boards instruction no.8/2002 dated 14th August, 2002 on above subject, I am directed to inform that following procedure for early centralization of search cases .....

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's are subjected to search operations and whose assessments are within the jurisdiction of different Assessing Officers. 13. If we therefore, eliminate this angle of the petitioner being subjected to search, a wrong premise on which the Principal Commissioner proceeded in his impugned order, what is left is that in his opinion the kind of web which has been woven by the tax payers and the discrepancies in valuation of inventory that will require detailed and coordinated investigation to be c .....

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s thus of the opinion that allowing these cases to proceed before the Assessing Officer would be against such instructions. Firstly, no such instructions have been cited and other than the instructions of the CBDT noted above, which apply to search cases in case of group of the assesses. Secondly, mere declaration of the kind of web woven by the tax payers is too general a statement not supported by any materials on record and can therefore, not form a basis for transfer of assessment proceeding .....

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ective and coordinated investigation or the like would not be sufficiently clear. If such reasons are indicated in the show cause notice, would not put the assessee to sufficient notice on the grounds on which the competent authority proposed to transfer the cases. Some Courts have held that such reasons for transferring the case would not be sufficient. On the other hand several Courts of the country have taken a view that such reasons are sufficient to permit transfer of cases. 19. We would th .....

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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 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 .....

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n 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 .....

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evertheless, 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 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 we .....

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or is actuated by mala fide either in fact or in law. … … 26. We therefore side with the school of thought that the reason for effective and coordinate investigation for transfer of assessment cases is neither vague or ground not insufficient. Particularly in the present case when through show cause notice and during hearing of such notices, it was clearly brought to the notice of the assesses the need for transfer of cases, no case for interference is made out. Learned counsel Shr .....

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the case of the group is pending at such place. Section 127 of the Act does not recognise or provide any such limitation on exercise of the powers. Discretion is wide and may be required to be exercised in varieties of situations. We neither can, nor propose to foresee all of them. 15. In the said decision thus, while recognizing wide discretionary powers of the competent Revenue Authorities to transfer assessment cases under section 127 of the Act in public interest, the Court also recognized a .....

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vestigation and coordination can be resorted to only in cases of assesses who are subjected to search operations. This requirement may arise in other circumstances also. However, the sufficiency of reasons would have to be judged from case to case basis. In the present case, we find no such justification. Entire approach of the Principal Commissioner, was erroneous since he proceeded on an incorrect premise that the petitioner also was subjected to search operation. There being no further reliab .....

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