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Genus Electrotech Ltd. Versus Union of India & 4

2017 (9) TMI 1040 - GUJARAT HIGH COURT

Transfer of cases u/s 127 - reasons for change in jurisdiction - Held that:- Even though an assessee may not have a vested right to insist that his assessment be completed only at one place or by a particular Assessing Officer, nevertheless, 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. Howeve .....

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n be stated to be wholly irrelevant or arbitrary, the Court would not interfere with such reasons. - The petitioner is a part of group companies which were subjected to common search action. The assessments of all 42 group companies are being centralised at one place. In view of the judgment of this Court in case of Shree Ram Vessel Scrap P. Ltd.(2013 (10) TMI 982 - GUJARAT HIGH COURT) we find no reason to interfere. - Special Civil Application No. 10328 of 2017 - Dated:- 13-9-2017 - MR. AK .....

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n the following background. The petitioner is a company registered under the Companies Act and is engaged in manufacture of electronic items. The principal place of business of the petitioner is situated at Gandhidham, Gujarat and Corporate office is situated at Ahmedabad. Earlier, the Principal Commissioner of Incometax, Ahmedabad, had passed an order on 30.12.2015 transferring the petitioner's assessment from DCIT, Circle2, Ahmedabad to ACIT, Central Circle, at Moradabad. 3. The petitioner .....

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er hearing, the Principal Commissioner passed an exparte order transferring the assessment. It was also contended that transferring the assessment at a place nearly 700 kms away from Ahmedabad would cause great prejudice and inconvenience to the petitioner. On behalf of the Revenue, the petition was opposed contending that the authority passing the order of transfer had granted hearing to the petitioner and thereafter, passed the order recording proper reasons. 4. The Court allowed the petition .....

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to imagine such grounds and meet with them. Following observations of the Court may be noted : 12. For multiple reasons, this notice would fail the test of granting reasonable opportunity of hearing. Mere issuance of notice inviting attendance of an assessee for hearing of a case for transfer of the assessment can hardly be stated to be fulfillment of requirement of hearing. On what primafacie grounds or reasons the case is to be transferred, was nowhere indicated in this notice. The petitioner .....

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e authority asked the assessee to imagine the possible grounds why the case would be considered for transfer and then to meet such grounds by making representation. He thus made the procedure of giving hearing a mere formality. 5. After this judgment was passed, the authority issued a notice to the petitioner on 5.8.2016 informing the petitioner that hearing was fixed to consider the transfer of case from Ahmedabad to Moradabad to facilitate coordinated investigation in search and seizure cases .....

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Act was Conducted on 30/07/2015 and 31/07/2015 by the DDIT (Inv.), Moradabad in the case of M/s. Genus Paper & Board Group. The residential premises of the Director, your factory premises at Gandhidham and your Corporate Office at Ahmedabad were also covered in this proceeding. 3. It is noticed from the Disclosure of Related Party Transactions made in your Audited Financial Report for F.Y.201112, that following transactions have been made by you with other members of the Genus group of compa .....

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d Adjusted 295 Kailash Coal & Coke Co Ltd. Associated Party Sale ­ ­ 0.14 0.14 Dr. Virtuous Urja Ltd. Associated Party Advance Given/ Received Adjusted 775.00 ­ 825.00 ­ Mr Vishnu Todi Managing Director Remuneration 23.085 ­ 23.85 ­ 4. It is also noticed that you are one of the companies of Genus group promoted by Shri I.C.Agrawal, his family members and business associates. A list of key persons of the Genus Group who are having major share holding in M/s. Genus Elec .....

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entralization of the cases with one assessing officer is essential for better coordinated investigation. In view of the above facts, it is proposed to transfer your case from DCIT., Circle 2(1)(1), Ahmedabad to ACIT., Central Circle, Moradabad u/s. 127(2)(a) of the I.T.Act for coordinated investigation. A hearing in this regard is fixed at 11:00 A.M. On 11/11/2016 at the office of the undersigned. You are requested to attend the same either personally or through an authorized representative. 6. .....

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minating material was found during the search from the premises of the company or its directors; that the proposed transfer is opposed to the spirit of the judgment of the High Court dated 18.7.2016 and lastly, that the transfer of assessment at such a far away place would cause prejudice to the petitioner. Ignoring such pleas of the petitioner, the Principal Commissioner, Ahmedabad, passed the impugned order dated 23.11.2016 in which it was observed as under : 4. The assessee company vide its v .....

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x Act, 1961 and all other powers enabling me in this behalf. I, the Pr. Commissioner of Incometax2, Ahmedabad hereby transfer the case mentioned in column No.2 of the Schedule hereunder from the Assessing Officer mentioned in column No.4 to the Assessing Officer mentioned in column No.5 thereof. 7. Appearing for the petitioner, learned counsel Shri Naresh Jain raised the following contentions : 1) The High Court having previously quashed the order of transfer of assessment, it was not open for t .....

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roceeded in a mechanical manner. Mere recitation that for coordinated investigation and assessment, transfer of assessment was necessary, would not fulfill the requirement of fair hearing envisaged under section 127 of the Act. Learned counsel relied on judgments to which we would refer to at an appropriate stage. 8. On the other hand, learned counsel Ms. Bhatt for the department contended that the High Court had quashed the earlier order of transfer of assessment only on the ground of non heari .....

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as placed on decision of Bombay High Court in case of Aamby Valley Ltd. v. Commissioner of Incometax reported in (2014) 41 taxmann. Com 15 (Bombay), wherein it was held as under : 14. The last objection raised by Mr. Mistry is that there is no evidence of any agreement between Commissioner of Income Tax (Central 6) New Delhi, and Commissioner of Income Tax Mumbai that the petitioners case should be transferred from Mumbai to New Delhi. These proceedings for transfer of the petitioners case was i .....

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ailable. Therefore, this objection is not sustainable. In view of all the above reasons, we do not find any reason to entertain this petition. 9. From the record it can be seen that earlier when the department had passed the order transferring the assessment of the petitioner, the same was struck down by the High Court on the ground that the requirement of hearing was not fulfilled. The Court noted that before passing the order, all that the Principal Commissioner had done was to issue the notic .....

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not stand terminated and it is always open for the authority to proceed further from the stage where the defect has been detected. In any case, we do not see any warrant in the judgment of the High Court by which the department was precluded from initiating a fresh procedure for transfer of the petitioner's assessment case after following the requirements of law. 10. In the present case what the department did was to supply tentative reasons why the authority was considering to transfer the .....

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Act pertains to jurisdiction of Assessing Officer. Subsection( 1) of section 124 reads as under : 124(1) Where by virtue of any direction or order issued under subsection( 1) or subsection( 2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction( (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, o .....

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ble 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 concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or .....

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r Director General or Principal Chief Commissioner or Chief Commissioner or Principal 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 Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or .....

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ssing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under subsection (1) or subsection (2) may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officer or Assessing Off .....

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in respect of any year. 14. Section 124(1) of thus lays down the jurisdiction of the Assessing Officer, whereas under subsection( 1) of section 127 of the Act, it is open to the concerned authority to transfer any case of an assessee from one Assessing Officer subordinate to him to any other Assessing Officer or Officers also subordinate to him. This power is hedged by two requirements which are that such order can be passed only after giving the assessee a reasonable opportunity of being heard .....

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se is to be transferred are not subordinate to the same Principal Directors General, Director General, Principal Chief Commissioners, Chief Commissioners or Principal Commissioners or Commissioners, the transfer of case would be only when such authorities to whom the Assessing Officers concerned are subordinate are in agreement. In such a case, the Principal Director General, Director General, Principal Chief Commissioner or Chief Commissioner or Commissioner from whose jurisdiction the case is .....

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r administration of assessments giving consistency, transparency and predictability on the question of which Assessing Officer would deal with which assessments. Nevertheless, an assessee cannot choose his Assessing Officer. At the same time, it is also recognised that transferring the assessment of an assessee at a far away place would lead to hardship and cause prejudice. It is in this context that the section requires giving of a reasonable opportunity of being heard to the assessee and to re .....

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ity, locality or place. The third important element of section 127 is when an assessment is being transferred from one Assessing Officer to another Assessing Officer, both of whom are not subordinate to the same head, the same could be done only with the agreement of the respective heads and if there is no such agreement, only by the Board or the authority that the Board may authorise in this behalf, by issuing notification in official gazette. This last requirement would ensure that there is no .....

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case is to be transferred, has to grant a reasonable opportunity of being heard to the assessee and then pass an order recording his reasons. This requirement would have two significant elements. One is that the authority under whose jurisdiction the assessment is being transferred has merely to show his agreement or disagreement, as the case may be. It is the authority from whose jurisdiction the case is being transferred, in addition to agreeing to transfer would have to grant an opportunity .....

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lity. 16. It is in this background that we would have to examine the question of agreement between the two Principal Commissioners. From the original files made available for our perusal by the counsel for the Revenue, we notice that on 21.9.2015, the Principal Director of Incometax( Investigation) Kanpur, had written to the Principal Commissioner of Incometax, Central, Lucknow, pointing out that search and seizure operations were carried out in Genus Paper and Board group of companies by the De .....

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d for proper and meaningful coordinated investigation, these cases were required to be centralised before one Assessing Officer. He was therefore, requested to consent for such centralisation of the cases. 17. On 14.9.2015, the Deputy Director of Incometax (Investigation) Moradabad, wrote to the Principal Director of Incometax (Investigation) Kanpur, sending a proposal for centralisation of all 42 assessment cases for the sake of better coordination and effective investigation of the group cases .....

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agreement to the case of the petitioner being transferred and centralised before ACIT, Central Circle, Moradabad along with other group cases. It is true that no such formal letter has been written by the Principal Commissioner of Ahmedabad indicating his agreement. However, the record would suggest that previously he had passed the order dated 30.12.2015 transferring the assessment of the petitioner. Before passing this order, he issued a notice asking the petitioner to remain present. As note .....

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be culled out from the record. Clause(a) of subsection( 2) of section 127 of the Act refers to the agreement of the two heads of the jurisdiction from where as assessment is transferred to where it is being transferred. There is no format in which such agreement must be recorded or conveyed. As noted, the additional duty of the authority from whose jurisdiction the assessment is being transferred is to give a reasonable opportunity of being heard to the assessee and then to pass an order citing .....

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t light. We cannot put the requirement of clause(a) to subsection( 2) to section 127 of the Act in such a straightjacket formula that even when the competent authority grants a hearing to the assessee and, thereafter, passes a reasoned order transferring the assessment, his action would fail merely because in writing he did not record his agreement. Contrary to what was canvassed before us, decision of the Supreme Court in case of Noorul Islam Educational Trust v. Commissioner of Income tax and .....

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ich contemplates a positive state of mind of the two jurisdictional Commissioners of Income tax which is conspicuously absent in the said case. The Supreme Court has used the expression positive state of mind referring to the requirement of agreement contained in the said provision. 19. The decision of learned Single Judge of Madras High Court in case of Noorul Islam Education Trust v. Commissioner of Incometax and others reported in (2011) 332 ITR 97 (Mad) cited by the counsel for the petitione .....

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not based on non compliance with the requirement of agreement between the two Principal Commissioners but was on the ground that the assessee was not granted reasonable opportunity of hearing. When the High Court therefore, set aside the order of transfer of assessment, it was not necessary that the proposal for transfer of case would have to be reinitiated from the very inception. If the two Principal Commissioners had already reached an agreement on the question of transfer of case, no such fr .....

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eady noticed, pertains to power to transfer cases. Subsection( 1) empowers the Director General, Chief Commissioner or the Commissioner after giving the assessee a reasonable opportunity of being heard wherever it is possible to do so and after recording his reasons, transfer any case from one more or more Assessing Officers subordinate to him to any other Assessing Officer or Assessing Officers also subordinate to him. Likewise, under subsection( 2) of section 127 after following similar proced .....

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ed in the same city, locality or place. Subsection( 4) of Section 127 provides that the transfer of a case under subsection( 1) or subsection( 2) may be made at any stage of the proceedings and shall not render necessary the reissuance of any notice already issued by the Assessing Officer from whom the case is transferred. 21. Exercise of power under subsection( 1) and subsection( 2) of the Act comes with certain procedural requirements namely, of granting a reasonable opportunity of being heard .....

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any arbitrary or irrelevant consideration. On the other hand, it can also be seen that transfer of a pending case from one Assessing Officer to another outside of a city, locality or place is likely to cause considerable inconvenience to an assessee. Therefore, even though an assessee may not have a vested right to insist that his assessment be completed only at one place or by a particular Assessing Officer, nevertheless, the reasons for transfer must be weighty enough to offset against such p .....

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jurisdiction, the Court is concerned with the decision making process and not the final decision itself. Unless the reasons which prompted the competent authority to transfer the case can be stated to be wholly irrelevant or arbitrary, the Court would not interfere with such reasons. Ofcourse an order of such nature can and need to be quashed if it is demonstrated that same is passed either without jurisdiction or is actuated by mala fide either in fact or in law. 22. As pointed out by Ms. Bhatt .....

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ation of mind to reach a view to transfer a case from one jurisdiction to another, then this Court will not interfere with the discretion of the administrative authority who transfers the case. This discretion is vested by the Act in high ranking officers viz. Commissioner of Income Tax and the necessity to transfer a case from the jurisdiction of one officer to another officer for better administration of the Act could be diverse and impossible to enumerate. It is for the above reason that Sect .....

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