TMI Blog2017 (12) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... ather it excludes certain procedure contemplated under sub-section (1) and sub-section (2) of Section 127 of the Act, when both the transferee and transferor officers are situated in the same city, locality or place. The provision commences by stating nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given . Therefore, when there is a total exclusion of an opportunity, the question of communicating the reasons to the assessee cannot be insisted upon and that is not required under the statute. Therefore, the assessee cannot seek to read something into the statute, which is not found therein.As pointed out earlier, sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but it is a clause providing for exclusion of certain procedures, which are required to be adhered to under circumstances not mentioned in sub-section (3) of Section 127 of the Act. Therefore, the theory of harmonious construction cannot be applied to the facts of this case, nor sub-section (3) of Section 127 of the Act, can be construed as a non-obstante clause, but a clause providing for exclusion of certain procedure in certain con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016, under Section 148 of the Income Tax Act, 1961 and the consequential notice, dated 19.12.2016, issued by the second respondent under Section 142 (1) of the Income Tax Act, 1961, and to quash the same. In the third Writ Petition, W.P.No.10896 of 2017, the challenge is to the order passed by the first respondent, dated 31.03.2017, under Section 263 of the Income Tax Act, 1961 for the assessment year 2012-13, on the ground that, it has been passed in gross violation of principles of natural justice, vitiated by legal malafides, lacking in bonafides, abuse of authority, wrongful exercise of discretion under Section 263 of the Income Tax Act, 1961 and to quash the same. 3. Mrs. Nalini Chidambaram, the learned Senior Counsel appearing for the petitioner submitted that, W.P.No.35408 of 2016 may be taken up for consideration at the first instance, as the result in this Writ Petition would have direct impact on the other two Writ Petitions (W.P.Nos.2544 of 2017 and W.P.No.10896 of 2017). Therefore, W.P.No.35408 of 2016 is taken up for disposal. 4. The petitioner is a Company, registered under the Indian Companies Act, stated to be engaged in the business of consultancy. The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup Company of M/s. Vasan Health Care (P) Ltd., and the entire proceedings, commencing from the survey proceedings, culminating in the impugned notification, dated 24.06.2016 are ultra-vires of the provisions of the Act. It is further submitted that, there is no material in possession of the first respondent to warrant clubbing of the petitioner's cases with Search and Seizure case of Shri.A.M.Arun, M/s. Vasan Health Care (P) Ltd. Further, principles of natural justice demands reasons to be recorded before passing the impugned notification and such reasons should be communicated to the petitioner. 6. The learned Senior Counsel submitted that, sub section (1) of Section 127 of the Act will not be attracted to the petitioner's case, and, as stated in the impugned notification and admitted in the counter affidavit, Section 127 (2) of the Act is applicable, and while exercising such power under the said provision, three requirements have to be fulfilled, viz., i) Two Principal Commissioners should agree, and such agreement should be in writing, ii) Assessee is entitled to a reasonable opportunity of being heard in the matter, and iii) Reasons should be recorded in writing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the root of the matter, rendering the proceedings as illegal. The learned Senior Counsel further submitted that, the petitioner holds a micro-minority share of less than 1% in M/s. Vasan Health Care (P) Ltd. as on date, and merely, by reason of such minuscule shareholding, the case of the petitioner cannot be centralized with the case of M/s. Vasan Health Care (P) Ltd. In this regard, the learned Senior Counsel has referred to the factual averments set out in the representation, dated 08.09.2016, as well as in paragraph No.8 of the reply affidavit to the counter affidavit. Further, it is submitted that, the first respondent proceeds on the basis that, no inconvenience is caused to the petitioner, as the transfer is within the City of Chennai, without appreciating the contentions raised by the petitioner that, transfer is mala fide, as the petitioner's case cannot be clubbed along with Search and Seizure cases, relating to the group cases of Shri.A.M.Arun, M/s. Vasan Health Care (P) Ltd. 9. The learned Senior Counsel has referred to the following decisions in support of the propositions (mentioned infra). a) Ajantha Industries and others Vs. Central Board of Direct Taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 12. It is further submitted that on a plain reading of Section 127 (3) of the Act, it is clear that, nothing in sub-section (1) or sub-section (2) of Section 127 of the Act, shall be deemed to require any such opportunity to be given where the transfer is from any assessing officer or assessing officers (whether with or without concurrent jurisdiction) to any other assessing officer or assessing officers (whether with or without concurrent jurisdiction) when the offices of all such officers are situated in the same city, locality or place. 13. It is further submitted that the question of reading sub-section (3) into sub-section (2) of Section 127 of the Act, cannot be done, as sub-section (3) of Section 127 of the Act, is very explicit and the concept of reading into it would arise only when there is no provision in the statute. In this regard, reliance was placed on the decision in the case of Mrs.Maneka Gandhi vs. Union of India and another reported in (1978) 1 SCC 248, wherein the statute was silent and therefore, the Constitution Bench has read into the concept of post decisional hearing. 14. Further, it is submitted that no prejudice would be caused to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue has admitted that the Chief Commissioner of Income Tax-I, Chennai, has addressed a letter dated 30.05.2016, to the Principal Commissioner of Income Tax, Chennai, is incorrect and it is a typographical error and the date of the letter is 13.06.2016. The learned Senior Counsel for the petitioner accepted the said submission and therefore, the argument advanced by the learned Senior Counsel on the said contention stands eschewed, since the revenue has produced copy of the file and demonstrated it before the Court that the date of the letter is 13.06.2016 and not 30.05.2016. 19. Further, it is submitted that the Income Tax Act, being a taxing statute, very strict interpretation has to be given and in the absence of any prejudice caused to the petitioner, the challenge to the impugned notification has to be rejected. 20. It is submitted that the Director General of Income Tax (Notification), Chennai, addressed a letter to the Chief Commissioner of Income Tax-I, Chennai, dated 30.05.2016. Based on such letter, the Chief Commissioner of Income Tax, has issued the impugned notification and the Deputy Commissioner of Income Tax, Central Circle-1(I), Chennai, having issued no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er vide separate writ petition, as there is a gap of 10 months between the notice and the impugned notification for transfer. 25. Further, it is submitted that the impugned order of transfer is discriminatory, as persons holding more than 5% shares in Vasan Eye Care (P) Ltd., their cases have not been transferred and clubbed with the search and seizure cases. Referring to the decision of the learned Single Judge in the case of Noorul Islam Educaltional Trust vs. The Commissioner of Income Tax-I, in W.P.(MD).No.60 of 2009 dated 11.12.2009, it is submitted that merely because search was conducted under Section 132 of the Act in the premises of the other assessees cannot be a reason for transfer when the incriminating materials found do not show the interlace and interconnecting transaction. 26. Learned Senior Counsel would emphasize that Section 127(2) and 127(3) of the Act, should be harmoniously read and sub-section (3) of Section 127 of the Act, only obviates personal hearing, but the other ingredients required under sub-section (2) of Section 127 of the Act, namely the agreement between both Commissioners and the recording of reasons have not been dispensed with and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nai (hereinafter referred as the Central Circle ). The impugned notification in the subject column states that it is for centralization of search and seizure cases - in the group of cases of Shri A.M.Arun vs. Vasan Health Care (P) Limited. The first respondent has referred to a letter from the Director General of Income Tax (Investigation), (i/c), Chennai, to the Chief Commissioner of Income Tax-1, Chennai, dated 30.05.2016. The challenge to the impugned notification are on the following grounds: (i) The notification is bad in law for not providing reasonable opportunity to the petitioner as required under Section 127(2) of the Act; (ii) No reasons have been recorded by the first respondent for transferring the case as required to be done under Section 127(2)(a) of the Act; (iii) The petitioner holds a minuscule number of shares as on date in Vasan Health Care (P) Limited and no way connected with the search and seizure operations conducted on the said group and there is no material available with the first respondent warranting clubbing of the petitioner s case with the search and seizure case; (iv) Section 127(2) of the Act mandates that the Commissioners to whom such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred, are not subordinate to the same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, the following procedures have to be adhered to. Clause (a) of Section 127(2) of the Act deals with cases where the Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate, are in agreement. Clause (b) of Section 127(2) of the Act refers to cases where the Principal Commissioners or Commissioners are not in agreement. 35. The petitioner s contention is that the entire process of transfer from Corporate Circle to Central Circle emanated from a letter addressed by the DGIT, TN Puducherry, (i/c), Chennai to the Chief Commissioner of Income Tax-1, Chennai dated 30.05.2016. Pursuant to which, the first respondent has issued the impugned notification and the case has been transferred to the Central Circle and the Principal Commissioners of Corporate Circle and Central Circle have not agreed to the transfer or in other words, the notification does not show any agreement. 36. In order to examine the correctness of the stand, the Court at the conclusion of the hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy Director of Income Tax Unit-1(3), Chennai. It is based on such survey, a proposal was sent to the DGIT (Investigation), Head of his Department, for centralization along with Vasan group. This report was forwarded by the Principal Director of Income Tax (Inv.) to DGIT (Inv.) vide letter dated 09.03.2016. 41. The DGIT (Inv.) vide his letter dated 30.05.2016, requested the CCIT-1, Chennai, for centralization of the case of the petitioner from Corporate Circle to Central Circle to facilitate co-ordinated investigation. Along with the said letter, the report of the DDIT (Inv.) Unit 3(2), Chennai, dated 25.02.2016, was forwarded to CCIT-1, Chennai. This is because Corporate Circle-1(1), Chennai, is within the jurisdiction of Principal Commissioner of Income Tax, who is subordinate to CCIT-I, Chennai. On 13.06.2016, the CCIT-1, Chennai, requested the Principal CIT, Chennai-1, who is a subordinate officer to notify the case of the petitioner for transferring the same from Corporate Circle to Central Circle for co-ordinated investigation. 42. In turn, the Principal Commissioner of Income Tax, Chennai-1, passed the impugned notification transferring the case from Corporate Circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (2) of Section 127 of the Act, when both the transferee and transferor officers are situated in the same city, locality or place. The provision commences by stating nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given . Therefore, when there is a total exclusion of an opportunity, the question of communicating the reasons to the assessee cannot be insisted upon and that is not required under the statute. Therefore, the assessee cannot seek to read something into the statute, which is not found therein. 47. In the case of K.P.Mohammed Salim, the Court pointed out that the power of transfer infact provides for a machinery provision and it must be given its full effect and it must be construed in a manner so as to make it workable. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner what for the statute was enacted. 48. The often quoted decision of the Constitution Bench of the Hon ble Supreme Court in the case of Kashiram Aggarwala vs. Union of India reported in [1965] 56 ITR 14 (SC), considered the power of transfer of cases under Section 127 of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. In support of such argument, reliance was placed on the fact that Section 64(1) and Section 64(2) of the Act conferred a right on the assessee to have his tax matter adjudicated upon by the respective officers mentioned in that provision and since Section 5(7A) of the Act authorized the transfer of the assessee s case from one ITO to another that involved infringement of his fundamental rights. The transfer in exercise of powers under Section 5(7A) of the Act is from one officer to another not necessarily within the same place. The Court repelled the plea raised against the validity of the said section on the ground that the right conferred on the assessee by Section 64(1) and Section 64(2) of the Act was not an absolute right and must be subject of the primary object of the Act itself, viz., the assessment and collection of the income tax; and it was also held that where the exigencies of tax collection so required, the CIT or the Central Board of Revenue had the power to transfer his case under Section 5(7A) of the Act to some other officer outside the area, where the assessee resides or carried on business. While examining the effect of proviso under 127(1) of the Act, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case will facilitate smooth and easy proceedings. 51. The above referred decisions were referred to by this Court in the case of M/s.Karandhai Tamil Sangam vs. the Commissioner of Income Tax-II, Ors., in W.P(MD).No.8062 of 2011, dated 24.08.2011, which was filed challenging an order of transfer raising similar contentions which were rejected. 52. As noticed above, providing reasonable opportunity to the assessee, while invoking Section 127(3) of the Act, does not arise and therefore, the decision in the case of Ajantha Industries vs. CBDT reported in [1976] AIR 437, would have no application to the facts of the present case. 53. The concept of post decisional hearing cannot be incorporated into Section 127 of the Act, as it would amount to re-writing the statute. The statutes specifically exclude an opportunity to the assessee when the case stands transferred to an officer in the same city. Therefore, the request made by the petitioner for a post decisional hearing is of little avail and precisely for such reason, the petitioner cannot draw any inspiration from the decision in the case of Mrs.Menaka Gandhi vs. Union of India and another reported in [1978] 1 SCC 248. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because Corporate Circle-1(1) was within the jurisdiction of Principle CIT, Chennai-1, who is subordinate to CCIT-I, Chennai. The CCIT, Chennai-I, vide letter dated 13.06.2016, requested the Principal Commissioner of Income Tax, Chennai-1, to notify the case of the petitioner transferring the same from Corporate Circle-1(1) to Central Circle-2(1),Chennai for the sake of co-ordinated investigation. The principal Commissioner of Income Tax, Chennai-1, on receipt of a letter from the DGIT (Investigation) dated 30.05.2016, through his Chief Commissioner of Income Tax, passed the impugned notification, transferring the case from Corporate Circle to Central Circle. Thus, the agreement between the two heads of Department is explicit and vivid and nothing more is required. 59. A plea of discrimination was raised by the petitioner contending that cases pertaining to persons holding more than 5% shares with Vasan Health Care Private Limited, has not been transferred and cannot be a reason, as this Court cannot step into the realm of investigation and as pointed out earlier, these issues are premature, as the impugned notification is an innocuous order of transfer and the petitioner canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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