TMI Blog2019 (12) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Principal Chief Commissioner of Income Tax, NER, Guwahati belonging to the two jurisdictions. It is neither a pleaded case of the petitioners nor it is submitted by the learned counsel for the petitioners that there was lack of agreement or there was disagreement between the two respective jurisdictional authorities for the purpose of transferring the cases of the petitioners from Dimapur, Nagaland to Kollam, Kerala. From the conspectus of facts, it, thus, transpires that it is not a case that all the cases of the petitioners were only assessed with the ACIT, Circle - Dimapur and the ITO, Ward - I, Dimapur with no financial interests and presence in the State of Kerala. It is not a case of the petitioners that there are only 7 (seven) cases of assessment for them and all those were being assessed at Dimapur taking into consideration their financial dealings only in the State of Dimapur and with no connection whatsoever in the State of Kerala. Rather, it goes to show that a substantial part of their financial and business dealings are being carried out in the State of Kerala through various entities. The respondent authorities are found to have provided adequate reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25-9-2019 - MR. MANISH CHOUDHURY J Advocate for the Petitioner : MS. M.L. GOPE : MR. A. TODI : MS. P.S. CHAKRABORTY : Mr. PFOSEKHO PFOTTE Advocate for the Respondent Nos. 1 to 4 : S. SARMA , SENIOR STANDING COUNSEL INCOME TAX DEPARTMENT JUDGMENT ORDER (CAV) Heard Ms. M.L. Gope, learned counsel for the petitioners and Mr. S. Sharma, learned Senior Standing Counsel, Income Tax Department appearing for the respondent nos. 1 to 4. 2. As the subject-matters in this batch of writ petitions, preferred under Article 226 of the Constitution of India, are analogous and inter-connected with each other, the same are heard together at the motion stage itself in terms of the earlier orders of this Court. On 31.07.2019, the Court after hearing the learned counsel for the parties at some length and upon consideration of the facts of the cases, had adjourned the cases to 19.08.2019 on the prayer made on behalf of the petitioners observing that the Court was not inclined to adjourn the cases. On 19.08.2019, the cases were adjourned till 23.08.2019 on the same ground. Accordingly, the writ petitions are taken up for disposal as agreed to by the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 07.12.2017, under Section 127(2) of the Act, were issued to the petitioners asking them to represent as to why the proposal to transfer their cases from the ACIT, Circle Dimapur or the ITO, Ward I, Dimapur, as the case may be, in the State of Nagaland to the ACIT, Central Circle Kollam in the State of Kerala should not be given effect to for the purpose of centralization and for a co-ordinated investigation. In response to the said notices dated 07.12.2017, the petitioners had submitted their representations objecting to the said proposal for transfer of their cases for the purposes indicated therein, submitting, inter-alia, that all of them are ordinarily residents of Nagaland and that the proposal for centralization of their cases was without any reason and it was based on vague generalities. Thereafter, the respondent no. 1 i.e. the Principal Commissioner of Income Tax, Jorhat passed orders, all dated 27.02.2018, transferring the cases of the petitioners to the ACIT, Central Circle - Kollam, Kerala. 6. Assailing the said orders dated 27.02.2018, the petitioners had preferred 7 (seven) nos. of writ petitions, W.P.(C) No. 42(K)/2018, W.P.(C) No. 43(K)/2018, W.P.( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 03.04.2018, whereby, the notices dated 07.12.2017 and the orders dated 27.02.2018, issued under Section 127(2) of the Act, were set aside observing that the respondents did not convey the reasons for the proposed transfer of the cases of the petitioners to the ACIT, Central Circle - Kollam, Kerala. The respondents were, however, given the liberty to issue fresh notices to the petitioners under Section 127 of the Act, if they intend to centralize the cases of the petitioners to the ACIT, Central Circle Kollam, Kerala and in doing so, the respondents should give reasons for the said proposal for transfer of the cases of the petitioners as to why centralization should be done at the ACIT, Central Circle - Kollam, Kerala. 8. This batch of writ petitions have been filed by the petitioners assailing the orders, all dated 18.07.2018, passed by the respondent no. 1 i.e. the Principal Commissioner of Income Tax, Jorhat, whereby, the cases of the petitioners have once again been transferred from the ACIT, Circle - Dimapur or the ITO, Ward - 1, Dimapur, as the case may be, in the State of Nagaland to the ACIT, Central Circle Kollam in the State of Kerala in exercise of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receded by a valid notice, followed by an effective opportunity of furnishing reply and hearing. The learned counsel for the petitioners has further referred to Rule 127 of the Income Tax Rules to submit that the addresses to which the notices dated 23.05.2018 and dated 26.06.2018 were sent and stated to be delivered and/or wherefrom the same were returned undelivered as unclaimed were not addresses where delivery of such notices was permitted. 10. It is submitted by the learned counsel for the petitioners that the appropriate reason must be disclosed in the notice itself and the failure to do so would vitiate the notice as well as the transfer order which is passed in consequence of an inadequate notice. The notice must indicate the reasons as to why it is necessary to transfer the cases from one place to the other but in the instant cases, the notices dated 23.05.2018 did not meet the requirements and as such, the entire proceeding which is quasi judicial in nature, is vitiated having fallen short of the principles of natural justice. The ground of transfer which must have nexus with administrative convenience and co-ordinated investigation is apparently missing in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managed from Kerala, which have necessitated the transfer of their cases to Kerala. As regards the service of notices dated 23.05.2018 and dated 26.06.2018 are concerned, it is submitted by him that the copies of the first notice dated 23.05.2018 were duly served upon the petitioners on 07.06.2018. When the first notice had been duly served on the petitioners, there is no question of non service of the second notice, which was sent to the same addresses, located in Kerala, where the first notice was served on them. It is further submitted by him that the statements of the petitioners that the second notice dated 26.06.2018 had never been served on them are incorrect statements. The postal articles containing the second notice were returned by the postal authorities with the endorsement unclaimed , which fact establishes that the petitioners knowingly did not accept the second notice dated 26.06.2018 after having received the first notice sent to them at the same addresses. There was no endorsement of the postal authority to the effect that the address was wrong. Merely because the notices were not served at the registered addresses of the petitioners, it is not open for the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. 13. For the purpose of adjudication of the issue involved in this batch of writ petitions, the pleadings and the documents available in the writ petition, W.P.(C) No. 33 (K)/2019 are considered treating the same as the leading case of this batch, since issues involved in the other writ petitions are also similar in nature and inter-connected and the learned counsel appearing for the parties have adverted to the pleadings of the said writ petition. The pleadings in all the other writ petitions, the counter affidavits of the respondent Income Tax Department authorities and the affidavits-in-reply to the counter affidavits are also in similar lines. 14. Before proceeding further it is apt to quote the provisions of Section 127 of the Act hereunder:- 1. The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal 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 concurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year. 15. It has emerged from the materials on record that a search and seizure operation was carried out by the respondent authorities on 08.06.2017 at various business as well as residential premises of M/s Sreevalsam Group under Section 132 of the Act. From the materials gathered during the said search and seizure operation, it has been found out that the petitioner in W.P.(C) No. 33(K)/2019 is the promoter of M/s Sreevalsam Group and his wife, two sons and a daughter who are the petitioners in the other writ petitions, mentioned hereinabove, are also connected with the affairs of various business entities of M/s Sreevalsam Group. 16. A perusal of Section 127 of the Act shows that the same pertains to power to transfer a case from one jurisdictional Assessing Authority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with the ACIT, Central Circle - Kollam, a copy of which was also sent to the addressees with the notice dated 07.12.2017 with the proposal to pass an order under Section 127(2) of the Act to centralize the cases from the ACIT, Circle - Dimapur and/or the ITO, Ward - I, Dimapur, as the case may be, to the ACIT, Central Circle - Kollam, Kerala. It, thus, appears that prior to sending the notice dated 07.12.2017, there was agreement between the Director General of Income Tax (Inv), Kochi and the Principal Chief Commissioner of Income Tax, NER, Guwahati belonging to the two jurisdictions. It is neither a pleaded case of the petitioners nor it is submitted by the learned counsel for the petitioners that there was lack of agreement or there was disagreement between the two respective jurisdictional authorities for the purpose of transferring the cases of the petitioners from Dimapur, Nagaland to Kollam, Kerala. 17. In the order dated 18.07.2018 (Annexure-VI to the writ petition), it has been recorded that the DDIT (Inv), Kollam, Kerala had suggested for centralisation of 21 Group cases with the ACIT, Central Circle - Kollam, Kerala. Out of the 21 cases, 5 cases were assessed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that he was found to be a Director of M/s Moneymuttahh Nidhi Ltd., which is based in Pathanamthitta district of Kerala, within the jurisdiction of the ACIT, Central Circle - Kollam. The petitioner in W.P.(C) No. 34(K)/2019, by the notice dated 23.05.2018, was informed that he is the proprietor of M/s Sreevalsam Residency, based in Pathanamthitta district of Kerala. The petitioner in W.P.(C) No. 35(K)/2019, by the notice dated 23.05.2018, was informed that he is the proprietor of M/s Sreevalsam Textiles, Pandalam, Pathanamthitta district, Kerala. That apart, both these two petitioners are also Directors in M/s Sreevalsam Gold Diamond Private Ltd., M/s Rajavalsam Motors Private Ltd., M/s Sreevalsam Hotels Resort Private Ltd. and M/s Moneymuttahh Nidhi Ltd., all based in Pathanamthitta district, Kerala. In the notice dated 23.05.2018, it is recorded that the petitioner in W.P.(C) No. 36(K)/2019 is the proprietrix of M/s Rajavalsam Fuels, which runs a fuel outlet at Pandalam, District - Pathanamthitta. She is also found to be a Director in M/s Sreevalsam Gold Diamonds Private Ltd., M/s Allebasi Builders Developers Private Ltd. and M/s Vrindavan Builders Private Ltd., which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired in 2007, and were retained as Consultant. It is learnt that your consultancy services were terminated in the wake of the search. It was also found that huge funds, running into several crores of rupees were, at your instance and direction, transferred from some business entities in Nagaland, which are run on paper by Nagaland residents, to various bank accounts of businesses in Kerala which are controlled by your family members. It has been brought out in the search findings that your own and your family members financial interests are based, and are controlled and managed, in Kerala state, particularly in Pathanamthitta district. Your family comprises yourself, your wife Smt. Valsala Raj, your sons Shri. Varun Raj and Shri. Arun Raj, and your daughter Ms. Pooja Raj. In the course of the search proceedings, it was found that although your family members were residing in Nagaland earlier, by the year 2006, Smt. Valsala Raj, Shri. Varun Raj, Shri. Arun Raj and Ms. Pooja Raj had relocated to Bangalore. By the year 2010-11, Shri. Varun Raj and Shri. Arun Raj had shifted to Pandalam (your ancestral place) in Pathanamthitta district of Kerala and started businesses in and arou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta district. Over several years, you have been directing the transfer of huge sums of money from several bank accounts in Nagaland to your family s businesses and to your family members who are all based in Pathnamthitta district of Kerala, making investments in your own name and in the names of your family members in the said businesses and also in several immovable properties in Kerala and elsewhere. Whenever funds were transferred to third parties, the same was ultimately transferred to an associate or concern in which you or your family members had controlling interest. It is manifest from the modus operandi followed by you that although the source of funds lay in Nagaland, its ultimate destination was in assets in Kerala belonging to you or your family members and to businesses controlled and managed by you or your family members in Kerala. Confronted with the revelation that you had made huge investments in properties and businesses in Kerala you had declared in your statement under section 132(4) that you were admitting additional income of ₹ 100 crore as undisclosed income in the hands of yourself, your family members and the various businesses by the various pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Circle - Kollam in the State of Kerala which, in turn, have explained the situation implied as to why the cases of the petitioners should not be considered for assessment in the State of Nagaland. Thus, this Court is of the considered view that the notices dated 23.05.2018 did not suffer from absence of reasons. Rather, the grounds of transfer, indicated in the said notices, are likely to facilitate a co-ordinated investigation and to be convenient for both the sides, contrary to the claims of the petitioners. As already noted above, it is not the case of the petitioners that there are only 7 (seven) cases of assessment only for the Group and all those are assessed only at Dimapur with no case of assessment with the ACIT, Central Circle - Kollam, Kerala. As such, the contention made on behalf of the petitioners on that count is found to be not tenable. 22. The rival submissions of the learned counsel for the parties as regards service of notice are taken note of. The contention of the petitioners with regard to the first notice dated 23.05.2018 is that the said notice had arbitrarily and illegally been served to each of them at a wrong address in Kerala when such no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory provision has been brought to the notice of this Court by the petitioners to buttress their contention to the effect that a time period is to be stipulated in such notice itself for submission of reply by the assessee to the proposal of transfer. The time period between the date of first notice i.e. 23.05.2018 and the date of passing of the impugned order dated 18.07.2018 is 56 days whereas the time period between the date of service of the first notice i.e. 07.06.2018, claimed by the respondent no.1, and the date of passing of the impugned order dated 18.07.2018 is 41 days, which are reasonable time period for one to respond to such a notice. Grant of reasonable time period is also one of the facets of affording reasonable opportunity of being heard. But considering the time periods, indicated above, it cannot be said that the respondent authorities had fallen short of on that count in adhering to the principles of natural justice. 23. In the first round of litigation, the petitioners had assailed the impugned action of transfer of their cases on the grounds that no reason was assigned by the respondent authorities in the notices, all dated 07.12.2017, containing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wherein he does not normally reside. The first is a case of wrong address but the second is not a case of wrong address. The plea that the assessees do not reside in those addresses is not to be accepted in this batch of writ petitions for the reasons already discussed in the preceding paragraphs and the view taken in respect of service of the first notice dated 23.05.2018. In this connection, it is profitable to refer to the presumption available in Section 27 of the General Clauses Act, 1897. As per the presumption under Section 27, when it is found that a notice has been sent by post to the correct address of the noticee, it is deemed to have been served or that the noticee is deemed to have a knowledge of the notice. Even in case such a notice returns unserved, it is deemed to have been served or that the noticee is deemed to have knowledge of the notice. It is pertinent to note that in the cases in hand, the postal authority had returned the postal articles, with the endorsement, unclaimed and not with any remark that the addresses were wrong. To displace such presumption as regards service of notice, nothing has been said on behalf of the petitioners except the bald state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Deputy Commissioner of Income Tax (DCIT), Central Circle (6), New Delhi for the purpose of a co-ordinated investigation and assessment of the petitioner. The order was passed on the grounds that the case belonging to the group were centralized with the DCIT, Central Circle (6), New Delhi and that the assessee had large scale financial transactions with the said group. It has been held that the power to transfer cases under Section 127 of the Act is to be exercised after following the principles of natural justice. It has been further held that the discretion of the authority to transfer a case has to be examined on the touchstone of the same not being arbitrary and/or perverse and/or malafide. If there are reasons in the impugned order which indicates due application of mind to reach a view to transfer a case from one jurisdiction to another then a High Court will not interfere with the discretion of the administrative authority to transfer the case. This discretion is vested by the Act in high ranking officials and the necessity to transfer a case from the jurisdiction of one Assessing Officer to another Assessing Officer for better administration of the Act could be diverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground that the same was ultra-virus Section 127(2)(a) of the Act as there was disagreement between the two jurisdictional authorities for such transfer. Upon due consideration, a Division Bench of this Court did not interfere with the impugned order finding that there was no disagreement. It was observed that there was no allegation of personal mala fides. This Court noted that though the head office of the petitioner company was in Dibrugarh where it was previously assessed, the registered office of the Company and business activities of the group were mostly around New Delhi. After perusal of the materials on record, it was found that the opinion formed by the Commissioner of Income Tax, Dibrugarh was not in any manner vitiated as there were materials to show that there was search and seizure at Delhi and there was allegation of tax evasion at Delhi which was being investigated at Delhi. The facts recorded in the impugned orders dated 18.07.2018 in this present batch of writ petitioners are in similar lines like Continental Milkrose (India) Ltd.(supra). 27. In Rathi and Company (supra), the challenge was to an order passed by the CIT, Guwahati-II, Guwahati tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Malu (supra) were followed. 29. In Atlanta Capital Pvt. Ltd. (supra) , the subject-matter before the Delhi High Court was an appeal under Section 260A(1) of the Act against an order of the Income Tax Appellate Tribunal (ITAT) and the question that arose was whether the notice to the assessee under Section 148 of the Act was duly issued and served in accordance with law. It was held that the onus was on the revenue to show that the proper service of notice had been affected under Section 148 of the Act on the assessee. It was found that the notice dated 27.03.2008 was issued to the assessee by the Assessing Officer (AO) at an address at B-231, Okla Industrial Area, Phase-I, New Delhi. Admittedly, the assessee had shifted from that address w.e.f. 01.02.2005 to a new address at B-115, Sarvodaya Enclave, New Delhi. For AY 2005-2006 and the subsequent AYs, the assessee disclosed his new address and even the AO had sent letters to the assessee at the new address on 08.08.2007 and 25.01.2008 for AY 2006-2007. It was in such fact situation, the Court held that there was no proper service of notice on the assessee under Section 148 of the Act. Noticeably, the notice involved th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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