Department Can Centralize Assessment At One Place If There Are Sufficient Reasons: Bombay High Court Upholds Transfer Order U/s 127

The High Court also found that the assessment of such persons would certainly have a bearing on the assessment of the Assessee, as there are inter se transactions between such parties.

Thus, the High Court upheld the order u/s 127 transferring Assessee's case from the AO in Mumbai to AO in Delhi.

As per Section 127 of Income tax Act, the Principal Commissioner or Commissioner can transfer cases from one AO to another if they deem it necessary for coordinated investigation, efficiency, or administrative convenience.

The Division Bench comprising Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “there was not only a substantial but an imminent reason and cause available with the respondents to exercise powers under Section 127 of the Act to deal with such cases, so as to centralize the assessment at one place”.

Facts of the case:

The Assessee, an individual and a resident of UAE, had transactions with Indian citizens, who were subject to search operation and whose assessments were centralized with the Central Circle at New Delhi. Thus, Assessee's case was also proposed to centralised at New Delhi. Challenging the same, the Assessee had approached the High Court.

Observations of the High Court:

The Bench found that the Assessee responded to the show cause notice whereby he did not make out any case against transfer of the said proceedings, and accordingly AO passed an order u/s 127 transferring Assessee's case from AO in Mumbai to AO in Delhi.

On such transfer, the Bench found that Assessee was served with notices u/s 153A and various other notices through e-mail on Assessee's email id which was operational.

As Assessee failed to comply with the notices, an order came to be passed against the Assessee u/s 271(1)(d) imposing a fine of Rs.10,000 and Assessee was also subject to special audit as per an order u/s 142(2A), noted the Bench.

The Bench took note of the fact that Assessee has not denied that he had transactions with such persons, as his only contention is that such transactions had not taken place in India.

As per Section 127(1) a decision to transfer the case is required to be taken after giving the Assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording of reasons for doing so, the case of the assessee can be transferred from one AO to another, added the Bench.

Thus, the Bench clarified that transfer order cannot be faulted on the ground that it is in breach of the principles of natural justice, since the Assessee has admitted that the he had transactions with the persons whose cases are already centralized with the Delhi I-T Authority.

The Bench also rejected Assessee's argument that he was unaware of the transfer proceedings as the very show cause u/s 127 had indeed been received and was also responded to by the Assessee.

Even if the authorities passing the order inadvertently records that the reply was not filed by the assessee, the Bench clarifierd that such mistake in the order would not enure to the benefit of assessee in the absence of any real and substantial prejudice, which the petitioner has grossly failed to demonstrate.

Therefore, while stating that no prejudice would be caused to the Assessee if he cooperates with Delhi I-T Authorities in all matters relating to the assessment, the High Court dismissed Assessee's petition.

Counsel for Petitioner/ Assessee: Senior Advocate Percy Pardiwalla with Advocates Suraj Iyer, Rajat Manchanda and Gauri Joshi

Counsel for Respondent/ Revenue: Advocates Akhileshwar Sharma, Debesh Panda, Ashish Venugopal and Pramod Kathane

Case Title: Rajiv Saxena vs. Commissioner of Income Tax

Case Number: W.P No. 3894 of 2022

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