'Co-Ordinated Investigation' For Prevention Of Tax Evasion Is Good Ground For Transfer: Delhi HC Refuses To Interfere With Transfer Order U/s 127

As per Section 127 of Income tax Act, 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 concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.

The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “it is ex-facie evident from the transfer order that it has been passed after giving a reasonable opportunity of hearing, considering the objections raised by the Assessee and the case of the Assessee was centralized “for the purpose of coordinated enquiries, investigations, and administrative convenience' passed the impugned order”.

As per the brief facts of the case, pursuant to a search-proceedings conducted at the premises of Zee Lab Group, headquartered at Haryana, certain incriminating materials alluding to the Assessee were found and hence, a notice under Section 131(1A) was issued to the Assessee calling for certain details. Subsequently, notice under Section 127(1) was issued proposing to centralize Assessee's case to DCIT, Central Circle, Haryana for the purpose of 'administrative, convenience, coordinated investigation and assessment'.

Relying on the Allahabad High Court judgment in Bhatia Minerals v. Commissioner of Income-Tax and Patna High Court judgment in Jharkhand Mukti Morcha v. Commissioner of Income-Tax, Ranchi, the Bench reiterated that “the 'coordinated investigation' for the purpose of proper assessment, prevention of evasion of tax, collection of tax is a good ground for transfer as it eases the administrative convenience of the income-tax authorities”.

The Bench observed that the administrative convenience of the Revenue and the need for 'coordinated investigation' would take precedence over the logistical difficulties faced by the Assessee, and reiterated. that Section 127, a machinery provision, the powers thereunder can be exercised for larger public interest and to fulfil the bona fide objectives of the Act

Relying upon the coordinate Bench judgment in Sameer Leasing Co. Ltd. v. Chairman, CBDT [1990] 185 ITR 129, the Bench further reiterated that “When such high functionaries agree to the transfer and a show-cause notice is issued and reasons are contained in the order of transfer and those reasons appear to be germane to the transfer and show that the transfer has been made in the public interest and for a proper adjudication under the Act, we do not see how the impugned provision can be said to be ultra vires”.

Referring to the Apex Court decision in Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC), the Bench also reiterated that “there is no fundamental right to be assessed at a particular place” and when Section 127 powers are invoked “territorial nexus becomes irrelevant and what becomes more prominent are the interests of adjudication and collection of taxes”.

At the same time, the Bench clarified that Section 127 order should reflect application of mind while disposing Assessee's objections and despite being a machinery provision, the reasons recorded in the transfer order should not be capricious or mala fide and should not be contrary to the bona fide objectives of the Act.

Finding that the details furnished by the Assessee indicated that certain transactions pertaining to the unsecured loans exist between the Assessee and the searched persons, the High Court upheld the impugned order which is purely administrative and does not call for judicial review as it is not a case where “the exercise of statutory powers by the authority can be said to be wholly arbitrary, irrational, without jurisdiction or suffers with mala fide intention”.

Counsel for Taxpayer: N.P. Shahi, Deepanshu Mehta & Kumail Abbas

Counsel for Department: Gaurav Gupta, Shivendra Singh & Namit Gupta

Case Title: Dollar Gulati Vs PCIT and Ors

Citation: 2024 LiveLaw (Del) 616

Case Number: W.P.(C) 4054/2024 & CM APPL 16537/2024

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