Full Judgment Text
WP459_20.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.459 OF 2020
Parappurathu Varghese Mathai … Petitioner
Vs.
Principal Commissioner of Income Tax-28 & others … Respondents
WITH
WRIT PETITION NO.690 OF 2020
Sarakutty Mathai … Petitioner
Vs.
Principal Commissioner of Income Tax-28 & others … Respondents
WITH
WRIT PETITION NO.492 OF 2020
Olive Builders … Petitioner
Vs.
Principal Commissioner of Income Tax-28 & others … Respondents
Mr. Devendra H. Jain for Petitioner.
Ms Shehnaz (Sheroo) Vispy Bharucha (Daruwalla) for Respondent
Nos.1 to 3.
CORAM : UJJAL BHUYAN,
MILIND N. JADHAV, JJ.
DATE : MARCH 13, 2020
P.C. :
This order will dispose of Writ Petition Nos.459, 492 and 690 of
2020.
2. Heard Mr. Jain, learned counsel for the petitioner and Ms
Bharucha, learned standing counsel Revenue for the respondents.
3. On consent of learned counsel for the parties, we have taken up
Writ Petition No.459 of 2020 as the lead case.
4. By filing this petition under Article 226 of the Constitution of
India, petitioner seeks quashing of orders dated 09.08.2019 and
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09.12.2019 relating to transfer of assessment jurisdiction from Mumbai
to Kochi.
5. Brief reference to the relevant facts is considered necessary.
6. Petitioner is an individual and a partner of the partnership firm
M/s. Olive Builders engaged in the business of development and
construction of buildings. It is stated that he is an assessee assessed to
income tax under the jurisdiction of respondent No.1.
7. It appears that a search and seizure operation was carried out in
the premises of Olive Builders on 16.05.2019 at Kochi where the
partnership firm is engaged in the business of development and
construction of buildings.
8. Thereafter an order dated 09.08.2019 was passed by respondent
No.1 - Principal Commissioner of Income Tax-28, Mumbai under sub-
section (2) of Section 127 of the Income Tax Act, 1961 (briefly ‘the Act’
hereinafter) transferring the case of the petitioner from Assistant
Commissioner of Income Tax-28(2), Mumbai to Deputy Commissioner
of Income Tax / Assistant Commissioner of Income Tax, Central Circle-
1, Kochi for administrative convenience and co-ordinated investigation
as the territorial jurisdiction of the case was with the assessing officer. It
was also mentioned that relevant case records under the Gift Tax Act as
well as Wealth Tax Act, if any, would also stand transferred accordingly
and that the said order was to come into effect on and from the date of
issue of the order.
9. It may be mentioned that order dated 09.08.2019 was a common
order in respect of the present petitioner as well as petitioner in Writ
Petition No.492 of 2020 (M/s. Olive Builders) and petitioner in Writ
Petition No.690 of 2020 (Sarakutty Mathai).
10. It appears that an objection was raised by the petitioner before
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respondent No.1 on 22.08.2019 regarding the order dated 09.08.2019 by
contending that the procedure prescribed under Section 127(2) of the Act
was not complied with thereby rendering the order dated 09.08.2019
invalid.
11. In response to the said notice, petitioner was informed by the
office of respondent No.1 vide letter dated 30.08.2019 that petitioner’s
case was also covered by the search and seizure operation carried out in
the premises of M/s. Olive Group under Section 132 of the Act by the
Investigation Wing of the Income Tax Department at Kochi. It was
mentioned that a proposal was received from the Principal Director of
Income Tax (Investigation), Kochi for centralization of the case of the
petitioner at Kochi for co-ordinated investigation of the group to protect
the interest of the revenue. To afford an opportunity of hearing,
petitioner was asked to attend the office of respondent No.1 either
personally or through his authorized representative on 11.09.2019.
11.1. This led to submission of representation by the petitioner before
respondent No.1 on 11.09.2019 requesting respondent No.1 to retain the
assessment jurisdiction over the petitioner at Mumbai.
11.2. Further representation was submitted on 16.09.2019.
12. Thereafter respondent No.1 passed an order dated 09.12.2019
stated to be in modification of the earlier order dated 09.08.2019 passed
under Section 127 of the Act. By the said order passed in exercise of
powers conferred by sub-section (2) of Section 127 of the Act,
respondent No.1 transferred the case of the petitioner from the
jurisdiction of the assessing officer Assistant Commissioner of Income
Tax, 28(2), Mumbai to Deputy Commissioner of Income Tax / Assistant
Commissioner of Income Tax, Central Circle-1, Kochi.
13. Aggrieved, the present writ petition has been filed.
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14. As already noticed above, the other two assessees namely, Olive
Builders and Sarakutty Mathai have filed the related writ petitions.
15. Basic contention of learned counsel for the petitioner is that there
was no agreement between the competent / designated authorities
leading to transfer of jurisdiction as per requirement of clause (a) of sub-
section (2) of Section 127 of the Act. That apart, reasons were not
disclosed. It was only after petitioner lodged objection that reasons came
to be disclosed in the form of the second order dated 09.12.2019, which
is stated to be in modification of the earlier order dated 09.08.2019.
Therefore, it is a case of post-decisional hearing which is not
contemplated under the statute. Final contention is that prior to issuance
of order dated 09.12.2019, reasons were never provided to the petitioner.
Mr. Jain would therefore contend that above procedural infirmities have
vitiated the decision making process warranting interference by the writ
court.
16. Per contra , Ms Bharucha, learned standing counsel Revenue has
referred to the averments made by respondent Nos.1, 2 and 3 in their
common affidavit in reply filed on 03.02.2020. Referring to the
averments made in paragraphs 5 and 6 of the said affidavit, she submits
that proposal was received from the Directorate General of Investigation
(Investigation), Kochi dated 25.06.2019 for centralization of assessment
jurisdiction at Kochi in the group cases relating to Olive Builders
including that of the petitioner. Similar proposal was also received from
the Principal Director of Income Tax (Investigation), Kochi dated
27.06.2019. Thereafter consent for transfer of jurisdiction was received
from the Chief Commissioner of Income Tax-6, Mumbai on 05.07.2019.
Accordingly, the order dated 09.08.2019 was passed under Section 127
of the Act. After the petitioner raised objection, the same was duly
considered whereafter opportunity of hearing was given to the petitioner.
Representative of the petitioner was heard and comments from the
concerned assessing officers were called for and considered. At this
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stage, we may mention that the affidavit in reply of respondent Nos.1, 2
and 3 also deals with the merit of the case relating to the search and
seizure operation carried out on 16.05.2019 and the reasons for transfer
of jurisdiction. Therefore, submission of Ms Bharucha is that the
procedural requirements contemplated under Section 127(2) of the Act
have been complied with and thus, there is no error or infirmity in the
decision taken by respondent No.1 for transfer of jurisdiction. After
passing of the subsequent order dated 09.12.2019, the initial order dated
09.08.2019 would no longer subsist as the same has merged with the
subsequent order dated 09.12.2019, which is in reality and substance, the
order passed under Section 127(2) of the Act. In the circumstances, writ
petition should be dismissed.
17. Submissions made by learned counsel for the parties have
received the due consideration of the Court.
18. Short point for consideration is whether impugned decision of
respondent No.1 to transfer assessment jurisdiction of the petitioner
from Mumbai to Kochi is in accordance with law, more specifically as
per the requirement of Section 127 of the Act?
19. To appreciate the issue, Section 127 may be adverted to. For ready
reference, we may extract Section 127 of the Act, which reads as under:
“ Power to transfer cases.
127. (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 concurrent jurisdiction) to any other Assessing Officer
or Assessing Officers (whether with or without concurrent
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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
Assessing Officers to whom the case is to be transferred are not
subordinate to the same Principal Director General or Director
General or Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner,-
(a) Where the Principal Directors General or Directors
General or Principal Chief Commissioners or Chief
Commissioners or Principal Commissioners or Commissioners
to whom such Assessing Officers are subordinate are in
agreement, then the Principal Director General or 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 Commissioners
aforesaid are not in agreement, the order transferring the case
may, similarly, be passed by the Board or any such Principal
Director General or Director General or Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner as the Board may, by
notification in the Official Gazette, authorise in this behalf.
(3) Nothing in sub-section (1) or sub-section (2) 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
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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 sub-section (1) or sub-
section (2) may be made at any stage of the proceedings, and
shall not render necessary the re-issue of any notice already
issued by the Assessing Officer or Assessing Officers from
whom the case is transferred.
Explanation .-In section 120 and this section, the word “case”,
in 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.”
20. As would be evident from the heading of the section it deals with
power to transfer cases. Apparently this is a case falling within the ambit
of sub-section (2) since both the assessing officers are not subordinate to
the same higher authority, one being at Mumbai and the other at Kochi.
Therefore, we may analyze the requirement of sub-section (2). Sub-
section (2) visualizes two situations - clause (a) and clause (b). Sub-
section (2) says that where the assessing officer from whom the case is
to be transferred and the assessing officer to whom the case is to be
transferred are not subordinate to the same Principal Director General or
Director General or Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, in the event
they are in agreement, then the Principal Director General or 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
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recording his reasons for doing so, pass the order. This is the requirement
of clause (a) of sub-section (2). In other words, clause (a) deals with a
situation where the designated higher authorities of both the areas to whom
the respective assessing officers are subordinate are in agreement. Once
they are in agreement that the assessment jurisdiction has to be transferred
then the designated higher authority from whose jurisdiction the case is to
be transferred may provide the assessee a reasonable opportunity of being
heard wherever it is possible to do so and after recording the reasons for
doing so, pass the order of transfer.
21. Before adverting to the situation contemplated under clause (b), we
are of the view that notwithstanding use of the expression ‘may’ in clause
(a) to sub-section (2), the requirement to provide reasonable opportunity of
hearing to the assessee is fundamental to the assumption of jurisdiction
under Section 127(2)(a). If that be so then the expression ‘may’ would
contemplate an obligatory requirement on the designated higher authority
to provide opportunity of hearing to the assessee. Careful reading of clause
(a) would further reveal that such reasonable opportunity of hearing has to
be provided before passing an order under Section 127(2). This is clear
from the language of the section itself. Thus, this section does not provide
or contemplate providing of post-decisional hearing. In any event, a post-
decisional hearing is to be provided only in exceptional cases and not in a
routine manner.
22. Insofar reasons are concerned, the section only provides for
recording of reasons and not furnishing of reasons to the assessee.
Therefore, the order passed under Section 127(2) must indicate that the
assessee was provided a reasonable opportunity of hearing and must also
record the reasons for transfer of assessment jurisdiction.
23. Having discussed the above, we may now advert to the situation
contemplated under clause (b). Clause (b) visualizes a situation where the
designated higher authorities of the two areas are not in agreement. In such
a situation, the order transferring the case may similarly be passed by the
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Central Board of Direct Taxes or by such designated higher authority as the
Board may, by a notification in the Official Gazette, authorize in this
behalf. Therefore, what clause (b) visualizes is a situation where the two
designated higher authorities are not in agreement regarding transfer of
assessment jurisdiction. In such a situation, the order is to be passed by the
Central Board of Direct Taxes or by the designated higher authority as may
be authorized by the Central Board of Direct Taxes by a notification in the
Official Gazette on its behalf. We may however mention that the expression
‘similarly’ is used in clause (b) of sub-section (2). As noticed above, sub-
section (2) would come into play when the two designated higher
authorities are not in agreement. If they are not in agreement then the
Central Board of Direct Taxes steps in and shall pass the necessary order
either by itself or through the authorized designated higher authority by
similarly following the procedure provided in clause (a). Therefore, the
expression ‘similarly’ would mean that the Board or the authorized
designated higher authority follow the same procedure as provided in
clause (a) before passing the order of transfer.
24. Having discussed the legal provisions as above, we may now advert
back to the first order dated 09.08.2019 passed by respondent No.1 under
Section 127(2) of the Act. Perusal of this order does not disclose that the
two designated higher authorities were in agreement for transfer of
assessment jurisdiction. Further, this order also does not indicate or
disclose that reasonable opportunity of hearing was granted to the
petitioner. That apart, the only reason mentioned for transfer of jurisdiction
is administrative convenience and co-ordinated investigation which on the
face of it is quite vague and indeterminate. It was only after petitioner
submitted objection that respondent No.1 passed the second order dated
09.12.2019 under Section 127(2) of the Act stating to be in modification of
the earlier order dated 09.08.2019. In paragraph 2 of the second order, it is
stated that a proposal was received from the Principal Director of Income
Tax (Investigation), Kochi on 25.06.2019 for centralization of cases at
Kochi. This was construed by respondent No.1 as consent for transfer of
the cases. At the same time, respondent No.1 also mentions that consent for
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transfer was received from the Chief Commissioner of Income Tax-6,
Mumbai on 05.07.2019. Accordingly, it was decided to centralize the cases
to facilitate detailed and effective co-ordinated investigation of the group
cases. Similar is the stand taken in the affidavit of the respondents.
25. The view taken by respondent No.1 that receipt of proposal from the
Principal Director of Income Tax (Investigation), Kochi was construed as
consent for transfer of the case is highly debatable. Thus in the context of
specific consent received by respondent No.1 from the Chief Commissioner
of Income Tax - 6, Mumbai, forwarding of a proposal for centralization of
assessment in a group of cases may not amount to a consent for transfer
within the meaning of clause (a) to sub-section (2). In fact the expression
used in clause (a) to sub-section (2) is ‘agreement’; ‘agreement’ per se
would mean that the concerned parties have to agree to a specific course of
action. There has to be a positive meeting of mind to the suggested
proposed course of action. The dictionary meaning of the expression
‘agreement’ is harmony in opinion or feeling; a manifestation of mutual
assent by two or more persons. Therefore, furnishing of a proposal, in our
view, may not amount to an agreement of the designated higher authorities
as contemplated under clause (a) to sub-section (2) of Section 127 of the
Act. In Noorul Islam Educational Trust Vs. CIT , (2016) 76 taxmann.com
144 , Supreme Court considered transfer of assessment jurisdiction under
Section 127(2)(a). Supreme Court held that agreement between the two
designated higher authorities was necessary. Revenue took the stand that
there was no disagreement between the two Commissioners. Rejecting this
stand, Supreme Court held that absence of disagreement cannot tantamount
to agreement as visualized under Section 127(2)(a) of the Act which
contemplates a positive state of mind of the two jurisdictional
Commissioners.
26. From the above, it is quite evident that before passing the impugned
order on 09.08.2019, no opportunity of hearing was granted to the
petitioner. Hearing was granted after the said decision was taken
culminating in the second order dated 09.12.2019. That apart, from the
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second order it is discernible that there was no agreement between the two
jurisdictional Principal Commissioners to transfer assessment jurisdiction
from Mumbai to Kochi. Evidently, the procedure prescribed under Section
127(2)(a) of the Act has not been complied with. It is trite that when a
statute requires a thing to be done in a particular manner, then it has to be
done in that particular manner.
27. In the light of the above discussions, we are of the view that the
decision making process leading to passing of the two impugned orders has
been vitiated for non-compliance to the statutory procedural requirements.
Consequently, both the orders dated 09.08.2019 and 09.12.2019 passed by
respondent No.1 cannot be sustained; those are hereby set aside and
quashed.
28. Since we have set aside the above two orders, all consequential
actions shall also stand interfered with.
29. It is open to the Central Board of Direct Taxes, New Delhi to step in
and take action as per clause (b) to sub-section (2) of Section 127 of the Act
in accordance with law keeping in mind the discussions made above.
30. We make it clear that we have not expressed any opinion on merit
and in the event Central Board of Direct Taxes decides to intervene, all
contentions of the parties would be open.
31. In view of the above order, all the three petitions are accordingly
allowed.
(MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)
Minal Parab
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.459 OF 2020
Parappurathu Varghese Mathai … Petitioner
Vs.
Principal Commissioner of Income Tax-28 & others … Respondents
WITH
WRIT PETITION NO.690 OF 2020
Sarakutty Mathai … Petitioner
Vs.
Principal Commissioner of Income Tax-28 & others … Respondents
WITH
WRIT PETITION NO.492 OF 2020
Olive Builders … Petitioner
Vs.
Principal Commissioner of Income Tax-28 & others … Respondents
Mr. Devendra H. Jain for Petitioner.
Ms Shehnaz (Sheroo) Vispy Bharucha (Daruwalla) for Respondent
Nos.1 to 3.
CORAM : UJJAL BHUYAN,
MILIND N. JADHAV, JJ.
DATE : MARCH 13, 2020
P.C. :
This order will dispose of Writ Petition Nos.459, 492 and 690 of
2020.
2. Heard Mr. Jain, learned counsel for the petitioner and Ms
Bharucha, learned standing counsel Revenue for the respondents.
3. On consent of learned counsel for the parties, we have taken up
Writ Petition No.459 of 2020 as the lead case.
4. By filing this petition under Article 226 of the Constitution of
India, petitioner seeks quashing of orders dated 09.08.2019 and
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09.12.2019 relating to transfer of assessment jurisdiction from Mumbai
to Kochi.
5. Brief reference to the relevant facts is considered necessary.
6. Petitioner is an individual and a partner of the partnership firm
M/s. Olive Builders engaged in the business of development and
construction of buildings. It is stated that he is an assessee assessed to
income tax under the jurisdiction of respondent No.1.
7. It appears that a search and seizure operation was carried out in
the premises of Olive Builders on 16.05.2019 at Kochi where the
partnership firm is engaged in the business of development and
construction of buildings.
8. Thereafter an order dated 09.08.2019 was passed by respondent
No.1 - Principal Commissioner of Income Tax-28, Mumbai under sub-
section (2) of Section 127 of the Income Tax Act, 1961 (briefly ‘the Act’
hereinafter) transferring the case of the petitioner from Assistant
Commissioner of Income Tax-28(2), Mumbai to Deputy Commissioner
of Income Tax / Assistant Commissioner of Income Tax, Central Circle-
1, Kochi for administrative convenience and co-ordinated investigation
as the territorial jurisdiction of the case was with the assessing officer. It
was also mentioned that relevant case records under the Gift Tax Act as
well as Wealth Tax Act, if any, would also stand transferred accordingly
and that the said order was to come into effect on and from the date of
issue of the order.
9. It may be mentioned that order dated 09.08.2019 was a common
order in respect of the present petitioner as well as petitioner in Writ
Petition No.492 of 2020 (M/s. Olive Builders) and petitioner in Writ
Petition No.690 of 2020 (Sarakutty Mathai).
10. It appears that an objection was raised by the petitioner before
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respondent No.1 on 22.08.2019 regarding the order dated 09.08.2019 by
contending that the procedure prescribed under Section 127(2) of the Act
was not complied with thereby rendering the order dated 09.08.2019
invalid.
11. In response to the said notice, petitioner was informed by the
office of respondent No.1 vide letter dated 30.08.2019 that petitioner’s
case was also covered by the search and seizure operation carried out in
the premises of M/s. Olive Group under Section 132 of the Act by the
Investigation Wing of the Income Tax Department at Kochi. It was
mentioned that a proposal was received from the Principal Director of
Income Tax (Investigation), Kochi for centralization of the case of the
petitioner at Kochi for co-ordinated investigation of the group to protect
the interest of the revenue. To afford an opportunity of hearing,
petitioner was asked to attend the office of respondent No.1 either
personally or through his authorized representative on 11.09.2019.
11.1. This led to submission of representation by the petitioner before
respondent No.1 on 11.09.2019 requesting respondent No.1 to retain the
assessment jurisdiction over the petitioner at Mumbai.
11.2. Further representation was submitted on 16.09.2019.
12. Thereafter respondent No.1 passed an order dated 09.12.2019
stated to be in modification of the earlier order dated 09.08.2019 passed
under Section 127 of the Act. By the said order passed in exercise of
powers conferred by sub-section (2) of Section 127 of the Act,
respondent No.1 transferred the case of the petitioner from the
jurisdiction of the assessing officer Assistant Commissioner of Income
Tax, 28(2), Mumbai to Deputy Commissioner of Income Tax / Assistant
Commissioner of Income Tax, Central Circle-1, Kochi.
13. Aggrieved, the present writ petition has been filed.
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14. As already noticed above, the other two assessees namely, Olive
Builders and Sarakutty Mathai have filed the related writ petitions.
15. Basic contention of learned counsel for the petitioner is that there
was no agreement between the competent / designated authorities
leading to transfer of jurisdiction as per requirement of clause (a) of sub-
section (2) of Section 127 of the Act. That apart, reasons were not
disclosed. It was only after petitioner lodged objection that reasons came
to be disclosed in the form of the second order dated 09.12.2019, which
is stated to be in modification of the earlier order dated 09.08.2019.
Therefore, it is a case of post-decisional hearing which is not
contemplated under the statute. Final contention is that prior to issuance
of order dated 09.12.2019, reasons were never provided to the petitioner.
Mr. Jain would therefore contend that above procedural infirmities have
vitiated the decision making process warranting interference by the writ
court.
16. Per contra , Ms Bharucha, learned standing counsel Revenue has
referred to the averments made by respondent Nos.1, 2 and 3 in their
common affidavit in reply filed on 03.02.2020. Referring to the
averments made in paragraphs 5 and 6 of the said affidavit, she submits
that proposal was received from the Directorate General of Investigation
(Investigation), Kochi dated 25.06.2019 for centralization of assessment
jurisdiction at Kochi in the group cases relating to Olive Builders
including that of the petitioner. Similar proposal was also received from
the Principal Director of Income Tax (Investigation), Kochi dated
27.06.2019. Thereafter consent for transfer of jurisdiction was received
from the Chief Commissioner of Income Tax-6, Mumbai on 05.07.2019.
Accordingly, the order dated 09.08.2019 was passed under Section 127
of the Act. After the petitioner raised objection, the same was duly
considered whereafter opportunity of hearing was given to the petitioner.
Representative of the petitioner was heard and comments from the
concerned assessing officers were called for and considered. At this
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stage, we may mention that the affidavit in reply of respondent Nos.1, 2
and 3 also deals with the merit of the case relating to the search and
seizure operation carried out on 16.05.2019 and the reasons for transfer
of jurisdiction. Therefore, submission of Ms Bharucha is that the
procedural requirements contemplated under Section 127(2) of the Act
have been complied with and thus, there is no error or infirmity in the
decision taken by respondent No.1 for transfer of jurisdiction. After
passing of the subsequent order dated 09.12.2019, the initial order dated
09.08.2019 would no longer subsist as the same has merged with the
subsequent order dated 09.12.2019, which is in reality and substance, the
order passed under Section 127(2) of the Act. In the circumstances, writ
petition should be dismissed.
17. Submissions made by learned counsel for the parties have
received the due consideration of the Court.
18. Short point for consideration is whether impugned decision of
respondent No.1 to transfer assessment jurisdiction of the petitioner
from Mumbai to Kochi is in accordance with law, more specifically as
per the requirement of Section 127 of the Act?
19. To appreciate the issue, Section 127 may be adverted to. For ready
reference, we may extract Section 127 of the Act, which reads as under:
“ Power to transfer cases.
127. (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 concurrent jurisdiction) to any other Assessing Officer
or Assessing Officers (whether with or without concurrent
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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
Assessing Officers to whom the case is to be transferred are not
subordinate to the same Principal Director General or Director
General or Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner,-
(a) Where the Principal Directors General or Directors
General or Principal Chief Commissioners or Chief
Commissioners or Principal Commissioners or Commissioners
to whom such Assessing Officers are subordinate are in
agreement, then the Principal Director General or 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 Commissioners
aforesaid are not in agreement, the order transferring the case
may, similarly, be passed by the Board or any such Principal
Director General or Director General or Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner as the Board may, by
notification in the Official Gazette, authorise in this behalf.
(3) Nothing in sub-section (1) or sub-section (2) 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
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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 sub-section (1) or sub-
section (2) may be made at any stage of the proceedings, and
shall not render necessary the re-issue of any notice already
issued by the Assessing Officer or Assessing Officers from
whom the case is transferred.
Explanation .-In section 120 and this section, the word “case”,
in 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.”
20. As would be evident from the heading of the section it deals with
power to transfer cases. Apparently this is a case falling within the ambit
of sub-section (2) since both the assessing officers are not subordinate to
the same higher authority, one being at Mumbai and the other at Kochi.
Therefore, we may analyze the requirement of sub-section (2). Sub-
section (2) visualizes two situations - clause (a) and clause (b). Sub-
section (2) says that where the assessing officer from whom the case is
to be transferred and the assessing officer to whom the case is to be
transferred are not subordinate to the same Principal Director General or
Director General or Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, in the event
they are in agreement, then the Principal Director General or 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
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recording his reasons for doing so, pass the order. This is the requirement
of clause (a) of sub-section (2). In other words, clause (a) deals with a
situation where the designated higher authorities of both the areas to whom
the respective assessing officers are subordinate are in agreement. Once
they are in agreement that the assessment jurisdiction has to be transferred
then the designated higher authority from whose jurisdiction the case is to
be transferred may provide the assessee a reasonable opportunity of being
heard wherever it is possible to do so and after recording the reasons for
doing so, pass the order of transfer.
21. Before adverting to the situation contemplated under clause (b), we
are of the view that notwithstanding use of the expression ‘may’ in clause
(a) to sub-section (2), the requirement to provide reasonable opportunity of
hearing to the assessee is fundamental to the assumption of jurisdiction
under Section 127(2)(a). If that be so then the expression ‘may’ would
contemplate an obligatory requirement on the designated higher authority
to provide opportunity of hearing to the assessee. Careful reading of clause
(a) would further reveal that such reasonable opportunity of hearing has to
be provided before passing an order under Section 127(2). This is clear
from the language of the section itself. Thus, this section does not provide
or contemplate providing of post-decisional hearing. In any event, a post-
decisional hearing is to be provided only in exceptional cases and not in a
routine manner.
22. Insofar reasons are concerned, the section only provides for
recording of reasons and not furnishing of reasons to the assessee.
Therefore, the order passed under Section 127(2) must indicate that the
assessee was provided a reasonable opportunity of hearing and must also
record the reasons for transfer of assessment jurisdiction.
23. Having discussed the above, we may now advert to the situation
contemplated under clause (b). Clause (b) visualizes a situation where the
designated higher authorities of the two areas are not in agreement. In such
a situation, the order transferring the case may similarly be passed by the
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Central Board of Direct Taxes or by such designated higher authority as the
Board may, by a notification in the Official Gazette, authorize in this
behalf. Therefore, what clause (b) visualizes is a situation where the two
designated higher authorities are not in agreement regarding transfer of
assessment jurisdiction. In such a situation, the order is to be passed by the
Central Board of Direct Taxes or by the designated higher authority as may
be authorized by the Central Board of Direct Taxes by a notification in the
Official Gazette on its behalf. We may however mention that the expression
‘similarly’ is used in clause (b) of sub-section (2). As noticed above, sub-
section (2) would come into play when the two designated higher
authorities are not in agreement. If they are not in agreement then the
Central Board of Direct Taxes steps in and shall pass the necessary order
either by itself or through the authorized designated higher authority by
similarly following the procedure provided in clause (a). Therefore, the
expression ‘similarly’ would mean that the Board or the authorized
designated higher authority follow the same procedure as provided in
clause (a) before passing the order of transfer.
24. Having discussed the legal provisions as above, we may now advert
back to the first order dated 09.08.2019 passed by respondent No.1 under
Section 127(2) of the Act. Perusal of this order does not disclose that the
two designated higher authorities were in agreement for transfer of
assessment jurisdiction. Further, this order also does not indicate or
disclose that reasonable opportunity of hearing was granted to the
petitioner. That apart, the only reason mentioned for transfer of jurisdiction
is administrative convenience and co-ordinated investigation which on the
face of it is quite vague and indeterminate. It was only after petitioner
submitted objection that respondent No.1 passed the second order dated
09.12.2019 under Section 127(2) of the Act stating to be in modification of
the earlier order dated 09.08.2019. In paragraph 2 of the second order, it is
stated that a proposal was received from the Principal Director of Income
Tax (Investigation), Kochi on 25.06.2019 for centralization of cases at
Kochi. This was construed by respondent No.1 as consent for transfer of
the cases. At the same time, respondent No.1 also mentions that consent for
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transfer was received from the Chief Commissioner of Income Tax-6,
Mumbai on 05.07.2019. Accordingly, it was decided to centralize the cases
to facilitate detailed and effective co-ordinated investigation of the group
cases. Similar is the stand taken in the affidavit of the respondents.
25. The view taken by respondent No.1 that receipt of proposal from the
Principal Director of Income Tax (Investigation), Kochi was construed as
consent for transfer of the case is highly debatable. Thus in the context of
specific consent received by respondent No.1 from the Chief Commissioner
of Income Tax - 6, Mumbai, forwarding of a proposal for centralization of
assessment in a group of cases may not amount to a consent for transfer
within the meaning of clause (a) to sub-section (2). In fact the expression
used in clause (a) to sub-section (2) is ‘agreement’; ‘agreement’ per se
would mean that the concerned parties have to agree to a specific course of
action. There has to be a positive meeting of mind to the suggested
proposed course of action. The dictionary meaning of the expression
‘agreement’ is harmony in opinion or feeling; a manifestation of mutual
assent by two or more persons. Therefore, furnishing of a proposal, in our
view, may not amount to an agreement of the designated higher authorities
as contemplated under clause (a) to sub-section (2) of Section 127 of the
Act. In Noorul Islam Educational Trust Vs. CIT , (2016) 76 taxmann.com
144 , Supreme Court considered transfer of assessment jurisdiction under
Section 127(2)(a). Supreme Court held that agreement between the two
designated higher authorities was necessary. Revenue took the stand that
there was no disagreement between the two Commissioners. Rejecting this
stand, Supreme Court held that absence of disagreement cannot tantamount
to agreement as visualized under Section 127(2)(a) of the Act which
contemplates a positive state of mind of the two jurisdictional
Commissioners.
26. From the above, it is quite evident that before passing the impugned
order on 09.08.2019, no opportunity of hearing was granted to the
petitioner. Hearing was granted after the said decision was taken
culminating in the second order dated 09.12.2019. That apart, from the
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second order it is discernible that there was no agreement between the two
jurisdictional Principal Commissioners to transfer assessment jurisdiction
from Mumbai to Kochi. Evidently, the procedure prescribed under Section
127(2)(a) of the Act has not been complied with. It is trite that when a
statute requires a thing to be done in a particular manner, then it has to be
done in that particular manner.
27. In the light of the above discussions, we are of the view that the
decision making process leading to passing of the two impugned orders has
been vitiated for non-compliance to the statutory procedural requirements.
Consequently, both the orders dated 09.08.2019 and 09.12.2019 passed by
respondent No.1 cannot be sustained; those are hereby set aside and
quashed.
28. Since we have set aside the above two orders, all consequential
actions shall also stand interfered with.
29. It is open to the Central Board of Direct Taxes, New Delhi to step in
and take action as per clause (b) to sub-section (2) of Section 127 of the Act
in accordance with law keeping in mind the discussions made above.
30. We make it clear that we have not expressed any opinion on merit
and in the event Central Board of Direct Taxes decides to intervene, all
contentions of the parties would be open.
31. In view of the above order, all the three petitions are accordingly
allowed.
(MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)
Minal Parab
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