An isolated transaction without an established group nexus cannot justify transfer under Section 127.

The petitioner, a Kolkata resident and managing director of a Kolkata-based company, challenged an order under Section 127 of the Income-tax Act, 1961 transferring his assessment jurisdiction from Kolkata to Delhi for coordinated investigation.

The proposed transfer followed inquiries into a ₹2.82 crore business advance the petitioner made to GMZ Commodities India Pvt. Ltd. in financial year 2022–23, which was returned through banking channels in the same year.

The petitioner denied any other transaction or structural connection with GMZ or the NML Group, whose entities were searched in 2023.

After receiving show-cause notices and submitting objections, the petitioner challenged the transfer order, arguing that the alleged transaction did not justify transfer and that the order failed to address the evidence and hardship raised.

The Revenue maintained that centralisation was necessary to investigate alleged accommodation entries and coordinate proceedings.

1. Whether the transfer of the petitioner’s assessment jurisdiction to Delhi under Section 127 was justified by a sufficient nexus with the searched NML Group and a legitimate need for coordinated investigation.

2. Whether the transfer order adequately considered the petitioner’s objections and disclosed a proper basis for the transfer.

Section 127 of the Income-tax Act empowers the competent authority to transfer a case between Assessing Officers, subject to the statutory requirements, including the applicable procedure, a reasonable opportunity of hearing where required, and recording reasons.

Coordinated investigation may justify transfer, but the decision must be supported by a legitimate investigative need and proper application of mind; a transaction alone, without a demonstrated group connection, may not justify transferring jurisdiction.

The Court relied on Lords Distillery for the requirement that objections be considered and reasons be valid and specific, and on Pradeep Kumar Kajaria for the need for cogent reasons and supporting material under Section 127.

It also referred to Mangal Chand & Sons, Dollar Gulati, Kamal Nath and Bhupinder Singh, cited by the Revenue in support of transfers for coordinated investigation where a sufficient nexus exists.

The Court accepted that the Revenue must be able to investigate the alleged accommodation entry, but found that the material relied on did not establish interlacing of funds, interconnected business activities or a structural link between the petitioner and the searched NML Group.

The asserted basis was an isolated advance to GMZ, made and repaid through banking channels in the same financial year; the petitioner denied further dealings and had provided explanations and records.

In the Court’s view, the transfer order did not demonstrate why centralising the petitioner’s assessment in Delhi was necessary, and the alleged investigative basis was insufficiently transparent and reasoned.

The transfer was therefore arbitrary and disproportionate despite the Revenue’s stated interest in coordinated investigation.

The Delhi authorities were directed to send relevant evidence, seized material and investigation reports to Kolkata within four weeks; the Kolkata Assessing Officer may examine the transaction and take action in accordance with law.

The petitioner was directed to cooperate with the Kolkata authorities and could be required to appear before Delhi investigation authorities virtually; no coercive action was to be taken for non-appearance in Delhi during the intervening period.