Mandatory Prior Hearing under Section 127(2) Cannot Be Waived for Administrative Convenience or Typographical Errors

The petitioner filed his income tax return for Assessment Year 2021-22 on December 17, 2021.

On March 30, 2025, the Respondent No. 1 issued a notice under Section 148 of the Income Tax Act, 1961, to reopen the assessment based on incriminating documents allegedly found during a search of the "Bleach Chem Group".

The petitioner filed a return in response and submitted objections on June 30, 2025, denying the alleged cash transactions.

While these objections were pending, Respondent No. 2 passed an order on January 19, 2026, under Section 127(2) of the Act, transferring the petitioner’s case from Ahmedabad to Rajkot without providing a prior opportunity for a hearing.

The transfer order erroneously claimed the transfer was made "on request of assessee".

1. Whether the transfer of the petitioner’s case from Ahmedabad to Rajkot under Section 127(2) of the Income Tax Act was legally valid despite the lack of a prior hearing.

2. Whether the Revenue must dispose of the petitioner’s objections to the Section 148 notice via a speaking order before proceeding with the assessment.

The court primarily applied Section 127(2)(a) of the Income Tax Act, 1961, which mandates that a reasonable opportunity of being heard must be given to the assessee before an order is passed to transfer a case from one jurisdiction to another.

The court also adhered to the procedural requirement that an Assessing Officer must dispose of an assessee’s objections to a reopening notice under Section 148 through a speaking order before finalizing the assessment.

The court noted the respondents' admission in their affidavit-in-reply that the mandatory requirement of Section 127(2)(a)—providing a reasonable opportunity of being heard—was not followed.

The Revenue admitted that the statement in the transfer order claiming the transfer was at the "request of the assessee" was a typographical error.

Consequently, the court found the transfer order to be procedurally flawed and without jurisdiction.

Regarding the assessment, the court emphasized that the ongoing proceedings required the disposal of the petitioner’s objections to the Section 148 notice.

However, because the transfer was invalid, the jurisdiction remained and required a fresh proceeding for transfer following the rules of natural justice.

The court directed the respondents to provide the petitioner a hearing before passing any fresh transfer order and subsequently to decide the petitioner's objections to the Section 148 notice in accordance with the law.

The court ordered the entire exercise to be completed by March 25, 2026.

Rule made absolute.