Athena Trade Winds Pvt. Ltd. v. Principal Commissioner of Income-tax-1 & Anr
[Citation -2019-LL-1210-19]

Citation 2019-LL-1210-19
Appellant Name Athena Trade Winds Pvt. Ltd.
Respondent Name Principal Commissioner of Income-tax-1 & Anr.
Court HIGH COURT OF MADHYA PRADESH AT INDORE
Relevant Act Income-tax
Date of Order 10/12/2019
Judgment View Judgment
Keyword Tags reasonable opportunity of being heard • principles of natural justice • search and seizure operation • warrant of authorization • concurrent jurisdiction • reasons for reopening • recording of reasons • administrative order • business transaction • residential premises • statutory provisions • commission income • transfer of case • assessment order • investigation
Bot Summary: Learned counsel for the petitioner has vehemently argued before this court that keeping in view the judgment delivered in the case of Ajanta Industries V/s. Central Board of Direct Taxes, 1976 102 ITR 281, it is mandatory under the law to communicate the reasons recorded for the purposes of the transfer of a case from one circle to another circle and the present case, the reasons recorded were not at all communicated to the petitioner. The section may be set out: The Commissioner of Income-tax may transfer any case from one Income-tax Officer subordinate to him to another, and the Central Board of Revenue may transfer any case from any one Income-tax Officer to another. 29506/2018 reasons for doing so, transfer any case from one In come- tax Officer subordinate to him to another also subordinate to him, and the Board may similarly transfer any case from one Income- tax Officer to another. The transfer of a case under sub- section may be made at any stage of the proceedings, and shall not render necessary the re- issue of any notice already issue by the Income-tax Officer from whom the case is transferred. The aforesaid para makes it very clear that the order for transfer of the cases in the aforesaid case was passed after affording an opportunity of hearing to the petitioners therein and to all other concerned persons by assigning cogent reasons and the procedural requirement of Section 127(2) was complied with. The aforesaid case certainly deals with transfer of a case from one Assessing Officer to another Assessing Officer. In the aforesaid case, the Rajasthan High Court was dealing with transfer of case again under the Income Tax Act and has held that convenience of assesee cannot override the need of the revenue for a better investigation of the case.


.1.... W.P.No.29506/2018 HIGH COURT OF M.P. BENCH AT INDORE D.B. HON'BLE JUSTICE S.C. SHARMA & HON'BLE JUSTICE SHAILENDRA SHUKLA W.P. No.29506/2018 (Athena Trade Winds Pvt. Ltd V/s. Principal Commissioner of Income Tax-1 & Anr.) Indore dt.10.12.2019 Shri Ashish Goyal, Advocate for petitioner. Ms. Veena Mandlik, Advocate for respondents/Department. Heard. ORDER petitioner before this court who is assessee at Indore has filed present petition being aggrieved by notice dated 22.9.2019 (Annexure P/1), by which assessee has been informed that he is being assessed at Chennai. assessee who is petitioner before this court Athena Trade Winds Pvt. Ltd. has stated in writ petition that search and seizure operation under Section 132 of Income Tax Act, 1961, were carried out in group Kaleshwari Refinery Pvt. Ltd and others on 17.5.2017 and summons were issued under Section 131 to several persons related to groups also to one Shri Vivek Pathak, Director of petitioner Company to present himself on 19.5.2017 before Officer of Director of Income Tax (Investigation), Chennai. .2.... W.P.No.29506/2018 statement of Vivek Pathak, Director was noted down under Section 134(4) and 132(4) of Income Tax Act, 1961 on 19.5.2017. He has categorically stated that petitioner Company is having business transaction with KRPL and its subsidiary KICPL based at Singapore and Company is acting as broker for them and in return gets commission income only. 2. Thereafter, search was conducted under warrant of authorization issued in name of KRPL in Office premises of petitioner Company as well as residential premises of Director Shri Vivek Pathak on 22.6.2017 and 23.6.2017 and nothing incriminating was found or seized from premises. petitioner further stated that on 16.9.2017 letter was received by petitioner for transferring of its case from DCIT-1(1) Indore to DCIT (Central)-2(4), Chennai from Income Tax Officer (Technical) under direction of Principal Chief Income Tax Commissioner, Indore. petitioner immediately submitted reply on 18.9.2017, seeking clarification and reasons for transferring of case from Indore to Chennai. petitioner also filed objections for transferring his case under Section 127 of .3.... W.P.No.29506/2018 Income Tax Act from Indore to Chennai. 3. Learned counsel for petitioner has contended before this court that without supplying any reason for transferring case from Indore to Chennai, order was passed which is at Page 41 filed along with return transferring case of petitioner from ACIT- 1(1) Indore to DCIT/ACIT (Central) circle Chennai. petitioner's contention is that even this order of transferring case was not given to him and for first time he has received notice under Section 143(2) of Income Tax Act, 1961 and has approached this court. 4. Learned counsel for petitioner has vehemently argued before this court that keeping in view judgment delivered in case of Ajanta Industries V/s. Central Board of Direct Taxes, 1976 102 ITR 281 (SC), it is mandatory under law to communicate reasons recorded for purposes of transfer of case from one circle to another circle and present case, reasons recorded were not at all communicated to petitioner. .4.... W.P.No.29506/2018 5. This court has repeatedly asked, learned counsel for Income Tax Department whether reasons were communicated to petitioner or not, she was not able to show any document to establish that reasons recorded by Department were communicated at any point of time to assessee. Nor return reflects that reasons recorded by Department were ever communicated to assessee. 6. Apex court in case of Ajanta Industries V/s. Central Board of Direct Taxes (supra) has held as under :- short question that arises for consideration is whether failure to record reasons in order which was communicated to appellants is violative of principles of natural justice for which order should be held to be invalid. Section 5(7A) was corresponding section in Income- tax Act, 1922 (briefly old Act). section may be set out: "The Commissioner of Income-tax may transfer any case from one Income-tax Officer subordinate to him to another, and Central Board of Revenue may transfer any case from any one Income-tax Officer to another. Such transfer may be made at any stage of proceedings, and shall not render necessary re- issue of any notice already issued by Income-tax Officer from whom case is transferred". successor section under Income-tax Act, 1961 is section 127 and same may be set out: "Transfer of cases from one Income-tax Officer to another:- (1) Commissioner may, after giving assessee reasonable opportunity of being heard in matter, wherever it is possible to do so, and after recording his .5.... W.P.No.29506/2018 reasons for doing so, transfer any case from one In come- tax Officer subordinate to him to another also subordinate to him, and Board may similarly transfer any case from one Income- tax Officer to another. Provided that nothing in this sub-section shall be deemed to require any such opportunity to be given where transfer is from one Income- tax Officer to another whose offices are situated in same city, locality or place. (2) transfer of case under sub- section (1) may be made at any stage of proceedings, and shall not render necessary re- issue of any notice already issue by Income-tax Officer from whom case is transferred. Explanation:-In this section and in sections 121 and 125, 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 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 date of such order or direction in respect of any year". section was amended by section 27 of Finance (No. 2) Act, 1967, and section 127 since then stands as under: (1) "The Commissioner may, after giving assessee reasonable opportunity of being heard in matter, where ever it is possible to do so, and after recording his reasons for doing so, transfer any case from any Income-tax Officer or officers also subordinate to him and Board may similarly transfer any case from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers. Provided that nothing in this subsection shall be deemed to require any such opportunity to be given where transfer is from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers and offices of all such Income- tax Officers are situated in same city, locality or place: Provided further that where any case has been transferred from any Income-tax officer or Income-tax Officers to two or more Income-tax Officers, Income-taxers to whom case is so transferred shall have concurrent jurisdiction over case and shall perform such functions in relation to said case as Board or Com- missioner (or any Inspecting Assistant Commissioner authorised by Commissioner in this behalf) may, by general or special order in writing, specify for distribution and allocation of work to be performed". (2) transfer of case under subsection (1) may be made at any stage of proceedings, and shall not render necessary reissue of any notice already issued by Income-tax .6.... W.P.No.29506/2018 Officer or Income-tax Officers from whom case is transferred. Explanation:-In this section and in sections 121, 123, 124 and 125, 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 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 date of such order or direction in respect of any year." Unlike-section 5(7A) section 127(1) requires reasons to be recorded prior to passing of order of transfer. impugned order does not state any reasons whatsoever for making order of transfer. reason for recording of reasons in order and making these reasons known to assessee is to enable opportunity to assessee to approach High Court under its writ jurisdiction under article 226 of Constitution or even this Court under Article 136 of Constitution in appropriate case for challenging order, inter alia, either on ground that it is based on irrelevant and extraneous condonations Whether such writ or special leave application ultimately fails is not relevant for decision of question We are clearly of opinion that requirement of recording reasons under section 127(1) is mandatory direction under law and non-communication thereof is not saved by showing that reasons exist in file although not communicated to assessee. When law requires reasons to be recorded in particular order affecting prejudicially interests of any person, who can challenge order in court, it ceases to be mere administrative order and vice of violation of principles of natural justice on account of omission to communicate reasons is not expiated Mr. Sharma also drew our attention to decision of this Court in S Narayanappa and Others vs. Commissioner of Income-tax, Bangalore where this Court was dealing with section 34 of old Act. It is clear that there is no requirement in any of provisions of Act or any section laying down as condition for initiation of proceedings that reasons which induced Commissioner to accord sanction to proceed under section 34 must also be communicated to assessee. Income-tax Officer need not communicate to assessee reasons which led him to initiate proceedings under section 34. case under section 34 is clearly distinguishable from that of transfer order under section 127(1) of Act. When order under section 34 is made aggrieved assessee can agitate matter in appeal against assessment order, but assessee against whom order of transfer is made has no such remedy under .7.... W.P.No.29506/2018 Act to question order of transfer. Besides, aggrieved assessee on receipt of notice under section 34 may even satisfy Income-tax Officer that there were no reasons for reopening assessment. Such opportunity is not available to assesse under section 127(1) of Act. above decision is, therefore, clearly distinguishable. We are, therefore, clearly of opinion that non- communication of reasons in order passed under section 127(1) is serious infirmity in order for which same is invalid. judgment of High Court is set aside. appeal is allowed and orders of transfer are quashed. No costs. 7. Learned counsel for Income Tax Department has placed reliance upon judgment delivered by this court in case of Ambika Solvex & Others v/s. Commissioner of Income Tax & Others, (2014) 23 ITJ 165 (MP), she has placed heavy reliance on para 25 of aforesaid judgment. aforesaid para makes it very clear that order for transfer of cases in aforesaid case was passed after affording opportunity of hearing to petitioners therein and to all other concerned persons by assigning cogent reasons and procedural requirement of Section 127(2) was complied with. 8. In present case, procedural requirement as provided under Section 127 of Act has not been complied with and therefore, judgment is distinguishable on facts. .8.... W.P.No.29506/2018 9. Learned counsel for Income Tax Department has also placed reliance upon judgment delivered in case of Bhatia Minerals V/s. Commissioner of Income-Tax & Others, reported in 1993 ITR Vol. 200 Page 591. aforesaid case certainly deals with transfer of case from one Assessing Officer to another Assessing Officer. However, issue of requirement of recording reasons and communication thereof has not been considered by Allahabad High Court in aforesaid judgment and therefore, judgment is again distinguishable on facts. 10. She has also placed reliance upon judgment delivered in case of Rishikul Vidyapeeth v/s. Union of India & Ors. reported as 1982 Vol.136 ITR Pg. 139. In aforesaid case, Rajasthan High Court was dealing with transfer of case again under Income Tax Act and has held that convenience of assesee cannot override need of revenue for better investigation of case. There is no doubt about it. need of revenue for better investigation is of paramount importance. However, need of revenue for better investigation of case cannot .9.... W.P.No.29506/2018 override and supersede statutory provisions as it is being done in present case and therefore, judgment is again distinguishable on facts as in aforesaid case issue of requirement of recording reasons and communication thereof was not at all considered. 11. In light of aforesaid, as at no point of time, reasons recorded, if any, were communicated to petitioner and therefore, no opportunity of hearing was granted to petitioner on issue of reasons recorded by Department. impugned order passed by Department transferring case to Chennai is quashed. All consequential proceedings are also quashed. (S.C. SHARMA) (SHAILENDRA SHUKLA) JUDGE JUDGE Shailesh Digitally signed by Shailesh Sukhdev DN: c=IN, o=High Court of Madhya Pradesh Bench Indore, postalCode=452001, st=Madhya Pradesh, SS/- 2.5.4.20=b99d782efca3d28a06caddf3fa57b98c350 54f3dd8638f2f98df0172d29e61c2, Sukhdev serialNumber=ffa0399242ca45066c1961743f4d30 7cfe601d3c99a4a61b38fcd08eaabe7237, cn=Shailesh Sukhdev Date: 2019.12.11 17:17:07 +05'30' Athena Trade Winds Pvt. Ltd. v. Principal Commissioner of Income-tax-1 & Anr
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