Parappurathu Varghese Mathai v. Principal Commissioner of Income-tax-28 & Others
[Citation -2020-LL-0313-69]

Citation 2020-LL-0313-69
Appellant Name Parappurathu Varghese Mathai
Respondent Name Principal Commissioner of Income-tax-28 & Others.
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 13/03/2020
Judgment View Judgment
Keyword Tags search and seizure operation • assumption of jurisdiction • co-ordinated investigation • transfer of jurisdiction • territorial jurisdiction • centralization of cases
Bot Summary: Thereafter an order dated 09.08.2019 was passed by respondent No.1 - Principal Commissioner of Income Tax-28, Mumbai under sub- section of Section 127 of the Income Tax Act, 1961 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. Doc 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. 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. Final contention is that prior to issuance of order dated 09.12.2019, reasons were never provided to the petitioner. 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 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. 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.


WP 459_20.doc IN 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 petitioner and Ms Bharucha, learned standing counsel Revenue for respondents. 3. On consent of learned counsel for parties, we have taken up Writ Petition No.459 of 2020 as lead case. 4. By filing this petition under Article 226 of Constitution of India, petitioner seeks quashing of orders dated 09.08.2019 and 1/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc 09.12.2019 relating to transfer of assessment jurisdiction from Mumbai to Kochi. 5. Brief reference to relevant facts is considered necessary. 6. Petitioner is individual and partner of partnership firm M/s. Olive Builders engaged in business of development and construction of buildings. It is stated that he is assessee assessed to income tax under jurisdiction of respondent No.1. 7. It appears that search and seizure operation was carried out in premises of Olive Builders on 16.05.2019 at Kochi where partnership firm is engaged in business of development and construction of buildings. 8. Thereafter 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 Income Tax Act, 1961 (briefly Act hereinafter) transferring case of 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 territorial jurisdiction of case was with assessing officer. It was also mentioned that relevant case records under Gift Tax Act as well as Wealth Tax Act, if any, would also stand transferred accordingly and that said order was to come into effect on and from date of issue of order. 9. It may be mentioned that order dated 09.08.2019 was common order in respect of 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 objection was raised by petitioner before 2/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc respondent No.1 on 22.08.2019 regarding order dated 09.08.2019 by contending that procedure prescribed under Section 127(2) of Act was not complied with thereby rendering order dated 09.08.2019 invalid. 11. In response to said notice, petitioner was informed by office of respondent No.1 vide letter dated 30.08.2019 that petitioner s case was also covered by search and seizure operation carried out in premises of M/s. Olive Group under Section 132 of Act by Investigation Wing of Income Tax Department at Kochi. It was mentioned that proposal was received from Principal Director of Income Tax (Investigation), Kochi for centralization of case of petitioner at Kochi for co-ordinated investigation of group to protect interest of revenue. To afford opportunity of hearing, petitioner was asked to attend 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 petitioner before respondent No.1 on 11.09.2019 requesting respondent No.1 to retain assessment jurisdiction over petitioner at Mumbai. 11.2. Further representation was submitted on 16.09.2019. 12. Thereafter respondent No.1 passed order dated 09.12.2019 stated to be in modification of earlier order dated 09.08.2019 passed under Section 127 of Act. By said order passed in exercise of powers conferred by sub-section (2) of Section 127 of Act, respondent No.1 transferred case of petitioner from jurisdiction of 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, present writ petition has been filed. 3/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc 14. As already noticed above, other two assessees namely, Olive Builders and Sarakutty Mathai have filed related writ petitions. 15. Basic contention of learned counsel for petitioner is that there was no agreement between competent / designated authorities leading to transfer of jurisdiction as per requirement of clause (a) of sub- section (2) of Section 127 of Act. That apart, reasons were not disclosed. It was only after petitioner lodged objection that reasons came to be disclosed in form of second order dated 09.12.2019, which is stated to be in modification of earlier order dated 09.08.2019. Therefore, it is case of post-decisional hearing which is not contemplated under statute. Final contention is that prior to issuance of order dated 09.12.2019, reasons were never provided to petitioner. Mr. Jain would therefore contend that above procedural infirmities have vitiated decision making process warranting interference by writ court. 16. Per contra, Ms Bharucha, learned standing counsel Revenue has referred to averments made by respondent Nos.1, 2 and 3 in their common affidavit in reply filed on 03.02.2020. Referring to averments made in paragraphs 5 and 6 of said affidavit, she submits that proposal was received from Directorate General of Investigation (Investigation), Kochi dated 25.06.2019 for centralization of assessment jurisdiction at Kochi in group cases relating to Olive Builders including that of petitioner. Similar proposal was also received from Principal Director of Income Tax (Investigation), Kochi dated 27.06.2019. Thereafter consent for transfer of jurisdiction was received from Chief Commissioner of Income Tax-6, Mumbai on 05.07.2019. Accordingly, order dated 09.08.2019 was passed under Section 127 of Act. After petitioner raised objection, same was duly considered whereafter opportunity of hearing was given to petitioner. Representative of petitioner was heard and comments from concerned assessing officers were called for and considered. At this 4/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc stage, we may mention that affidavit in reply of respondent Nos.1, 2 and 3 also deals with merit of case relating to search and seizure operation carried out on 16.05.2019 and reasons for transfer of jurisdiction. Therefore, submission of Ms Bharucha is that procedural requirements contemplated under Section 127(2) of Act have been complied with and thus, there is no error or infirmity in decision taken by respondent No.1 for transfer of jurisdiction. After passing of subsequent order dated 09.12.2019, initial order dated 09.08.2019 would no longer subsist as same has merged with subsequent order dated 09.12.2019, which is in reality and substance, order passed under Section 127(2) of Act. In circumstances, writ petition should be dismissed. 17. Submissions made by learned counsel for parties have received due consideration of Court. 18. Short point for consideration is whether impugned decision of respondent No.1 to transfer assessment jurisdiction of petitioner from Mumbai to Kochi is in accordance with law, more specifically as per requirement of Section 127 of Act? 19. To appreciate issue, Section 127 may be adverted to. For ready reference, we may extract Section 127 of Act, which reads as under: Power to transfer cases. 127. (1) Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving assessee reasonable opportunity of being heard in 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 5/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc jurisdiction) also subordinate to him. (2) Where Assessing Officer or Assessing Officers from whom case is to be transferred and Assessing Officer or Assessing Officers to whom case is to be transferred are not subordinate to same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (a) Where 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 Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction case is to be transferred may, after giving assessee reasonable opportunity of being heard in matter, wherever it is possible to do so, and after recording his reasons for doing so, pass order; (b) where Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, order transferring case may, similarly, be passed by Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as Board may, by notification in 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 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 6/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc without concurrent jurisdiction) and offices of all such officers are situated in same city, locality or place. (4) transfer of case under sub-section (1) or sub- section (2) may be made at any stage of proceedings, and shall not render necessary re-issue of any notice already issued by Assessing Officer or Assessing Officers from whom case is transferred. Explanation.-In section 120 and this section, 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. 20. As would be evident from heading of section it deals with power to transfer cases. Apparently this is case falling within ambit of sub-section (2) since both assessing officers are not subordinate to same higher authority, one being at Mumbai and other at Kochi. Therefore, we may analyze requirement of sub-section (2). Sub- section (2) visualizes two situations - clause (a) and clause (b). Sub- section (2) says that where assessing officer from whom case is to be transferred and assessing officer to whom case is to be transferred are not subordinate to same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, in event they are in agreement, then Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction case is to be transferred may, after giving assessee reasonable opportunity of being heard in matter, wherever it is possible to do so, and after 7/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc recording his reasons for doing so, pass order. This is requirement of clause (a) of sub-section (2). In other words, clause (a) deals with situation where designated higher authorities of both areas to whom respective assessing officers are subordinate are in agreement. Once they are in agreement that assessment jurisdiction has to be transferred then designated higher authority from whose jurisdiction case is to be transferred may provide assessee reasonable opportunity of being heard wherever it is possible to do so and after recording reasons for doing so, pass order of transfer. 21. Before adverting to situation contemplated under clause (b), we are of view that notwithstanding use of expression may in clause (a) to sub-section (2), requirement to provide reasonable opportunity of hearing to assessee is fundamental to assumption of jurisdiction under Section 127(2)(a). If that be so then expression may would contemplate obligatory requirement on designated higher authority to provide opportunity of hearing to assessee. Careful reading of clause (a) would further reveal that such reasonable opportunity of hearing has to be provided before passing order under Section 127(2). This is clear from language of section itself. Thus, this section does not provide or contemplate providing of post-decisional hearing. In any event, post- decisional hearing is to be provided only in exceptional cases and not in routine manner. 22. Insofar reasons are concerned, section only provides for recording of reasons and not furnishing of reasons to assessee. Therefore, order passed under Section 127(2) must indicate that assessee was provided reasonable opportunity of hearing and must also record reasons for transfer of assessment jurisdiction. 23. Having discussed above, we may now advert to situation contemplated under clause (b). Clause (b) visualizes situation where designated higher authorities of two areas are not in agreement. In such situation, order transferring case may similarly be passed by 8/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc Central Board of Direct Taxes or by such designated higher authority as Board may, by notification in Official Gazette, authorize in this behalf. Therefore, what clause (b) visualizes is situation where two designated higher authorities are not in agreement regarding transfer of assessment jurisdiction. In such situation, order is to be passed by Central Board of Direct Taxes or by designated higher authority as may be authorized by Central Board of Direct Taxes by notification in Official Gazette on its behalf. We may however mention that expression similarly is used in clause (b) of sub-section (2). As noticed above, sub- section (2) would come into play when two designated higher authorities are not in agreement. If they are not in agreement then Central Board of Direct Taxes steps in and shall pass necessary order either by itself or through authorized designated higher authority by similarly following procedure provided in clause (a). Therefore, expression similarly would mean that Board or authorized designated higher authority follow same procedure as provided in clause (a) before passing order of transfer. 24. Having discussed legal provisions as above, we may now advert back to first order dated 09.08.2019 passed by respondent No.1 under Section 127(2) of Act. Perusal of this order does not disclose that 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 petitioner. That apart, only reason mentioned for transfer of jurisdiction is administrative convenience and co-ordinated investigation which on face of it is quite vague and indeterminate. It was only after petitioner submitted objection that respondent No.1 passed second order dated 09.12.2019 under Section 127(2) of Act stating to be in modification of earlier order dated 09.08.2019. In paragraph 2 of second order, it is stated that proposal was received from 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 cases. At same time, respondent No.1 also mentions that consent for 9/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc transfer was received from Chief Commissioner of Income Tax-6, Mumbai on 05.07.2019. Accordingly, it was decided to centralize cases to facilitate detailed and effective co-ordinated investigation of group cases. Similar is stand taken in affidavit of respondents. 25. view taken by respondent No.1 that receipt of proposal from Principal Director of Income Tax (Investigation), Kochi was construed as consent for transfer of case is highly debatable. Thus in context of specific consent received by respondent No.1 from Chief Commissioner of Income Tax - 6, Mumbai, forwarding of proposal for centralization of assessment in group of cases may not amount to consent for transfer within meaning of clause (a) to sub-section (2). In fact expression used in clause (a) to sub-section (2) is agreement ; agreement per se would mean that concerned parties have to agree to specific course of action. There has to be positive meeting of mind to suggested proposed course of action. dictionary meaning of expression agreement is harmony in opinion or feeling; manifestation of mutual assent by two or more persons. Therefore, furnishing of proposal, in our view, may not amount to agreement of designated higher authorities as contemplated under clause (a) to sub-section (2) of Section 127 of 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 two designated higher authorities was necessary. Revenue took stand that there was no disagreement between two Commissioners. Rejecting this stand, Supreme Court held that absence of disagreement cannot tantamount to agreement as visualized under Section 127(2)(a) of Act which contemplates positive state of mind of two jurisdictional Commissioners. 26. From above, it is quite evident that before passing impugned order on 09.08.2019, no opportunity of hearing was granted to petitioner. Hearing was granted after said decision was taken culminating in second order dated 09.12.2019. That apart, from 10/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 WP459_20.doc second order it is discernible that there was no agreement between two jurisdictional Principal Commissioners to transfer assessment jurisdiction from Mumbai to Kochi. Evidently, procedure prescribed under Section 127(2)(a) of Act has not been complied with. It is trite that when statute requires thing to be done in particular manner, then it has to be done in that particular manner. 27. In light of above discussions, we are of view that decision making process leading to passing of two impugned orders has been vitiated for non-compliance to statutory procedural requirements. Consequently, both 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 above two orders, all consequential actions shall also stand interfered with. 29. It is open to 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 Act in accordance with law keeping in mind discussions made above. 30. We make it clear that we have not expressed any opinion on merit and in event Central Board of Direct Taxes decides to intervene, all contentions of parties would be open. 31. In view of above order, all three petitions are accordingly allowed. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) Minal Parab 11/11 Uploaded on - 20/03/2020 Downloaded on - 21/03/2020 09:14:53 Parappurathu Varghese Mathai v. Principal Commissioner of Income-tax-28 & Other
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