W.A. (MD) No.417 of 2020 BEFORE MADURAI BENCH OF MADRAS HIGH COURT RESERVED ON: 19.06.2020 DELIVERED ON: 30.06.2020 CORAM: HON'BLE MR. JUSTICE P.N. PRAKASH and HON'BLE MR. JUSTICE B. PUGALENDHI W.A. (MD) No.417 of 2020 and C.M.P. (MD) Nos.2831 and 3158 of 2020 V.V. Minerals represented by its Partner S. Vaikundarajan 17C Keeraikaranthattu Tisaiyanvillai Tirunelveli District Appellant vs. 1 Principal Commissioner of Income Tax 2, V.P. Rathinasamy Nadar Road Bibikulam Madurai 625 002 2 Assistant Commissioner of Income Tax Central Circle 2, Madurai Kulamangalam Main Road Meenambalpuram Madurai 625 002 3 Deputy Director of Income Tax Central Circle 2, Madurai Kulamangalam Main Road Meenambalpuram Madurai 625 002 Respondents Writ Appeal preferred under Clause 15 of Letters Patent challenging order dated 28.02.2020 passed in W.P. (MD) No. 16869 of 2019. http://www.judis.nic.in 1/20 W.A. (MD) No.417 of 2020 For appellant Mr.V. Lakshmi Narayanan for M/s. Kingsly Solomon For R1 Ms. S. Srimathy Central Govt. Standing Counsel For RR 2 & 3 Mr. T.R. Senthil Kumar Senior Standing Counsel for I.T. Dept. assisted by for Mrs. K.G. Usha Rani Standing Counsel for I.T. Dept. JUDGMENT (delivered by P.N. PRAKASH, J.) challenge in this intra-Court appeal is to order dated 28.02.2020 passed by learned Single Judge of this Court in W.P. (MD) No.16869 of 2019, refusing to quash transfer of case order dated 19.02.2019 passed by Principal Commissioner of Income Tax, Madurai 2. 2 For sake of convenience and better understanding of facts, private parties are referred to by their names and authorities are referred to by their designation. 3 To appreciate rival submissions, it may be necessary to give thumbnail sketch of undisputed facts: 3.1 There are three V.V. Minerals referred to in order passed by Principal Commissioner of Income Tax, Madurai, impugned in writ http://www.judis.nic.in 2/20 W.A. (MD) No.417 of 2020 petition, with each having distinct Permanent Account Number (PAN). Ergo, we designate them as follows: 1. V.V. Minerals No.1 (PAN AAGFS5361Q) 2. V.V. Minerals No.2 (PAN AAHFV2400N) 3. V.V. Minerals No.3 (PAN AACFV2265L). 3.2 Apart from above three V.V. Minerals, other juristic persons referred to in order impugned in writ petition, are as under: 1. V.V. Titanium Pigments Pvt. Ltd. (PAN AADCV7723P) 2. V.V. Marine Products (PAN AALFV2122R) 3. Shree Sanghvi Mills Pvt. Ltd. (PAN AAECS5431N) 4. V.V. Mart (PAN AAHFV2398H) 5. Ajax Media Tech Pvt. Ltd. (PAN AANCA0470G) 3.3 Thus, there are eight juristic persons and apart from them, there are following 12 natural persons with individual PANs: 1. S. Vaikundarajan (PAN ABEPV0032E) 2. S. Jegatheesan (PAN ABXPJ7672F) 3. J. Subburajan (PAN CWJPS9725F) 4. V. Subramanian (ANVPS2304R) 5. J. Muthurajan (PAN AKZPM1405G) 6. J. Chenthilrajan (PAN AHZPC 0253F) 7. Subasaranya (PAN BRIPS 1638E) 8. V.Velmurugan (PAN AEDPV 5896G) 9. J. Renuka (PAN ABXPJ 7678R) 10.S. Karthiyayini (PAN BACPK 6338N) 11.V. Chandraboopathy (PAN AEUPC 3562R) 12.C. Simarna (PAN CSEPS2249P) http://www.judis.nic.in 3/20 W.A. (MD) No.417 of 2020 3.4 All aforesaid 20 persons were registered for Income Tax purpose with Assistant Commissioner of Income Tax, Tirunelveli. Even according to V.V. Minerals, they are leader in Tamil Nadu in mineral industry and they have established sterling reputation in their business circles and are renowned for their commitment to quality and ethical business practices, vide paragraph no.3 of affidavit filed in support of writ petition. 3.5 Mr. V. Lakshmi Narayanan, learned counsel representing Mr.Kingsly Solomon, learned counsel on record for V.V. Minerals, submitted that except C. Simarna, other 11 natural persons are Partners/Directors in 8 juristic persons referred to above; 3.6 Concededly, from 25.10.2018, Income Tax sleuths conducted simultaneous searches under Section 132 of Income Tax Act, 1961 (for conciseness IT Act ) in business premises of juristic persons and in residential premises of non-juristic and natural persons. 3.7 According to Income Tax Department, searches were conducted between 25.10.2018 and 24.12.2018 and incriminating materials tending to show huge tax evasions were recovered. http://www.judis.nic.in 4/20 W.A. (MD) No.417 of 2020 3.8 In South Tamil Nadu, Madurai District has two Central Circles of Income Tax Department, under which, Tirunelveli District also falls. Principal Commissioner of Income Tax, Madurai, issued individual notices dated 28.01.2019 under Section 127 of IT Act to all 20 assessees calling for objections, if any, for proposal to transfer their assessments files, from Tirunelveli to Madurai. 3.9 At this juncture, it will be appropriate to extract verbatim relevant portion of notice dated 28.01.2019 that was issued by Principal Commissioner of Income Tax, Madurai, to V.V. Minerals No.2: It is proposed to transfer your case from Assistant Commissioner of Income Tax, Circle I, Tirunelveli, to Deputy Commissioner of Income Tax, Central Circle-2, Madurai under Section 127 of Income Tax Act, 1961. reason for proposed transfer is that detailed, coordinated and centralized investigation is necessary. 3.10 In response to aforesaid notice, V.V. Minerals No.2 addressed letter dated 31.01.2019 asking for relevant supporting documents to justify transfer, besides seeking 30 days' time to submit their reply. 3.11 Principal Commissioner of Income Tax, Madurai, sent communication dated 11.02.2019 to V.V. Minerals No.2, fixing date of hearing as 18.02.2019 at 4.30 p.m., in Income Tax office, Madurai. http://www.judis.nic.in 5/20 W.A. (MD) No.417 of 2020 3.12 V.V. Minerals No.2 followed it up with letter dated 16.02.2019 once again reiterating that they have not been furnished with relevant documents for justifying transfer of their case from Tirunelveli to Madurai. 3.13 Personal hearing was afforded to assessees on 18.02.2019 at 4.30 p.m. assessees took stand that their Chartered Accountant is stationed at Tirunelveli and that he is 85 years old and therefore, it will cause hardship for them if their cases are transferred to Madurai. 3.14 Principal Commissioner of Income Tax, Madurai, considered objections and by order dated 19.02.2019, directed transfer of files of 20 assessees from Tirunelveli Circle to Central Circle-2, Madurai. Thereafter, Income Tax authorities at Central Circle-2, Madurai, issued notice dated 16.07.2019 under Section 153-A of IT Act to all assessees, including V.V. Minerals No.2, which is not under challenge here. 3.15 Calling into question legality and validity of transfer order dated 19.02.2019 passed by Principal Commissioner of Income Tax, Madurai, V.V. Minerals No.2 filed W.P. (MD) No.16869 of 2019. http://www.judis.nic.in 6/20 W.A. (MD) No.417 of 2020 4 At time of admission of W.P. (MD) No.16869 of 2019, learned Single Judge of this Court granted stay of transfer order dated 19.02.2019 on 05.08.2019 and after prolonged battle, matter was heard finally and disposed of by another learned Single Judge of this Court vide order dated 28.02.2020, dismissing writ petition and sustaining transfer order dated 19.02.2019, assailing correctness of which, instant intra-Court appeal has been preferred by V.V. Minerals No.2. 5 During hearing of this intra-Court appeal, we rummaged through papers in order to ascertain as to which of three V.V. Minerals had filed writ petition, because, there is no reference to PAN in affidavit filed in support of writ petition. When we posed this pointed question to Mr.Lakshmi Narayanan, he submitted that V.V. Minerals No.2 (PAN AAHFV2400N) had filed writ petition and accepting his word, we proceed further to continue referring to appellant/writ petitioner as V.V.Minerals No.2, for sake of convenience. When we asked Mr.Senthil Kumar, learned Senior Standing Counsel for Income Tax Department, as to whether other 19 assessees had filed any writ petition challenging transfer of their cases, he answered in negative. Therefore, we proceeded on premise that out of 20 persons referred to in transfer order dated 19.02.2019 impugned in writ petition, only V.V. Minerals No.2 is before us. http://www.judis.nic.in 7/20 W.A. (MD) No.417 of 2020 6 When this intra-Court appeal came up for admission, Division Bench of this Court, vide order dated 16.03.2020, granted interim stay of order dated 28.02.2020 passed by learned Single Judge, till 30.03.2020. 7 Income Tax Department filed C.M.P.(MD) No.3158 of 2020 in this intra-Court appeal for having stay order dated 16.03.2020 vacated. When vacate stay petition came up for hearing before another Division Bench on 01.06.2020, adjournment was sought by V.V. Minerals No.2, but, learned counsel for Income Tax Department strongly objected for grant of adjournment. Recording objection so made by learned counsel for Income Tax Department, Division Bench ordered as under: 2. Having regard to practical difficulties expressed by learned counsel appearing for respondent, this Court is inclined to adjourn matter to 15.06.2020. It is made clear to learned counsel for respondent that he or his Senior Counsel engaged by him must be ready to argue main case on 15.06.2020 either by making physical appearance or through Video Conference. In case, learned counsel for respondent is unable to bring his Senior Counsel from Chennai to Madurai, he should inform Registry earlier, so that matter will be listed for hearing through Video Conference. 3. interim order granted earlier is extended till then. (emphasis supplied) 8 matter was not listed on 15.06.2020, but, was listed only on 19.06.2020. http://www.judis.nic.in 8/20 W.A. (MD) No.417 of 2020 9 Mr. Senthil Kumar, learned Senior Standing Counsel for Income Tax Department, submitted that there is absolutely no infirmity in order passed by learned Single Judge and that writ petition has been filed only after issuance of notice dated 16.07.2019 under Section 153-A of IT Act by Central Circle-2, Madurai, in order to stall further proceedings. 10 Mr. Lakshmi Narayanan, learned counsel for V.V. Minerals No.2, submitted that show cause notice dated 28.01.2019 does not contain reasons for proposal to transfer cases from Tirunelveli Circle to Central Circle-2, Madurai and therefore, transfer order dated 19.02.2019 founded upon such defective notice cannot be sustained. He further took this Court to preamble portion of transfer order dated 19.02.2019 and submitted that Principal Commissioner of Income Tax, Madurai, has not acted on his own, but has acted on letter dated 03.01.2019 of Director General of Income Tax (Investigation), Chennai. Building upon his argument, he drew attention of this Court to Section 127(1) of IT Act and submitted that whole lot of officers have power to effect transfer, which includes Director General of Income Tax (Investigation), Chennai and Principal Commissioner of Income Tax, Madurai and when both of them have concurrent http://www.judis.nic.in 9/20 W.A. (MD) No.417 of 2020 powers, exercise of power by latter at request of former, is bad in law. In this context, it is profitable to extract Section 127(1) of IT Act 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 jurisdiction) also subordinate to him. 11 Mr. Lakshmi Narayanan drew attention of this Court to Division Bench judgment of Gauhati High Court in Shri Mul Chand Malu vs. Union of India and 8 others1, wherein, it has been held that show cause notice should contain reasons for transfer, so that assessee is in position to give effective representation to it. He placed further reliance upon Division Bench judgment of Andhra Pradesh High Court in Vijayasanthi Investments Pvt. Ltd. vs. Chief Commissioner of Income Tax and Others2 and judgment of High Court of Calcutta in Chotanagpur Industrial Gases (P) Ltd. and others vs. Commissioner of Income Tax and others3. 1 W.P. (C) No.5828 of 2015 decided on 25.02.2016 2 (1991) 187 ITR 405 http://www.judis.nic.in 3 (1998) 233 ITR 377 (Cal) 10/20 W.A. (MD) No.417 of 2020 12 This Court gave its careful thought and anxious consideration to rival submissions. 13 It is admitted fact that road distance between Tirunelveli and Madurai is just 158 kms. V.V. Minerals and their associates were being assessed by Tirunelveli Circle. Searches were conducted from 25.10.2018 to 24.12.2018 and huge materials were seized. According to Income Tax Department, from 25.10.2018, searches were conducted in 63 premises spread across various parts of Tamil Nadu and also in other parts of country relating to V.V.Minerals and Department has unearthed undisclosed income to tune of Rs.2.262 crores. 14 In this backdrop, Director General of Income Tax (Investigation), Chennai, appears to have addressed letter dated 03.01.2019 to Deputy Commissioner of Income Tax, Central Circle-2, Madurai, suggesting transfer of cases of 20 assessees from Tirunelveli Circle to Central Circle-2, Madurai. Principal Commissioner of Income Tax, Madurai, issued show cause notice dated 28.01.2019 under Section 127 of IT Act, wherein, it is stated that reason for proposed transfer is that, detailed, coordinated and centralised investigation is necessary. Thus, it is http://www.judis.nic.in 11/20 W.A. (MD) No.417 of 2020 manifest and limpid that this is not case where no reason has been assigned in show cause notice for transfer of cases. In cases relied upon by Mr.Lakshmi Narayanan, be it noted that Income Tax authorities transferred cases from one State to another State, whereas, in case on hand, cases have been transferred from Tirunelveli Circle to neighbouring Central Circle-2, Madurai and not out of Tamil Nadu. 15 To expatiate, in Shri Mul Chand Malu (supra), cases were transferred from Gauhati to New Delhi. In Chotanagpur Industrial Gases (P) Ltd. (supra), case was transferred from Calcutta to Patna. In Vijayasanthi Investments Pvt. Ltd. (supra), case was transferred from Vishakapatnam to Bombay. Thus, judgments relied upon by Mr. Lakshmi Narayanan are distinguishable on facts. 16 We are aware that Section 127 of IT Act does not create any geographical classification. Nevertheless, judgments of Courts should not be read as Euclid's theorem, but, should be understood in context in which they were rendered, and blind and pedantic following of precedents is not expected of Constitutional Courts. http://www.judis.nic.in 12/20 W.A. (MD) No.417 of 2020 17 Coming to assigning of reasons in show cause notice, in Shri Mul Chand Malu (supra), Division Bench of Gauhati High Court has held as under: 18. . . . To facilitate fair opportunity, show cause notice must disclose reason or gist thereof as to why transfer of jurisdiction to officer at New Delhi is necessitated. 19. Moreover, ground of transfer must have nexus towards administrative convenience and coordinated investigation , as is relfected in impugned transfer order. But, unfortunately, these twin reasons of administrative convenience and coordinated investigation , are not reflected in show cause notice and therefore, in our opinion, assessees were denied of reasonable opportunity of hearing envisaged by law. In our view, principles of natural justice have to be complied at every stage and violation at initial stage cannot be cured through additional reasons incorporated in final order. (emphasis supplied) 18 From above judgment, it can be inferred that show cause notice should disclose reason or gist thereof, which was absent in said case. Whereas, in case on hand, show cause notice has spelt out reasons for proposed transfer of cases. Whether reasons so given are sufficient or insufficient, cannot be subject matter of judicial review. To be noted, this is not case of preventive detention, where, personal liberty of person is sought to be stifled by keeping him in custody. This is case where assessment files are being transferred from one city to neighbouring city hardly 158 kms. away, in same State. What inconvenience can this cause to V.V. Minerals No.2, especially when they have business and offices in several cities? http://www.judis.nic.in 13/20 W.A. (MD) No.417 of 2020 19 Mr. Senthil Kumar contended that after cases were transferred to Central Circle-2, Madurai, Central Circle-2, Madurai, has issued notice under Section 153-A of IT Act and those proceedings have to be completed within time stipulated therein and that stay granted by this Court is impeding process. 20 As riposte, Mr. Lakshmi Narayanan made two fold submissions. According to him, firstly, stay granted by Court will bring to halt, running of limitation period and secondly, due to COVID-19 pandemic, Central Government itself has extended limitation period upto 31.12.2020. 21 With regard to first submission of Mr. Lakshmi Narayanan, Mr. Senthil Kumar submitted that V.V. Minerals No.2 had challenged only transfer order, that too belatedly, and had obtained order of stay and not proceedings under Section 153-A of IT Act and therefore, in absence of stay of proceedings under Section 153-A, ibid., stay that has been granted in respect of transfer of proceedings will not save running of period of limitation of proceedings under Section 153-A of IT Act. This Court finds sufficient substance and force in submission of Mr. Senthil Kumar. http://www.judis.nic.in 14/20 W.A. (MD) No.417 of 2020 22 Coming to contention of Mr. Lakshmi Narayanan that Director General of Income Tax (Investigation) and Principal Commissioner of Income Tax, Madurai, have concurrent powers under Section 127(1) of IT Act for transfer of cases and therefore, decision of Principal Commissioner of Income Tax, Madurai, to transfer cases, based on proposal given by Director General of Income Tax (Investigation) shows non application of mind on part of latter and failure on his part to exercise jurisdiction under Section 127(1) ibid., perusal of Section 127(1), ibid., extracted supra does not show that Director General of Income Tax (Investigation) has power under said provision. Had he had power, he himself would have taken steps for transfer of cases. Assuming for moment that he has power, sending of proposal by him to Deputy Commissioner of Income Tax, Circle-2, Madurai, suggesting transfer of cases, will not lead to inference that he had abdicated his power and that Principal Commissioner of Income Tax, Madurai, had not applied his mind independently. reading of transfer order shows that Chief Commissioner of Income Tax, Madurai, has approved proposal vide letter dated 21.01.2019 and thereafter, show cause notice under Section 127(2), ibid., was issued on 28.01.2019. This Court does not find any reason whatsoever to infer that Principal Commissioner of Income Tax, Madurai, http://www.judis.nic.in 15/20 W.A. (MD) No.417 of 2020 had blindly towed line of Director General of Income Tax (Investigation), as contended by Mr. Lakshmi Narayanan. 23 It is case of V.V. Minerals No.2 that they have not been supplied with documents for effectively giving reply to show cause notice dated 28.01.2019 issued under Section 127 of IT Act. It is indeed hard to fathom for this Court as to what documents V.V. Minerals No.2 want from Department. If they want search and seizure documents, that cannot be furnished to them in proceedings under Section 127 of IT Act. Yet another grievance of V.V. Minerals No.2 is that their Chartered Accountant is very elderly person domiciled in Tirunelveli and that he will find it difficult to come to Madurai. This grievance is also imaginary, because, Income Tax returns are now filed online. case of Department that Central Circle-2, Madurai, has better infrastructure like strong rooms to keep seized documents, etc. cannot be simply wished away. 24 After hearing both sides extensively, when this Court expressed its mind that it would pass final orders in intra-Court appeal itself, Mr.Lakshmi Narayanan firmly and resolutely, but, of course, politely, submitted that he has argued only Vacate Stay Petition and that he has not argued main case. Registry also placed before us, e-mail sent by http://www.judis.nic.in 16/20 W.A. (MD) No.417 of 2020 Mr. Kingsly Solomon, learned counsel on record for V.V. Minerals No.2, wherein, he has stated that he is not in position to appear through Video Conferencing without accessing case bundles. We do understand predicaments and compulsions of advocates, especially when they perceive that sailing before Court is rough. However, since Mr.Lakshmi Narayanan, learned counsel engaged by Mr. Kingsly Solomon, argued extensively before us citing all above rulings, we politely negatived their request for adjournment of main case to another date for following reasons: At time of admission of this intra-Court appeal on 16.03.2020, this Court granted interim stay till 30.03.2020 and posted matter for orders. In meanwhile, Income Tax Department filed C.M.P. (MD) No.3158 of 2020 for vacating order of interim stay granted on 16.03.2020 and when matter was listed on 01.06.2020, Income Tax Department was ready for arguments, but, learned counsel for V.V. Minerals No.2 sought adjournment. This has been recorded by Court in order dated 01.06.2020 and matter was adjourned to 15.06.2020 specifically for taking up of main case (See paragraph no.7 above, wherein, relevant portion of order dated 16.03.2020 has been extracted). Therefore, V.V. http://www.judis.nic.in 17/20 W.A. (MD) No.417 of 2020 Minerals No.2, who are enjoying order of stay passed by this Court, know full well that matter will be taken up finally on 15.06.2020. For some reason or other, matter was not listed on 15.06.2020 and was listed on 19.06.2020 and we heard both sides elaborately. Therefore, we found no justification in acceding to request of learned counsel for V.V. Minerals No.2 to adjourn main case to another date. Hence, we reserved orders in main case on 19.06.2020. Thereafter, Registry received written submissions by e-mail from both sides which we took on record. We are not passing orders on Vacate Stay Petition and keeping intra-Court appeal pending for another day, because, dispute falls in very narrow compass requiring no further hearing. In view of aforemade discussion, instant intra-Court appeal fails and is accordingly dismissed. Costs made easy. Connected C.M.Ps. are closed. (P.N.P., J.) (B.P., J.) 30.06.2020 cad http://www.judis.nic.in 18/20 W.A. (MD) No.417 of 2020 To 1 Principal Commissioner of Income Tax 2, V.P. Rathinasamy Nadar Road Bibikulam Madurai 625 002 2 Assistant Commissioner of Income Tax Central Circle 2, Madurai Kulamangalam Main Road Meenambalpuram Madurai 625 002 3 Deputy Director of Income Tax Central Circle 2, Madurai Kulamangalam Main Road Meenambalpuram Madurai 625 002 http://www.judis.nic.in 19/20 W.A. (MD) No.417 of 2020 P.N. PRAKASH, J. and B. PUGALENDHI, J. cad W.A. (MD) No.417 of 2020 30.06.2020 http://www.judis.nic.in 20/20 V.V. Minerals v. Principal Commissioner of Income-tax, Madurai / Assistant Commissioner of Income-tax Central Circle 2, Madurai / Deputy Director of Income-tax Central Circle 2, Madurai