Consent for transfer of jurisdiction u/s 127 of the assessee must be given by the appropriate authority not by a authority subordinate to him – High Court
In a recent judgment, the Hon’ble Allahabad High Court consent for transfer of jurisdiction u/s 127 of the assessee must be given by the appropriate authority not by a authority subordinate to him.
ABCAUS Case Law Citation:
ABCAUS 3904 (2024) (03) HC
In the instant case, a writ petition had been filed by the assessee to assail the orders/communications issued by the Principal Commissioner of Income Tax (‘PCIT’) under Section 127 of the Income Tax Act, 1961 (‘the Act’). By those communications, jurisdiction to assess the petitioner has been transferred from the State of Uttar Pradesh to Mumbai.
It was submitted that grant of opportunity before transfer of assessment case jurisdiction, is mandatory in view of Section 127(2) of the Act. For effective opportunity to be granted, the assessee must be disclosed the proposed reasons for transfer, at the stage of issuance of show cause notice itself.
It was stated that in the present case, a show cause notice was issued by the Principal Commissioner of Income Tax is wholly non-speaking. In any case, it does not disclose the reasons on which the transfer order was eventually passed.
It was further argued that the fact of search conducted in the case of one person at Mumabi and the alleged connection that the revenue seeks to establish between that search and the search conducted in the case of the petitioner as also the material discovered between the two search was never disclosed to the petitioner. Thus, the petitioner was disabled from raising any objection in that regard.
It was also submitted that despite specific request made by the petitioner in its two replies, the Principal Commissioner of Income Tax chose not to disclose to the petitioner the reasons giving rise to the transfer proceedings. Thus, violation of essential requirements of principles of natural justice has been done.
It was submitted that since the Assessing Officer from whom the assessment jurisdiction of the petitioner is proposed to be transferred and the Assessing Officer to whom such jurisdiction is proposed to be transferred were not subordinate to one authority and in fact, were subordinate to two different authorities in two different regions, consent of those authorities was required to be obtained with further stipulation of the Principal Chief Commissioner of Income Tax U.P. to have granted opportunity of hearing to the petitioner and to pass a transfer order, if required, after due application of mind to the objections that may have been raised by the petitioner.
It was also submitted that in the present case, the Chief Commissioner of Income Tax Mumbai gave his consent for the assessment jurisdiction of the petitioner to be transferred from UP to Mumbai. At present, the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand does not appear to have given his consent. In any case, since the revenue recognizes that such consent was to be obtained from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand, as is apparent from the communication issued by the Chief Commissioner of Income Tax Mumbai, it is that authority which may have issued show cause notice to the petitioner and considered its reply before the assessment jurisdiction over the petitioner may have been consented to be transferred from UP to Mumbai. Instead show cause was issued by the Principal Commissioner of Income Tax.
On the other hand, the revenue strenuously urged that there was no prejudice being caused to the petitioner. The petitioner company, its associators concerned and its directors were subjected to simultaneous search proceedings along one other person who was involved in ‘Dabba’ trading. That being a wholly illegal transaction, the search further revealed that the petitioner company, its associates and directors were actively involved in that illegal activity. Various hardware and electronic documents etc. have been seized from the possession of the petitioner, its associates and directors etc. Since the search resulted in discovery of unaccounted revenue generated by the said person searched at Mumbai, the petitioner’s assessment cases are also required to be centralised at Mumbai. Reference has also been made to the fact that the petitioner company is registered in the State of Gujrat.
The Hon’ble High Court opined that it cannot be denied at this stage that the show cause notice issued to the petitioner was rather non-speaking. Other than containing the proposal to transfer the assessment jurisdiction of the petitioner from UP to Mumbai occasioned by the search conducted against it, it makes no reference of the necessity to transfer the same for reason of parallel search proceedings against other person. The petitioner is right in his contention, since consent to transfer the case from UP to Mumbai was desired from the Principal Chief Commissioner, Uttar Pradesh (West) and Uttrakhand, it is that authority that may have given the consent after issuing appropriate show cause notice to the petitioner after considering its reply thereto. In any case, it may not have been opened either to the Chief Commissioner of Income Tax, Mumbai or the Principal Chief Commissioner Uttar Pradesh (West) and Uttrakhand to delegate that function to the Principal Commissioner of Income Tax.
The Hon’ble High Court observed that the language of Section 127 (2) (a) of the Act is pretty much clear in that regard. The consent has to emerge amongst two superior officers heading two different Commissionerate etc. with respect to the transfer sought. It is in that context that the designations have been expressed in the plural in the first part of Section 127(2)(a) and in the singular in the later part. Thus, for the purpose of obtaining the views of the assessee, notice is required to be issued by the appropriate authority i.e. the officer who may express his consent to his counterpart being the officer under whose jurisdiction the case may eventually be transferred. At the same time, by virtue of first part of the Section 127(2)(a) the consent must emerge amongst officers of equal rank. That appears to be the plain meaning that must be given.
The Hon’ble High Court observed that in the hierarchy of officers provided under Section 116 of the Income Tax Act, once the request is received from the higher ranked officer even if outside the jurisdiction of the officer from whom the case is to be transferred, indifference to that higher authority making the request, the officer placed lower in rank may feel compelled to express his consent. Similarly, within the jurisdiction if the consent is accorded by the higher rank officer and the function of obtaining the assessee’s objection is delegated to a subordinate officer, that opportunity to the assessee may remain an illusory remedy, of no avail. Once the consent may have been expressed by the higher ranked officer within the jurisdiction, his subordinate may not look to take a different view and render infructuous the consent given by his superior.
The Hon’ble High Court opined that both on the plain language used by the statute as also for functional test, as above, it commends acceptance that the consent sought by the Chief Commissioner of Income Tax Mumbai ought to have been considered and if necessary granted by an officer of equal rank, here the Principal Chief Commissioner of Uttar Pradesh (West) and Uttrakhand. For that reasons it is that authority that may have issued the show cause notice to the petitioner and considered its reply before granting consent.
The Hon’ble High Court disposed the writ petition with the following directions :-
(i) The order were set aside.
(ii) The petitioner may treat the impugned order to be the final show cause notice issued to it by the Principal Chief Commissioner of Income Tax Uttar Pradesh (West) and Uttrakhand.
(iii) The petitioner may file its final reply to the said show cause notice within a period of ten days from today.
(iv) On such compliance shown, the Principal Chief Commissioner Income Tax Uttar Pradesh (West) and Uttrakhand may fix a short date for hearing within one week therefrom.
(v) The petitioner undertakes to appear before the said authority on the date fixed.
(vi) Appropriate order may be passed in accordance with law by the Principal Chief Commissioner Income Tax Uttar Pradesh (West) and Uttrakhand and further proceedings may arise accordingly.
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