Supreme Court refused to quash the order passed by the PCIT under section 127 of Income Tax Act 1961 transferring the case of the assessee from one State to another.
In a recent case the Hon’ble Supreme Court declined to quash the transfer of case under section 127 of Income Tax Act. High Court had held that corrigendum notice under section 127 mentioned additional facts beyond the original notice was not illegal.
ABCAUS Case Law Citation:
4653 (2025) (07) abcaus.in SC
The petitioner assessee was resident of Vadodara. He received an intimation from the Principal Commissioner of Income Tax (PCIT) along with notice issued under section 127 of the Income Tax Act, 1961 (the Act) with regard to transfer of his case on the ground that the petitioner was having significant suspicious cash transactions with a party at Pune and therefore, in the interest of Revenue, case of the petitioner was sought to be transferred to Pune.
The petitioner furnished reply vide an email contending as to why the case should not be transferred to Pune. However, PCIT passed an order under section 127 of the Act to transfer the case of the petitioner on the ground that the petitioner did not submit its response.
The petitioner addressed a letter to PCIT submitted proof of its email and asked revision of the order. The Petitioner also approached High Court alleging that order was in violation of the principles of natural justice. The High Court disposed of the matter by granting the liberty to the PCIT to pass corrigendum order.
In pursuance of the directions of the High Court, the PCIT issued a fresh show cause notice to the Petitioner. However, the Petitioner did not respond to the said second notice. As a result, the PCIT passed the impugned order transferring the case of the assessee to Pune.
Again, the Petitioner approached High Court with a prayer for quashing the second notice and the order alleging that under the guise of corrigendum, the second show cause notice mentioned additional facts beyond the original notice directing the petitioner to make submissions.
It was the case of the petitioner that since the impugned notice was ultra vires the liberty granted by this Court, the petitioner had not given any reply to such notice.
It was submitted by the Petitioner that impugned second notice as well as order were contrary to the provisions of section 127(2)(a) of the Act because both the impugned notice and order were in form of corrigendum to the earlier order passed under section 127 of the Act and hence, the PCIT could not have improved upon the facts as well as the reasons which are not available in the previous order.
It was further submitted that the corrigendum means correction of printed matter and therefore, the impugned notice relying upon further material was without jurisdiction and liable to be quashed and set aside. In support of such submission, reliance was placed on the decision of Hon’ble Allahabad High Court.
The Hon’ble High Court observed that the petitioner was provided the opportunity to make further submission vide second show cause notice pursuant to directions / order passed by the High Court. However, the petitioner did not avail the said opportunity to make further submissions.
The Hon’ble High Court further observed that as per notice, the reason for transfer of case was the details of the cash transactions entered into by the petitioner with a party at Pune as to centralise the case of the petitioner with other group cases with DCIT Pune for coordinated investigation in public interest.
The Hon’ble High Court observed that, the contention raised on behalf of the petitioner that no document/information was provided to the petitioner for exercising the power to transfer the case under section 127 of the Act was contrary to the record.
The Hon’ble High Court opined that the purpose of transfer of case was justified and the copies of the same were not required to be given to the petitioner as the petitioner had not denied the alleged transactions but objected such transfer on the ground of inconvenience, harassment and cumbersome to him.
The Hon’ble High Court observed that as per the provisions of section 127 of the Act, requirement of transferring the assessment in appropriate cases would have element of public interest and the assessee has no choice to select his Assessing Officer.
The Hon’ble High Court noted that the coordinate Bench of the High Court while considering the provisions of section 127 of the Act, referring to decisions of various other Hon’ble High Courts as well as Hon’ble Supreme Court upheld the stance of the Revenue that for effective and coordinative investigation, if otherwise established on the record, the same can be a good ground for transfer of a case. It was further held that procedural requirements to be followed namely, of granting a reasonable opportunity of being heard in the matter wherever it is possible to do so, of recording of reasons for passing such order and as provided by the Supreme Court in Ajanta Industries (supra) communicating such reasons also to the assessee. It was held that such discretionary power has to be exercised for achieving the public purpose and not for any arbitrary. It was also held that transfer of a pending case from one Assessing Officer to another outside of a city, locality or place is likely to cause considerable inconvenience to an assessee. Therefore, even though an assessee may not have a vested right to insist that his assessment be completed only at one place or by a particular Assessing Officer, nevertheless, the reasons for transfer must be weighty enough to offset against such personal inconvenience of an assessee.
In view of the above law, the Hon’ble High Court held that the contention raised on behalf of the petitioner that impugned second show cause notice and final order being corrigendum notice and order containing further details was without jurisdiction, was not tenable as the same were in continuation of original order so as to comply with the provisions of the Act to provide opportunity of hearing to the petitioner.
The Hon’ble High Court further opined that the petitioner had not filed any reply to the second notice and now it was contended that the petitioner did not file reply as the said corrigendum notice referred to new details relied upon to transfer case. Such approach of the petitioner cannot be accepted to quash the impugned order.
Accordingly, the High Court dismissed the Petition of the assessee.
Not satisfied with the order of the Hon’ble High Court, the assessee challenged it before the Hon’ble Supreme Court by way of filing a Special Leave Petition (SLP).
However, the Apex Court declined to entertain the SLP and dismissed it with the following observation,
“We are not inclined to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petition is dismissed.”
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