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CASE TITLE: DOLLAR GULATI v PRINCIPAL COMMISSIONER OF INCOME TAX & ORS. And MARK GULATI v PRINCIPAL COMMISSIONER OF INCOME TAX & ORS.

CASE NO: W.P.(C) 4054/2024 & CM APPL 16537/2024

ORDER ON: 07 May 2024

QUORUM: J. YASHWANT VARMA, J. PURUSHAINDRA KUMAR  KAURAV

FACTS OF THE CASE:

The present writ petitions, at the instance of the assessees, seek to assail the impugned orders dated 20 February 2024 [W.P.(C) 4086/2024]  and 11 March 2024 [W.P.(C) 4054/2024] passed under Section 127 of the Income Tax Act, 1961

The facts leading to the present petition, are taken into consideration.in W.P.(C) 4054/2024 [Dollar Gulati v. Principal Commissioner of Income Tax, wherein, on 11 April 2023, a search operation under Section 132 of the Act was conducted on the premises of M/s. Zee Lab Group, Pursuant to the said search, some incriminating material alluding to the assessee was discovered and therefore, a notice under Section 131(1A) of the Act was issued to the assessee, whereby, the assessee was called on to furnish details of income earned by him since Assessment Year 2017-18 Thereafter, the assessee furnished a reply to the aforesaid notice, whereby, the financial statements of bank accounts, particulars of the investments made and details of the unsecured loan transactions etc. were provided to the Revenue.  Subsequently, on 2 February 2024, a show cause notice was issued to the assessee, whereby, for the purpose of an ‘administrative, convenience, coordinated investigation and assessment’, the case of the assessee was sought to be centralized at DCIT, Central Circle, Karnal, Haryana and the assessee was called upon to furnish objections, if any, against the proposed transfer. Consequently, on 3 February 2024, the assessee furnished his reply against the above noted show cause notice stating inter alia that the proposed transfer was not bona fide and there was no link between the assessee and the searched party. After considering the reply filed by the assessee, on 11 March 2024, the Revenue passed an order under Section 127 of the Act, whereby, the case of the assessee was centralized and transferred from the Income Tax Office Delhi to DCIT, Central Circle, Karnal, Haryana. It is this order which is challenged before this court in this writ petition. 

LEGAL ISSUES:

whether the Revenue while passing the impugned order bears in mind the legislative mandate of Section 127 of the Act and considers the objections raised by the assesses (petitioner)?

LEGAL PROVISIONS:

Section 127 of the Income Tax Act, 1961- empowers the Principal Commissioner or Commissioner of Income Tax to transfer cases from one AO to another.

Section 132 of the income tax Act – empowers income tax authorities to carry out a search and seizure of books of accounts, documents, cash, jewellery etc.

CONTENTIONS OF THE PETITIONER:

The Petitioner through their counsel. N.P. Shahi submitted that the impugned order was passed without any application of mind and in a mechanical manner as it reflects no reasoning regarding the transfer of the petitioner’s case from the jurisdictional Assessing Officer to DCIT, Central Circle, Karnal, Haryana. the counsel further argued that the petitioners case was nowhere linked to the searched party and therefore, there was no need for the centralization of the petitioner’s case. He further submitted that due to the arbitrary and irrational order passed by the Revenue, unnecessary hardship would be caused to the petitioner as he has to travel all the way from Delhi to the DCIT, Central Circle, Karnal, Haryana.   

CONTENTIONS OF THE RESPONDENT:

The counsel, Mr. Deepak Gupta, appearing on behalf of the Respondent, strongly opposed the submissions advanced by the petitioner’s counsel and submitted that the impugned order was passed following the mandate of Section 127 of the Act. Counsel also argued that the petitioner has duly been given an opportunity of hearing and after considering the reply of the petitioner, the Revenue has passed the impugned order. counsel further submitted that the petitioner had an indelible link to the searched persons, which was even reflected in the reply filed by the a petitioner, to the notice  and therefore, an order of centralization under Section 127 of the Act is justifiable. 

COURT ANALYSIS AND JUDGEMENT:

The court having been heard both the the parties, analysed the scope and ambit of powers conferred upon the Revenue under Section 127 of the Act. And the court observed that, Section 127 of the Act,  is a machinery Provision which is aimed at larger public interest which  can be Exercised. Further the court considered that, the legislative mandate advises that the order Of transfer under Section 127 of the Act ought to be passed after Providing a reasonable opportunity of hearing to the assessee. Hence the court opined that, the order passed under Section 127 of the Act should duly reflect the application of mind while disposing of the Objections filed by the assessee. Moreover, the convenience of parties Shall be considered by the Revenue while exercising the powers under Section 127 of the Act, however, the court considered that in view of the administrative nature Of such an order, the administrative convenience of the Revenue and The need for coordinated investigation‘ would take precedence over The logistical difficulties faced by the assessee. It is also fundamental to point out that despite being a machinery provision, the reasons Recorded in the order of transfer should not be capricious or mala fide And such order shall not run contrary to the bona fide objectives of the Act.

For more clear understanding of the ambit and scope of section 127 of the act The following judicial decisions where considered by the court,

• P. Mohammed Salim v. CIT,
• Infrastructure Ltd. V. Commissioner of Income-tax,
• Sanjay Gandhi Memorial Trust v. CIT
• Aamby Valley Ltd. V. CIT
• Sameer Leasing Co. Ltd. V. Chairman, CBDT,
• Bhatia Minerals v. Commissioner of Income-Tax,
• Jharkhand Mukti Morcha v. Commissioner of Income-Tax, Ranchi

In the conspectus of the above  judicial decisions and principles Emerging from those decisions, the court examined the Grounds of challenge raised, And the court observed that it is evident from an ex facie reading of the impugned order That an opportunity of hearing was given to the assessee and the Revenue has considered the objections raised by the assessee before Passing the impugned order, and moreover, the court opined that the case of the assessee Was centralized on the grounds of coordinated enquiries, Investigations and administrative convenience’, therefore, the Contention of the assessee that the impugned order reflects no Application of mind and the Revenue had not considered the Objections raised by the assessee holds no merit. Therefore the court pointed out that it is crystal clear in light of the Discussion noted above that the powers of Section 127 of the Act can Be invoked for public interest and administrative convenience. Furthermore, the ground of coordinated investigation‘ is a good Ground of transfer as upheld by various decisions quoted above.Furthermore, considering the controversy from another lens of Exercising the power of judicial review vested under Article 226 of the Constitution, the court finds  that the present is not a case where the exercise Of statutory powers by the authority can be said to be wholly arbitrary, Irrational, without jurisdiction or suffers with mala fide intention. Therefore, in light of all the  discussion and judicial Pronouncements, the court  hereby does not opine to interfere with the Orders dated 20 February 2024 [W.P.C. 4086/2024] and 11 March 2024 [W.P.(C) 4054/2024] passed under Section 127 of the Act.  Further the court contended that  these observations have been made only for the Purpose of deciding the challenge which stands raised before the court they Should not be construed to be an expression on the merits of the case Or otherwise. Accordingly and subject to the aforesaid observations, the court Dismissed  these writ petitions.

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Judgement reviewed by:SOWMYA.R