By TIOL News Service:

MUMBAI, MAY 03, 2016 : THE ISSUE IS - Whether it is open to Revenue to transfer a case u/s 127(2) to the place where assessee is assessed in normal course merely for coordinated investigation and administrative convenience. NO is the verdict.

Facts of the case:

The assessee carries on business of Builders and Developers i.e. constructing flats for Sale in and around Mumbai. During the impugned year, the CIT, Mumbai issued a showcause notice to the assessee proposing to transfer its case u/s 127(2) from Mumbai to ACIT, Aurangabad. The basis for the proposed transfer was centralization of Jhaveri Group for purposes of co-ordinated investigation along with other cases. In response, the assessee contended that it did not belong to the Jhaveri Group nor were they in any way related to them. The only connection with the Jhaveri Group was the fact that flats in a building constructed by them were booked by the members of Jhaveri Group. This submission was however rejected transferring the assessee's case from Mumbai to Aurangabad. On appeal, the High Court set aside the order of transfer on the ground that the order was relied upon only a letter from DIT(Investigation), Nagpur and was a nonspeaking order for the reason it did not deal with the submissions made by the assessee. Consequent thereto, a fresh notice was issued u/s 127(2) proposing to transfer assessee's case without making any reference to the letter of the DIT (Investigation). After considering the submissions made by assessee, the Principle CIT passed the impugned order transferring the assessee's case from Mumbai to Aurangabad, on the ground that one of the buyers namely Abhishek Jhaveri had become a witness for the Department having admitted to paying cash money to the assessee, and it is on the basis of this admission that investigation was required to be done in the case of assessee and for that purpose it would be necessary to transfer its case from Mumbai to Aurangabad.

After hearing the parties, the High Court had held:

++ it is found that the CIT had originally passed an order transferring the assessee's case from Mumbai to Aurangabad on the basis of a letter of DIT (Investigation), Nagpur informing the CIT that a search and seizure operation was carried out in respect of assessee who in turn is related to the Jhaveri group of Aurangabad. The aforesaid order was set aside as copy of the aforesaid intimation was not given to the assessee by the Revenue. This Court while setting aside the order, however granted liberty to the Revenue to pass a fresh order after following the principles of natural justice. Consequent thereto, neither the showcause notice nor the impugned order make any reference to the communication received from DIT (Investigation). We find this attitude of the Revenue strange, as the letter from DIT (Investigation), Nagpur was the basis of seeking to transfer the assessee's case from Mumbai to Aurangabad. In all fairness, once the letter from DIT (Investigation), was incorrect, the proposal to transfer the proceedings ought to have been withdrawn. The attitude of the Revenue seems to be once a transfer u/s 127(2) is proposed, come what may, they would transfer the case. Further, we find that the notice issued consequent to the order of this Court is bereft of any particulars, save and except that the transfer is required for the sake of co-ordinated investigation along with other connected cases for administrative convenience. The showcause notice must refer to the documents and the inferences drawn from the documents by the CIT supporting the proposed transfer. By mere giving of the documents relied upon without the party knowing what inference is being drawn therefrom, the requirement of natural justice is not met. This itself would lead to a breach of principles of natural justice;

++ it is found that the impugned order does not deal with the assessee's submissions as contained in its letter, inter alia pointing out that only 3 flats out of 78 flats in the building being constructed in Vile Parle had been sold by the assessee to the members of the Jhaveri Group. In case, the assessee's assessments are to be transferred to the places where its customers (purchaser of its flats) are being assessed, then, the assessee's cases would have to be transferred to at various places where its customers resides. This is an impossibility. It is to be noted that where transaction take place in the course of its business and a search takes place on such other persons at the place where such person is assessed, it would not necessarily result in the transfer of assessee's case to the place where the person it is dealing with in the normal course is being assessed. The fact that there would be inconvenience to the assessee as emphasized in its subsequent letter even adverted to in the impugned order was much less dealt with. Thus, the order itself is a nonspeaking order. The basic and minimal requirement of the assessee being given a personal hearing and the opportunity to respond to the proposed transfer is to enable the Authority to consider whether in the facts and circumstances of the case, the transfer of the case from Mumbai to Auranbagad is warranted. Particularly, bearing in mind that the assessee has otherwise no connection with Aurangabad except for having sold 3 out of 78 flats in the building being constructed to the persons who are being assessed at Aurangabad. Nevertheless, the assessee had itself pointed out the inconvenience which would be caused to it and the arbitrary nature of the transfer of assessee's assessment to Aurangabad. This objection was not appropriately considered and dealt with in this case. In the above view, the impugned order passed by the Principal CIT is set aside.

(See 2016-TIOL-859-HC-MUM-IT)