By TIOL News Service

AHEMDABAD, SEPT 22, 2017: THE ISSUE THAT ARISES BEFORE THIS COURT IS - Whether Department is precluded from initiating fresh procedure for transfer of Assessee's case, if its previous procedure was struck down by Writ Court on basis of non compliance of hearing opportunity evisaged u/s 127(1). NO is the verdict.

Facts of the case:

The Assessee company, engaged in manufacture of electronic items, preferred the present petition challenging an order passed by the Principal Commissioner of Income-tax, Ahmedabad, transferring the Assessee's case for assessment from DCIT, Circle 2, Ahmedabad to ACIT, Central Circle, Moradabad. The Assessee challenged such order before this Court mainly on the ground that without supplying necessary information and documents containing reasons though asked for and without even conveying the date of further hearing, the Principal Commissioner passed an exparte order transferring the assessment. The Court allowed the petition on the ground that requirement of hearing before passing the order of transferring the assessment was not satisfied. It was held that mere issuance of notice inviting attendance of an assessee for hearing of a case for transfer, would not fulfill the requirement of hearing envisaged u/s 127(1). After this judgment was passed, the authority issued a notice to Assessee informing that hearing was fixed to consider the transfer of case from Ahmedabad to Moradabad to facilitate coordinated investigation in search and seizure cases along with the case of other group companies. In response, the Assessee objected to the transfer of case interalia contending that transferring the assessment at a distance of nearly 800 kms away from Ahmedabad would cause great prejudice to Assessee. Ignoring such plea, the Principal Commissioner, Ahmedabad, passed the impugned order u/s 127(2)(a) transferring the case.

High Court held that,

++ from the record, it can be seen that earlier when the department had passed the order transferring the assessment of Assessee, the same was struck down by the High Court on the ground that the requirement of hearing was not fulfilled. The Court noted that before passing the order, all that the Principal Commissioner had done was to issue the notice to Assessee to attend his office and to state why the case should not be transferred. It is well settled that when an administrative action is struck down on ground of breach of principles of natural justice, action does not stand terminated and it is always open for the authority to proceed further from the stage where the defect has been detected. In any case, we do not see any warrant in the judgment of the High Court by which the department was precluded from initiating a fresh procedure for transfer of Assessee's case after following the requirements of law. In the present case, what the Department did was to supply tentative reasons why the authority was considering to transfer Assessee's case to Moradabad. The petitioner was allowed to make a representation. Such representation was considered and a final order was passed. Insofar as the requirement of hearing is concerned, therefore, we see no breach;

++ from the original files, we notice that the Principal DIT (Investigation) Kanpur, had written to the Principal CIT, Lucknow, pointing out that search and seizure operations were carried out in Genus Paper and Board group of companies by the Dehradhun unit of Directorate. Subsequently, the ADIT, Dehradhun, had sent a proposal for centralisation of 42 cases of the group proposing to centralise them with the AO, Central Circle, Moradabad. All the cases are covered under the warrant of authorisation u/s 132(1) and 132A and books and documents were found and seized in such cases. These cases are directly connected to the said group and for proper and meaningful coordinated investigation, these cases were required to be centralised before one AO. He was therefore, requested to consent for such centralisation of the cases, and the Principal CIT, Lucknow, conveyed his consent for centralisation of the cases of Assessee before ACIT, Central Circle, Moradabad. Thus clearly, the Principal CIT, Lucknow, had shown his agreement to the case of Assessee being transferred and centralised;

++ it is true that no formal letter has been written by the Principal Commissioner of Ahmedabad indicating his agreement. However, the record would suggest that previously he had passed the order transferring the assessment of Assessee. As noted, this order was struck down by judgment of the writ court. dated 18.7.2016. Thereafter, the said authority issued fresh notices calling upon the Assessee to participate in the hearing and indicating the grounds on which he proposed to transfer the assessment. Clause(a) of Section 127(2) refers to the agreement of the two heads of the jurisdiction from where an assessment is transferred to where it is being transferred. There is no format in which such agreement must be recorded or conveyed. As noted, the additional duty of the authority from whose jurisdiction the assessment is being transferred is to give a reasonable opportunity of being heard to the assessee and then to pass an order citing reasons. This would necessarily be after he agrees to allowing the assessment to be transferred. When therefore, Principal Commissioner of Ahmedabad had issued notices to Assessee on more occasions than one proposing to transfer the assessment, his agreement for such transfer was writ large on the face of the record;

++ we cannot put the requirement of clause(a) to Section 127(2) in such a straightjacket formula that even when the competent authority grants a hearing to the assessee and, thereafter, passes a reasoned order transferring the assessment, his action would fail merely because in writing he did not record his agreement. Further, when the High Court set aside the order of transfer of assessment, it was not necessary that the proposal for transfer of case would have to be reinitiated from the very inception. If the two Principal Commissioners had already reached an agreement on the question of transfer of case, no such fresh agreement had to be arrived at, unless there was material change in circumstances. In the present case, the Assessee is a part of group companies which were subjected to common search action. The assessments of all 42 group companies are being centralised at one place. Therefore, there is no reason to interfere in the transfer.

(See 2017-TIOL-1982-HC-AHM-IT)