Ground Of Coordinated Investigations Is A Good Ground For Transfer U/S 127 Income Tax Act: Delhi HC
The Delhi High Court has observed that grounds of coordinated investigation or administrative convenience is an adequate rationale to pass an order of transfer and exercise powers under Section 127 of the Income Tax Act, 1961.
Two writ petitions were filed at the instances of the Assesses assailing the impugned orders passed under Section 127 of the Act, where, the cases of the Assessees are centralized to the board of DCIT, Karnal, Haryana.
The Division Bench of Justice Yashwant Varma and Justice Purushaindra Kumar observed, “It is imperative to point 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, we find 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.”
Advocate N.P. Shahi appeared for the Petitioners while SSC Gaurav Gupta and SSC Prashant Meharchandani appeared for the Respondents.
On April 11, 2023, a search under Section 132 was conducted at M/s. Zee Lab Group at Karnal, Haryana. Incriminating material related to the Assessee was found, leading to a notice under Section 131(1A) which called for the furnishing of income details since AY 2017-18. The Assessee replied with financial statements, bank account details, investment particulars, and unsecured loan transactions.
A show cause notice was issued to the Assessee, whereby, for an ‘administrative, convenience, coordinated investigation and assessment’, the case of the Assessee was sought to be centralized at DCIT, Karnal, Haryana and the Assessee was called upon to furnish objections, if any, against the proposed transfer. The Assessee filed its reply and after considering it, 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 Officer, Delhi to DCIT, Karnal, Haryana.
After considering the legislative mandate and ambit of Section 127 of the Act the Court examined whether coordinated enquiries, investigations or administrative convenience’ is an adequate rationale to pass an order of transfer and exercise powers under Section 127 of the Act.
“Therefore, it is evident from the legislative mandate and dictum laid down by the abovementioned judicial pronouncements on the scope and ambit of Section 127 of the Act, that it is a machinery provision which is aimed at the larger public interest. On the touchstone of public interest, the powers under Section 127 of the Act can be exercised. Furthermore, 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.”, the Court held.
Additionally, the Court observed that the convenience of parties shall be considered by the Revenue while exercising the powers under Section 127 of the Act, however, given 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 assessees. It was also pointed 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.
The Court also rejected the contention of the Assessee that the Revenue had not considered the objections raised by them and that there was no need to centralize the cases. “As it is ostensibly clear that the Revenue before passing the impugned order dated 20 February 2024 has provided the opportunity of hearing to the assessee [Mark Gulati] and considered the assessee‘s [Mark Gulati] objections, thus, the order would reflect that the Revenue had duly applied its mind and powers under Section 127 was invoked on the grounds of administrative convenience and meaningful assessment.”, the Court said.
Accordingly, the Court refused to interfere with the impugned orders and dismissed the writ petitions.
Cause Title: Dollar Gulati v. Principal Commissioner of Income Tax & Ors. and Mark Gulati v. Principal Commissioner of Income Tax & Ors. (Neutral Citation: 2024:DHC:3630-DB)
Appearances:
Petitioners: Advocates N.P. Shahi, Deepanshu Mehta and Kumail Abbas
Respondents: SSC Gaurav Gupta, SSC Prashant Meharchandani, Advocates Shivendra Singh, Namit Gupta, Akshat Singh, Ritika Vohra and Utkarsh Kandpal