Case of assessee cannot be transferred from one income-tax authority to another without giving opportunity of hearing to assessee[2013] 35 taxmann.com 522 (Bombay)
Section 127 of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases [Opportunity of hearing] - Assessment year 2010-11 - Whether allowing personal hearing to assessee is necessary before case is transferred from one income-tax authority to another - Held, yes [Para 11] [Partly in favour of assessee]
HIGH COURT OF BOMBAY
Aamby Valley Ltd.
v.
Commissioner of Income-tax
DR. D.Y. CHANDRACHUD AND A.A. SAYED, JJ.
WRIT PETITION NO. 2854 OF 2012
JANUARY 24, 2013
Section 127 of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases [Opportunity of hearing] - Assessment year 2010-11 - Whether allowing personal hearing to assessee is necessary before case is transferred from one income-tax authority to another - Held, yes [Para 11] [Partly in favour of assessee]
FACTS
| ■ | A notice under section 127(2) was issued to assessee, by which the case pertaining to assessee was proposed to be transferred from the Deputy Commissioner, Mumbai to Deputy Commissioner, Delhi. The assessee requested the Assessing Officer to furnish reasons for the proposed transfer and sought an opportunity of personal hearing. | |
| ■ | In reply it was stated that case of assessee was proposed to be centralized with 'S' in view of its large scale transactions and investments with 'S', which had already been centralized with the Deputy Commissioner, Delhi. | |
| ■ | The assessee submitted its objections to the proposed transfer that hardship would be caused in view of fact that all books of account and other details were maintained at Mumbai. | |
| ■ | However, the order centralizing the case of assessee with Deputy Commissioner, Delhi was passed on 5-1-2012 without granting any hearing to assessee. | |
| ■ | Subsequently, the Assessing Officer, New Delhi issued notice to assessee requiring it to attend proceedings and furnish relevant information so as to complete the assessment for assessment year 2010-11 which would otherwise become time barred by limitation on 31-3-2013. | |
| ■ | However, the assessee requested the Assessing Officer to hold proceedings in abeyance informing that a writ petition was filed challenging the legality of order passed under section 127. |
HELD
| ■ | Section 127(1) confers powers on the Commissioner 'after giving the assessee a reasonable opportunity of being heard in the matter, whenever it is possible to do so, and after recording his reasons for doing so', to transfer any case from one Assessing Officer subordinate to him to any other Assessing Officer also subordinate to him. Under sub-section (2), where the Assessing Officer from whom the case is to be transferred and the Assessing Officer to whome the case is to be transferred are not subordinate, inter alia, to the same Commissioner, the power is, inter alia, conferred upon the Commissioner from whose jurisdiction the case is to be transferred. In such a case, the Commissioner, the statute provides, 'may after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so and after recording his reasons for doing so, pass the order.' These provisions have been interpreted in the judgment of the Division bench noted above in the case of Sahara Hospitality Ltd. v. CIT [2013] 352 ITR 38/[2013] 211 Taxman 15/25 taxmann.com 299 (Bom.). In the present case, admittedly, though reasons were furnished to the assessee and the basis on which the transfer was sought to be effected was indicated, no personal hearing was afforded. The requirement of a personal hearing in the present case is of some significance because the assessee had submitted objections both on the need to transfer the case to New Delhi and on the alleged hardships that would be caused if such a transfer were to be effected. Whether the objections of the assessee were sustainable or otherwise is a separate matter which need not detain us at this stage. In view of the law laid down by the Division Bench in the judgment noted earlier, interpreting the provisions of section 127, the furnishing of a personal hearing was necessary. [Para 10] | |
| ■ | Since no personal hearing was afforded, the issue that now falls for determination is what relief in the present case should be granted to the assessee. The order of transfer was passed on 5-1-2012. Though the assessee had by its letters requested the Assessing Officer to hold proceedings in abeyance since a petition was being filed before this Court, no petition was filed until the last week of October, 2012. The assessment proceedings for the assessment year 2010-11 would become time barred by 31-3-2013, in view of the mandate of section 153(1)(a). The present case does not fall within the ambit of the provisions of section 153(3) including clause (ii). The assessee had waited for nearly ten months before instituting the proceedings. Having regard to the fact that the assessment would otherwise become time barred, it is viewed that the ends of justice would require that the final order should be so modulated so as to balance the need to comply with the principles of natural justice on the one hand with the necessity of protecting the revenue on the other. Therefore it is not inclined to interfere with the order dated 5-1-2012, to the extent that the case file stands transferred to New Delhi in relation to the assessment proceedings for the assessment year 2010-11, on the ground of the delay on the part of the assessee in moving this Court in relation to the transfer pertaining to proceedings for the assessment year 2010-11 which, as indicated earlier, would become time barred on 31-3-2013. Save and except for the aforesaid it is directed that the Commissioner, Mumbai shall proceed to furnish an opportunity of being heard to assessee and for that purpose treat the impugned order dated 5-1-2012, as a notice calling upon the assessee to show cause as to why the case should not be transferred. [Para 11] |
CASES REFERRED TO
Sahara Hospitality Ltd. v. CIT [2012] 211 Taxman 15/25 taxmann.com 299 (Bom.) (para 9).
Jehangir D. Mistri, Parag Khandhar and Jatin Pore for the Petitioner. Arvind Pinto for the Respondent.
JUDGMENT
1. Rule, by consent returnable forthwith. With the consent of the counsel and at their request the petition is taken up for hearing and final disposal.
2. The petitioners have sought to challenge the validity of an order dated January 5, 2012, issued by the Commissioner of Income-tax-8, Mumbai, under section 127(2) of the Income-tax Act, 1961, by which the case pertaining to the assessee has been transferred from the Deputy CIT-8(1), Mumbai, to the Deputy CIT, Delhi (Central)-6, New Delhi.
3. On August 26, 2011, a notice was issued by the Deputy Commissioner of Income-tax, Circle 8(1) requiring the attendance of the first petitioner on September 13, 2011, in connection with the assessment proceedings for the assessment year 2010-11.
4. By a notice dated September 12, 2011, the Assessing Officer informed the petitioner of a proposal to transfer its case from Deputy CIT 8(1), Mumbai, to the Deputy CIT CC-6, New Delhi, and sought the no objection of the petitioner by September 23, 2011, failing which it was stated that an order under section 127(2) would be passed. By a reply dated September 22, 2011, the petitioner requested the Assessing Officer to furnish reasons for the proposed transfer of the assessment proceedings to New Delhi and sought an opportunity of a personal hearing on its objections which would be submitted before the respondents. On November 23, 2011, the first respondent in reply stated that the case of the petitioner was proposed to be centralised with the Sahara group in view of a large scale financial transactions and investments of the assessee with the Sahara group which has been already centralized with the Deputy CIT-6, New Delhi. The centralisation of the case was sought to be effected in order to make co-ordinated enquiries/investigation into such financial transactions.
5. On December 20, 2011, the petitioner submitted its objections to the proposed transfer stating, inter alia, that hardship would be caused in view of the fact that all books of account together with other details such as bills, vouchers, registers and files are maintained in Mumbai where the business activities are carried out.
6. On January 5, 2012, the first respondent issued an order under section 127(2) stating that all cases belonging to the Sahara group had been centralised with the Deputy CIT -6, New Delhi. Moreover, it was stated that the assessee had financial transactions with other group entities and is learnt to have stakes in an IPL cricket team owned by a group company, Sahara Adventure Sports Pvt. Ltd. which had also been centralised.
7. On January 18, 2012, the Assessing Officer in New Delhi issued a notice to the petitioner requiring it to attend proceedings and to furnish information as listed out in an annexure to the letter. A further notice was issued by the Assessing Officer on February 3, 2012. On February 7, 2012, the assessee informed the Assessing Officer that it proposed to file a writ petition before this court challenging the legality of the order passed under section 127 but in order to comply with the order under section 142(1), certain documents were being filed. On February 22, 2012, the Assessing Officer issued a notice under section 142(1) and called upon the assessee to furnish information in order to complete the assessment under section 143(3). The assessee sought an extension of time by a letter dated March 3, 2012. On April 20, 2012, and May 7, 2012, the assessee sought an adjournment in order to institute proceedings before this court.
8. These proceedings were filed in the registry on October 23, 2012. The assessment for the assessment year 2010-11 would become barred by limitation on March 31, 2013, under section 153(1)(a).
9. A petition was filed before this court under article 226 of the Constitution by Sahara Hospitality Ltd. v. CIT [2013] 352 ITR 38/[2012] 211 Taxman 15/25 taxmann.com 299 (Bom) in order to challenge a similar order dated January 5, 2012, passed by the CIT-8 transferring the proceedings from Mumbai to New Delhi. By a judgment of a Division Bench dated September 12, 2012, that petition was allowed on the ground that the requirement of furnishing to the assessee a reasonable opportunity of being heard is mandatory under section 127 and that the word "may" should be read as "shall". While setting aside the order passed in that case liberty was reserved to the CIT-8 to pass a fresh order after hearing the petitioner in that case, Sahara Hospitality Ltd. (supra) The orders of the Division Bench has been relied upon by the petitioners and a similar order has been sought.
10. Section 127(1) confers powers, inter alia, on the Commissioner "after giving the assessee a reasonable opportunity of being heard in the matter, whenever it is possible to do so, and after recording his reasons for doing so", to transfer any case from one Assessing Officer subordinate to him to any other Assessing Officer also subordinate to him. Under sub-section (2), where the Assessing Officer from whom the case is to be transferred and the Assessing Officer to whom the case is to be transferred are not subordinate, inter alia, to the same Commissioner, the power is, inter alia, conferred upon the Commissioner from whose jurisdiction the case is to be transferred. In such a case, the Commissioner, the statute provides, "may after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so and after recording his reasons for doing so, pass the order." These provisions have been interpreted in the judgment of the Division Bench noted above in the case of Sahara Hospitality Ltd. (supra). In the present case, admittedly, though reasons were furnished to the assessee and the basis on which the transfer was sought to be effected was indicated, no personal hearing was afforded. The requirement of a personal hearing in the present case is of some significance because the assessee had submitted objections both on the need to transfer the case to New Delhi and on the alleged hardships that would be caused if such a transfer were to be effected. Whether the objections of the assessee were sustainable or otherwise is a separate matter which need not detain us at this stage. In view of the law laid down by the Division Bench in the judgment noted earlier, interpreting the provisions of section 127, the furnishing of a personal hearing was necessary.
11. Since no personal hearing was afforded, the issue that now falls for determination is what relief in the present case should be granted to the assessee. The order of transfer was passed on January 5, 2012. As we have noted earlier, the endorsement by the registry in the present case in respect of the date of filing is October 23, 2012. Though the assessee had by its letters dated February 7, 2012, April 20, 2012, and May 7, 2012, requested the Assessing Officer to hold proceedings in abeyance since a petition was being filed before this court, no petition was filed until the last week of October 2012. The petition was moved before the court for the first time on January 2, 2013. The assessment proceedings for the assessment year 2010-11 would become time barred by March 31, 2013, in view of the mandate of section 153(1)(a). The present case does not fall within the ambit of the provisions of section 153(3) including clause (ii). The assessee has waited for nearly ten months before instituting the proceedings. Having regard to the fact that the assessment would otherwise become time barred, we are of the view that the ends of justice would require that the final order that the court would pass should be so modulated to balance the need to comply with the principles of natural justice on the one hand with the necessity of protecting the Revenue on the other. We are not, therefore, inclined to interfere with the order dated January 5, 2012, to the extent that the case file stands transferred to New Delhi in relation to the assessment proceedings for the assessment year 2010-11. We decline to do so on the ground of the delay on the part of the assessee in moving this court in relation to the transfer pertaining to proceedings for the assessment year 2010-11 which, as indicated earlier, would become time barred on March 31, 2013. Save and except for the aforesaid, we direct that the CIT-8, Mumbai, the first respondent, shall proceed to furnish an opportunity of being heard to the assessee and for that purpose treat the impugned order dated January 5, 2012, as a notice calling upon the assessee to show cause as to why the case should not be transferred. We reiterate and clarify by way of abundant caution that this would not affect the transfer of the proceedings so far as it pertains to the assessment year 2010-11 which shall be completed by the Assessing Officer to whom the proceedings have been transferred.
12. The assessee would be at liberty to file a reply, if any, within a period of two weeks before the first respondent who shall thereupon pass final orders in accordance with law after affording an opportunity of a personal hearing to the assessee within a period of three weeks thereafter. The assessee shall appear before the first respondent together with an authenticated copy of this order on February 7, 2013.
13. Rule is made absolute in the aforesaid terms. There shall be no order as to costs.
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