Facts of the Case

The petitioners challenged orders dated 20 February 2024 and 11 March 2024 passed under Section 127 of the Income Tax Act, 1961, whereby their cases were transferred from the jurisdictional Assessing Officer in Delhi to the Deputy Commissioner of Income Tax, Central Circle, Karnal, Haryana.

The transfer followed a search operation conducted on 11 April 2023 in the Zee Lab Group. During the search, incriminating material allegedly relating to the petitioners was discovered. Consequently, notices were issued seeking financial details, investments, and loan transactions.

Subsequently, show cause notices proposing centralisation of cases were issued for coordinated investigation and assessment. Despite objections by the assessees denying any link with the searched entities, the Revenue passed transfer orders under Section 127.

Issues Involved

  1. Whether transfer of jurisdiction under Section 127 for coordinated investigation is legally valid.
  2. Whether the Revenue must establish a direct nexus between the assessee and the searched party.
  3. Scope of judicial review over administrative transfer orders under the Income Tax Act.

Petitioner’s Arguments

The petitioners contended that the transfer orders were mechanical and lacked proper reasoning. It was argued that they had no connection with the searched entities and that centralisation would cause undue hardship, including the need to travel from Delhi to Karnal for proceedings.

They also asserted that the orders reflected non-application of mind and failed to justify the necessity of transfer.

Respondent’s Arguments

The Revenue argued that the transfer was made in accordance with Section 127 after providing an opportunity of hearing and considering the objections. It contended that incriminating material discovered during search indicated financial dealings between the petitioners and persons covered in the search.

The Revenue further submitted that centralisation was required for coordinated investigation, meaningful assessment, and administrative convenience, especially where multiple related parties were involved.

Court Order / Findings

  • Section 127 empowers tax authorities to transfer cases in public interest after providing an opportunity of hearing and recording reasons.
  • Orders under Section 127 are administrative in nature and intended to facilitate effective tax collection.
  • Coordinated investigation and administrative convenience are recognized as valid grounds for transfer.
  • There is no fundamental right of an assessee to be assessed at a particular location.
  • Judicial review is limited to examining whether the order is arbitrary, mala fide, or without jurisdiction.

Important Clarification

The judgment reinforces that Section 127 is a machinery provision designed to ensure effective administration of tax laws. Transfer of jurisdiction can be ordered for coordinated investigation even if it causes inconvenience to the assessee, provided principles of natural justice are followed.

The ruling also clarifies that courts will not interfere with such administrative decisions unless they are shown to be perverse, mala fide, or without statutory authority.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1772177192_DOLLARGULATIVsPRINCIPALCOMMISSIONEROFINCOMETAXORS..pdf 

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