Facts of the Case

The petitioners challenged transfer orders dated 06.09.2023 passed under Section 127(2) of the Income-tax Act, 1961, whereby their cases were transferred from Delhi to Mumbai.

The transfer was proposed on the ground that a search operation had been conducted on the Suumaya Group in Mumbai and for the purpose of coordinated investigation and administrative convenience.

Prior to passing the impugned orders, a notice dated 22.05.2023 was issued to the petitioners. The petitioners filed detailed objections stating that:

  • They were residents of Delhi.
  • Their business operations and companies were located in Delhi.
  • Books of accounts and tax consultants were based in Delhi.

However, the Principal Commissioner of Income Tax passed the transfer orders without discussing or addressing the objections raised by the petitioners. Further, the impugned orders did not contain a Document Identification Number (DIN).

Issues Involved

  1. Whether transfer orders passed under Section 127 without recording reasons are valid in law?
  2. Whether absence of DIN renders the order invalid?
  3. Whether reasons recorded in internal files but not reflected in the order can sustain the validity of transfer?

Petitioner’s Arguments

  • The impugned orders were non-speaking orders, lacking any reasoning.
  • The objections raised by the petitioners were not considered or addressed.
  • Absence of DIN violated CBDT Circular No. 19/2019, rendering the orders non est in law.
  • Transfer was arbitrary and without justification.

Respondent’s Arguments

  • Transfer was justified for coordinated investigation due to search conducted on the Suumaya Group in Mumbai.
  • Administrative convenience warranted centralization of cases.

Court’s Findings / Order

  • The impugned orders were non-speaking and devoid of reasons, which is contrary to the mandatory requirement under Section 127(1).
  • The authority failed to consider and deal with the objections raised by the petitioners.
  • Reasons must be recorded in the order itself and cannot be supplemented by internal records or prior communications.
  • Absence of DIN violated CBDT Circular No. 19/2019, further vitiating the orders.

Accordingly, the Delhi High Court set aside the impugned transfer orders and allowed the writ petitions.

Important Clarification by Court

  • Recording of reasons in the order is mandatory, not procedural.
  • Mere reference to “administrative convenience” or “coordinated investigation” without explanation is insufficient.
  • Reasons must be communicated to the assessee, enabling judicial review.
  • Orders without DIN are invalid as per CBDT circular.

 Link to download the order -

https://delhihighcourt.nic.in/app/showFileJudgment/RAS03102023CW129142023_174313.pdf

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