Facts of the Case

The Petitioner, Avijai Charitable Trust, filed a writ petition challenging an order dated 05 January 2021 passed under Section 127 of the Income Tax Act, 1961, whereby its case was transferred from one jurisdictional authority to another.

The Petitioner contended that the transfer was made without considering its objections and without granting an opportunity of hearing. It was further stated that the case was wrongly grouped with the PMC Group despite no financial or transactional connection with the said group.

Issues Involved

  1. Whether an order passed under Section 127 transferring jurisdiction without considering the assessee’s reply is valid in law.
  2. Whether failure to provide an opportunity of hearing violates principles of natural justice.
  3. Whether recording of reasons is mandatory before transferring jurisdiction under Section 127.

Petitioner’s Arguments

  • The impugned order is illegal as the Petitioner’s reply was not considered.
  • No opportunity of hearing was provided before passing the transfer order.
  • The Petitioner had no connection with the PMC Group, yet its case was transferred along with it.
  • The transfer order lacked justification and violated statutory requirements under Section 127.

Respondent’s Arguments

  • The Respondents admitted that the Petitioner’s reply was not considered due to it not reflecting on the ITBA portal.
  • However, it was acknowledged that the reply had indeed been filed prior to the passing of the impugned order.

Court’s Findings

  • The Court held that recording justifiable and cogent reasons is a mandatory precondition for transfer under Section 127.
  • Such transfer can only be effected after considering the assessee’s reply.
  • The failure to consider the Petitioner’s reply amounted to a violation of principles of natural justice.
  • The Court emphasized that procedural fairness must be strictly followed in jurisdictional transfers.

Court Order / Decision

  • The impugned order dated 05 January 2021 was set aside.
  • All consequential actions were quashed.
  • The matter was remanded back to the Commissioner of Income Tax (Exemptions) to reconsider the Petitioner’s objections.
  • Direction issued to pass a fresh reasoned order after:
    • Granting an opportunity of hearing
    • Considering the Petitioner’s reply

Important Clarification

  • Transfer of jurisdiction under Section 127 cannot be mechanical or administrative.
  • Consideration of objections and recording of reasons are mandatory safeguards.
  • Non-consideration of reply itself is sufficient to invalidate the transfer order.

Sections Involved                            

  • Section 127 of the Income Tax Act, 1961
  • Principles of Natural Justice

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:3964-DB/MMH06122021CW121112021_104355.pdf


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