Facts of the Case

The petitioners, comprising individuals and companies belonging to the ATS Group, challenged an order dated 07.10.2008 passed by the Commissioner of Income Tax, Delhi-I, New Delhi under Section 127(2) of the Income Tax Act, 1961.

By the impugned order, the Commissioner transferred the petitioners’ income tax cases from various Assessing Officers in Delhi to the Assistant Commissioner of Income Tax, Central Circle, Meerut. The transfer order stated that the transfer was being made for “administrative convenience and coordinated investigation” after considering the objections submitted by the assessees.

Prior to the transfer, the petitioners had received a proposal for transfer of jurisdiction from Delhi to Meerut and submitted detailed objections before the Commissioner of Income Tax as well as the Chief Commissioner of Income Tax.

The petitioners contended that:

  • Their registered offices and head offices were situated in Delhi.
  • The directors resided either in Delhi or Noida.
  • The business activities were located in Noida, which was close to Delhi.
  • They had no business activities in Meerut.
  • Centralisation of assessments could be carried out in Delhi itself.
  • Conducting assessment proceedings at Meerut would cause substantial inconvenience.

Despite these objections, the transfer order merely stated that the objections had been considered and that the transfer was being made for administrative convenience and coordinated investigation. No reasons were provided addressing the specific objections raised by the petitioners.

Issues Involved

  1. Whether an order passed under Section 127(2) of the Income Tax Act transferring an assessee’s case must disclose proper application of mind to the objections raised by the assessee.
  2. Whether a transfer order merely stating that objections have been considered, without dealing with them specifically, satisfies the requirements of law.
  3. Whether the transfer of assessment proceedings from Delhi to Meerut was sustainable in the absence of a reasoned order.

Petitioner’s Arguments

The petitioners argued that:

  • Their principal offices and management were situated in Delhi.
  • The business operations were carried out from Noida and Delhi and not from Meerut.
  • Transfer to Meerut would cause serious practical difficulties in attending assessment proceedings.
  • They did not object to centralisation of assessments but requested that such centralisation be done in Delhi.
  • The authorities failed to consider and address the detailed objections submitted by them.
  • The transfer order lacked reasons and therefore violated the principles governing exercise of powers under Section 127(2) of the Income Tax Act.

Respondent’s Arguments

The Revenue relied upon the impugned transfer order and maintained that:

  • The cases were transferred after considering the objections submitted by the assessees.
  • The transfer was necessary for administrative convenience.
  • The transfer was also required for coordinated investigation.
  • The order had been passed in exercise of powers conferred under Section 127(2) of the Income Tax Act, 1961.

Court Findings

The Delhi High Court observed that the transfer order did not disclose any proper application of mind to the objections raised by the petitioners.

The Court referred to its earlier decision in Nitin Developers and Construction v. CIT (284 ITR 605), wherein it had been held that an order of transfer under Section 127(2) must demonstrate due consideration of the objections raised by the assessee.

The Court noted that:

  • The impugned order merely stated that objections had been considered.
  • The order failed to explain how the objections had been dealt with.
  • No reasons were recorded for rejecting the objections.
  • The order did not indicate any application of mind to the specific concerns raised by the petitioners.

Accordingly, the Court held that the transfer order could not be sustained in law.

Court Order

The Delhi High Court:

  • Set aside the impugned transfer order dated 07.10.2008.
  • Granted liberty to the Commissioner of Income Tax, Delhi-I, New Delhi to pass a fresh order under Section 127(2) of the Income Tax Act.
  • Directed that before passing any fresh order, the petitioners must be granted a further opportunity of hearing.
  • Clarified that any future order must specifically deal with and consider the objections raised by the petitioners.

Important Clarification

The Court did not prohibit transfer of the cases. Instead, it held that while exercising powers under Section 127(2), the authority must pass a reasoned and speaking order demonstrating proper consideration of the assessee’s objections.

The judgment reinforces the principle that administrative convenience alone cannot justify a transfer order unless the authority records reasons and addresses the objections raised by the affected assessee.

Link to download the order -

https://delhihcourt.nic.in/app/case_number_pdf/2008:DHC:3258-DB/BDA05122008CW83392008.pdf

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