Section 127(1) requires not only a reasonable opportunity of being heard to be afforded to an assessee but also mandates that reasons be recorded by the concerned official for transferring any case from one AO to another which was not done in the case of assessee as the impugned order carries the conclusion but not any reasons in support thereof, hence order set aside

CALCUTTA HIGH COURT

W.P. No. 8457(W) of 2014.

Chirag Vincom P. Ltd. .................................................................................Appellant.
V
Deputy Commissioner of Income-tax ...........................................................Respondent

SANJIB BANERJEE, J.

Date :April 16, 2014

Appearances</td>

R. K. Bhardwaj for the petitioner.
Ms. Smita Das De for the respondent.

Section 127(1) of the Income Tax Act, 1961 — Transfer of Case — Section 127(1) requires not only a reasonable opportunity of being heard to be afforded to an assessee but also mandates that reasons be recorded by the concerned official for transferring any case from one AO to another which was not done in the case of assessee as the impugned order carries the conclusion but not any reasons in support thereof, hence order set aside — Chirag Vincom P. Ltd. v. Deputy Commissioner of Income-tax.

FACTS:

The show-cause notice called upon the assessee to present its objections to the proposed] transfer of the account from Kolkata to the Kanpur Central region. The notice informed the assessee that a search and seizure operation u/s 132 had been carried out on the Tirubala group of concerns by the Investigation Wing of the Income-tax Department, Kolkata, which revealed that the assessee company was related to the group and had transactions with other entities of the group and shared common directors. The notice expressed the tentative opinion that the transfer of the assessee's account to Kanpur was necessary for a co-ordinated investigation. Assessee responded by a writing claiming that the transfer would result in serious financial burden on the assessee company since the accounts pertaining to assessee company were under block assessment in the same assessment year as involved in the search at Kanpur. Thereafter, AO passed an order stating that assessee-company does neither show any conviction nor adequate argument whereby it can be said that the interests of the Revenue will be served by retaining the assessee-company under Deputy Commissioner of Income-tax. Being aggrieved, assessee filed a writ petition.

HELD,

that the reasons furnished by the Commissioner were not the links between the facts and the conclusion but the conclusion itself. Reasons were the grounds that impel a person to reach a conclusion on the basis of the facts as noticed and presented. The impugned order carries the conclusion but not any reasons in support thereof. In the backdrop of the quality of the order impugned, it was not necessary to pronounce conclusively as to whether the expression "opportunity of being heard in the matter" in section 127(1) obliges the concerned official to grant a personal hearing. However, since it was evident that the Commissioner relied on a report, the contents whereof were not made known to the assessee and since the order does not indicate any reasons in support of the decision to transfer the account despite the objection of the assessee company, the order cannot be accepted. In the result, petition was answered in favour of assessee.

JUDGMENT

The judgment of the court was delivered by

Sanjib Banerjee J.-The assessee challenges an order under section 127(1) of the Income-tax Act, 1961, transferring the assessee's account to a different jurisdiction.

The two grounds canvassed are that the expression "opportunity of being heard in the matter" appearing in the relevant provision implies a personal hearing before the officer makes a final order ; and that the Commissioner who passed the relevant order relied on material that was not disclosed in the show-cause notice and, thereby, acted in breach of the principles of natural justice.

The show-cause notice of January 9, 2014, called upon the first petitioner to present its objections to the proposed transfer of the account from Kolkata to the Kanpur Central region. The notice informed the first petitioner that a search and seizure operation under section 132 of the Act had been carried out on the Tirubala group of concerns on November 24, 2011, by the Investigation Wing of the Income-tax Department, Kolkata, which revealed that the petitioner company was related to the group and had transactions with other entities of the group and shared common directors.

The notice expressed the tentative opinion that the transfer of the petitioner's account to Kanpur was necessary for a co-ordinated investigation.

The petitioner responded by a writing of January 20, 2014, inter alia, claiming that the transfer would result in serious financial burden on the petitioner company since the accounts pertaining to the petitioner company were under block assessment in the same assessment year as involved in the search at Kanpur.

The order impugned was passed on February 2, 2014, and recorded that "opportunity of being heard and furnishing objections . . . was given to the . . . assessee . . ." The show-cause notice was substantially quoted in the order and the gist of the objection noticed before the relevant Commissioner pronounced the decision to transfer the account.

Paragraph 4 of the impugned order, however, reveals that a report had been called "from the jurisdiction Assessing Officer and the matter has been carefully perused". The report which, doubtless, went into the decision-making process was not made available to the assessee nor are the contents of the report revealed in the impugned order.

Section 127(1) of the Act requires not only a reasonable opportunity of being heard to be afforded to an assessee but also mandates that reasons be recorded by the concerned official for transferring any case from one Assessing Officer to another. The only reasons indicated in the order impugned are as follows :

"The objection filed by the assessee-company does neither show any conviction nor adequate argument whereby it can be said that the interests of the Revenue will be served by retaining the assessee-company under Deputy Commissioner of Income-tax-CC-XXX, Kol." Reasons are the life-blood of a judicial or quasi-judicial order and should indicate a link between the facts and the conclusion or inference drawn from the facts. The reasons furnished by the Commissioner as quoted above are not the links between the facts and the conclusion but the conclusion itself. Reasons are the grounds that impel a person to reach a conclusion on the basis of the facts as noticed and presented. The impugned order carries the conclusion but not any reasons in support thereof.

In the backdrop of the quality of the order impugned, it is not necessary to pronounce conclusively as to whether the expression "opportunity of being heard in the matter" in section 127(1) of the Act obliges the concerned official to grant a personal hearing. However, since it is evident that the Commissioner relied on a report, the contents whereof were not made known to the assessee and since the order does not indicate any reasons in support of the decision to transfer the account despite the objection of the petitioner company, the order cannot be accepted.

WP No. 8457(W) of 2014 is allowed by setting aside the order of transfer of February 2, 2014, passed under section 127(1) of the said Act. As a consequence, if any steps have been taken by the respondent authorities pursuant to the order of transfer, the same stand annulled with liberty to the respondent authorities to revisit the matter as to the transfer of the account afresh in accordance with law.

There will be no order as to costs.

Urgent certified website copies of this order, if applied for, be made available to the parties, subject to compliance with all requisite formalities.

[2014] 365 ITR 273 (CAL)