Naresh Manakchand Jain … v. Principal Commissioner Of Income Tax-20 And Ors. …

18 wp 707 of 2019.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.707 OF 2019 Naresh Manakchand Jain …Petitioner versusPrincipal Commissioner of Income Tax-20and Ors. …Respondents Mr. Sumit Patni I/by Mr. S.S.Lanke, for Petitioner. Mr. A.R.Malhotra, for Respondents. CORAM:AKIL KURESHI & S.J. KATHAWALLA, JJ. DATE: 15[th] JULY, 2019 P.C.: 1. The Petition is filed by the Assessee to challenge the order dated 12[th] September, 2018 as at annexure A to the Petition, passed by the PrincipalCommissioner of Income Tax, Mumbai, transferring the Petitioner's assessments forthe assessment years 2011-12 and 2012-13 in exercise of the powers under Section 127of the Income Tax Act, 1961 (“the Act” for short). 2.Brief facts are as under : The Petitioner is an individual and is regularly assessed to the tax. He had filed return of income for the assessment years 2011-12 and 2012-2013 before theappropriate Assessing Officer at Mumbai. It appears that one Ranka Jewellers Group,was subjected to search and seizure operation by the Income Tax Department. The SSP 1/9 18 wp 707 of 2019.doc said group of assessees was being assessed by the Assessing Officer under thejurisdiction of the Principal Commissioner of Income Tax, Pune. The Petitioner wasvisited with a show cause notice dated 21[st] January, 2017 issued by the department inwhich he was conveyed the proposal for transferring his assessments in followingterms : “Sub : Centralization of your case to DCIT/ACIT Central Circle-2(1), Pune date of search & Survey – 20.10.2016 – reg. Kindly refer to the above. The Pr. Commissioner of Income Tax (Central), Pune, has sent aproposal to centralize your case with DCIT/ACIT Central Circle-2(1), Pune consequent to the search and survey action carried outon 20.10.2016 in the case of Ranka Group of cases. You arerequested to submit your objection if any, to the proposedcentralization within five days from the receipt of this letter, failingwhich it will be presumed that you have no objection to theproposed centralization and accordingly order u/s 127 of theIncome Tax Act, 1961 will be passed centralizing your case withDCIT/ACIT Central Circle-2(1), Pune under the charge of Pr. CIT(Central), Pune.” 3.In response to such notice, the Petitioner raised detailed objections under a communication dated 6[th] March, 2017 contending interalia that the proposed exerciseof the powers was impermissible. The Petitioner had no dealings with any person in SSP 2/9 18 wp 707 of 2019.doc the Ranka group. The need to centralize the Petitioner's assessments with the saidgroup of assessees therefore, did not arise. The Petitioner relied on certainjudgments. He also sought personal hearing. 4.On 11[th] May, 2017 the Income Tax Officer wrote to the Petitioner asking himto remain present with his objections before the concerned authority. The Petitionerresponded to the said letter under a communication dated 16[th] May, 2017 contendingthat the Petitioner was out of station on the said and requested for fixing another dateof hearing. On this communication itself, a remark was put by the officer stating thatnext date of hearing is fixed on 5[th] June, 2017. On 4[th] June, 2017 the Petitionerinwarded a letter in department reiterating his objections to the transfer ofassessments and stated that if the authority still has any reservation, a personal hearingmay be given. Admittedly, on 5[th] June, 2017 no one remained present on behalf of thePetitioner for personal hearing. Thereupon, the Principal Commissioner, Mumbai,passed the impugned order. 5.Appearing for the Petitioner learned Counsel Shri Patni raised the followingcontentions : (i) The impugned order was passed in breach of the principle of natural justice.The show cause notice did not indicate any reasons why the assessments had to betransferred. In the final order, the authority has relied on several documents andmaterials never supplied to the Petitioner. There was no reference to such materials SSP 3/9 18 wp 707 of 2019.doc even at the show cause notice. (ii) There was no agreement between the Principal Commissioner, Mumbai and the Principal Commissioner, Pune, as required under Section 127 of the Act. On thatground also, the impugned order must fail. (iii)Counsel further submitted that the agreement between the saidjurisdictional Commissioners must be arrived at before the issuance of the show causenotice itself, which in the present case, was totally absent. (iv)Counsel further submitted that principle of natural justice which wouldinclude the requirement of fair hearing must take within its fold a right of personalhearing, which in the present case was not granted. 6.Counsel relied on certain judgments, reference to which would be made atthe later stage. 7.On the other hand, learned Counsel appearing for the Departmentvehemently opposed the Petition contending that the show cause notice was issuedand opportunity of hearing was granted to the Petitioner. Even personal hearing wasallowed. The Petitioner did not avail of the opportunity. The PrincipalCommissioner, Mumbai has passed the impugned order. His concurrence to theproposal for transfer of the assessments is thus writ large of the face of the record.Such concurrence does not have to be stated in any precise words or any particularformat. As long as the concurrence can be culled out from the record, the same would SSP 4/9 18 wp 707 of 2019.doc be sufficient compliance to the requirement of Section 127 of the Act. 8.At the outset, we may record that when the assessment of an Assessee isbeing transferred from one Commissionerate to another, the requirement of hearingand following the principle of natural justice is inbuilt in the statutory provisionscontained in Section 127 of the Act. Several courts have taken such a view. It is notnecessary to load this judgment with all such pronouncements. Reference to adecision of this Court in case of Shikshana Prasaraka Mandali, Sharda Sabhagruha,S.P.College Campus, Pune V/s. The Commissioner of Income Tax (Central) and Ors.1would suffice. In the said case, the Court quashed the order of transfer of assessmenton the ground that the proceedings were in breach of the principle of natural justice.It was held that the grounds stated in the impugned order were never put to thePetitioner for his remarks. The Court observed as under : “15.The giving of notice containing the reasons for the proposedaction is a basic postulate for compliance of the Audi AlteramPartem Rule. It is axiomatic that unless a party is informed of thereasons for the proposed action, it would be impossible for thenoticee to put forth its point of view with regard to the reasons forthe proposed action. The views of the noticee are to be consideredby the authority before taking any decision to confirm or drop thenotice. A show cause notice to be effective must be adequate so asto enable a party to effectively object/respond to the same. Theauthority concerned is obliged to consider the objections, if any, SSP 5/9 18 wp 707 of 2019.doc 9. SSP 5/9 18 wp 707 of 2019.doc 9. and thereafter, reach a finding one way or the other. This alongensures absence of arbitrary exercise of powers by the authorities.Thus, there has been failure of Audi Alteram Partem Rule and thecase of the Petitioner has been transferred in breach of naturaljustice de hors the non giving of personal hearing to the Petitioner.In that view of the matter also the order dated 2/8/2012 passed bythe respondent cannot be sustained.” This aspect has been elaborated by this Court in an another decision in the case of Sahara Hospitality Ltd. V/s. Commissioner of Income Tax-8 and Ors., dated12th. September, 2012 in Writ Petition No.596 of 2012 10.Neither of these decisions nor other decisions placed before us by theCounsel for the Petitioner, however, lays down the proposition in law that suchrequirement of hearing would include personal hearing. However, in facts of thepresent case, we are not inclined to test the impugned order on this ground, sinceadmittedly the Department had offered such personal hearing, which the Petitionerdid not avail of. We have noted that initially personal hearing was fixed on 16[th] May,2017. The Petitioner conveyed his unavailability on said date and sought anadjournment. Hearing was refixed on 5[th] June, 2017, on which date also the Petitionermerely filed his written submissions and did not participate personally or throughauthorized representative. The Petitioner therefore, cannot complain that personalhearing though asked for, was not granted. Such hearing was granted, but not availedof. SSP 6/9 18 wp 707 of 2019.doc 11.Despite such observations, we did not find that in the present case, theprocedure adopted by the concerned authority in passing the impugned order passesthe test of following the principles of natural justice which would include fair hearing.We have reproduced the entire show cause notice issued to the Petitioner, whichmerely conveyed to him that search and survey action was carried out in case of RankaGroup of cases and the Petitioner should therefore, submit an objection to hisassessments being centralized. This show cause notice no where points out how thePetitioner was connected with the said Ranka Group and what useful purpose wouldbe served in centralizing his assessments with the said group of assessees. 12.Far more importantly, in the impugned order, the Principal Commissionerof Mumbai has relied on various statements of the assessees of the said group, on thebasis of which he came to the conclusion that it would be necessary to centralize thePetitioner's assessments with the said group of assessees also. Relevant portion of theimpugned order reads as under : “The assessee Shri Naresh M. Jain in his statement recorded u/s.132(4) of the Act has admitted tht by using the bank and Demataccounts of the entry providers, has systematically provided bogusexempt LTCG entry to Ranka Jewellers Group and otherbeneficiaries. Further Shir Abhinandan Suresh Jain has in hisstatement recorded u/s. 132(4) of the Act accepted the fact thatNaresh M. Jain inflated the scrip price of Risa International Ltd.,with connivance of other operators. The mediators Shri Bhupesh SSP 7/9 “The assessee Shri Naresh M. Jain in his statement recorded u/s.132(4) of the Act has admitted tht by using the bank and Demataccounts of the entry providers, has systematically provided bogusexempt LTCG entry to Ranka Jewellers Group and otherbeneficiaries. Further Shir Abhinandan Suresh Jain has in hisstatement recorded u/s. 132(4) of the Act accepted the fact thatNaresh M. Jain inflated the scrip price of Risa International Ltd.,with connivance of other operators. The mediators Shri Bhupesh SSP 7/9 Harishchandra Rathod and Rakesh H. Shah have accepted in theirrecorded statements that they provided signed cheques and otherdocuments related to bank accounts and demat accounts of the entryproviders to Naresh M. Jain for certain commission. The statementrecorded u/s. 132(4) of the Act is itself admissible evidence as perthe Indian Evidence Act. The statements of all the personsmentioned above clearly indicate the involvement of Shri Naresh M.Jain in organizing the artificial price rise in the shares of M/s. RisaInternational Ltd. It is also clear that co-ordinated investigation inthe cases of M/s. Ranka Group cannot take place unless the case ofShri Naresh M. Jain is also centralized with the same officer who isassessing the other cases of M/s. Ranka Jewellers Group.” 13.In this portion thus, the Principal Commissioner referred to the statementsof one Abhinandan Jain recorded under Section 132(4) of the Act, suggesting that thePetitioner had inflated the script price of one Risa International Ltd., in connivancewith other operators. The statements of other witnesses were referred to suggest thatthe Petitioner had received commission for such activities. According to him, suchstatements establish the involvement of the Petitioner in organizing artificial price risein the shares of the said Company. Admittedly, none of these aspects were stated inthe show cause notice, nor the statements or even the gist of the statements to theextent relevant, was provided to the Petitioner. The Petitioner therefore, had noopportunity to meet with such adverse material which the Principal Commissioner SSP 8/9 18 wp 707 of 2019.doc pressed in service for passing the impugned order. Under the circumstances, theimpugned order is quashed. In view of such conclusion, we need not examine thePetitioner's alternative contention that there was no concurrence between the twojurisdictional Commissioners about transfer of the assessments. The Writ Petition isaccordingly disposed of. ( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J. ) SSP 9/9