Parappurathu Varghese Mathai … v. Principal Commissioner Of Income Tax-28 & Others …

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.459 OF 2020 Parappurathu Varghese Mathai…Vs. Petitioner Principal Commissioner of Income Tax-28 & others … Respondents WITHWRIT PETITION NO.690 OF 2020 Sarakutty MathaiVs. … PetitionerRespondents Principal Commissioner of Income Tax-28 & others … WITHWRIT PETITION NO.492 OF 2020 Olive BuildersVs. … Petitioner Principal Commissioner of Income Tax-28 & others … Respondents Mr. Devendra H. Jain for Petitioner. Ms Shehnaz (Sheroo) Vispy Bharucha (Daruwalla) for RespondentNos.1 to 3. CORAM : UJJAL BHUYAN,MILIND N. JADHAV, JJ.DATE :MARCH 13, 2020 P.C.: This order will dispose of Writ Petition Nos.459, 492 and 690 of2020. 2.Heard Mr. Jain, learned counsel for the petitioner and MsBharucha, learned standing counsel Revenue for the respondents. 3.On consent of learned counsel for the parties, we have taken upWrit Petition No.459 of 2020 as the lead case. 4.By filing this petition under Article 226 of the Constitution ofIndia, petitioner seeks quashing of orders dated 09.08.2019 and 09.12.2019 relating to transfer of assessment jurisdiction from Mumbaito Kochi. 5.Brief reference to the relevant facts is considered necessary. 6.Petitioner is an individual and a partner of the partnership firmM/s. Olive Builders engaged in the business of development andconstruction of buildings. It is stated that he is an assessee assessed toincome tax under the jurisdiction of respondent No.1. 7.It appears that a search and seizure operation was carried out inthe premises of Olive Builders on 16.05.2019 at Kochi where thepartnership firm is engaged in the business of development andconstruction of buildings. 8.Thereafter an order dated 09.08.2019 was passed by respondentNo.1 - Principal Commissioner of Income Tax-28, Mumbai under sub-section (2) of Section 127 of the Income Tax Act, 1961 (briefly ‘the Act’hereinafter) transferring the case of the petitioner from AssistantCommissioner of Income Tax-28(2), Mumbai to Deputy Commissionerof Income Tax / Assistant Commissioner of Income Tax, Central Circle-1, Kochi for administrative convenience and co-ordinated investigationas the territorial jurisdiction of the case was with the assessing officer. Itwas also mentioned that relevant case records under the Gift Tax Act aswell as Wealth Tax Act, if any, would also stand transferred accordinglyand that the said order was to come into effect on and from the date ofissue of the order. 9.It may be mentioned that order dated 09.08.2019 was a commonorder in respect of the present petitioner as well as petitioner in WritPetition No.492 of 2020 (M/s. Olive Builders) and petitioner in WritPetition No.690 of 2020 (Sarakutty Mathai). respondent No.1 on 22.08.2019 regarding the order dated 09.08.2019 bycontending that the procedure prescribed under Section 127(2) of the Actwas not complied with thereby rendering the order dated 09.08.2019invalid. 11.In response to the said notice, petitioner was informed by theoffice of respondent No.1 vide letter dated 30.08.2019 that petitioner’scase was also covered by the search and seizure operation carried out inthe premises of M/s. Olive Group under Section 132 of the Act by theInvestigation Wing of the Income Tax Department at Kochi. It wasmentioned that a proposal was received from the Principal Director ofIncome Tax (Investigation), Kochi for centralization of the case of thepetitioner at Kochi for co-ordinated investigation of the group to protectthe interest of the revenue. To afford an opportunity of hearing,petitioner was asked to attend the office of respondent No.1 eitherpersonally or through his authorized representative on 11.09.2019. 11.1. This led to submission of representation by the petitioner beforerespondent No.1 on 11.09.2019 requesting respondent No.1 to retain theassessment jurisdiction over the petitioner at Mumbai. 11.2. Further representation was submitted on 16.09.2019. 11.1. This led to submission of representation by the petitioner beforerespondent No.1 on 11.09.2019 requesting respondent No.1 to retain theassessment jurisdiction over the petitioner at Mumbai. 11.2. Further representation was submitted on 16.09.2019. 12.Thereafter respondent No.1 passed an order dated 09.12.2019stated to be in modification of the earlier order dated 09.08.2019 passedunder Section 127 of the Act. By the said order passed in exercise ofpowers conferred by sub-section (2) of Section 127 of the Act,respondent No.1 transferred the case of the petitioner from thejurisdiction of the assessing officer Assistant Commissioner of IncomeTax, 28(2), Mumbai to Deputy Commissioner of Income Tax / AssistantCommissioner of Income Tax, Central Circle-1, Kochi. 13.Aggrieved, the present writ petition has been filed. 14.As already noticed above, the other two assessees namely, OliveBuilders and Sarakutty Mathai have filed the related writ petitions. 15.Basic contention of learned counsel for the petitioner is that therewas no agreement between the competent / designated authoritiesleading to transfer of jurisdiction as per requirement of clause (a) of sub-section (2) of Section 127 of the Act. That apart, reasons were notdisclosed. It was only after petitioner lodged objection that reasons cameto be disclosed in the form of the second order dated 09.12.2019, whichis stated to be in modification of the earlier order dated 09.08.2019.Therefore, it is a case of post-decisional hearing which is notcontemplated under the statute. Final contention is that prior to issuanceof order dated 09.12.2019, reasons were never provided to the petitioner.Mr. Jain would therefore contend that above procedural infirmities havevitiated the decision making process warranting interference by the writcourt. 16.Per contra, Ms Bharucha, learned standing counsel Revenue hasreferred to the averments made by respondent Nos.1, 2 and 3 in theircommon affidavit in reply filed on 03.02.2020. Referring to theaverments made in paragraphs 5 and 6 of the said affidavit, she submitsthat proposal was received from the Directorate General of Investigation(Investigation), Kochi dated 25.06.2019 for centralization of assessmentjurisdiction at Kochi in the group cases relating to Olive Buildersincluding that of the petitioner. Similar proposal was also received fromthe Principal Director of Income Tax (Investigation), Kochi dated27.06.2019. Thereafter consent for transfer of jurisdiction was receivedfrom the Chief Commissioner of Income Tax-6, Mumbai on 05.07.2019.Accordingly, the order dated 09.08.2019 was passed under Section 127of the Act. After the petitioner raised objection, the same was dulyconsidered whereafter opportunity of hearing was given to the petitioner.Representative of the petitioner was heard and comments from theconcerned assessing officers were called for and considered. At this stage, we may mention that the affidavit in reply of respondent Nos.1, 2and 3 also deals with the merit of the case relating to the search andseizure operation carried out on 16.05.2019 and the reasons for transferof jurisdiction. Therefore, submission of Ms Bharucha is that theprocedural requirements contemplated under Section 127(2) of the Acthave been complied with and thus, there is no error or infirmity in thedecision taken by respondent No.1 for transfer of jurisdiction. Afterpassing of the subsequent order dated 09.12.2019, the initial order dated09.08.2019 would no longer subsist as the same has merged with thesubsequent order dated 09.12.2019, which is in reality and substance, theorder passed under Section 127(2) of the Act. In the circumstances, writpetition should be dismissed. 17.Submissions made by learned counsel for the parties havereceived the due consideration of the Court. 17.Submissions made by learned counsel for the parties havereceived the due consideration of the Court. 18.Short point for consideration is whether impugned decision ofrespondent No.1 to transfer assessment jurisdiction of the petitionerfrom Mumbai to Kochi is in accordance with law, more specifically asper the requirement of Section 127 of the Act? 19.To appreciate the issue, Section 127 may be adverted to. For readyreference, we may extract Section 127 of the Act, which reads as under: “Power to transfer cases. 127.(1)The Principal Director General or DirectorGeneral or Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner or Commissionermay, after giving the assessee a reasonable opportunity of beingheard in the matter, wherever it is possible to do so, and afterrecording his reasons for doing so, transfer any case from one ormore Assessing Officers subordinate to him (whether with orwithout concurrent jurisdiction) to any other Assessing Officeror Assessing Officers (whether with or without concurrent (2)Where the Assessing Officer or Assessing Officers fromwhom the case is to be transferred and the Assessing Officer orAssessing Officers to whom the case is to be transferred are notsubordinate to the same Principal Director General or DirectorGeneral or Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner or Commissioner,- (a)Where the Principal Directors General or DirectorsGeneral or Principal Chief Commissioners or ChiefCommissioners or Principal Commissioners or Commissionersto whom such Assessing Officers are subordinate are inagreement, then the Principal Director General or DirectorGeneral or Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner or Commissionerfrom whose jurisdiction the case is to be transferred may, aftergiving the assessee a reasonable opportunity of being heard inthe matter, wherever it is possible to do so, and after recordinghis reasons for doing so, pass the order; (b)where the Principal Directors General or DirectorsGeneral or Principal Chief Commissioners or ChiefCommissioners or Principal Commissioners or Commissionersaforesaid are not in agreement, the order transferring the casemay, similarly, be passed by the Board or any such PrincipalDirector General or Director General or Principal ChiefCommissioner or Chief Commissioner or PrincipalCommissioner or Commissioner as the Board may, bynotification in the Official Gazette, authorise in this behalf. (3)Nothing in sub-section (1) or sub-section (2) shall bedeemed to require any such opportunity to be given where thetransfer is from any Assessing Officer or Assessing Officers(whether with or without concurrent jurisdiction) to any otherAssessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all suchofficers are situated in the same city, locality or place. (4)The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, andshall not render necessary the re-issue of any notice alreadyissued by the Assessing Officer or Assessing Officers fromwhom the case is transferred. Explanation.-In section 120 and this section, the word “case”,in relation to any person whose name is specified in any orderor direction issued thereunder means all proceedings under thisAct in respect of any year which may be pending on the date ofsuch order or direction or which may have been completed onor before such date, and includes also all proceedings under thisAct which may be commenced after the date of such order ordirection in respect of any year.” (4)The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, andshall not render necessary the re-issue of any notice alreadyissued by the Assessing Officer or Assessing Officers fromwhom the case is transferred. Explanation.-In section 120 and this section, the word “case”,in relation to any person whose name is specified in any orderor direction issued thereunder means all proceedings under thisAct in respect of any year which may be pending on the date ofsuch order or direction or which may have been completed onor before such date, and includes also all proceedings under thisAct which may be commenced after the date of such order ordirection in respect of any year.” 20.As would be evident from the heading of the section it deals withpower to transfer cases. Apparently this is a case falling within the ambitof sub-section (2) since both the assessing officers are not subordinate tothe same higher authority, one being at Mumbai and the other at Kochi.Therefore, we may analyze the requirement of sub-section (2). Sub-section (2) visualizes two situations - clause (a) and clause (b). Sub-section (2) says that where the assessing officer from whom the case isto be transferred and the assessing officer to whom the case is to betransferred are not subordinate to the same Principal Director General orDirector General or Principal Chief Commissioner or ChiefCommissioner or Principal Commissioner or Commissioner, in the eventthey are in agreement, then the Principal Director General or DirectorGeneral or Principal Chief Commissioner or Chief Commissioner orPrincipal Commissioner or Commissioner from whose jurisdiction the caseis to be transferred may, after giving the assessee a reasonable opportunityof being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order. This is the requirementof clause (a) of sub-section (2). In other words, clause (a) deals with asituation where the designated higher authorities of both the areas to whomthe respective assessing officers are subordinate are in agreement. Oncethey are in agreement that the assessment jurisdiction has to be transferredthen the designated higher authority from whose jurisdiction the case is tobe transferred may provide the assessee a reasonable opportunity of beingheard wherever it is possible to do so and after recording the reasons fordoing so, pass the order of transfer. 21.Before adverting to the situation contemplated under clause (b), weare of the view that notwithstanding use of the expression ‘may’ in clause(a) to sub-section (2), the requirement to provide reasonable opportunity ofhearing to the assessee is fundamental to the assumption of jurisdictionunder Section 127(2)(a). If that be so then the expression ‘may’ wouldcontemplate an obligatory requirement on the designated higher authorityto provide opportunity of hearing to the assessee. Careful reading of clause(a) would further reveal that such reasonable opportunity of hearing has tobe provided before passing an order under Section 127(2). This is clearfrom the language of the section itself. Thus, this section does not provideor contemplate providing of post-decisional hearing. In any event, a post-decisional hearing is to be provided only in exceptional cases and not in aroutine manner. 22.Insofar reasons are concerned, the section only provides forrecording of reasons and not furnishing of reasons to the assessee.Therefore, the order passed under Section 127(2) must indicate that theassessee was provided a reasonable opportunity of hearing and must alsorecord the reasons for transfer of assessment jurisdiction. 23.Having discussed the above, we may now advert to the situationcontemplated under clause (b). Clause (b) visualizes a situation where thedesignated higher authorities of the two areas are not in agreement. In sucha situation, the order transferring the case may similarly be passed by the 22.Insofar reasons are concerned, the section only provides forrecording of reasons and not furnishing of reasons to the assessee.Therefore, the order passed under Section 127(2) must indicate that theassessee was provided a reasonable opportunity of hearing and must alsorecord the reasons for transfer of assessment jurisdiction. 23.Having discussed the above, we may now advert to the situationcontemplated under clause (b). Clause (b) visualizes a situation where thedesignated higher authorities of the two areas are not in agreement. In sucha situation, the order transferring the case may similarly be passed by the Central Board of Direct Taxes or by such designated higher authority as theBoard may, by a notification in the Official Gazette, authorize in thisbehalf. Therefore, what clause (b) visualizes is a situation where the twodesignated higher authorities are not in agreement regarding transfer ofassessment jurisdiction. In such a situation, the order is to be passed by theCentral Board of Direct Taxes or by the designated higher authority as maybe authorized by the Central Board of Direct Taxes by a notification in theOfficial Gazette on its behalf. We may however mention that the expression‘similarly’ is used in clause (b) of sub-section (2). As noticed above, sub-section (2) would come into play when the two designated higherauthorities are not in agreement. If they are not in agreement then theCentral Board of Direct Taxes steps in and shall pass the necessary ordereither by itself or through the authorized designated higher authority bysimilarly following the procedure provided in clause (a). Therefore, theexpression ‘similarly’ would mean that the Board or the authorizeddesignated higher authority follow the same procedure as provided inclause (a) before passing the order of transfer. 24.Having discussed the legal provisions as above, we may now advertback to the first order dated 09.08.2019 passed by respondent No.1 underSection 127(2) of the Act. Perusal of this order does not disclose that thetwo designated higher authorities were in agreement for transfer ofassessment jurisdiction. Further, this order also does not indicate ordisclose that reasonable opportunity of hearing was granted to thepetitioner. That apart, the only reason mentioned for transfer of jurisdictionis administrative convenience and co-ordinated investigation which on theface of it is quite vague and indeterminate. It was only after petitionersubmitted objection that respondent No.1 passed the second order dated09.12.2019 under Section 127(2) of the Act stating to be in modification ofthe earlier order dated 09.08.2019. In paragraph 2 of the second order, it isstated that a proposal was received from the Principal Director of IncomeTax (Investigation), Kochi on 25.06.2019 for centralization of cases atKochi. This was construed by respondent No.1 as consent for transfer ofthe cases. At the same time, respondent No.1 also mentions that consent for transfer was received from the Chief Commissioner of Income Tax-6,Mumbai on 05.07.2019. Accordingly, it was decided to centralize the casesto facilitate detailed and effective co-ordinated investigation of the groupcases. Similar is the stand taken in the affidavit of the respondents. transfer was received from the Chief Commissioner of Income Tax-6,Mumbai on 05.07.2019. Accordingly, it was decided to centralize the casesto facilitate detailed and effective co-ordinated investigation of the groupcases. Similar is the stand taken in the affidavit of the respondents. 25.The view taken by respondent No.1 that receipt of proposal from thePrincipal Director of Income Tax (Investigation), Kochi was construed asconsent for transfer of the case is highly debatable. Thus in the context ofspecific consent received by respondent No.1 from the Chief Commissionerof Income Tax - 6, Mumbai, forwarding of a proposal for centralization ofassessment in a group of cases may not amount to a consent for transferwithin the meaning of clause (a) to sub-section (2). In fact the expressionused in clause (a) to sub-section (2) is ‘agreement’; ‘agreement’ per sewould mean that the concerned parties have to agree to a specific course ofaction. There has to be a positive meeting of mind to the suggestedproposed course of action. The dictionary meaning of the expression‘agreement’ is harmony in opinion or feeling; a manifestation of mutualassent by two or more persons. Therefore, furnishing of a proposal, in ourview, may not amount to an agreement of the designated higher authoritiesas contemplated under clause (a) to sub-section (2) of Section 127 of theAct. In Noorul Islam Educational Trust Vs. CIT, (2016) 76 taxmann.com144, Supreme Court considered transfer of assessment jurisdiction underSection 127(2)(a). Supreme Court held that agreement between the twodesignated higher authorities was necessary. Revenue took the stand thatthere was no disagreement between the two Commissioners. Rejecting thisstand, Supreme Court held that absence of disagreement cannot tantamountto agreement as visualized under Section 127(2)(a) of the Act whichcontemplates a positive state of mind of the two jurisdictionalCommissioners. 26.From the above, it is quite evident that before passing the impugnedorder on 09.08.2019, no opportunity of hearing was granted to thepetitioner. Hearing was granted after the said decision was takenculminating in the second order dated 09.12.2019. That apart, from the second order it is discernible that there was no agreement between the twojurisdictional Principal Commissioners to transfer assessment jurisdictionfrom Mumbai to Kochi. Evidently, the procedure prescribed under Section127(2)(a) of the Act has not been complied with. It is trite that when astatute requires a thing to be done in a particular manner, then it has to bedone in that particular manner. 27.In the light of the above discussions, we are of the view that thedecision making process leading to passing of the two impugned orders hasbeen vitiated for non-compliance to the statutory procedural requirements.Consequently, both the orders dated 09.08.2019 and 09.12.2019 passed byrespondent No.1 cannot be sustained; those are hereby set aside andquashed. 28.Since we have set aside the above two orders, all consequentialactions shall also stand interfered with. 29.It is open to the Central Board of Direct Taxes, New Delhi to step inand take action as per clause (b) to sub-section (2) of Section 127 of the Actin accordance with law keeping in mind the discussions made above. 30.We make it clear that we have not expressed any opinion on meritand in the event Central Board of Direct Taxes decides to intervene, allcontentions of the parties would be open. 31.In view of the above order, all the three petitions are accordinglyallowed. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.)