Wp/1333/2013 Of Sachin Joshi v. The Commissioner Of Income-Tax-15 And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1333 OF 2013 Sachin Joshi V/s. The Commissioner of Income Tax & Ors. ...Petitioner...Respondents Mr.R. Murlidharan with Mr.Madhur Aggrwal and Mr.Atul K. Jasani for the Petitioner. Mr.A.R. Malhotra for the Respondents. CORAM : S.J. VAZIFDAR & A.K. MENON, JJ.DATE : 14TH MARCH, 2014. P.C. :- 1.Rule. Rule is made returnable and heard forthwith. 2.The petitioner seeks to have quashed and set-aside an order dated 07.03.2013 under section 127 of the Income Tax Act, 1961, passed by respondent No.1 transferring the petitioner's case from the present jurisdiction DCIT, Mumbai to the jurisdiction of respondent No.2 i.e. Deputy Commissioner of Income Tax, Hyderabad. 3.The petitioner, an individual has been filing his returns in Mumbai. The jurisdiction qua the petitioner is that of the Deputy Commissioner of Income Tax – 15(3) in Mumbai. wp1333-13 4.Respondent No.2 by a notice dated 12.10.2012 informed the petitioner that a search was initiated under section 132 of the said Act in respect of the group companies of Sureshchandra Agarwal and others and that pursuant to the provisions of section 153-C, it was necessary to assess or reassess the petitioner's total income of six assessment years immediately preceding assessment year relevant to the previous year in which search was conducted or requisition made. The petitioner was called upon to furnish the return of income in respect of each of the six assessment years. 5.The petitioner by his letter dated 26.10.2012 inter-alia stated that it would be difficult for him to get his income assessed in Hyderabad, as he is based in Mumbai and has been filing his return in Mumbai. He requested respondent No.2 to provide him the material / documents / accounts etc. seized during the search conducted on 29.10.2012 which allegedly belongs to him and based on which the said notice dated 12.10.2012 was issued. There was no response to the letter. 6.The petitioner was served with a show cause notice dated 05.12.2012 issued by the Income Tax Officer, Mumbai. The notice informed that a search and seizure operation was conducted on Sureshchandra Agarwal and others ; that the petitioner's case is related to the searched group ; that the searched group is being wp1333-13 assessed in the charge of CIT (Central), Hyderabad and that the petitioner's case was proposed to be centralized with DCIT, Hyderabad, respondent No.2, for the purpose of co-ordinated investigation and administrative convenience. The petitioner was directed to submit his objections, if any to the proposed transfer of his case to Hyderabad (inadvertently mentioned as Pune). 7.The petitioner by a letter dated 10.12.2012 forwarded his objections to respondent No1. The petitioner stated that he had not received any response to his said letter dated 26.10.2012 by which he had inter-alia requested respondent No.2 to provide the material and documents seized during the search from the possession of Sureshchandra Agarwal and others. 8.In the impugned order dated 07.03.2013, respondent No.1 apart from recording some of the aforesaid facts merely held as under :- “3.I have carefully considered the submissions of the assessee and found that this is not entirely correct. During the search at the residence of Shri Rajendrakumar in the group Shri Sureshchandra Agarwal, a MOU was found and seized. This MOU referred to sale of property bearing door No.8-2-277 at Banjara Hills, Hyderabad for a consideration of Rs.11,47,50,000/- after paying an advance of Rs.51,00,000/-. The MOU is required to be investigated and as all the group cases are assessed at Hyderabad, I consider it necessary to transfer the jurisdiction over the case of the assessee to DCIT (CC)-4, Hyderabad for co-ordinated investigation.” wp1333-13 8.In the impugned order dated 07.03.2013, respondent No.1 apart from recording some of the aforesaid facts merely held as under :- “3.I have carefully considered the submissions of the assessee and found that this is not entirely correct. During the search at the residence of Shri Rajendrakumar in the group Shri Sureshchandra Agarwal, a MOU was found and seized. This MOU referred to sale of property bearing door No.8-2-277 at Banjara Hills, Hyderabad for a consideration of Rs.11,47,50,000/- after paying an advance of Rs.51,00,000/-. The MOU is required to be investigated and as all the group cases are assessed at Hyderabad, I consider it necessary to transfer the jurisdiction over the case of the assessee to DCIT (CC)-4, Hyderabad for co-ordinated investigation.” wp1333-13 9.The impugned order was thus based only upon the MOU being found during the search. The petitioner was however, not furnished with a copy of the MOU referred to in the impugned order. The MOU was not even referred to in the show cause notice. Nor was it forwarded by respondent No.2 at any time. As we noted earlier, the petitioner by his letter dated 26.10.2012 requested respondent No.2 for copies of the material / documents / accounts etc. seized during the search based on which the notice dated 12.10.2012 was served upon him by respondent No.2. There was no response from respondent No.2 to the said letter. It is of vital importance to note that even during the personal hearing, the petitioner was not furnished with a copy of the MOU. The MOU was not even referred to by respondent No.1. The MOU was referred to for the first time only in the impugned order. It is pertinent to note that the petitioner had filed an affidavit before respondent No.1. The affidavit was forwarded under cover of the petitioner's Chartered Accountant's letter dated 21.12.2012. In paragraph 10, the petitioner stated that he had no business dealings and/or relation with the said Sureshchandra Agarwal and he was not concerned with the said group.10.The MOU referred to in the impugned order was between wp1333-13 the petitioner and one Gill for the sale of the petitioner's property in Hyderabad. There is not even an attempt to explain the relevance or significance of the MOU. He was faced with it for the first time only in the impugned order. The reasons in support of the impugned order were not mentioned in the show cause notice. The petitioner therefore, never had an opportunity of responding to the MOU. 11.Mr.Murlidharan, the learned counsel appearing on behalf of the petitioner rightly submitted that the impugned order is clearly in breach of the principles of natural justice, contrary to the provisions of section 127 and the judgments of this Court. Mr.Murlidharan's submission is supported by the judgment of a Division Bench of this Court dated 05.03.2013 in Writ Petition No.2634 of 2012, in the case of Shikshana Prasaraka Mandali vs. The Commissioner of Income Tax. The Division Bench held as under :- “7. We have considered the submissions. It is a settled position in law as held by this Court in the matter of Sahara Hospitality Ltd.(supra) that before an order of transfer of case is passed under Section 127(2) of the Act, an opportunity of personal hearing is mandatory, wherever it is possible to do so. 12. In any view of the matter, the entire proceeding transferring the case from Pune to Mumbai is in breach of principles of natural justice. This is for the reason that the impugned order dated 2/8/2012 gave various reasons supporting/justifying the conclusion therein. However, while calling upon the Petitioner to show cause on 8/2/2012 to the proposed transfer none of the reasons found in support of the impugned order dated 2/8/2012 were mentioned in the show cause notice. 14. None of the above grounds which find place in the impugned order was ever put to the Petitioner before passing the impugned order. 12. In any view of the matter, the entire proceeding transferring the case from Pune to Mumbai is in breach of principles of natural justice. This is for the reason that the impugned order dated 2/8/2012 gave various reasons supporting/justifying the conclusion therein. However, while calling upon the Petitioner to show cause on 8/2/2012 to the proposed transfer none of the reasons found in support of the impugned order dated 2/8/2012 were mentioned in the show cause notice. 14. None of the above grounds which find place in the impugned order was ever put to the Petitioner before passing the impugned order. 15. The giving of notice containing the reasons for the proposed action is a basic postulate for compliance of the Audi Alteram Partem Rule. It is axiomatic that unless a party is informed of the reasons for the proposed action, it would be impossible for the noticee to put forth its point of view with regard to the reasons for the proposed action. The views of the noticee are to be considered by the authority before taking any decision to confirm or drop the notice. A show cause notice to be effective must be adequate so to enable a party to effectively object/respond to the same. The authority concerned is obliged to consider the objections, if any, and thereafter reach a finding one way or the other. This alone ensures absence of arbitrary exercise of powers by the authorities. Thus, there has been failure of Audi Alteram Partem Rule and the case of the Petitioner has been transferred in breach of natural justice 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 by the respondent cannot be sustained.” 12.The judgment applies squarely to this case. The petitioner was denied an effective hearing. If the order is passed on a point of which notice was not given to the party, the personal hearing would be meaningless. The party has in effect had no opportunity of meeting the case on the basis of which the impugned action is taken. 13.A Division Bench of the Andhra Pradesh High Court in Vijayasanthi Investments Pvt. Ltd. vs. Chief Commr.of I.T. (A.P),(1991) 187, ITR 405 held as under :- “From the aforesaid decisions, it is clear that, in the matter of the transfer of a case under section 127 of the Act, it is necessary that the authority which proposes to transfer the case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being heard with a view to enable him to effectively show cause against the proposed transfer. The notice must also propose to give a personal hearing. It is also necessary to mention in the notice the reasons for the proposed transfer so that the assessee could make an effective representation with reference to the reasons set out. It is not sufficient merely to say in the notice that the transfer is proposed "to facilitate detailed and coordinated investigation". The reasons cannot be vague and too general in nature but must be specific and based on material facts. It is again not merely sufficient to record the reasons in the file but it is also necessary to communicate the same to the affected party”. 14. Mr.Murlidharan attempted to support the petitioner's case even on the basis that the MOU can be considered despite the fact that the petitioner's attention was never invited to it. For instance, he said that the MOU was entered into not between the petitioner and Sureshchandra Agarwal but between the petitioner and one Gill and the MOU was not even acted upon. This was clear from the fact that the petitioner in his income tax and wealth tax returns in the subsequent years had shown the property. The part payments made thereunder were also returned. 14. Mr.Murlidharan attempted to support the petitioner's case even on the basis that the MOU can be considered despite the fact that the petitioner's attention was never invited to it. For instance, he said that the MOU was entered into not between the petitioner and Sureshchandra Agarwal but between the petitioner and one Gill and the MOU was not even acted upon. This was clear from the fact that the petitioner in his income tax and wealth tax returns in the subsequent years had shown the property. The part payments made thereunder were also returned. 15.We however, did not consider it necessary to hear Mr.Murlidharan in respect of the MOU. It was for the authorities to do so. The authorities not having relied upon the MOU, at any stage, cannot now be permitted to rely upon the same. 16.In the circumstances, Rule is made absolute in terms of prayer (a). In view thereof, it is not necessary to grant the other prayers. No order as to costs. (A.K. MENON, J.) (S.J. VAZIFDAR, J.)