The Calcutta High Court has quashed the income tax transfer order issued without supporting documentation.
The bench of Justice Rajarshi Bharadwaj has observed that the transfer was necessitated for coordinated investigation and meaningful assessment holds merit only when supported by valid reasons and material evidence. The purported need for coordination is not substantiated by specific or credible evidence linking the Petitioner’s assessment to the alleged concealment of income by the partnership firm.
The Petitioner/assessee has challenged the transfer being procedurally flawed and in violation of the principles of natural justice. The petitioner is an individual deriving income from various sources, including salary, share of profits from a partnership firm/LLP, and other sources. The Petitioner has been regularly filing income tax returns in Kolkata as per the provisions of the Income Tax Act, 1961
The Petitioner is a permanent resident of Kolkata and has been assessed under the jurisdiction of the Income Tax Officer, Ward 36(1), Kolkata, for several years.
The Principal Commissioner of Income Tax (Pr. CIT), Kolkata, issued a notice under Section 127(2) proposing the transfer of the Petitioner’s assessment records to the Assistant Commissioner of Income Tax, Central Circle, Dhanbad, citing vague reasons, including the presence of “incriminating documents” and instructions under CBDT Instruction No. 05/2001. However, no instructions were attached.
The Petitioner objected to this proposal through a detailed letter, emphasizing the absence of incriminating documents or valid grounds for transfer and highlighting that the Petitioner neither resides nor conducts business in Dhanbad.
The Principal Commissioner of Income Tax (Pr. CIT), Kolkata did not provide an opportunity of being heard or supplying the incriminating material, contrary to the principles of natural justice and the procedural requirements under Section 127(2).
Subsequently, the case was transferred to the jurisdiction of the Assistant Commissioner of Income Tax, Central Circle, Dhanbad, without proper intimation to the Petitioner.
The petitioner submitted that the transfer of their assessment under Section 127(2) of the Income Tax Act, 1961, is arbitrary, lacking valid justification and violative of statutory and procedural requirements. The Respondents have failed to comply with the mandatory provisions, including granting the Petitioner a proper opportunity to be heard and disclosing the incriminating material relied upon. The reliance on vague and unsubstantiated grounds for such transfer undermines the principles of procedural fairness, rendering the impugned action legally unsustainable.
The Petitioner acknowledges that a coordinated and sustained investigation may, under appropriate circumstances, serve as a valid ground for transfer. However, action requires the existence of cogent reasons and prima facie material justifying the necessity of the transfer. The issuance of a notice under Section 127(2) is not a mere procedural formality but a statutory requirement. This provision must be interpreted to mandate the application of mind by the authorities, with the reasons for the transfer being clearly stated and disclosed to the assessee.
The court held that the Respondents failed to demonstrate compliance with the requirement of agreement between the jurisdictional Principal Commissioners, as required by law. The absence of documented concurrence between the Principal Commissioner of Income Tax, Kolkata-5, and the Principal Commissioner of Income Tax, Central Patna, is a significant procedural lapse, vitiating the legality of the transfer order.
The court concluded that the transfer order is legally unsustainable. All subsequent notices and actions taken by the Dhanbad Assessing Officer, based on this invalid transfer, lack jurisdiction. The writ petition is allowed and the transfer order is set aside.
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Case Details
Case Title: Pradeep Kumar Kajaria Versus Union of India
Case No.: W.P.O. 835 of 2024
Date: 04.12.2024
Counsel For Petitioner: S. M. Surana
Counsel For Respondent: Soumen Bhattacharjee
