Case Note & Summary
The petitioner, Kamal Varandmal Galani, an individual assessee, filed a writ petition before the Bombay High Court challenging an order dated 21 November 2022 passed under Section 127 of the Income Tax Act, 1961, by which his assessment case was transferred from the Deputy Commissioner of Income Tax-19(3), Mumbai to the Deputy Commissioner of Income Tax Central Circle-3, Jaipur. The petitioner had been filing income tax returns in Mumbai for 22 years, with the last return filed electronically from Mumbai on 31 December 2021 for assessment year 2021-22. On 24 June 2022, a show cause notice was issued by the Principal Commissioner of Income Tax-19 informing the petitioner of the proposed transfer of assessment jurisdiction to Jaipur, stating that it was to enable a proper and coordinated assessment along with the assessment in the case of Veto Group, Jaipur, on whom search proceedings were conducted under Section 132 of the Act. The notice mentioned that the Principal Commissioner of Income Tax (Central), Rajasthan had proposed centralization of the petitioner's case with Veto Group at Jaipur. The petitioner filed objections to the proposed transfer, but the impugned order was passed without considering those objections. The court framed the issue of whether the transfer order was valid when the show cause notice did not disclose reasons and the objections were not considered. The petitioner argued that the show cause notice was vague and did not provide any material or basis for the transfer, and that the impugned order was non-speaking. The respondents contended that the transfer was necessary for coordinated assessment. The court analyzed the requirements of Section 127 and principles of natural justice, holding that the show cause notice must disclose reasons to enable effective objections, and the order must be speaking and consider the objections. The court found that the notice merely stated the transfer was for proper and coordinated assessment without disclosing any material, and the impugned order did not refer to or deal with the petitioner's objections. Consequently, the court quashed the impugned order and directed the respondents to issue a fresh show cause notice disclosing reasons and to pass a speaking order after considering the petitioner's objections.
Headnote
A) Administrative Law - Natural Justice - Show Cause Notice - Section 127 Income Tax Act, 1961 - The show cause notice must disclose the reasons for proposed transfer to enable the assessee to make effective objections. The notice merely stated that transfer was proposed for proper and coordinated assessment with Veto Group, Jaipur, without disclosing any material or basis. Held that such notice is insufficient and violates principles of natural justice (Paras 5-7). B) Income Tax - Transfer of Assessment - Section 127 Income Tax Act, 1961 - Opportunity of Hearing - The Assessing Officer must consider the objections raised by the assessee before passing the transfer order. In this case, the petitioner filed objections but the impugned order did not refer to or deal with those objections. Held that the order is non-speaking and liable to be set aside (Paras 8-10). C) Income Tax - Transfer of Assessment - Section 127 Income Tax Act, 1961 - Speaking Order - The order under Section 127 must be a speaking order reflecting application of mind to the objections raised. The impugned order merely stated that transfer was necessary for coordinated assessment without addressing the petitioner's contentions. Held that the order is unsustainable (Paras 11-12).
Issue of Consideration
Whether the transfer of assessment jurisdiction under Section 127 of the Income Tax Act, 1961 is valid when the show cause notice does not disclose the reasons for transfer and the petitioner's objections are not considered before passing the order.
Final Decision
The impugned order dated 21 November 2022 under Section 127 of the Income Tax Act, 1961 is quashed and set aside. The respondents are directed to issue a fresh show cause notice disclosing reasons for the proposed transfer and to pass a speaking order after considering the petitioner's objections.
Law Points
- Natural justice
- Section 127 Income Tax Act
- Transfer of assessment jurisdiction
- Show cause notice must disclose reasons
- Opportunity of hearing
- Speaking order
