IT: Principles of natural justice require that assessee should be given an opportunity to explain whether not responding to summons issued under section 131(1A) was sufficient reason to transfer its assessment from one place to another
■■■
[2014] 46 taxmann.com 138 (Bombay)
HIGH COURT OF BOMBAY
Amin Manilal & Co. (P.) Ltd.
v.
Commissioner of Income-tax-6, Mumbai*
MOHIT S. SHAH, CJ.
AND M.S. SANKLECHA, J.
AND M.S. SANKLECHA, J.
WRIT PETITION NOS. 1843, 2456 & 2459 OF 2013
JANUARY 6, 2014
Section 127, read with section 131, of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases (Failure to comply section 131 summons) - Commissioner passed an order under section 127 transferring assessee's case from one jurisdiction to another jurisdiction on ground that assessee failed to respond to summons issued under section 131(1A) - Whether principles of natural justice require that assessee should be given an opportunity to explain whether not responding to summons issued under section 131(1A) was sufficient reason to transfer its assessment from one place to another - Held, yes - Whether since Commissioner passed impugned order without giving an opportunity of hearing to assessee, it was to be set aside and matter was to be remanded back for disposal afresh - Held, yes [Para 10][Matter remanded]
CASES REFERRED TO
Shikshana Prasaraka Mandali v. CIT [2013] 352 ITR 53/215 Taxman 191/32 taxmann.com 129 (Bom.)(para 10).
Ms. A. Vissanji and S.J. Mehta for the Petitioner. A.R. Malhotra for the Respondent.
ORDER
1. At the request of the counsel for the parties all the three petitions are being disposed of finally at the stage of admission. As the three petitions raise identical issues arising from similar facts they are being disposed of by this common order.
2. In all the three petitions a common order dated 2 November 2012 of Commissioner of Income Tax passed under Section 127(2) of the Income Tax Act, 1961 ('the Act') is being challenged. By the impugned order dated 2 November 2012 the petitioner's case (all pending assessment proceedings) are being transferred from Mumbai to Bangalore.
3. The facts in these three petitions are identical. Therefore, for the sake of convenience, the facts in Writ Petition (L) No.1843 are being referred to as the context in which the impugned order dated 2 November 2012 is being assailed.
4. The Petitioner is a company engaged in the business of trading in commodities and also derives income by way of rent, interest and dividend. The Petitioner's day to day activities are looked after by one Hasmukhray Amin who is 70 years of age. One Priyakant Amin the son of Hasmukhray Amin is on the board of the petitioner company.
5. In the course of search actions carried out at Bangalore it was found prima facie that that one Jitendra Salecha was providing accommodation entries to Priyakant Amin and his concerns. This led to a search being conducted at the petitioner's premises in Mumbai and the statement of Hasmukhray Amin was also recorded. Consequently, a common summons dated 27 July 2011 under Section 131(1A) of the Act was issued to Priyakant Amin as a Director of all the three Petitioner companies to explain why the business loss claimed by the petitioner should not be disallowed. This was on the ground that the loss appears to have been claimed merely on the basis of accommodation entries provided by Jitendra Salecha and were not genuine. The summons was replied to by Priyakant Amin by pointing out that Hasmukhray Amin who conducts the day to day business of the Petitioner company will alone be able to respond to the queries raised.
6. Thereafter on 1 August 2012 a notice was issued to the Petitioner, inter alia, informing the Petitioner that it is proposed to centralize the Petitioner's assessment proceedings from Mumbai to Bangalore for the purposes of proper investigation and administrative convenience. For the aforesaid purpose, the Petitioner was granted an opportunity of personal hearing. The Petitioner's representative attended the hearing and resisted the proposed transfer of the proceeding to Bangalore.
7. The Commissioner of Income Tax on 29 October 2012 recorded the reasons dealing with the petitioner's objections to the transfer. The primary reason given to pass an order of transfer from Mumbai to Bangalore was that there was no reply given by Petitioner to the summons issued under Section 131(1A) of the Act on 27 July 2011 seeking explanation for the losses claimed as a result of the transactions with Jitendra Salecha of Bangalore. By the impugned order dated 2 November 2012, the Petitioner's case came to be transferred from Mumbai to Bangalore.
8. Ms. Vissanji, learned counsel for the Petitioner submits that the impugned order refers to the reason for the transfer as being the failure of the Petitioner to respond to the summons dated 27 July 2011. However, this reason is for the first time indicated in the reasons recorded in support of the impugned order. In the show cause notice dated 1 August 2012 no such ground was even alluded to. It is further submitted that there has been a breach of principles of natural justice. It is the petitioner's submission that had the reasons been furnished to the Petitioner at the time of issuance of show cause notice, the Petitioner would have fair opportunity to deal with the issue and point out why the transfer of the case is not justified on the above ground.
9. As against this, Mr. Malhotra, learned counsel for Revenue submits that the Petitioner had knowledge that the entire proceedings were with regard to accommodation entries made available to the Petitioner company by one Jitendra Salecha. Besides not responding to the summons dated 27 July 2011 was a fact which was within the knowledge of the Petitioner. In these circumstances, he states that the impugned order calls for no interference. Therefore, it is the case of the Revenue that no fruitful purpose would be served by remanding the matter for fresh hearing.
10. We have considered the rival submissions. Although an assessee can have no right to be assessed to tax by a particular officer, yet a transfer of assessment proceeding for one place to another cannot be done arbitrarily by the Commissioner of Income Tax. The order of transfer of a case must satisfy the requirement of Section 127 of the Act. In this case, the revenue may have justifiable reasons for the purposes of transferring the proceedings of assessment of the Petitioner from Mumbai to Bangalore. However, such transfer of proceedings from Mumbai to Bangalore must be in compliance with provisions of Section 127 of the Act which inter alia requires compliance with principles of natural justice. The show cause notice which has been issued to the Petitioner seeks to transfer the proceedings of assessment from Mumbai to Bangalore only on he ground of "for proper investigation and administrative convenience". The notice does not indicate the reasons which have led to the revenue being of the view that the transfer of assessments from Mumbai to Bangalore is necessary for proper investigation. We find that the reasons set out in support of the impugned order namely non response to the summons dated 27 July 2011 is not even mentioned in the show cause notice dated 1 August 2012. Our Court in Shikshana Prasaraka Mandali v. CIT [2013] 352 ITR 53/215 Taxman 191/32 taxmann.com 129 (Bom.) has held that giving of notice for proposed transfer must contain reasons for the same. This alone would enable a party to respond to the same and satisfy the audi alterm partem rule. The reasons may not be elaborate but must indicate the basis of the proposed transfer. The principles of natural justice would require that the Petitioner should be given an opportunity to explain whether not responding to summons issued under Section 131(1A) of the Act is sufficient reason to transfer the petitioner's assessment from Mumbai to Bangalore. The Commissioner of Income Tax in the order passed under Section 127 of the Act is required to deal with the objections of the assessee.
11. In the above view, we set aside the common impugned order dated 2 November 2012 transferring the petitioner's proceedings from Mumbai to Bangalore. However, we direct that the reasons set out by the Commissioner on 29 October 2012 in support of the impugned order dated 2 November 2012 should be treated as a show cause notice and the Petitioner would respond to the same. The Commissioner of Income Tax, Mumbai shall, after hearing the Petitioner and considering the reply, if any, filed by the petitioner pass appropriate order under Section 127 of the Act.
12. The petitions are disposed of in the above terms. No order as to costs.
SUNIL__._,_.___
No comments:
Post a Comment