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IN THE HIGH COURT OF DELHI
Rajiv Sahai Endlaw, Sanjeev Narula, JJ.
Dev Wines Sales Corporation - Appellant
Versus
Principal Commissioner of Income Tax - Respondent
W.P.(C) 1761 of 2021
Decided On : 11-02-2021
The court affirmed that the transfer of jurisdiction under Section 127 of the Income Tax Act is valid for administrative convenience, even without explicit reasoning in the notice, provided the principles of natural justice are met.
Headnote:(A) Income Tax Act, 1961 - Section 127 - Transfer of jurisdiction - The petitioner contested the jurisdiction transfer from Delhi to Faridabad without stating reasons, relying on several precedents. The court found that the transfer was justified for administrative convenience and upheld the impugned order, noting that the petitioner was aware of the circumstances of the transfer. (Paras 3, 8, 12)
(B) Natural Justice - The court ruled that the principles of natural justice were adhered to since the petitioner had an opportunity to respond and was aware of the reasons for the transfer. (Para 8)
(C) Administrative Powers - The court asserted that the transfer of jurisdiction under Section 127 is an administrative function, and judicial review is limited unless evidence of mala fides exists. (Para 9)
(D) Suppression of Facts - The court emphasized that the petitioner's failure to disclose its partners' residences constituted suppression of material facts, rendering the petition liable for dismissal. (Para 14)
| Table of Content |
|---|
| 1. petition impugns transfer of jurisdiction. (Para 1 , 2 , 3) |
| 2. counsel for parties present differing arguments. (Para 4 , 5 , 6) |
| 3. consideration of the notice and reasons for transfer. (Para 7 , 8) |
| 4. legal standards for administrative power exercise. (Para 9 , 10) |
| 5. relevance of partnership disclosures and implications. (Para 11 , 12 , 13 , 14) |
| 6. concluding dismissal of the petition. (Para 15 , 16) |
JUDGMENT
[VIA VIDEO CONFERENCING]
Rajiv Sahai Endlaw, J.
CM No.5073/2021 (for exemption)
1. Allowed, subject to just exception and as per extant Rules.
2. The application is disposed of.
W.P.(C) No.1761/2021
3. The petition impugns the order dated 15th January, 2021, passed in exercise of powers under Section 127 of the INCOME TAX ACT , 1961, of transfer of jurisdiction of the petitioner from ITO, Ward-29(1), Delhi to Deputy Commissioner of Income Tax, Central Circle-2, Faridabad.
4. It is the contention of the counsel for the petitioner, (i) that the petitioner, since its inception and since the Assessment Year 2014-15 has been assessed at Delhi; (ii) that in the show cause notice issued prior to exercising the power, no reason whatsoever was given; and, (iii) that even in the impugned order, no reason whatsoever has been given.
5. Reliance is placed on Pannalal Binjraj Vs. The Union of India, (1957) 31 ITR 565 (SC); Power Controls Vs. Commissioner of Income Tax, Delhi-VII, (2000) 241 ITR 807 (Delhi); Ajantha Industries Vs. Central Board of Direct Taxes, New Delhi, (1976) 102 ITR 281 (SC); Vijayasanthi Investments Pvt. Ltd. Vs. Chief Commissioner of Income Tax, (1991) 187 ITR 405 (AP); Saptagiri Enterprises Vs. Commissioner of Income Tax, (1991) 189 ITR 705 (AP) and ATS Promoters and Builders P. Limited Vs. Chief Commissioner of Income Tax, (2009) 308 ITR 65 (Delhi).
6. Per contra, the counsel for the respondents appearing on advance notice has referred to Vishal Kumar Vs. Commissioner of Income Tax, (2014) 225 TAXMAN 203 (Delhi). He has also contended that both the partners of the petitioner are residents of Faridabad and which fact has been concealed from this Court. It is further stated that the address given of the petitioner at Delhi was found to be a fictitious address and else the information during the simultaneous raids at as many as 16 places has revealed Devender Kumar Gupta, who has filed this petition and who is the managing partner of the petitioner, to be the kingpin.
7. We have considered the rival contentions.
8. We will first deal with the argument of the counsel for the petitioner, of neither the notice preceding the impugned order nor the impugned order containing any reasons for transfer. Vide the notice dated 8th October, 2020, issued in exercise of power under Section 127 (2) of the Act, the petitioner was informed of the proposal received from the Principal Commissioner of Income Tax (Central) Gurugram regarding the centralization of the case of the petitioner from ITO Ward 29(1), New Delhi to ACIT/DCIT, Central Circle-II, Faridabad and the petitioner asked to submit its objections, if any and to participate in the hearing granted. Undoubtedly, the said notice did not set out any reasons for transfer. However, a perusal of Section 127 (2)(a) shows the same to be requiring only giving the assessee a reasonable opportunity of being heard in the matter, that too "wherever it is possible to do so" and only requires reasons to be recorded, if directing transfer. Though there is no specific requirement for the notice to set out the reasons but the principles of natural justice require reasons to be stated, to enable the assessee to make effective use of the opportunity granted of hearing. The present is however not a case where though no reasons were set out in the notice but the petitioner was unaware of the reasons for proposed transfer. The petitioner, in its reply dated 26th October, 2020 to the notice referred to an earlier reply (but which has not been produced) and contended
