MAIN LAND FINANCE PVT LTD. vs. PRINCIPAL COMMISSIONER OF INCOME TAX, FARIDABAD

Facts

The petitioner, Main Land Finance Pvt. Ltd., challenged a transfer order dated June 22, 2022, passed under Section 127 of the Income Tax Act, 1961, by the Principal Commissioner of Income Tax (PCIT), Faridabad. The order proposed to transfer the petitioner's case from Ward 1(3), Faridabad, to Central Circle 2, Lucknow, citing coordinate investigation and administrative convenience. The petitioner received a show cause notice on June 1, 2022, and requested a personal hearing and the relied-upon material. However, the impugned order was passed without granting a personal hearing or providing the requested material. The respondent-PCIT, Faridabad, filed a reply stating that both Principal Commissioners had consented to the transfer after due application of mind, fulfilling the requirements of Section 127(2)(a). The respondent also claimed that a reasonable opportunity of hearing was provided on June 10, 2022, and placed on record letters proposing and consenting to the centralization of cases following a search and seizure operation on December 18, 2021, in the case of Raj Group & others.

Held

The High Court dismissed the petition, holding that the impugned order dated June 22, 2022, transferring the petitioner's case under Section 127 of the Income Tax Act, 1961, was an administrative order passed after due application of mind. The Court found that the reasons for centralization were adequately provided in the letter dated March 28, 2022 (Annexure R-1), which proposed the transfer following a search and seizure operation. The consent given by the Principal Commissioner of Income Tax, Lucknow, vide letter dated April 11, 2022 (Annexure R-2), was also considered to be based on due application of mind. The Court held that the petitioner was not entitled to the relied-upon documents at the stage of transfer proceedings, as such documents could be requested during the assessment proceedings. The Court distinguished the cited judgments, stating that in the present case, detailed reasons were provided, and the objections were considered. The Court concluded that there was no ground to interfere with the administrative order, as it was not arbitrary or malafide.

Key Issues

1. Whether the transfer order dated June 22, 2022, passed under Section 127 of the Income Tax Act, 1961, is liable to be quashed for non-compliance with Section 127(2)(a) of the Act, specifically regarding the requirement of a positive agreement between the concerned Commissioners and the supply of relied-upon material to the assessee. Assessee's Contentions: - The transfer order is bad in law as there was no positive agreement between the two Commissionerates, violating Section 127(2)(a) of the Act, as held in Noorul Islam Educational Trust vs. CIT and Rent Works India Pvt. Ltd. vs. PCIT. - The assessee was not provided with the relied-upon material despite a specific request, which amounts to a serious lapse, citing Reliance Securities Ltd. vs. SEBI and T. Takano vs. SEBI. - A personal hearing was not granted, and the order was passed without recording reasons, contrary to the principles laid down in Deep Malhotra and others vs. The Chief Commissioner of Income Tax and others and Nagindas Kasturchand and Bros. vs. PCIT. Revenue's Contentions: - Both Principal Commissioners consented to the transfer after due application of mind, and there was an agreement, satisfying Section 127(2)(a). - The petitioner was given a notice and a reasonable opportunity of being heard on June 10, 2022. - The transfer was proposed for centralization of cases following a search and seizure operation, with detailed reasoning provided in the proposal letter dated March 28, 2022. - The assessee is not entitled to the relied-upon documents at the stage of transfer proceedings, as these can be sought during assessment proceedings.