YOGESHBHAI CHANDRAKANT PALA vs. PRINCIPAL COMMISSIONER OF INCOME TAX 1, RAJKOT

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SCA/12015/2021HC GujaratGJHC24029136202101 August 2022Bench: HONOURABLE MR. JUSTICE N.V.ANJARIA,HONOURABLE MR. JUSTICE BHARGAV D. KARIA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court allowed the petition to the extent of remitting the case back to the competent authority. The court found that the impugned order transferring the assessment proceedings was passed in breach of the principles of natural justice, as the petitioner was deprived of an adequate opportunity of being heard. The court noted that the aspect of the registered email address not being used for the notice could not be disputed. The communication from the department itself indicated that the petitioner did not furnish a reply by the stipulated date, leading to the order. The court emphasized that Section 127 expressly provides for affording an opportunity of hearing. The conclusion by the authorities that the assessee had no objection was deemed arbitrary and a violation of natural justice. Consequently, the impugned order dated 23.2.2021 passed under Section 127(2) was set aside. The competent authority was directed to decide the issue afresh after giving an opportunity of being heard to the petitioner and considering his objections within four weeks. The court explicitly stated that it had not expressed any opinion on the merits of the case.

What were the facts?

The petitioner, Yogeshbhai Chandrakant Pala, filed a Special Civil Application challenging a show cause notice dated 8.2.2021, an order dated 23.2.2021, and a letter dated 9.4.2021. These were issued by the Principal Commissioner of Income Tax, Rajkot (Respondent No. 1) under Section 127(2) of the Income Tax Act, 1961. The action under challenge was the transfer of the petitioner's assessment proceedings from Rajkot to DCIT/ACIT, Central Circle, Varanasi. The reasons cited for the proposed transfer included a search warrant executed at Varanasi and the fact that transactions involved parties falling under the jurisdiction of PCIT, Allahabad, necessitating centralization for coordinated assessment. The petitioner filed objections on 5.3.2021, stating he resided and had business in Rajkot, and that only his premises were searched, not a group search.

What were the issues?

1. Whether the order transferring the assessment proceedings under Section 127 of the Income Tax Act, 1961, was passed in breach of the principles of natural justice, specifically by failing to provide an adequate opportunity of being heard to the petitioner? Assessee's Contentions: The petitioner argued that the impugned order was passed in breach of natural justice as no proper opportunity of being heard was provided. He contended that the show cause notice was not sent to his registered email address and he only became aware of it when logging into the e-filing website. He further submitted that even though Rajkot has a centralized wing, there was no valid reason to invoke Section 127. The petitioner relied on the fact that the search was only at his premises and not a group search. Revenue's Contentions: The revenue, through its communication dated 9.4.2021, stated that the show cause notice was provided through ITBA and the petitioner was requested to furnish objections by 16.02.2021. It was noted that no reply was furnished by that date, and subsequently, the order under Section 127 was passed. The revenue's position implicitly suggests that the statutory requirement of providing an opportunity was met through the ITBA notice, and the subsequent order was based on the lack of response.

Which sections of the Income-tax Act were involved?

Section 127,Section 132(1)

AI-generated summary — verify with the full judgment below

C/SCA/12015/2021 ORDER DATED: 01/08/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 12015 of 2021 ========================================================== YOGESHBHAI CHANDRAKANT PALA Versus PRINCIPAL COMMISSIONER OF INCOME TAX 1, RAJKOT ========================================================== Appearance: MR SUDHIR M MEHTA(2058) for the Petitioner(s) No. 1 MS SHAILEE S MEHTA(5873) for the Petitioner(s) No. 1 for the Respondent(s) No. 4 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1,2,3 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 01/08/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned advocate Mr. Sudhir Mehta for the petitioner and learned advocate Mr. Nikunt Raval for the respondents. 2. By filling the present petition under Article 226 of the Constitution, the petitioner has prayed to set aside the show cause notice dated 8.2.2021. Also challenged are impugned order dated 23.2.2021 and letter dated 9.4.2021 issued by respondent No.1 under section 127(2) of the Income Tax Act, 1961 transferring the assessment in the case of the petitioner from Rajkot to DCIT/ACIT, Central Circle, Varanasi. 3. In the notice dated 8.2.2021 issued under section 127 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), the following reasons Page 1 of 5

C/SCA/12015/2021 ORDER DATED: 01/08/2022 are given for proposing transfer of the case from the present jurisdiction at Rajkot to DCIT/ACIT, Central Circle, Varanasi, “(i) Warrant u/s. 132(1) of the Income Tax Act, 1961, was issued in your case by Pr. Director of Income Tax (Inv.). Lucknow and the same was executed on 13.10.2020 at LBS Airport, Varanasi. Furthermore, all the parties/assessee from which the transactions have taken place, fall under the jurisdiction of PCIT, Allahabad. Hence, the case is required to be centralised with the Central Circle, Varanasi for the purpose of coordinated and effecting assessment proceedings. (ii) As per the guidelines of the CBDT all the cases in which search have taken place are to be centralised with the Central Circle to facilitate coordinated investigation.” 3.1 The objections were filed by the petitioner on 5.3.2021 in response to the aforesaid show cause notice. Apart from stating that the petitioner assessee had been filling his income tax return regularly and that he is residing and having business establishment at Rajkot and has been assessed only at Rajkot, it was stated that there was no group search under section 132(1) of the Act and at the place of the assessee only, the search had taken place. It was submitted that search proceedings require physical personal hearing at the office of the assessing authority and when the Rajkot has also the centralised wing of income tax, there was no good reason to invoke the powers under section 127 of the Act. 4. Learned advocate for the petitioner submitted that the impugned Page 2 of 5

C/SCA/12015/2021 ORDER DATED: 01/08/2022 order of transfer dated 23.2.0221 came to be passed in breach of principles of natural justice without providing any opportunity of being heard to the petitioner. It was submitted that the aforesaid show cause notice was never sent to the registered E-mail address. It was pointed out that in the objections dated 5.3.2021 aforementioned also the petitioner had raised the aspect that he did not receive the notice at the registered E- mail address and that he came to know when he logged in the E-filling website for other purpose to come to know about such show cause notice issued to him. Whereafter, he submitted objections. 5. The aspect of registered E-mail address of the petitioner could not be disputed. 5.1 This stand is fortified from the communication dated 9.4.2021 issued by the department to the petitioner in respect of the subject of the centralisation of the case under section 127 of the Act. It was stated thus, “In this connection, it is to inform that Pr.CIT(Central), Lucknow vide letter dated 28.01.2021 has given consent for centralization of the case of Sh. Yogesh Chandrakant Pala with ACIT/DCIT Central Circle, Varanasi. Accordingly, this office vide show cause notice dated 8.2.2021 has provided an opportunity of being heard to you through ITBA and you were requested to furnish your objection/reply if any, on or before 16.02.2021. However, you did not furnish any reply/objection by 16.02.2021. Subsequently, the order u/s. 127 was passe don 23.02.2021. This is for your kind information.” Page 3 of 5

C/SCA/12015/2021 ORDER DATED: 01/08/2022 5.2 Section 127 of the Act expressly provides for affording opportunity of hearing to the concerned assessee when the powers to transfer the assessment is to be exercised by the competent authority under the said provision. When the petitioner is deprived of such opportunity, there is a statutory infraction in addition to the violation of natural justice operating to the prejudice of the petitioner as his case was not considered by the authority. 5.3 In the impugned order also it is stated that the assessee did not file any reply against the proposed centralisation under section 127 of the Act. It also became undisputed that the petitioner has not been given any opportunity of hearing. Drawing of conclusion by the authorities that the assessee had no objection on such proposed transfer, not only violated the basic principle of natural justice which are incorporated in section 127 itself, under which the powers are exercised, but it also acted arbitrarily assuming that the petitioner had no objection to the proposed transfer.

6.

In light of the above, this petition is allowed to the extent by remitting back the case to the competent authority of the respondents. Page 4 of 5

C/SCA/12015/2021 ORDER DATED: 01/08/2022 The competent authority shall decide on the issue of transfer of assessment of the petitioner from Rajkot to DCIT/ACIT, Central Circle, Varanasi afresh by giving opportunity of being heard to the petitioner after considering the objections raised by the petitioner 6.1 The exercise shall be completed and necessary orders shall be passed in accordance with law within a period of four weeks from the date of receipt of copy this order. 6.2 In order that the competent authority of the respondent is enabled to decide afresh, the impugned order dated 23.2.0221 passed under section 127(2) of the Act is set aside. 6.3 It is clarified that this court has not expressed any opinion on the merits of the case of the either side. The present order of remand is passed only on the ground of non-giving of opportunity of being heard to the petitioner. 7. The petition is allowed in the aforesaid terms and to the said extent. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) C.M. JOSHI Page 5 of 5

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