RENTWORKS INDIA PRIVATE LIMITED vs. PRINCIPAL COMMISSIONER OF INCOME TAX-14 AND ANR

ORAL JUDGMENT: (PER A.S.OKA,J.) 1 On   19th September   2017,   notice   for   final disposal

at admission

stage

was issued. Accordingly,   today,   we   have   taken   up   the   writ petition   for   final   hearing.     The   Commissioner   of Income   Tax,   Mumbai   issued   notice   dated   18th  April 2017   to   the   petitioner   taking   recourse   to   sub­ section 2 of Section 127 of the Income Tax Act,1961 (for short `the Income Tax Act').   The petitioner­ assessee was put to notice that there is a proposal to   transfer   the   case   of   the   petitioner   to   DCIT, Central Circle­2(1), Chennai for proper co­ordinated investigation. There was a reply filed to the said show cause notice by the petitioner on 8th May 2017. The   impugned   order   was   made   by   the   Principal Commissioner of Income Tax, Mumbai under sub­section CNR No : HCBM020177542017 Uploaded on - 21/08/2020 2 of section 127 of the Income Tax Act by which the case   of   the   petitioner   was   transferred   to   DCIT, Central   Circle­2(1)   at   Chennai.   It   is   this   order which   is   subjected   to   a   challenge   in   this   writ petition   under   Articles   226   and   227   of   the Constitution of India. 2 The   first   submission   of   the   learned   senior counsel   appearing   for   the   petitioner   is   that   the show cause notice is vague.   The second submission is that the impugned order is passed in breach of principles   of   natural   justice   as   the   contentions which are raised in the reply have not been adverted to.  Next challenge is on the merits of the reasons assigned.     There   is   one   more   important   challenge which is based on non compliance of the requirements of sub­section (2) of Section 127 of the Income Tax Act.     The   submission   which   is   supported   by   a specific ground is that the condition precedent for show   cause   notice   is   that   there   has   to   be   an agreement   between   the   first   respondent   (Principal Commissioner   of   Income   Tax­14,   Mumbai)   and   the Principal   Commissioner   of   Income   Tax,   Circle­ Chennai   as   contemplated   by   sub­section   (2)   of Tax­11. The   learned   counsel   for   the   respondent dealing with the last submission relied upon clause (o)   of   paragraph   4   of   the   affidavit   in   reply   of [2016] 388 ITR 489 (SC) Uploaded on - 21/08/2020 Ankit Verma, ACIT – HQ (Judicial), Pr.CIT­14,Mumbai. Commissioner of Income Tax­II, Nagpur3. 4 We   have   given   careful   consideration   to   the submissions   made   across   the   bar.     It   will   be necessary to advert to section 127 of the Income Tax Act which reads thus: “127. (1) The [Principal Director General] or Director   General   or   [Principal   Chief Commissioner   or]   Chief   Commissioner   or [Principal Commissioner or] Commissioner may 2 [1997] 95 Taxman 132 (PAT.)

[2016] 388 ITR 208 (Bombay) Uploaded on - 21/08/2020 after   giving   the   assessee   a   reasonable opportunity   of   being   heard   in   the   matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent   jurisdiction)   to   any   other Assessing   Officer   or   Assessing   Officers (whether   with   or   without   concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers   from   whom   the   case   is   to   be transferred and the Assessing Officer or the Assessing Officers to whom the case is to be transferred are not subordinate to the same [Principal   Director   General   or]   Director General or [Principal Chief Commissioner or] Chief

Commissioner

or [Principal

| Commissioner or] Commissioner, ­ (a) where the [Principal Directors General or]   Directors   General   or   [Principal   Chief Commissioners   or]   Chief   Commissioners   or [Principal   Commissioners   or]   Commissioners to   whom   such   Assessing   Officers   are subordinate   are   in   agreement,   then   the [Principal   Director   General   or]   Director General   or   [Principal   Commissioner   or] Commissioner   from   whose   jurisdiction   the case is to be transferred may, after giving the   assessee   a   reasonable   opportunity   of being heard in the matter, wherever it is impossible   to   do   so,   and   after   recording Uploaded on - 21/08/2020 his reasons for doing so, pass the order; (b)where   the   [Principal   Directors   General or]   Directors   General   or   [Principal   Chief Commissioners   or]   Chief   Commissioners   or [Principal   Commissioners   or]   Commissioners aforesaid are not in agreement, the order transferring   the   case   may,   similarly,   be passed by the Board or any such [Principal Director   General   or]   Director   General   or [Principal   Chief   Commissioner   or]   Chief Commissioner or [Principal Commissioner or] Commissioner   as   the   Board   may,   by notification   in   the   Official   Gazette, authorise in this behalf. (3) Nothing   in   sub­section   (1)   or   sub­ section  (2)  shall  be  deemed  to   require  any such   opportunity   to   be   given   where   the transfer   is   from   any   Assessing   Officer   or Assessing Officers  (whether  with  or  without concurrent   jurisdiction)   to   any   other Assessing   Officer   or   Assessing   Officers (whether   with   or   without   concurrent jurisdiction)   and   the   offices   of   all   such officers   are   situated   in   the   same   city, locality or place. (4) The transfer of a case under sub­section (1)   or   sub­section   (2)   may   be   made   at   any stage   of   the   proceedings,   and   shall   not render necessary the re­issue of any notice already   issued   by   the   Assessing   Officer   or Assessing   Officers   from   whom   the   case   is Uploaded on - 21/08/2020 transferred. Explanation­   In  section  120  and  this  section,  the word “case”, in relation to any person whose name is specified   in   any   order   or   direction   issued thereunder means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all   proceedings   under   this   Act   which   may   be commenced after the date of such order or direction respect of any year.] 5 In the present case, there is no dispute that sub­section 2 of section 127 is   applicable.   The condition   precedent   for   exercising   power   under clause   (a)   of   sub­section   2   of   section   127   for passing an order of transfer is an agreement which is contemplated by clause (a) of sub­section 2 of section 127. In the present case, as far as the existence   of   the   agreement   is   concerned,   the submission is crystalised in clause (o) of affidavit in reply.  Clause (o) reads thus: “(o) With reference to paragraph (15) O,P and Q of the writ petition  the agreement of the concerned   jurisdictional   Pr   CITs   is   by necessary   implication.   Proceedings   u/s   127 (2) were initiated in this jurisdiction upon receipt of reference from the office of the DGIT (Inv.), Chennai seeking notification of the case.  This necessarily implies agreement Uploaded on - 21/08/2020 between the respective Pr.CITs.   It is only in   the   case   of   lack   of   agreement   that   a separate   procedure   is   provided   in   the   Act. Further   as   the   petitioner   received   notice u/s.143(2)   from   DCIT   Central   Cir   2(1), Chennai,   which   fact   also   underscores   the agreement with the Pr.CIT Centra 2 Chennai.” (underline supplied) 6 The law on this aspect is laid down in the case of   Noorul   Islam   Educational   Trust   (supra). Paragraphs 4 and 5 of the said decision reads thus: “4 As the Income­tax/assessment file of the appellant   –   assessee   has   been   transferred from one Assessing Officer in Tamil Nadu to another Assessing  Officer in Kerala and the two Assessing Officers are not subordinate to the   same   Director   General   or   Chief Commissioner   or   Commissioner   of   Income   Tax under   section   127(2)   (a)   of   the   Act   an agreement   between   Director   General,   Chief Commissioner or Commissioner, as the case may be, of the two jurisdictions is necessary. 5 The counter affidavit filed on behalf of the Revenue does not disclose that there was any   such   agreement.     In   fact,   it   has   been consistently   and   repeatedly   stated   in   the said   counter   affidavit   that   there   is   no disagreement   between   the   two   Commissioners. Absence of disagreement cannot tantamount to Uploaded on - 21/08/2020 agreement as visualized under Section 127(2) (2)   (a)   of   the   Act   which   contemplates   a positive   state   of   mind   of   the   two jurisdictional   Commissioners   of   Income   Tax which is conspicuously absent.” (underline supplied) 7 In   view   of   the   absence   of   the   agreement   as contemplated   by   clause   (a)   of   sub­section   (2)   of section 127, the Apex Court proceeded to interfere with the order of transfer of goods by setting aside the same. 8 The Apex Court has categorically held that the absence of disagreement   will not be tantamount to an agreement as visualized under section 127(2)(a) which contemplates positive state of mind of the two jurisdictional   Principal   Commissioners   of   Income Tax.   The agreement contemplated by clause (a) of sub­section (2) of section 127 may not be a drawn up agreement. What is necessary is that there has to be an  agreement  which  will  involve  positive  state  of mind   of   the   two   jurisdictional   Principal Commissioners.   Both   of   them   must   consent   to   the transfer after application of mind. 9 In the present case, it is not even the case made out in the show cause notice that the agreement as contemplated by the first part of clause (a) of sub­section (2) of section 127 exists. The existence of   such   agreement   between   two   jurisdictional Commissioners  is a condition precedent for passing Uploaded on - 21/08/2020 the order of transfer. Except for the request which came   from   the   investigation   office,Chennai   of transferring   the   case,   there   is   no   reference whatsoever   to   any   such   agreement.     Clause   (b)   of sub­section   (2)   of   section   127   provides   for consequences when there is no such agreement.  When the jurisdiction to pass an order of transfer under clause (a) of sub­section (2) of Section 127 can be exercised only when there is such an agreement, the fact   that   such   an   agreement   exists   ought   to   have been stated in the the show cause notice as the same is a jurisdictional fact. Apart from the failure to mention the same in the show cause notice, the only stand of the revenue is that there is an agreement by implication.   This stand is completely contrary to paragraph 5 of the decision of the Apex Court in the case of Noorul Islam Educational Trust (supra). The decision in the case of Ramswaroop (supra) will also bind this Court for the reasons stated above. 10 Coming to the decision in the case of Jharkhand Mukti  Morcha,  relevant  facts  are   in  paragraph  12. In the said case, specific reliance was placed on a document   dated   27th  November   2016. It   is   on   the basis   of   the   written   document   that   a   finding   was recorded   that   there   was   an   agreement   between   the Jurisdictional   Commissioners   of   Ranchi   and   Delhi. In the present case, even going by the case made out by the respondent, no such agreement is spelt out. In   absence   of   any   such   agreement,   the   first respondent had no jurisdiction to pass the order of transfer. Uploaded on - 21/08/2020 As   the   impugned   order   cannot   be   sustained   on above ground, it is not necessary to to into other challenges. 12 Accordingly,  for  the  reasons  quoted above,  we pass following order : . Impugned   order   dated   25th May   2017 (Exhibit­H to the petition) is hereby quashed and set aside. Rule is made absolute on above terms with no order as to costs. (A.K.MENON,J.) (A.S.OKA,J.) Uploaded on - 21/08/2020 Powered by TCPDF (www.tcpdf.org)