Murliwala Agrotech Pvt. Ltd Vs Union of India (Rajasthan High Court)
The Rajasthan High Court addressed a writ petition concerning the arbitrary use of power by the Income Tax Department to transfer an assessee’s case from one assessing authority to another under Section 127 of the Income Tax Act, 1961. This was the second round of litigation for the petitioner, Murliwala Agrotech Pvt. Ltd., challenging the transfer of its case from Circle Udaipur to Circle New Delhi. The High Court ultimately quashed the second transfer order, criticizing the Revenue’s “rigid and adamant” conduct.
First Round of Litigation and Judicial Precedent
The initial attempt by the Revenue to transfer the case through an order dated November 21, 2019, was challenged by the petitioner. A coordinate Bench of the Rajasthan High Court, in an order dated July 20, 2022, allowed the petitioner’s initial writ petition (D.B. Civil Petition No. 6847/2021).
The key findings of the court in the first round were:
- Natural Justice is Mandatory: The court emphasized that Section 127(1) of the Income Tax Act, which deals with transferring assessment proceedings, is framed with the salutary objective of adhering to the principles of natural justice. Since assessment/reassessment proceedings are adversarial, providing an opportunity of hearing to the assessee before transferring the case is essential.
- Absence of Recorded Reasons: The Revenue had not established a case, nor recorded reasons, that it was impossible to provide a hearing to the assessee before the initial transfer decision.
- Faceless Assessment Doesn’t Nullify Rights: The shift to faceless assessment proceedings does not negate the assessee’s right to engage counsel/advisors or evade the requirement of following natural justice principles.
Judicial Precedents Cited in the First Round:
- Smt. Jeewan Kumari (Division Bench of the Rajasthan High Court): Held that under Section 127(1), it was incumbent upon the Board to provide an opportunity of hearing before ordering a case transfer.
- Noorul Islam Educational Trust (Hon’ble Supreme Court): Similar view confirming the necessity of an opportunity of hearing.
The Court distinguished the facts from Advantage Strategic Consulting (P) Ltd., where the challenge became infructuous after the assessment order was passed and the transfer was within the same city.
