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Case Law Details

Case Name : Achintya Securities Private Limited Vs Union of India And 4 Others (Allahabad High Court)
Appeal Number : Writ Tax No. 215 of 2024
Date of Judgement/Order : 05/03/2024
Related Assessment Year :
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Achintya Securities Private Limited Vs Union Of India And 4 Others (Allahabad High Court)

In a recent judicial pronouncement, the Allahabad High Court delved into the intricacies of procedural fairness concerning the transfer of tax assessment jurisdiction. The case of Achintya Securities Private Limited Vs Union Of India And 4 Others brought to light the necessity of adhering to legal provisions and principles of natural justice in administrative actions.

Background:

Achintya Securities Private Limited, the petitioner, approached the court to challenge orders issued by the Principal Commissioner of Income Tax under Section 127 of the Income Tax Act, 1961. These orders sought to transfer the jurisdiction of assessing the petitioner’s tax liabilities from Kanpur to Mumbai.

Key Arguments and Findings:

1. Lack of Disclosure and Procedural Deficiency:

  • The petitioner argued that the show cause notice issued prior to the transfer did not adequately disclose the reasons for the jurisdictional shift. It contended that essential information regarding the alleged connections between search operations and the transfer were withheld.
  • The court acknowledged the non-speaking nature of the notice, emphasizing the importance of providing the assessee with a fair opportunity to respond.

2. Necessity of Consent from Competent Authorities:

  • The petitioner raised concerns about the requirement for obtaining consent from the Principal Chief Commissioner of Income Tax, Uttar Pradesh (West) and Uttarakhand, as the transferring and receiving officers were subordinate to different authorities.
  • The court underscored the statutory mandate of obtaining consent from officers of equal rank and jurisdiction, ensuring uniformity and fairness in the decision-making process.

Judicial Directives:

In light of the arguments presented and the statutory framework, the Allahabad High Court issued the following directives:

  • The challenged orders were set aside, allowing the petitioner to treat them as final show cause notices issued by the Principal Chief Commissioner of Income Tax, Uttar Pradesh (West) and Uttarakhand.
  • The petitioner was granted ten days to file a final reply to the show cause notice.
  • Upon receipt of the petitioner’s reply, the Principal Chief Commissioner was instructed to schedule a hearing within one week.
  • The petitioner pledged to appear before the authority on the designated date.
  • The Principal Chief Commissioner was tasked with issuing an appropriate order in accordance with the law, thereby ensuring procedural regularity and fairness.

Conclusion:

The judgment rendered by the Allahabad High Court serves as a reminder of the importance of procedural fairness and adherence to legal requirements in administrative actions, particularly in matters of tax assessment jurisdiction transfers. Upholding principles of natural justice fosters transparency, accountability, and confidence in the legal system, safeguarding the rights of all parties involved.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Sri Abhinav Mehrotra, learned counsel for the petitioner,Sri Ashish Agarwal, Sri Krishna Agarwal and Sri Manu Ghildyal, learned counsel for the revenue and Sri Anant Kumar Tiwari, learned counsel for Union of India.

2. Present writ petition has been filed by the assessee to assail theorders/communications dated 01.2024 and 11.01.2024 issued by the Principal Commissioner of Income Tax (in short ‘PCIT’) under Section 127 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). By those communications, jurisdiction to assess the petitioner has been transferred from ACIT Circle 2 (1) (1), Kanpur to Central Circle 6 (4), Mumbai.

3. Submissionsof Sri Mehrotra, are two fold :-

(i) It has been submitted grant of opportunity before transfer ofassessment case jurisdiction, is mandatory in view of Section 127

(2) of the Act. For effective opportunity to be granted, the assessee must be disclosed the proposed reasons for transfer, at the stage of issuance of show cause notice itself. In the present case, a show cause notice dated 17.11.2023 issued by the Principal Commissioner of Income Tax, Kanpur-1 is wholly non-speaking. In any case, it does not disclose the reasons on which the transfer order was eventually passed. Thus, the fact consideration of search conducted in the case of Ravi Omprakash Agarwal, at Mumbai and the alleged connection that the revenue seeks to establish between that search and the search conducted in the case of the petitioner as also the material discovered between the two search was never disclosed to the petitioner. Thus the petitioner was disabled from raising any objection in that regard. Despite specific request made by the petitioner in its two replies, the Principal Commissioner of Income Tax chose not to disclose to the petitioner the reasons giving rise to the transfer proceedings. Thus, violation of essential requirements of principles of natural justice has been pressed.

(ii) It has been submitted since the Assessing Officer from whomthe assessment jurisdiction of the petitioner is proposed to be transferred and the Assessing Officer to whom such jurisdiction is proposed to be transferred are not subordinate to one authority and in fact, are subordinate to two different authorities in two different regions inasmuch as the assessing authority of Circle 2 (1) (1) is subordinate to the Principal Chief Commissioner of Income Tax U.P. (West) and Uttrakhand and the assessing authority for Central Circle 6 (4) Mumbai is subordinate to the Chief Commissioner of Income Tax (Central)-2, Mumbai, consent of those authorities was required to be obtained with further stipulation of the Principal Chief Commissioner of Income Tax U.P. (West) and Uttrakhand to have granted opportunity of hearing to the petitioner and to pass a transfer order, if required, after due application of mind to the objections that may have been raised by the petitioner.

4. In the present case, the Chief Commissioner of Income Tax(Central)-2 Mumbai gave his consent for the assessment jurisdiction of the petitioner to be transferred from Kanpur to At present, the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand does not appear to have given his consent. In any case, since the revenue recognizes that such consent was to be obtained from the Principal Chief Commissioner of Income Tax, U.P. (West) and Uttrakhand, as is apparent from the communication dated 11.07.2023 issued by the Chief Commissioner of Income Tax (Central)-2 Mumbai, it is that authority which may have issued show cause notice to the petitioner and considered its reply before the assessment jurisdiction over the petitioner may have been consented to be transferred from Kanpur to Mumbai.

5. On the other hand, learned counsel for the revenue has strenuously urged that there is no prejudice being caused to the The petitioner company, its associators concerned and its directors were subjected to simultaneous search proceedings along with Ravi Omprakash Agarwal. The latter was involved ‘Dabba’ trading. That being a wholly illegal transaction, the search further revealed that the petitioner company, its associates and directors were actively involved in that illegal activity. Various hardware and electronic documents etc. have been seized from the possession of the petitioner, its associates and directors etc. Since the search resulted in discovery of unaccounted revenue generated by the said Ravi Omprakash Agarwal the person searched at Mumbai, the petitioner’s assessment cases are also required to be centralised at Mumbai. Reference has also been made to the fact that the petitioner company is registered in the State of Gujrat.

6. Having heard learned counsel for the parties and perused therecord, the merits of the transfer sought apart, it cannot be denied at this stage that the show cause notice issued to the petitioner was rather non-speaking. Other than containing the proposal to transfer the assessment jurisdiction of the petitioner from Kanpur to Mumbai occasioned by the search conducted against it, it makes no reference of the necessity to transfer the same for reason of parallel search proceedings against Ravi Omprakash Agarwal. Again, learned counsel for the petitioner is right in his contention, since consent to transfer the case from Kanpur to Mumbai was desired from the Principal Chief Commissioner, Uttar Pradesh (West) and Uttrakhand, it is that authority that may have given the consent after issuing appropriate show cause notice to the petitioner after considering its reply thereto. In any case, it may not have been opened either to the Chief Commissioner of Income Tax, Mumbai or the Principal Chief Commissioner Uttar Pradesh (West) and Uttrakhand to delegate that function to the Principal Commissioner of Income Tax, Kanpur.

7. The language of Section 127 (2) (a) of the Act is pretty muchclear in that The consent has to emerge amongst two superior officers heading two different Commissionerate etc. with respect to the transfer sought. It is in that context that the designations have been expressed in the plural in the first part of Section 127 (2) (a) and in the singular in the later part. Thus, for the purpose of obtaining the views of the assessee, notice is required to be issued by the appropriate authority i.e. the officer who may express his consent to his counterpart being the officer under whose jurisdiction the case may eventually be transferred. At the same time, by virtue of first part of the Section 127 (2) (a) the consent must emerge amongst officers of equal rank.

8. That appears to be the plain meaning that must be given. In the hierarchy of officers provided under Section 116 of the Income Tax Act, once the request is received from the higher ranked officer even if outside the jurisdiction ( of the officer from whom the case is to be transferred) indifference to that higher authority (making the request), the officer placed lower in rank may feel compelled to express his consent. Similarly, within the jurisdiction if the consent is accorded by the higher rank officer and the function of obtaining the assessee’s objection is delegated to a subordinate officer, that opportunity to the assessee may remain an illusory remedy, of no avail. Once the consent may have been expressed by the higher ranked officer within the jurisdiction, his subordinate may not look to take a different view and render infructuous the consent given by his superior.

9. Thus both on the plain language used by the statute as also for functional test, noted above, it commends acceptance that the consent sought by the Chief Commissioner of Income Tax Mumbai ought to have been considered and if necessary granted by an officer of equal rank, here the Principal Chief Commissioner of Uttar Pradesh (West) and Uttrakhand. For that reasons it is that authority that may have issued the show cause notice to the petitioner and considered its reply before granting consent.

10. Since the facts are undisputed and the stand of the revenue is disclosed on the strength of oral instructions, in the interest of justice, the writ petition is disposed of at this stage with the following directions :-

(i) The order dated 01.2024 and 11.01.2024 is set aside.

(ii) The petitioner may treat the impugned order to be the final show cause notice issued to it by the Principal Chief Commissioner of Income Tax Uttar Pradesh (West) and Uttrakhand.

(iii) The petitioner may file its final reply to the said show cause notice within a period of ten days from today.

(iv) On such compliance shown, the Principal Chief Commissioner Income Tax Uttar Pradesh (West) and Uttrakhand may fix a short date for hearing within one week therefrom.

(v) The petitioner undertakes to appear before the said authority on the date fixed.

(vi) Appropriate order may be passed in accordance with law by the Principal Chief Commissioner Income Tax Uttar Pradesh (West) and Uttrakhand and further proceedings may arise accordingly.

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