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The Commissioner Of ... v. Income Tax Officer-W...
Structured Summary of the Judgment (A. Selvam, J.)
Factual and Procedural Background
The present Writ Appeal challenges an order of the learned Single Judge in W.P.(MD) No. 60 of 2009 dated 11.12.2009. The writ petition (W.P.(MD) No. 60 of 2009) was filed by the respondent before this Court under Article 226 of the Constitution seeking a writ of certiorari and mandamus to call for and quash the order recorded in C. No. 464/50/91-92.CIT-1 dated 16.12.2008 (the "impugned order") passed by the first respondent. The petitioner in the writ petition is Noorul Islam Educational Trust, which runs several educational institutions in Thuckalay, Kanyakumari District and maintains a separate income-tax account. The impugned order transferred the petitioner's case from the file of the second respondent to the file of the third respondent. The Single Judge allowed the writ petition and quashed the impugned order; the Department (first respondent/first appellant) challenged that decision by filing this Writ Appeal.
Legal Issues Presented
- Whether the transfer order dated 16.12.2008 passed by the first respondent under Section 127 of the Income Tax Act, 1961 is valid in law, or whether it is liable to be quashed.
Arguments of the Parties
Appellants / Respondents (Revenue) — Arguments
- Section 127(2)(a) of the Income Tax Act, 1961 authorises the first respondent (Commissioner) to transfer cases after observing due formalities; the impugned transfer was made in accordance with that provision.
- The Chairman of the trust (A.P. Majeed Khan) is alleged to run institutions in Kerala and during search undisclosed income of Rs. 70,17,400 was detected in his individual case; to have coordinated enquiry and investigation in the Noorul Islam Group cases and in the individual case of the Chairman, the transfer was made.
- The transfer was effected after observing formalities and for the machinery purpose of effective tax assessment; the learned Single Judge erred in quashing the transfer without giving due regard to Section 127 as a collection/ machinery provision.
Respondent / Petitioner (Noorul Islam Educational Trust) — Arguments
- The trust runs separate educational institutions in and around Thuckalay, Kanyakumari District and maintains a separate income-tax account; the institutions run individually by the Chairman in Kerala are not connected with the trust’s institutions.
- There were no circumstances justifying transfer of the petitioner's case from the file of the second respondent to the file of the third respondent; accordingly, the Single Judge correctly held that the transfer was not justified and quashed the impugned order.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| K.P. Mohammed Salim v. Commissioner of Income Tax, Cochin [(2008) 300 ITR 302 (SC)] | Held that an order of transfer under Section 127 is passed for the purpose of assessment; it serves a larger public interest and is a machinery provision that must be given full effect and construed to make it workable. | The Court relied on this precedent to treat Section 127 as a machinery provision meant to facilitate assessment and enquiry, supporting the view that transfer orders under Section 127 may be made to enable coordinated investigation/assessment and should be upheld where they serve that machinery purpose. |
Court's Reasoning and Analysis
The court began with a textual reading of Section 127 of the Income Tax Act, 1961 (including sub-section (2)(a)), noting its express provisions:
- Commissioners (and equivalent officers) may transfer cases between Assessing Officers after giving the assessee a reasonable opportunity to be heard, where it is possible to do so.
- Where transfer is between officers not subordinate to the same Commissioner, subsection (2)(a) permits transfer after giving a reasonable opportunity where the Commissioners are in agreement; subsection (3) creates an exception for transfers within the same city/locality where opportunity need not be given.
- Section 127 permits transfer at any stage and does not mandate re-issuance of earlier notices; the section does not prescribe specific substantive reasons that must be recorded beyond the requirement to record reasons when applicable.
On that statutory foundation the court observed that:
- Section 127 is primarily a machinery provision designed to facilitate assessment and tax collection; it does not enumerate substantive reasons that must be shown to justify a transfer, and it vests unfettered transfer power (subject to the procedural safeguards in the section) in the concerned authorities.
- The Department relied on the existence of undisclosed income (Rs. 70,17,400) detected in the individual case of the trust's Chairman and on the fact that the Chairman operates institutions in Kerala; these facts were not disputed by the petitioner (no objection to the undisclosed income was raised), and the petitioner admits separate institutions exist at the locations described.
- Relying on the Supreme Court decision in K.P. Mohammed Salim (supra), the court accepted that Section 127 must be given its full effect as a workable machinery provision and that transfers can be made in public interest for effective assessment/enquiry.
- Given the admitted facts and the purpose of Section 127 — enabling coordinated enquiry/assessment where there is a commonality of inquiry between group cases and an individual's case — the court concluded the transfer was legally permissible and would not cause prejudice to the petitioner.
- The learned Single Judge, according to this court, erred by not sufficiently considering the statutory power under Section 127(2)(a) and the machinery character of Section 127, and by quashing the transfer on the ground that it was "not factually justifiable" without giving effect to the legislative scheme and precedent cited.
Holding and Implications
Writ Appeal Allowed; the order passed in W.P.(MD) No. 60 of 2009 dated 11.12.2009 is set aside and W.P.(MD) No. 60 of 2009 is dismissed without costs.
Direct consequences:
- The impugned transfer order dated 16.12.2008 (C. No. 464/50/91-92.CIT-1) effected by the first respondent stands affirmed as valid in law by this Court.
- The writ petition that had quashed that transfer is now dismissed; the transfer remains operative for the purposes of coordinated enquiry and assessment as contemplated under Section 127 of the Income Tax Act, 1961.
- The appeal was allowed without costs; the writ petition was dismissed without costs.
Broader implications: The Court treated Section 127 as a machinery provision consistent with the Supreme Court precedent cited and did not purport to lay down any new principle of law beyond applying the statutory text and that precedent to the admitted facts. No new precedent was announced by this judgment.
JUDGMENT
(Judgment of the Court was delivered by A. SELVAM, J.)
Challenge in this Writ Appeal is to the order passed in W.P(MD) No. 60 of 2009 dated 11.12.2009 by the learned Single Judge of this Court.
2. The respondent herein as petitioner has filed W.P(MD) No. 60 of 2009 under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus calling for the records in respect of the order passed in C. No. 464/50/91-92.CIT-1, dated 16.12.2008 by the first respondent and quash the same.
3. The main averments made in the petition are that the petitioner viz., Noorul Islam Educational Trust has been running so many educational institutions in Thuckalay, Kanyakumari District. It is being run by a Committee of Trustees. The petitioner is having separate income tax account. The first respondent has transferred the case of the petitioner from the file of second respondent to the file of third respondent. The reason assigned by the first respondent for making such transfer is not valid. The first respondent ought to have transferred the case of the petitioner to any Assistant Commissioner of Income Tax within Tamil Nadu. The first respondent ought to have considered necessity of retaining assessment of the petitioner in Tamil Nadu. The first respondent without considering the contentions putforth on the side of the petitioner has erroneously passed the impugned order dated 16.12.2008 and thereby made such transfer. Under the said circumstances, the present writ petition has been filed for getting the relief sought for therein.
4. In the counter filed on the side of the respondents, it is averred that as per Section 127(2)(a) of the Income Tax Act, 1961, the first respondent after observing due formalities is having power to transfer cases from one place to another. Under the said circumstances for the reasons assigned in the impugned order, the first respondent has made such transfer and the reasons given in the petition are not genuine and therefore the present writ petition deserves to be dismissed.
5. On the basis of divergent contentions raised on either side, the learned Single Judge has allowed W.P(MD) No. 60 of 2009 by way of holding that the transfer in question is not justified and ultimately quashed the order dated 16.12.2008 passed by the first respondent. The order passed by the learned Single Judge is being challenged in the present Writ Appeal.
6. The short point which comes up for consideration in the present Writ Appeal is as to whether the order of transfer dated 16.12.2008 made by the first appellant/first respondent is valid as per law or the same is liable to be quashed?
7. The entire order of transfer has been made only on the basis of provision of Section 127 of the Income Tax Act, 1961 and the same reads as follows:
“Power to transfer cases: (1) The Director General or Chief Commissioner or Commissioner may, after giving the assesee 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 Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,-
(a) Where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief 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 possible to do so, and after recording his reasons for doing so, pass the order;
(b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.
(3) Nothing in sub-section(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 sub-section(1) or sub-section(2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is 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 in respect of any year.”
8. A mere reading of the provision of the said Section would clearly go to show that Directors General, or Chief Commissioners or Commissioners are having power to transfer cases from one place to another after giving reasonable opportunity to assessee. Further it is made clear that if transfer is made from the file of one Assistant Commissioner to another Assistant Commissioner within the same locality or place, reasonable opportunity to assessee need not be given.
9. In the instant case, the impugned transfer has been made from the file of second respondent to the file of third respondent. The only condition made in Section 127(2)(a) is that such transfer should be made after giving reasonable opportunity to the concerned assessee. Further Section 127 does not speak about any reason. Therefore it is pellucid that the first respondent/first appellant is having unfettered power of transfer under the said Section. With these legal backdrops, the Court has to analyze as to whether the impugned order dated 16.12.2008 is liable to be quashed?
10. The learned Senior Standing Counsel for Income Tax appearing for the appellants/respondents has contended with great vehemence that the Chairman of the respondent is having some institutions in Kerala State and the same are within the purview of third respondent and further an undisclosed income of Rs. 70,17,400/- is detected in his case and only for having coordinate enquiry and investigation both in Noorul Islam Group cases as well as individual case, after observing all formalities mentioned in Section 127(2)(a) of the Income Tax Act, 1961, the first respondent has passed the impugned order and the learned Single Judge without considering the fact that the said Section is nothing, but a machinery to collect income tax, has erroneously allowed W.P(MD) No. 60 of 2009 and therefore the order passed by the learned Single Judge is liable to be set aside.
11. In order to sustain the order passed by the learned Single Judge, the learned counsel appearing for the respondent/petitioner has also equally contended that the respondent/petitioner is having various educational institutions in and around Thuckalay, Kanyakumari District and even though the Chairman of the trust is having separate institutions in Kerala, income tax cases are different and no circumstance arises to make such transfer from the file of second respondent to the file of third respondent and under the said circumstances the learned Single Judge has allowed W.P(MD) No. 60 of 2009 after holding that the transfer is not justified and therefore the order passed by the learned Single Judge does not call for any interference.
12. As pointed out earlier, the order in question has to be passed by the first respondent/first appellant only by way of invoking the provision of Section 127(2)(a) of the Income Tax Act, 1961. As per the said provision, the first respondent/first appellant is having power of transfer after giving reasonable opportunity to the particular assessee. Further the entire Section 127 does not say any specific reason.
13. The contentions putforth on the side of the appellants/respondents are that the Chairman of the petitioner/respondent in individual capacity is owning several institutions in Kerala State and during search Rs. 70,17,400/- of undisclosed income has been detected and only for having coordinate enquiry and investigation, the transfer in question has been made.
14. The admitted facts of the respondent/petitioner is that the respondent/petitioner is having several educational institutions in and around Thuckalay, Kanyakumari District. It is also an admitted fact that the Chairman of the trust by name A.P Majeed Khan in individual capacity is having several similar institutions in Kerala State. With regard to detection of an undisclosed income of Rs. 70,17,400/-, no objection has been raised on the side of the respondent/petitioner.
15. As pointed out earlier, the only point now winched to the fore is as to whether the first respondent is having power of transfer and in that way the impugned order passed by the first respondent is valid in law or the same is liable to be quashed?
16. The learned Senior Standing Counsel for Income Tax appearing for the appellants/respondents has relied upon the decision reported in K.P Mohammed Salim v. Commissioner Of Income Tax, Cochin [(2008) 300 ITR 302 (SC)], wherein the Hon'ble Supreme Court has had an occasion to decide the power mentioned in Section 127 and also the purpose for which the said provision is in existence. In paragraph No. 14 of the decision referred to supra, it is stated like thus:
“An order of transfer is passed for the purpose of assessment of income. It serves a larger purpose. Such an order has to be passed in public interest.”
In paragraph No. 17, it is observed that power of transfer is in effect provides for a machinery provision. It must be given its full effect. It must be construed in a manner so as to make it workable. Even Section 127 of the Act is a machinery provision, it should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner wherefor the statute was enacted.
17. From the conjoint reading of the observation made by the Hon'ble Supreme Court, it is made clear that transfer is nothing, but a machinery for the purpose of collecting income tax. Further Section 127 is a machinery provision.
18. It has already been stated in so many places that Section 127 of the said Act does not specify any reason(s) for making transfer and further nobody can say that the first respondent/first appellant is not having such kind of power.
19. The specific contention putforth on the side of the appellants/respondents is that for having coordinate enquiry and investigation in respect of cases of Noorul Islam Group and in individual capacity of A.P Majeed Khan, the transfer in question has been made.
20. It is not the contention of the respondent/petitioner that its Chairman in individual capacity is not running separate educational institutions. Further in the order in question, it has been clearly stated that an undisclosed income of Rs. 70,17,400/- has been detected from his case.
21. The main objection raised on the side of the respondent/petitioner is that the institutions being run in individual capacity by the said A.P Majeed Khan, are not having connection with the institutions, being run by the respondent trust.
22. It is true that the respondent/petitioner is having separate educational institutions in and around Thuckalay, Kanyakumari District. It is also true that the Chairman of the respondent/petitioner is running several educational institutions in Kerala in his individual capacity. But no-one can say that the said A.P Majeed Khan is not getting income from the institutions which are being run by the trust as well as from the institutions which are being run by him in his individual capacity. Under the said circumstances for making effective assessment and also for having coordinate enquiry and investigation, such transfer is must and the same would not create any prejudice to the respondent/petitioner.
23. The learned Single Judge without considering the powers mentioned in Section 127(2)(a) of the said Act and also without considering that no reason need be given in transfer, has erroneously quashed the impugned order dated 16.12.2008
24. As pointed out earlier, the entire proceeding has been made as per provision of Section 127(2)(a) of the said Act and the same is nothing, but a machinery provision. The only object of the appellants/respondents is to have effective income tax enquiry. Since Section 127(2)(a) is nothing, but a machinery provision and since no serious allegations have been levelled against the appellants/respondents, this Court is of the considered view that the first respondent/first appellant is having power of transfer even without assigning any reason and therefore the order passed by the first appellant/first respondent is perfectly valid in law and the same need not be quashed. The learned Single Judge has simply observed that such transfer is not factually justifiable and consequently allowed the writ petition. In view of the discussion made earlier, this Court has received considerable force in the contention putforth on the side of the appellants/respondents and therefore the impugned order passed in W.P(MD) No. 60 of 2009 by the learned Single Judge is liable to be quashed.
25. In fine, this Writ Appeal is allowed without costs and the order passed in W.P(MD) No. 60 of 2009 dated 11.12.2009 is set aside and W.P(MD) No. 60 of 2009 is dismissed without costs.
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