Section 127 of the Income Tax Act, 1961 — Transfer of cases — Requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee.[2020] 53 ITCD 1 (MP)
Facts: The petitioner before this court who is an assessee at Indore has filed the present petition being aggrieved by notice dated 22.9.2019 by which the assessee has been informed that he is being assessed at Chennai. The assessee who is the petitioner before this court Athena Trade Winds Pvt. Ltd. has stated in the writ petition that a search and seizure operation under Section 132 were carried out in the group “Kaleshwari Refinery Pvt. Ltd” and others on 17.5.2017 and summons were issued under Section 131 to several persons related to the groups also to one Shri Vivek Pathak, Director of the petitioner – Company to present himself on 19.5.2017 before the Officer of Director of Income Tax (Investigation), Chennai. The statement of Vivek Pathak, Director was noted down under Section 134(4) and 132(4) on 19.5.2017. He has categorically stated that the petitioner – Company is having business transaction with KRPL and its subsidiary – KICPL based at Singapore and the Company is acting as broker for them and in return gets commission income only. Thereafter, a search was conducted under warrant of authorization issued in the name of KRPL in the Office premises of the petitioner – Company as well as the residential premises of Director Shri Vivek Pathak on 22.6.2017 and 23.6.2017 and nothing incriminating was found or seized from the premises. The petitioner further stated that on 16.9.2017 a letter was received by the petitioner for transferring of its case from DCIT-1(1) Indore to DCIT (Central)-2(4), Chennai from Income Tax Officer (Technical) under the direction of Principal Chief Income Tax Commissioner, Indore. The petitioner immediately submitted a reply on 18.9.2017, seeking clarification and the reasons for transferring of the case from Indore to Chennai. The petitioner also filed objections for transferring his case under Section 127 from Indore to Chennai.
Held, that the reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is based on irrelevant and extraneous condonations . Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question. We are clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated. In the present case, the procedural requirement as provided under Section 127 has not been complied. At no point of time, reasons recorded, if any, were communicated to the petitioner and therefore, no opportunity of hearing was granted to the petitioner on the issue of the reasons recorded by the Department. The impugned order passed by the Department transferring the case to Chennai is quashed. All consequential proceedings are also quashed.