‘Co-ordinated Investigation’ to Avoid Tax Evasion is Good Ground For Transfer Case from ITO to DCIT: Delhi HC upholds Order u/s 127 of Income Tax Act [Read Order]

The Delhi High Court has held that ‘Co-Ordinated Investigation’ to avoid tax evasion is good ground for transferring the case from the Income Tax Officer ( ITO ) to the Deputy Commissioner of Income-tax ( DCIT ) and refused to interfere with the order of passed under section 127 of the Income Tax Act, 1961.

Pursuant to a search-proceedings conducted at the premises of Zee Lab Group, headquartered at Haryana, certain incriminating materials alluding to Dollar Gulati , the Assessee were found and hence, a notice under Section 131(1A) was issued to the Assessee calling for certain details. Subsequently, notice under Section 127(1) was issued proposing to centralize Assessee’s case to DCIT, Central Circle, Haryana for the purpose of ‘administrative, convenience, coordinated investigation and assessment’.

As per Section 127 of Income tax Act, the [Principal Director General or Director General] or [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner] 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, 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.

In light of the judgment in Bhatia Minerals v. Commissioner of Income-Tax and Patna High Court judgment in Jharkhand Mukti Morcha v. Commissioner of Income-Tax, Ranchi, the Bench reiterated that “the ‘coordinated investigation’ for the purpose of proper assessment, prevention of evasion of tax, collection of tax is a good ground for transfer as it eases the administrative convenience of the income-tax authorities”.

The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that the administrative convenience of the Revenue and the need for ‘coordinated investigation’ would take precedence over the logistical difficulties faced by the Assessee, and reiterated. that Section 127, a machinery provision, the powers thereunder can be exercised for larger public interest and to fulfil the bona fide objectives of the Act

The Bench clarified that Section 127 order should reflect application of mind while disposing Assessee’s objections and despite being a machinery provision, the reasons recorded in the transfer order should not be capricious or mala fide and should not be contrary to the bona fide objectives of the Act.

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