DMK Trust Gets Relief from Madras HC, Quashes Income Tax Transfer Orders u/s 127 on Lack of Procedural Issues [Read Order]
The court ruled that reasons must be explicit, communicated, and based on material facts when exercising quasi-judicial powers. It concluded that the impugned orders did not meet these standards and were therefore liable to be quashed.
DMK – Trust – Taxscan
DMK – Trust – Taxscan
The Madras High Court has quashed transfer orders issued against DMK Charitable Trust and the Dravida Munnetra Kazhagam (DMK) Party under Section 127 of the Income Tax Act, 1961 citing procedural lapses.
The controversy arose when the Commissioner of Income Tax (Exemptions) passed two identical orders dated January 19, 2021, transferring the cases of the DMK Charitable Trust and the DMK political party from their jurisdictional officers to the Assistant Commissioner of Income Tax, Central Circle-1(3), Chennai.
These orders followed a direction from the Director General of Income Tax (Investigation), citing the need for “coordinated investigation” linked to search operations at the premises of DMK leader Mr. D. Duraimurugan.
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The Trust challenged the orders through a batch of writ petitions (W.P. Nos. 2089, 2102 & 6711 of 2021), arguing that no prior notice or hearing was granted, as mandated under Section 127(2) of the Act. Moreover, the court found that there was no recorded agreement between the heads of the transferring and receiving tax officers, a requirement when officers are not subordinate to the same authority.
Justice C. Saravanan held that administrative convenience or vague references to coordinated investigation do not suffice to justify a transfer under Section 127. He observed that the absence of reasons in the transfer orders and the failure to provide an opportunity of hearing rendered the orders arbitrary and violative of Article 14 of the Constitution.
The court noted the submission on the role played by the Assistant Commissioner who initiated the transfer proposal, observing that the timing of the move just before state elections indicated possible mala fide intent.
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While the Income Tax Department argued that the transfers were necessary to investigate links between the Trust and Mr. Duraimurugan, the court noted that separate PANs existed for the Trust and the political party, and their association alone could not justify centralization of jurisdiction.
The court ruled that reasons must be explicit, communicated, and based on material facts when exercising quasi-judicial powers. It concluded that the impugned orders did not meet these standards and were therefore liable to be quashed.
Accordingly, the High Court allowed the writ petitions and set aside the impugned transfer orders, restoring jurisdiction to the original assessing officers. The court added that “It is needless to state that the respective petitioners may be given an opportunity of being heard to explain the case as the respective petitioners are likely to loose out the benefit of faceless assessment under Section 144B of the IT Act.”
To Read the full text of the Order CLICK HERE
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