Seized Documents From Group Companies Justify Coordinated Investigation: Madras HC Upholds Transfer u/s 127 of the ITA [Read Order]
Despite the petitioner’s objections about inconvenience and lack of direct findings, the court upheld the transfer for coordinated investigation.
Madras HC – Income Tax transfer – Coordinated tax assessment – Taxscan
Madras HC – Income Tax transfer – Coordinated tax assessment – Taxscan
The High Court of Madras,ruled that seized documents from group entities justified the transfer of assessment cases under Section 127 of the Income Tax Act,1961 for a coordinated investigation, as the cases needed to be centralized for effective and joint assessment.
M and C Property Development,petitioner-assessee, along with other appellants, were entities or individuals operating only in Tamil Nadu. A search was conducted at its premises in connection with entities based in West Bengal that also had operations in Coimbatore.
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Following the search, a show cause notice under Section 127 of the Act was issued, proposing to transfer the case to the Central Circle in Kolkata. The notice stated that certain incriminating documents found during the search were linked and needed to be examined together for a coordinated investigation.
In response, the petitioner submitted that there were no direct findings against it. It also pointed out that its registered office was in Coimbatore and that it would be difficult and expensive to attend proceedings or engage legal representation in Kolkata. It requested that the assessment remain with the local authorities.
After receiving the petitioner’s reply, the department issued the final order transferring the case to Kolkata. It explained that a search was conducted on S. Martin and Future Gaming and Hotel Services Pvt. Ltd. on 12.10.2023 by the Kolkata Investigation Wing for suspected tax evasion in their lottery business.
The order mentioned that 66 search warrants were issued, and 102 PANs were centralised. The petitioner was said to be connected with the main group in different roles. To carry out a proper and joint assessment, the department decided to transfer all related cases, including that of the petitioner, to Kolkata.
The petitioner’s claim that a previous case in 2019 was handled in Coimbatore was rejected, as that search involved different facts and was done by the Chennai Investigation Wing.
Based on the findings and recommendation from the Kolkata Wing, the Principal Commissioner passed the order under Section 127 to transfer the case. The petitioner then challenged this order by filing a writ petition.
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The single Judge dismissed all the writ petitions with similar reasons. The Judge held that Section 127 of the Act allowed transfer of cases between officers and was important for smooth tax administration.
It was noted that the assessment could not be completed in Coimbatore or Chennai without documents seized during the search. Since the documents were with the Kolkata Investigation Wing, the transfer was found to be justified.
The Judge also found that the transfer was needed for a proper and coordinated assessment of the entire group. A search was conducted by the Kolkata team in connection with tax evasion, and key documents were seized.
It was not disputed that the appellants were sister concerns of the Lottery group and had common management. Whether a coordinated investigation was needed was for the authorities to decide.
The petitioner’s counsel cited cases opposing the transfer, but the Court found them not applicable as the current order gave proper reasons and followed due process.
The Additional Solicitor General supported the order and referred to the Dollar Gulati case, where the Delhi High Court upheld the transfer for coordinated investigation. The Supreme Court also approved this view.
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The division bench of Justice S.S.Sundar and Justice C.Saravanan noted that documents were seized from the petitioner’s premises by the Kolkata Investigation Wing, which were relevant to the assessment. Since the petitioner was part of a group and the seized materials related to multiple entities, the cases were rightly centralized for coordinated investigation under Section 127.
The petitioner admitted being part of the group and did not allege any mala fides in the transfer. The court held that the transfer power under Section 127 was broad and lawfully used.
The court found no error in the single Judge’s order and dismissed the writ appeal.
To Read the full text of the Order CLICK HERE
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