Rajasthan HC Slams Revenue for Second Attempt to Transfer Case Despite Earlier Quashing, Calls Action Arbitrary and Unjustified [Read Order]

In a recent ruling, the Rajasthan High Court held that the Revenue’s repeated attempt to transfer a taxpayer’s case under Section 127 of the Income Tax Act, 1961, despite an earlier quashing by the court, was arbitrary, rigid, and unjustified.

Murliwala Agrotech Pvt. Ltd., the petitioner, filed a writ petition challenging the fresh transfer order dated 19 October 2022 issued by the Principal Commissioner of Income Tax under Section 127(1) of the Income Act.

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Earlier, a similar transfer order dated 21 November 2019 had been quashed by a coordinate bench of the same court on 20 July 2022 for violating the principles of natural justice, as no effective opportunity of hearing had been granted before transferring the case from Udaipur to Delhi. The court had allowed the Revenue to initiate fresh proceedings only after providing the petitioner with a proper hearing.

Following the court’s directions, the Revenue issued a fresh notice on 5 September 2022 and the petitioner submitted detailed objections. Despite this, the Principal Commissioner again passed a transfer order on 19 October 2022 based on the same grounds as before.

The petitioner’s counsel argued that the second order was passed mechanically and in disregard of the earlier judgment, as there was no change in circumstances that could justify the transfer. They argued that since the Income Tax Department has introduced a faceless assessment system, the transfer of jurisdiction from Udaipur to Delhi served no practical purpose.

The department’s counsel argued that the order had been passed after considering the petitioner’s objections and was necessary for uniform assessment of persons connected with a search conducted under Section 132(1) on 27 November 2017 in the Brindavan Group. They argued that the power to transfer under Section 127(1) was properly exercised.

The Division Bench comprising Chief Justice K.R. Shriram and Justice Ravi Chirania observed that the factual situation remained unchanged from that considered in the earlier judgment of 20 July 2022. The court pointed out that the Revenue had merely obtained some formal approvals, which did not alter the basis of the case.

It explained that the repeated attempt to transfer the case despite an earlier judicial finding was neither reasonable nor justified. The bench observed that the Revenue’s insistence on transferring the case reflected a rigid and adamant approach and had unnecessarily delayed the proceedings for more than six years.

It further observed that since the Brindavan Group’s assessment had already been completed in December 2019, there was no valid reason to transfer the petitioner’s case to Delhi for the sake of uniformity.

The court held that the transfer order dated 19 October 2022 was arbitrary and contrary to law. It quashed the order and declared any action taken during the pendency of the petition as invalid. The court directed the Revenue to continue proceedings from the stage before the transfer orders were issued.

It also granted liberty to the department to take action in accordance with law under Section 153C or any other applicable provision, clarifying that such liberty would not amount to an endorsement of further action. The writ petition was allowed.

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