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M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
November, 28th 2016
$~18-22 & 7
*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                                 DECIDED ON: 02.11.2016

+                 W.P. (C) 3837/2016, CM APPL.16315/2016
        CHAUDHARY SKIN TRADING COMPANY                       ..... Petitioner
                        versus
        PR. COMMISSIONER OF INCOME TAX-21               ..... Respondent
                  W.P. (C) 3839/2016, CM APPL.16318/2016
        NASIRA BEGUM                                         ..... Petitioner
                        versus
        PR. COMMISSIONER OF INCOME TAX-21                ..... Respondent
                  W.P. (C) 3841/2016, CM APPL.16320/2016
        ARSHIA AHMED QURESHI                                 ..... Petitioner
                        versus
        PR. COMMISSIONER OF INCOME TAX-21                ..... Respondent
                  W.P. (C) 3842/2016, CM APPL.16322/2016
        M.K. LEATHER TRADING COMPANY                         ..... Petitioner
                        versus
        PR. COMMISSIONER OF INCOME TAX-21               ..... Respondent

                  W.P. (C) 3843/2016, CM APPL.16324/2016
        MOHD. KAMIL                                          ..... Petitioner
                        versus
        PR. COMMISSIONER OF INCOME TAX-21               ..... Respondent
                  W.P.(C) 9935/2016, CM APPL.39493-39495/2016
        M. K. OVERSEAS PVT. LTD.                         .... Petitioner
                        versus
        PRINCIPAL COMMISSIONER OF INCOME TAX - 06 ..... Respondent


        Appearance: Mr. Jayant K. Mehta with Mr. Saurabh Dev Karan Singh and
        Mr. Shaurya Kuthiala, Advocates for petitioners in all matters.
        Mr. Ashok K. Manchanda, Sr. Standing Counsel for revenue in item
        nos.18-22.
        Mr. Rahul Chaudhary, Sr. Standing Counsel for revenue in item no.7.




W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016                         Page 1
        CORAM:
        HON'BLE MR. JUSTICE S. RAVINDRA BHAT
        HON'BLE MS. JUSTICE DEEPA SHARMA
        S.RAVINDRA BHAT, J.(ORAL)

        1.      In this batch of writ petitions, the orders made by the revenue, i.e.,
        Principal Commissioner of Income Tax under Section 127 have been
        challenged.
        2.      The assessee, one of the petitioners, M.K. Overseas Pvt. Ltd.,
        Director and other associates/concerns related to it was subjected to search
        and seizure proceedings. Some others - who are also before this Court as
        the petitioners were on the very same day, i.e., 28.04.2015, subjected to
        survey proceedings under Section 133A.
        3.      The revenue proposed to centralize the cases. These cases were
        before the Central Circle, Ghaziabad and notice was issued to each of the
        assessees under Section 127 (1) of the Income Tax Act. The rationale to
        justify the transfer was a common one - "search and seizure operation"
        under Section 132 of the Income Tax Act in the cases of M/s M.K.
        Overseas group of companies, Ghaziabad was carried out on 28.04.2015.
        As per communication received from Principal Commissioner of Income
        Tax, (Central) Kanpur, cases were required to be centralized for
        coordinated post search investigation and meaningful assessment. In the
        case of M.K. Overseas Pvt. Ltd., the petitioner in W.P.(C)9935/2016, the
        following reasons were given: -
                "A Search & Seizure operation u/s 132 of the Income Tax, 1961 was
                carried out on 28.04.2014 in the M.K. Overseas Group of cases,
                Ghaziabad.      Your case is proposed to be centralized with
                DCIT/ACIT, Central Circle, Ghaziabad under the administrative
                control of Pr. Commissioner of Income Tax (Central), Kanpur."

        All the assessees resisted notices contending that this process would cause




W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016                                 Page 2
        great hardship as their headquarters and principal place of business was not
        located in Ghaziabad and that its personnel would have to travel a long
        distance to attend the proceedings.
        4.      It was also stated inter alia by M.K. Overseas that it is an approved
        meat processing plant and that it was assessed to income tax regularly and
        that the entire management of the company was in Delhi.
        5.      The CIT after considering the responses rejected the submissions
        and directed the transfer of the proceedings in exercise of powers under
        Section 127. In the case of M.K. Overseas, the order - dated 13.07.2016
        cited the following reasons: -
                "4. The objections raised by the assessee company have been
                considered and rejected being not tenable. A Search & Seizure
                operation u/s 132 of the Income Tax Act, 1961 was carried out on
                28.04.2015 by Meerut Unit of Director of Income Tax
                (Investigation), Kanpur in M.K. Overseas Group of cases. M/s
                M.K. Overseas Pvt. Ltd., is one of the group companies and was
                covered in the search and seizure proceedings. Authorisation u/s
                133A of the Act was also issued in the name of Assessee Company.
                During survey proceedings various incriminating documents/loose
                papers and hard disk etc. Were found and impounded from the
                premises of M/s M.K. Overseas Pvt. Ltd., B-63-64, Site-IV,
                Sahibabad Industrial Area, District Ghaziabad, UP, for which
                coordinated investigation is required.






                5.     The assessee has raised objection that entire management of
                the assessee is in Delhi and centralizing its case to Delhi will help in
                saving the precious time which would be wasted in travelling to and
                from to Ghaziabad, which is almost thirty five Km. from assessee's
                office. In this regard, it is pertinent to mention here that the entire
                set up of the factory/meat processing plant of the assessee company
                is located in Ghaziabad which is almost thirty five Km. from Delhi.
                When the assessee company can operate its factory/plant from
                Ghaziabad then why it is inconvenient for the assessee company to
                attend the income tax proceedings at Ghaziabad. Moreover, except
                administrative inconvenience, the assessee has not offered any
                explanation/justification for not centralizing its case to Central




W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016                                   Page 3
                Circle, Ghaziabad.      Therefore, assessee's request for not
                centralizing its case to Central Circle, Ghaziabad, cannot be
                acceded to.

                6.     For the foregoing reasons, objections of the assessee
                company are hereby rejected. The transfer of jurisdiction over the
                case to the charge of Pr. Commissioner of Income Tax (Central),
                Kanpur, will facilitate co-ordinated post search and meaningful
                assessments."

        In the case of other five assessees, common order was made on 2.2.2016
        which inter alia stated as follows: -
                "2. Thus, in exercise of the power conferred under section 127 of
                the Income Tax Act, 1961 and all other enabling powers in this
                behalf. I, Pr. Commissioner of Income Tax, Delhi-21, New Delhi,
                hereby transfer the case, the particulars of which are mentioned in
                Column No.2 from the Assessing Officer mentioned in Column No.4
                to the Assessing Officer mentioned in Column No.5 and direct that
                the powers of the Assessing Officer mentioned in Column No.4 in
                respect of this case shall be exercised by the Assessing officer
                mentioned in Column No.5 functioning under PCIT mentioned in
                Column No.l6. This transfer is effected for the purpose of
                conducting coordinated post search investigation and meaningful
                assessments and also keeping in view the Board's instructions that
                the search cases should be centralized with Central Charge."

        6.      The petitioners urge that the failure to mention any reason in the
        notice under Section 127 vitiates the entire transfer and rely upon the
        authority of the Supreme Court in Ajantha Industries v. CBDT (1976) 102
        ITR 281 (SC) and the judgment of the Calcutta High Court in Chotanagpur
        Industrial Gases Pvt. Ltd. v. CIT 233 ITR 377. It is submitted that the mere
        mention of the search and seizure proceedings and the conclusion, i.e.,
        proposal to centralize all pending proceedings in the Ghaziabad office
        cannot be considered as a reason. It does not provide any clue as to why
        the revenue wishes to transfer the assessments and collect them at one




W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016                               Page 4
        place. It was urged next by learned counsel, Mr. Jayant K. Mehta that
        even on the merits, the mere mention of "coordinated post investigation and
        meaningful assessments" as a common feature or reason to transfer juxta
        posed with the grounds opposing the transfer were insufficient and did not
        justify the order under Section 127. In this regard, learned counsel relied
        upon the judgment in Global Energy Pvt. Ltd. v. Commissioner of Income
        Tax, (2013) 356 ITR 502 (Bom) where it was held that the mere reference
        to administrative convenience as a ground for transfer did not justify the
        exercise of power.
        7.      Counsel for the revenue submitted that the writ proceedings are
        without merit. It was stated that the mention of the fact, i.e., search and
        seizure operation and the proposal to centralize it were reasons enough for
        which a valid notice could be given. Furthermore, the assessees did not
        express prejudice or substantial prejudice at the stage when they had
        responded to the notice. On the merits, it was urged that the rationale, i.e.,
        of coordinating the post investigation efforts and meaningful assessments
        were sufficient compliance with law. It was highlighted that the search
        has yielded incriminating documents and in this context coordination in
        regard to the block assessment with respect to post search investigation was
        relevant and could be efficaciously carried out at one place. It is evident
        from the above discussion that the petitioners' grievance as articulated is
        twofold, firstly whether the notice was vitiated and secondly if not whether
        the reasons given in the transfer order are of the nature that can stand
        scrutiny under Section 127.
        8.      The narrative would disclose that none of the assessees voiced any
        prejudice at the stage when they were issued notices. The record shows
        that all of them responded to the notice and gave their own justification
        why the final order under Section 127 should not be made. The assesse



W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016                                 Page 5
        has no doubt relied upon the authority to say that this omission does not
        stop it from contending that the notices were void at the same time; the
        Court is not unmindful of the fact that two stages are separate. The
        substantiality of prejudice for lack of reasons or otherwise has to be
        independently considered given the fact of each cases.     In the present case
        it is not as if the notice did not contain the reasons at all. The assess ees'
        contentions that the notice did not contain reasons is fallacious, the
        reference to search and seizure operations and the proposal to centralize the
        cases in Ghaziabad cannot be considered no reasons. If these had been
        omitted, the assessees would have been within their rights that the notices
        did not contain reasons. The assessees were fully aware of the search and
        seizure operations and the fact that its premises in Ghaziabad too were
        subject to such proceedings. Having regard to all these facts, the Court
        hereby rejects the first contention that the ingredients of the notice did not
        exist when the proposal to transfer was first notified to these assessees.
        9.      As far as the rationale to transfer, i.e., conduct of coordinated post
        search investigation and meaningful assessment goes, we are of the opinion
        that like in the case of first contention, the assessees have failed here as
        well. The kind of reasoning required by an order under Section 127 cannot
        be compared or likened to a quasi judicial order that has adverse
        consequences. One can understand if additions are made on sketchy or
        bare minimum reasons, they cannot be upheld.              However, what is
        proposed by an order under Section 127 is the transfer of one or several
        assessments from one circle to another, to that extent inconvenience
        undoubtedly ensue; however, to say that this leads to grave prejudice if
        detailed reasoning were not given is something that the Court cannot
        countenance.       The consequence would only be that the assessees'
        contentions would have to be taken into account by another Assessing



W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016                                  Page 6
        Officer who would also have before him or her all other related
        assessments. In these circumstances, the Court is unprepared to hold that
        the brief reasons relied upon by the revenue does not amount to reasons at
        all or that they are vague. In such exercise in every case where an order
        under Section 127 is challenged, there are two interests - those of the
        assessees who invariably plead inconvenience and hardship and that of the
        revenue which would inevitably cite public interest. The Court's task is to
        unravel whether in fact the revenue's contentions are correct and if so reject
        the assessees' contentions. On the other hand, if there is no real public
        interest and if there are no reasons even the briefest one, the order cannot
        be sustained. Conversely, if there is reasoning and the public interest is
        discernable, as in this case, the only result can be rejection of the assessees'
        contentions.
10. In view of the forgoing analysis, we are of the opinion that these petitions have no merit; they are accordingly dismissed along with pending applications. S. RAVINDRA BHAT (JUDGE) DEEPA SHARMA (JUDGE) NOVEMBER 02, 2016 /vikas/ W.P.(C)3837, 3839, 3841, 3842, 3843 & 9935/2016 Page 7
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