Allahabad H.C : Whether such reason could not be said to be irrelevant or not germane to issue; that was valid and cogent reason

High Court Of Allahabad

Preeti Elhence vs. CIT -I, Kanpur

Section 127, 132, 153C

Ashok Bhushan And Mahesh Chandra Tripathi, JJ.

Writ Tax No. 754 Of 2007

March 11, 2014

ORDER

1. Heard Shri Shubham Agarwal, learned counsel for the petitioner and Shri R.K. Upadhya, learned counsel appearing for the respondent.

2. By this petition, the petitioner has prayed for quashing the order dated 27/4/2007, Annexure-6 to the writ petition, by which the Commissioner of Income Tax exercising the power under Section 127 of the Income Tax Act, 1961 (hereinafter called the “Act, 1961”) transferred the case of the petitioner from Additional CIT Range-2 Kanpur to ACIT Central Circle Meerut.

3. Brief facts necessary to be noted for deciding the writ petition are: A search and seizure operation took place under Section 132(1) of the Act on 27/10/2005 against Dr. G.P. Elhence, Smt. Radhey Elhence and Dr. Anil Elhence. The petitioner, being daughter in law of Dr. G.P. Elhence, Smt. Radhey Elhence at the relevant time was residing at the premises A-130 Shastri Nagar, Meerut and an amount of Rs.45,000/- was found from the room of the petitioner out of which Rs. 40,5000/- was seized. A notice under Section 127 (2) of the Act dated 13/10/2006, was issued to the petitioner giving her an opportunity of hearing in respect of the proposed transfer from Additional CIT Range-2 Kanpur to ACIT Central Circle Meerut. Following was the reason given in the notice dated 13/10/2006.

“A Search & Seizure operation u/s. 132(1) of the I.T. Act was carried out in the case of Dr. Anil Elhence, Dr. G.P. Elhence and Smt. Radhey Elhence at the residential premises no A-130 Shastri Nagar, Meerut by investigation Unit Meerut on 27-10-2005. Your case is connected with the case of Dr Anil Elhence, Dr. G.P. Elhence and Smt. Radhey Elhence residing at the premises no A-130 Shastri Nagar, Kanpur. It is, therefore, proposed to transfer your case from Range-2 Kanpur to ACIT, Central Circle Meerut, in the charge of The CIT (Central), Kanpur for the purpose of coordinated post search investigation and meaningful assessments.”

4. The petitioner submitted her reply to the said notice. In the reply it was stated that there was no search warrant issued in the name of the petitioner, hence the search and seizure operations cannot be made the basis for transfer of the case. By another notice dated 13/3/2007, the date was fixed for hearing before the Commissioner of Income Tax was 28/3/2007. The petitioner submitted her reply to the subsequent notice also. The Commissioner of Income Tax passed the order dated 27/4/2007 transferring the case of the petitioner from Additional CIT Range-2 Kanpur to ACIT Central Circle Meerut. The Commissioner of Income Tax in his order dated 27/4/2007 has referred to the reply submitted by the petitioner and after noticing the contention of the petitioner passed an order for transfer of the said case which is under challenge in the present writ petition.

5. Learned counsel for the petitioner challenging the order impugned contended that the order does not contain any valid and germane reason in exercising the power under Section 127(2) of the Act. He submits that recording of reason and reasons being relevant and germane are condition precedent in exercising the power under Section 127(2) of the Act. He has placed reliance on a Division Bench judgment of this Court in Sahara Airlines Ltd. v. DGIT [2006] 286 ITR 33/152 Taxman 522 (All.), as well as another Division Bench judgment of this Court in Vijay Kumar Gauri Shanker v. CIT [2006] 283 ITR 524/153 Taxman 272 (All.). He has also referred to Section 132 (4A) and Section 153 (C) of the Act in respect of his submission. Section 127 (1) of the Act provides as follows:

“127. Power to transfer cases.— (1) The Director General or Chief 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.”

6. In the present case, two notices were issued to the petitioner and she was also given the opportunity of being heard and thereafter for reasons as mentioned in the order impugned, the transfer of the petitioner’s case has been made.

7. The submission which has been pressed by the learned counsel for the petitioner is that the reason for transfer has to be germane and relevant to the issues raised. He has referred to paragraph 14 of the judgment in the case of Sahara Airlines Ltd. & Ors (supra) which provides as follows:

“14. The reasons, so recorded, have to be relevant and germane to the issues raised which can be supported by documentary evidence or such evidence, as may be available, but if reasons are absurd or non-existent, mere recording of statement of reasons would not be sufficient to hold the order as valid for the compliance of the requirement of recording reasons. But the sufficiency or adequacy of material for recording such reasons, may not be a factor to raise a plea of quantitative insufficiency of material, so as to make the reasons recorded as arbitrary or bad.”

In Vijay Kumar Gauri Shanker’s case (supra) following was laid down in paragraph 12.

“12. It is therefore imperative upon the concerned authority while exercising power to transfer proceedings which may cause inconvenience and prejudice to the assessee to show conscious application of mind at the appropriate stage by recording reasons in the order itself. The order passed without application of mind cannot be justified by showing circumstances or material from the record to ascertain the same, as it will be in negation of statutory condition to record reasons by the authority itself.”

8. There cannot be any dispute to the proposition that the reasons for exercising power under Section 127(1) has to be relevant and germane. In event, the power under Section 127(1) is exercised on extraneous reason the order falls outside the purview of Section 127 (1). In paragraph 5 of the order dated 27/4/2007 following reasons have been given by the Commissioner.

“5.In the letter dated 20-04-2007 the assessee reiterated the submissions as put forth vide her earlier reply letter dated 27-1-2006 which have been discussed in the para-2 above. The assessee also placed reliance on the judgment of the Hon’ble Supreme Court of India in the case of Manish Mahwani v ACIT reported in Volume-4 JT Page 104 (2007) (SC). The submissions put forth by the A.R. of the assessee in letters dated 27-10-2006 and 20-04-2007 have been carefully considered. The contention of the assessee that there is no connection between her and the persons in whose name search warrant was issued and search and seizure took place, is not acceptable in view of the fact that she is the daughter-in-law of Dr G.P. Elhence in whose name search warrant was issued. The assessee is living in the House No.A-130, Shastri Nagar, Meerut which was covered under the search and seizure operation. This house property belongs to her father-in-law Dr G.P. Elhence. Not only this, during the course of search operation, cash o
f Rs 45,000/- was found from her room in the house no A-130 Shastri Nagar, Meerut out of which Rs 40,500/- was seized. This fact was brought to the notice of the assessee vide letter dated 13-03-2007 reproduced above. In view of these facts, the case of the assessee is clearly connected with the case of Dr G.P. Elhence, Dr. Anil Elhence and Smt. Radhey Elhence in whose names, warrant was issued and search and seizure operation was conducted. Further, the facts of the case of the assessee are distinguishable from that of the case Manish Mahwani v ACIT reported in Volume-4 JT Page 104 (2007) (SC) on which the assessee has placed reliance.”

9. The Commissioner noted in the order impugned that the assessee is living in A-130 Shastri Nagar, Meerut which was covered under the search and seizure operation. The order further states that in the search operation cash of Rs. 45,000/- was found from her room out of which Rs. 40,500/-was seized. The reasons given in the order impugned cannot be said to be irrelevant or not germane to the issues. Section 127(1) of the Act gives ample power to the Commissioner to transfer a case on a valid and cogent reason.

10. In the present case, the assessee was living in A-130 Shastri Nagar, Meerut where the search operation took place and where cash of Rs. 45,000/- was found from her room out of which 40,500/-was seized.

11. We are satisfied that the reasons recorded by the Commissioner cannot be said to be irrelevant or not germane to the issues. There is no error in the order of the Commissioner in exercising the power by the Commissioner under Section 127 (1) of the Act in transferring the case of the petitioner.

12. Now coming to Section 132 (4A) of the Act which provides that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed that search belongs to such person.

13. Section 132 (4A) of the Act contains a provision regarding presumption. The said provision may be relevant at the time of final assessment regarding the cash seized in the search, but the said provision does not help the petitioner in finding any fault in exercise of power under section 127 (1) of the Act.

14. Lastly, the learned counsel for the petitioner has referred to Section 153 (C) of the Act which relates to assessment of income tax of any other person. The said provision is again relevant in the assessment proceedings and does not help the petitioner in finding any fault for exercising the power under Section 127 (1) of the Act.

15. In view of the foregoing discussions, we are of the view that there is no error committed by the Commissioner in transferring the case of the petitioner under Section 127 (1) of the Act.

16. The writ petition is dismissed.

[Citation : 365 ITR 268]