Bombay H.C : Where assessee did not challenge order of transfer of its case at earliest letting all believe that such transfer was accepted, assessee should be barred from challenging same on exercise of jurisdiction by new authority

High Court Of Bombay

Patel Knr Jv VS. Commissioner Of Income-Tax

Assessment Years : 2009-10 To 2012-13

Section : 127

Mohit S. Shah, Cj. And M.S. Sanklecha, J.

Writ Petition No. 422 Of 2013

February 28, 2014

JUDGMENT

M.S. Sanklecha, J. -By this petition under article 226 of the Constitution of India, the petitioner challenges :

(a) Order dated August 31, 2012, passed under section 127 of the Income-tax Act, 1961 (“the Act”), transferring with effect from August 31, 2012, the petitioner’s papers and proceedings (case) under the Act from the Deputy Commissioner of Income-tax, Mumbai, to the Deputy Commissioner of Income-tax, Hyderabad ; and

(b) Four notices dated July 23, 2013, issued under section 148 of the Act by the Deputy Commissioner of Income-tax, Hyderabad, seeking to reassess the petitioner for the assessment years 2009-10, 2010-11, 2011-12 and 2012-13.

2. Briefly, the facts leading to this petition are as under :

(i) The petitioner is a joint venture between one Patel Engineering Ltd. and K. N. R. Construction Ltd. each having 50 per cent share.

The petitioner is assessed as an association of persons (AOP) under the Act at Mumbai since the assessment year 2002-03. The petitioner is engaged in the business of development of infrastructure facilities/projects like construction of roads, highways, etc.

(ii) On August 28, 2012, the petitioner received a notice dated August 22, 2012, from the Commissioner of Income-tax, Mumbai. By the above notice, the petitioner was called upon to show cause why the petitioner’s assessment should not be centralised with the Deputy Commissioner of Income-tax at Hyderabad, for the purposes of better investigation, co-ordination and in public interests. The above notice fixed the personal hearing on August 29, 2012.

(iii) On August 29, 2012, the petitioner filed its reply to the show-cause notice, opposing the transfer of its case from Mumbai to Hyderabad. The petitioner pointed out that its management is in control of Patel Engineering Ltd. which is assessed in Mumbai. Besides, it also forms part of the consolidated audited accounts of Patel Engineering Ltd. Moreover, it was submitted that accounts and all related documents of the association of persons are maintained in Mumbai and assessing them at Hyderabad would cause great inconvenience and difficulties to the petitioner. In view of the above, it was submitted that the proposed transfer of the petitioner’s case from Mumbai to Hyderabad be withdrawn.

(iv) On August 29, 2012, the hearing before the Commissioner of Income-tax was adjourned to August 30, 2012, at the instance of the petitioner. Thereafter, on August 30, 2012, the petitioner was heard by the Commissioner of Income-tax.

(v) On August 31, 2012, the Commissioner of Income-tax, by the impugned order, transferred the case of the petitioner from the Deputy Commissioner of Income-tax, Mumbai, to the Deputy Commissioner of Income-tax, Hyderabad. The above impugned order of transfer, relies upon a search carried out by the Revenue in respect of M/s. KNR Constructions Ltd. and others as a reason for the transfer of the petition.

(vi) The order dated August 31, 2012, was served on the petitioner on December 7, 2012. The present petition was filed on February 11, 2013, in this court. However, thereafter, the same was not moved before the court. In the meantime, consequent to the impugned order dated August 31, 2012, the Deputy Commissioner of Income-tax, Hyderabad, issued four notices dated July 23, 2013, under section 148 of the Act seeking to reassess the petition for the assessment years 2009-10 to 2012-13. It is only thereafter, that the petitioner moved this petition before the court and on August 20, 2013, this court granted an ad interim stay of the four impugned notices dated July 23, 2013.

3. Mr. J.D. Mistri, learned senior counsel appearing for the petitioner, in support of the petition, submits as under :

(a) The impugned order dated August 31, 2012, passed under section 127 of the Act has been passed in breach of the principles of natural justice. This is so as no proper notice for an effective hearing was given to the petitioner by setting out the ground on which the petitioner’s case is proposed to be transferred from Mumbai to Hyderabad. This is so as the impugned order relies upon a search carried out on M/s. KNR Construction Ltd. and this was never a part of the notice. Moreover, the impugned order itself is a non-speaking order as it does not consider the objection of the petitioner to the proposed transfer. It merely records that for the purposes of better investigation, co-ordination and in public interest, the case of the petitioner is transferred.

(b) The management of the petitioner is in the hands of one of the joint venture partners, namely, M/s. Patel Engineering Ltd. This fact is also reflected in the consolidated balance sheet and the profit and loss account of M/s. Patel Engineering Ltd. The aforesaid fact was an important feature for continuing the case of the petitioner in Mumbai. The transfer to Hyderabad on mere ground that a search has been conducted in the case of one member of the association of persons, namely, KNR Constructions is not sufficient for the purpose of transferring the petitioner’s case from Mumbai to Hyderabad ; and

(c) The four impugned notices dated July 23, 2013, issued by the Deputy Commissioner of Income-tax at Hyderabad, seeking to reopen the assessment for the assessment years 2009-10, 2010-11, 2011-12 and 2012-13 are all without jurisdiction. This is so as the transfer of the petitioner’s case from Mumbai to Hyderabad is itself bad in law.

4. As against the above, Mr. Pinto, learned counsel appearing for the Revenue, in support of the impugned order dated August 31, 2012, passed under section 127 of the Act and the four impugned notices dated July 23, 2013, issued under section 148 of the Act, submits as under :

(a) It is submitted that the order of transfer was issued under section 127 of the Act on August 31, 2012. The petitioner chose to file the present petition only in February, 2013, and even, thereafter, did not move this court to seek any stay of transfer of case by order dated August 31, 2012. It was only on August 20, 2013, that the petitioner moved this court and sought to amend the petition to challenge the four impugned notices dated July 23, 2013, issued by the Deputy Commissioner of Income-tax at Hyderabad. Therefore, on the ground of laches and delay alone, the petition should not be entertained.

(b) The impugned order dated August 31, 2012, under section 127 of the Act is an order passed in accordance with the principles of natural justice. It is submitted that the impugned order was passed after granting the petitioner a personal hearing at which time, the petitioner was informed of the proposed ground of transfer. In particular, he emphasised the fairness of the Commissioner as evidenced by the fact that on August 29, 2013, the petitioner sought an adjournment and the same was granted so as to enable the petitioner to have an effective hearing.

5. We have considered the rival submissions. Before examining the merits of the impugned order dated August 31, 2012, we shall first examine the objection of the Revenue that the petition ought not to be entertained on account of delay. In this case, the impugned order was passed on August 31, 2012. The petitioner states that the impugned order of transfer of its case from Mumbai to Hyderabad was received by it on December 7, 2012. The petitioner has filed the petition only on February 11, 2013, i.e., after about two months after the receipt of the impugned order. Further, even after filing the petition, the petitioner chose not to move the petition and seek any relief of interim or ad interim nature staying the implementation of transfer of its case by the impugned order dated August 31, 2012. In fact, much after the transfer in 2012, the Deputy Commissioner of Income-tax, Hyderabad, issued the impugned notices dated July 23, 2013, under section 148 of the Act, seeking to reopen the assessment for the assessment years 2009-10, 2010-11, 2011-12 and 2012-13, the petitioner moved a praecipe on August 12, 2013, and at its instance, the court placed the matter on August 20, 2013. These notices dated July 23, 2013, for reopening would have been issued after the Assessing Officer at Hyderabad had came to a reasonable belief that income chargeable to tax has escaped assessments and recorded reasons for the same. Thus, the jurisdiction has already been exercised by the Deputy Commissioner of Income-tax at Hyderabad after the passing of the impugned order dated August 31, 2012, under section 127 of the Act. It is after the exercise of jurisdiction by the Deputy Commissioner of Income-tax that on August 20, 2013, the petitioner moved this court and sought permission to amend the petition and also sought ad interim stay of the impugned notices dated July 23, 2013. In view of the aforesaid conduct of the petitioner in not challenging the order dated August 31, 2012, at the earliest and letting all believe particularly, the Assessing Officer, i.e., the Deputy Commissioner of Income-tax at Hyderabad that the order of transfer dated August 31, 2012, under section 127 of the Act from Mumbai to Hyderabad was acceptable to the petitioner. This led the Assessing Officer to exercise his jurisdiction. This inordinate delay on the part of the petitioner has been explained only by stating that the impugned order dated August 31, 2012, under section 127 of the Act was received only on December 7, 2012. Thereafter, the delay in filing a petition in the court of over two months and the neglect in moving the court to seek a stay on the impugned order dated August 31, 2012, is unexplained.

6. In the above view, we see no reason to entertain the present petition. The petitioner’s conduct is indicative of it having accepted the order of transfer dated August 31, 2012. This is as the petition was filed only in February, 2013, and thereafter not moving the court for any interim relief. It is only when the Assessing Officer at Hyderabad issued four impugned notices dated July 23, 2013, under section 148 of the Act seeking to reopen the earlier assessments that this petition was mentioned on August 12, 2013, and placed on board on August 20, 2013, for urgent interim relief and amendment. This is a clear case of laches on the part of the petitioner. Therefore, in the above facts, we refuse to exercise our extraordinary writ jurisdiction under article 226 of the Constitution of India. Thus, no occasion arises to examine the petitioner’s grievance on the merits.

7. Accordingly, the petition is dismissed, with no order as to costs.

[Citation : 362 ITR 351]