Transfer of jurisdiction under section 127: Non-disclosure of reasons or failure to provide a hearing to the assessee renders the transfer order invalid.




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Transfer of jurisdiction under section 127: Non-disclosure of reasons or failure to provide a hearing to the assessee renders the transfer order invalid.

Recently, the Calcutta High Court has held that Non-disclosure of reasons or failure to provide a hearing to the assessee renders the transfer order invalid in case of transfer of jurisdiction of AO U/s 127..

The case details is as under:

Pradeep Kumar Kajaria vs. Union of India & Ors. :-
Calcutta High Court
W.P.O. No. 835 of 2024
Dated: December 4, 2024

Let us have a Short Overview of the case:
1. Petitioner’s Background:
Regular income tax filer in Kolkata under PAN No. AFJPK5331E.
Assessed under ITO, Ward 36(1), Kolkata, and a permanent resident of Kolkata.
Partner in Saraidhela Developers LLP, with operations in Dhanbad.

2.  Search Operations:
•  October 31, 2023: Searches conducted on another partner’s premises and LLP offices in Dhanbad.
•  Search extended to the Petitioner’s residence; no undisclosed assets were found.

3.  Transfer of Jurisdiction:
•  December 13, 2023: Pr. CIT Kolkata issued a notice under Section 127(2), proposing the transfer of assessment jurisdiction to Dhanbad.
•  The Petitioner objected, citing lack of incriminating material and procedural violations.

4.  Procedural Violations:
• 
Transfer finalized without addressing objections or granting a hearing.
  The transfer order was vague and unsupported by evidence.

5.  Subsequent Actions:
•  Post-transfer, multiple notices were issued by the Dhanbad Assessing Officer, which the Petitioner contested on jurisdictional grounds as under:
  The transfer violated Section 127(2) of the Income Tax Act, 1961, due to:
  Lack of a valid justification.
  Failure to disclose incriminating material.
•  Denial of an opportunity to be heard.

Assessee relied on the following:
  Mul Chand Malu v. Union of India [(2016) 383 ITR 367]: Emphasized cogent material for transfer.
  Kamalnath v. Pr. CIT, Kolkata [(2023) 453 ITR 588]: Held that procedural fairness requires disclosing material and relevance.

Observation
  The Respondents’ justification of “coordinated investigation” was unsupported by specific evidence linking the Petitioner to concealment of income.
  The Supreme Court in Smt. Chandra Prabha Kushwaha v. CIT [(2014) 361 ITR 66] mandated that valid reasons must be stated in transfer orders under Section 127(2).

High Court has held as under:
  The transfer order was procedurally flawed and legally unsustainable.
Actions and notices by the Dhanbad Assessing Officer, based on the invalid transfer, were held to lack jurisdiction.
•  Writ petition allowed, and the transfer order was set aside.

It may be noted that in Mul Chand Malu v. Union of India-(2016) 383 ITR 367 (Delhi HC) has held as under:
•  Transfer of jurisdiction must be supported by cogent material and proper reasons.
•  Non-disclosure of reasons or failure to provide a hearing to the assessee renders the transfer order invalid.
•  Procedural safeguards are substantive requirements, not mere formalities.

The copy of the order is as under:

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