Even administrative orders for transfers of jurisdiction must respect the principles of fairness, particularly in cross-jurisdictional transfers.
Provisions of Section 127 of the Income Tax Act – 1961 can be summarized as under:
1. Power to Transfer Cases (Subsection 1):
• Allows transfer of cases between AOs subordinate to the same authority.
• Preconditions:
• Opportunity of being heard to the assessee (unless exempt under subsection 3).
• Recording of reasons for transfer in writing.
2. Transfer Between Different Jurisdictions (Subsection 2):
• Applicable when AOs involved are under different authorities.
• Two scenarios:
a. Agreement between Authorities: The authority from whose jurisdiction the case is transferred issues the order.
b. Disagreement between Authorities: The Board (CBDT) or an authorized officer issues the transfer order.
3. Exceptions to Opportunity of Hearing (Subsection 3):
• No hearing is required if the transfer is within the same city, locality, or place.
4. Applicability of Transfer Orders (Subsection 4):
• Transfer orders can be issued at any stage of proceedings.
• Pre-existing notices or actions by the previous AO remain valid.
Few cases
1. Recording and Communication of Reasons
• Ajantha Industries v. CBDT [(1976) 102 ITR 281 (SC)]:The Supreme Court held that recording reasons for the transfer and communicating them to the assessee are mandatory requirements under Section 127.
• Transfer orders lacking these elements are invalid.
R. S. Seth Gopikisan Agarwal v. DCIT [(1961) 41 ITR 101 (SC)]: It was held that while the transfer is an administrative action, adherence to procedural safeguards like communication of reasons ensures transparency and fairness.
2. Opportunity of Being Heard
• Soni Motors v. Union of India [(2011) 333 ITR 470 (Raj)]:The Rajasthan High Court ruled that if the transfer significantly affects the assessee, the principle of natural justice mandates an opportunity of being heard.
• Naresh Kumar Agarwal v. CIT [(2009) 312 ITR 0317 (All)]:The Allahabad High Court observed that even administrative orders like transfers must respect the principles of fairness, particularly in cross-jurisdictional transfers.
3. Transfer for Centralized Investigation
• Jharkhand Mukti Morcha v. CIT [(1997) 222 ITR 110 (Pat)]:The Patna High Court upheld the transfer of cases to a specialized unit for coordinated investigation in cases involving political funding.
• Aamby Valley Ltd. v. PCIT [(2021) 430 ITR 36 (Bom)]:In this case, the Bombay High Court ruled that transferring cases to ensure a centralized investigation in large-scale evasion cases was justified.
4. Validity of Transfer without Hearing
• Shri Balaji Rice Co. v. CIT [(1981) 132 ITR 575 (MP)]:The Court held that no hearing is required for transfers within the same city under Subsection 3. However, recording reasons remains mandatory.
• Carborundum Universal Ltd. v. CBDT [(1989) 180 ITR 171 (Mad)
1. M. G. George Muthoot v. CIT [(2021) 435 ITR 158 (Ker)]:
2. R. Venkatkrishna & Sons v. CIT [(2023) 448 ITR 96 (Mad)]: