Reasonable Opportunity of Being Heard is a condition precedent before transfer of case from one AO to other U/s 127
The Himachal Pradesh High Court in M/s Deluxe Enterprises vs. Income Tax Officer and Others (ITA No. 23 of 2017 along with CWP No. 6575 of 2014) ruled on the jurisdiction and procedural requirements under Section 127 of the Income Tax Act, 1961. The judgment emphasized the following key points:
Let us have a Short Overview of the case, copy of which is attached herewith.
Key Observations:
1. The case is regarding the scope of Section 127 & its compliance.
• The Act mandates two essential conditions for transferring a case from one Assessing Officer (AO) to another:
• Reasonable Opportunity of Being Heard: The assessee must be given a chance to present objections to the transfer.
• Recording of Reasons: The authority transferring the case must record clear reasons for the transfer.
• These requirements uphold the principles of natural justice.
2. Jurisdiction Without Transfer:
• The High Court held that an Assessing Officer who lacks jurisdiction cannot issue notices or finalize assessments without properly transferring the case under Section 127.
• Ignoring procedural requirements violates the assessee’s right to a fair hearing.
3. Implications of Non-Compliance:
• If the twin conditions of Section 127 are not met, any assessment orders or proceedings initiated or finalized by the officer without jurisdiction are void.
• In this case, the best judgment assessment orders were quashed due to the procedural irregularities.
4. Valuable Right of the Assessee:
• The Court recognized the taxpayer’s right to challenge jurisdiction. Any decision regarding jurisdiction must be made transparently, following due process.
5. Reference to Precedents:
• The Court relied on prior rulings, including:
• Anand Chauhan vs. The Commissioner of Income Tax (2015 Him L.R. (DB) 454), which reinforced the importance of affording the assessee an opportunity to be heard during jurisdictional disputes.
• Ajantha Industries and Others v. CBDT and Others (AIR 1976 SC 437), where the Supreme Court highlighted the necessity of recording reasons for transfers under Section 127.
Decision:
The High Court quashed the impugned best judgment assessments, holding them procedurally invalid. However, it allowed the department to initiate fresh proceedings either:
• By transferring the case as per Section 127, or
• By continuing proceedings under the original jurisdiction.
The Copy of the order is as under:
