M/S LALIT HANS PROTIEN PVT LTD ANR V. PRINCIPAL CHIEF COMMI AND ORS

SAW/249/2015

AI Insights

The case involves M/s. Lalit Hans Protien Pvt. Ltd., a company engaged in the business of Vanaspati Oil, which was subjected to a survey by the Income Tax Department following a search and seizure operation at the Purti Group of Companies in Kolkata. The Revenue argued that there was a close link between the appellant and the Purti Group, necessitating a centralized investigation in Kolkata. The appellant contested the transfer, asserting that the transactions with the Purti Group were ordinary business dealings with no significant link. The Single Judge and subsequently the Division Bench of the High Court upheld the decision to centralize the case in Kolkata, citing the need for a coordinated investigation due to the interconnected business activities and familial ties between the directors of the appellant company and the Purti Group.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 735735 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 01-04-2015
• Assessment Year: misc
• Other Referred Cases: R.K. Agrawal & others Vs. CIT, Global Energy (P) Ltd. Vs. CIT, Sachin Joshi Vs. CIT, Noorul Islam Educational Trust Vs. CIT, K.P. Mohammed Salim Vs. CIT, Continental Milkose (India) Ltd. Vs. CIT & ors., Ambika Solvex & ors. Vs. CIT & ors., ATS Infrastructure Ltd. Vs. CIT, State of UP & Anr. Vs. Johri mal
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: PARINITOO JAIN
• Assessee Lawyers: ANANT KASLIWAL
• Keywords: Centralization of Cases; Coordinated investigation; Income Tax; Search and seizure; Survey
• Section: 133A; 127

Judgement Text

"1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR DB Special Appeal (Writ) No.249/2015 M/s. Lalit Hans Protien Pvt. Ltd. & anr. Vs. The Principal Chief Commissioner of Income Tax, Jaipur & ors. Date of Order :: 01/04/2015 PRESENT HON'BLE MR. JUSTICE AJAY RASTOGI HON'BLE MR. JUSTICE J.K. RANKA Mr. Anant Kasliwal, counsel for the appellants. Mrs. Parinitoo Jain, counsel for the respondents. Reportable BY THE COURT (Per Hon'ble Ranka, J.) 1. Instant intra-court appeal has been preferred against order of the ld. Single Judge dt.04/03/2015. 2. Brief facts, which can be noticed on perusal of the impugned order, are that the appellant-assessee is a private limited company and was initially incorporated as M/s. Hari Kewal Solvex Private Limited by the Registrar of Companies, Rajasthan, Jaipur at No.17-018216 in 2003-04 and later on its name was changed to M/s. Lalit Hans Protien Pvt. Ltd. It is claimed that the assessee is being assessed at Alwar by the officers of the Income Tax Department since inception. The assessee is in the business of Vanaspati Oil and is also 2 manufacturing/producing oil in a plant at Alwar. 3. A search and seizure operation was carried by the respondent-department at Kolkata in the Purti Group of Companies on 18/09/2012 where it is claimed that the authorized officers found incriminating material. It is the contention of the Revenue that since the assessee as well as its directors have a close and live link with Purti Group of companies, therefore, a survey under Section 133 A was carried at the business/factory premises of the assessee at Alwar simultaneously on 18/09/2012. It is also claimed that during the course of survey, incriminating documents/material was found and during the course of survey, the directors of the assessee surrendered income and gave cheques to the tune of Rs.15 lac towards tax. The officers, assessing Purti Group of Companies, Kolkata, came to the conclusion that the appellants and its directors are closely associated and linked with the business of Purti Group of Companies, Kolkata and on the basis of some incriminating material found during the course of search and seizure operation in the case of Purti Group of Companies relating to assessee and with a view to have coordinated investigation, the officers of the Revenue at Kolkata felt that all cases under the umbrella of Purti Group of Companies 3 including the assessee is required to be centralized and assessed by a common officer at Kolkata where entire Purti Group is assessed so also even Directors of the appellant firm who were already being assessed at Kolkota. 4. Admittedly, the Commissioner of Income Tax-III, Kolkota sent a communication to centralize the case of the appellant-M/s. Lalit Hans Protien Pvt. Ltd. from ACIT Circle-1, Alwar to DCIT CC-XXV, Koltaka and opportunities were provided by the Commissioner, Alwar to the appellant by detailed letters dt.12/03/2013 and 05/06/2014, inter-alia, mentioning that the assessee-appellant was part of the Purti Group of Industries, entire Purti Group was assessed to Income Tax at Kolkata and even two directors of the appellant were assessed at Kolkata and prima-facie, it was noticed that there were transactions in between the appellant and Purti Vanaspati Pvt. Ltd and therefore, the cases are required to be centralized at Kolkata for coordinated investigation. The transfer was objected by the appellant vide letter dt.11/05/2013 and 05/06/2014 mentioning that there was no link in between the assessee with that of Purti Group of Companies and the transaction, if any of sale and purchase, is in ordinary course of business and that too stands recorded in the books of accounts and 4 there was no live link with the assessee with Purti Group of Companies and merely because both the directors are assessed at Kolkata, for that reason, it could not be transferred. However, The Commissioner considering the replies of the assessee and relying upon certain authorities, rejected the claim of the assessee. 5. The claim was reiterated before the ld. Single Judge and it was asserted that merely on the basis of conjectures & surmises as well as assumptions and presumptions, the case of the assessee could not have been transferred from Alwar at a very far distant place. It has been held by the ld. Single Judge that admittedly some transactions have been noticed to have taken place by the assessee with that of Purti Group of Companies and may be the transactions are minuscule but admittedly the transactions are there. It has been further held by the ld. Single Judge that both the directors of the assessee are not only brothers of the main director of Purti Group of Companies but also are being assessed at Kolkata since beginning. The ld. Single Judge also, on the basis of the material provided by the DDIT (Inv.) Hqrs. Tech.II, Kolkata that name of the assessee finds place in the records of Purti Group of Companies, upheld the order dt.07/08/2014 5 impugned in the writ petition. 6. Ld. counsel for the appellant-assessee vehemently contended that the order of the ld. Single Judge needs interference as the ld. Single Judge has not decided the controversy in right manner. He contended that the search/survey at Kolkata/Alwar was carried on 18/09/2012 and till date even after two and half years, the Revenue has not been able to disclose about live link of the assessee with Purti Group of Companies. He contended that at the time of survey, books of accounts and other material were carried by the Revenue Officers and nothing has come out during last about two and half years as to what has been found/noticed to link the affairs of the assessee viz-a-viz Purti Group of Companies. He drew attention of this Court about total turnover viz-a-viz sales to M/s. Purti Vanaspati Private Limited that it was just about 2.75%, 3.65% and 2.44 % for the years ended on 31/03/2012, 31/03/2013 and 31/03/2014 respectively and contended that merely because some stray, sale or purchases are there with Purti Group of Companies, transfer of the case of the assessee from Alwar to Kolkata, cannot be said to be justified. It was further contended that the turnover during the period ended on 31/03/2014 was Rs. 1,62,36,47,989/- wheres the sale to M/s 6 Purti Vanaspati Private Limited was only to the extent of Rs.3,95,75,351/- and thus merely because there were some transactions, it cannot be said that there was live link of the assessee with Purti Group of Companies. He further contended that the directors have choice to be assessed at Kolkata and merely because two of the directors are being assessed at Kolkata, does not mean that there is live link and the case could be transferred . He further contended that the order of the ld. Single Judge needs interference. In addition to the cases relied upon by the assessee before the ld. Single Judge, he also relied upon the judgments rendered in the case of R.K. Agrawal & others Vs. CIT: (2006) 283 ITR 532 (All); Global Energy (P) Ltd. Vs. CIT: (2013) 89 DTR (Bom-Goa); Sachin Joshi Vs. CIT: (2015) 370 ITR 598 (Bom) and Noorul Islam Educational Trust Vs. CIT, W.P. (MD) No.60 of 2009, decided by Madras High Court vide judgment dt.11/12/2009. 7. Per-contra, ld. counsel for the respondent- Revenue strenuously supported the order of the ld. Single Judge and contended that concentrated efforts of coordinated investigation in cases like this are required to be done by the officers of the Income Tax Department. She further contended that not only at Kolkata but at Alwar also, 7 at the time of search/survey, incriminating material was found linking the assessee with Purti Group of Companies. She further contended that prima-facie view is required to be looked into at the time of transfer of cases and the Commissioner at Alwar as well as Commissioner at Kolkata, noticing that there was live link in between the assessee viz- a-viz Purti Group of Companies, correctly came to such conclusion and contended that the cases are required to be looked into by a senior Assessing Officer (AO) otherwise there will be different versions and different/contradictory finding on the same material which needs to be avoided. She further contended that there is no harm to the assessee in attending proceedings at Kolkata as at Alwar also the assessee is being assisted by a counsel and he may engage services of a counsel/CA at Kolkata, with no inconvenience. She further contended that the circular of the Central Board of Direct Taxes dated.25/04/2014 with regard to centralization of cases would indicate that the cases like this need to be centralized for concentrated investigation. She further contended that the directors of the assessee, noticing incriminating material, had also surrendered certain income and gave cheques of Rs.15 lac as tax against the income surrendered at the time of survey on the spot as per the statement of the Director recorded by the officers of the 8 survey team. She relied upon the judgments, which were relied upon before the ld. Single Judge. Counsel for the Revenue further stated that all the assessment records of the appellant-assessee have already been transferred/sent to the DCIT CC- XXV, Koltaka on 18/03/2015. 8. We have considered the arguments advanced by ld. counsel for the parties and have perused the order of the ld. Single Judge, impugned herein as well as the order of Commissioner at Alwar and the Commissioner at Kolkata and in our view, the ld. Single Judge has rightly come to the conclusion that on the basis of the material noticed, it would be appropriate to have coordinated investigation in cases like this. The assessee so also Purti Group of Companies (M/s. Purti Vanaspati Pvt. Ltd.) are into the same trade and admittedly sales/purchases have been found to have taken place in between the assessee and M/s Purti Vanaspati Pvt. Ltd., may be the turnover is not so large but that does not mean that there is no live link in between the assessee and Purti Group of Companies. It was admitted by Mr. Kamal Agrawal, appellant No.2 herein, who is Director of the appellant No.1 on 18/09/2012 when the statements were being recorded, that the assessee purchased Palm Oil from M/s Purti Vanaspati Pvt. Ltd., Kolkata and sold “Kacchi 9 Dhani” Mustard Oil to M/s Purti Vanaspatri Pvt. Ltd and that Mr. Kishore Agrawal, who is managing the affairs of M/s Purti Vanaspati Pvt. Ltd., is his elder brother. 9. It would be appropriate to quote the guidelines issued by the Central Board of Direct Taxes dt.17/09/2008 and 25/04/2014 for the purposes of centralization of cases, which reads as under:- “i. Non-search cases connected with the search cases where findings of the search have material bearing and needs of coordinated investigation/interest of revenue require such cases to be assessed in the Central Charge. ii. Survey cases or enquiry cases (whether such enquiries were conducted by any wing of the department or an outside agency) wherein some organized/ systematic manipulation of accounts/fraud/substantial revenue is involved and/or coordination with outside agencies or a large number of officers within the department is required. iii. Cases arising out of scam as a result of investigation/ enquiry conducted by some other Law Enforcement Agency where needs of coordinated investigation/ interest of revenue require centralization. iv. Complex cases of substantial revenue implication requiring in-depth investigation. 10 v. Any other case which is required to be centralized for administrative requirement or other reasons stated by the DsGIT/CsCIT, as the case may be.” 10. After analyzing the circular of the Board (supra) and Section 127(2), in our view, case of the appellant would fall in Para (i) and Para (iv) of the aforesaid circular as a survey has been made at the business premises of the appellant simultaneously and the Revenue has been able to establish that there was interconnection of the appellant with Purti Group of Companies and not only search case but survey case like that of the appellant also needs in-depth investigation/coordinated investigation to bring out the desired results by a common officer. 11. Admittedly, the Commissioner granted adequate opportunity of being heard twice and adequate reasons have been recorded and even such reasons have been conveyed to the appellant and under Section 127 once the reasons have been recorded and so also conveyed to the appellant, then the courts in normal circumstances ought not to interfere in the administrative decisions taken by the Revenue. Admittedly, incriminating material has been found 11 not only at Kolkata but also at Alwar and concentrated/coordinated investigation is required to be seen at this stage. Endeavour of not only of the Revenue but the assessee as well, is of framing of correct assessments, while a tax payer needs to pay the desired tax on the income earned, the Revenue also collects due tax, neither a penny more nor a penny less. 12. As observed earlier, though the Directors of the appellant are being assessed at Kolkata, may not be of much relevance but certainly a doubt is created as to when both the working directors are being assessed at Kolkata why only the appellant should be left out to be assessed at Alwar. Admittedly, the appellant No.2 and Dinesh Agarwal, the two real brothers and directors of the appellant company, have shown their residential addresses in their return of income as 49-A, Tollygunge, Circular Road, Kolkata-53 where the other directors and real brothers of the directors of the Purti Vanaspati (P) Ltd. are also residing. Therefore, in the instant case, the revenue has been able to establish live link of the present-appellant (assessee) viz-a-viz Purti Group of Companies/Directors. 13. The ld. Single Judge has already observed that the 12 Panchanama drawn on 18/09/2012 shows the name of the appellant as one of the companies in the Purti Group of Companies and during the search operation, papers of connected transactions, inter linked business activities of the assessee-company were also found and seized from the Kolkata office. Ld. Single Judge has rightly come to the conclusion that in order to examine the entries recorded in documents/share transactions, books of accounts and hard disc and to carry out further proper investigation in a coordinated manner, all the cases of group and the connected cases are required to be centralized at one place with the same assessing officer and we also concur with the finding reached by the ld. Single Judge and we are not persuaded to come to a different conclusion as has been reached by the ld. Single Judge. 14. With regard to the contention of the ld. counsel of the assessee that even after lapse of more than two and a half years,nothing concrete has been provided by the department to justify the action u/s 127; we feel that department at this stage is not required to provide all the material available at its end and only when matters are centralized and assessment is taken up then only the incriminating material found by them can be confronted. 13 Passage of time is no basis to withhold transfer of cases in the facts of the instant matter. 15. The Hon'ble Apex Court, in the case of K.P. Mohammed Salim Vs. CIT: (2008) 300 ITR 302 (SC), held that the power of transfer is in effect a machinery provision and it must be given its full effect. It must be construed in a manner so as to be workable. Section 127 of the Act is a machinery provision and it should be construed to effectuate the charging section so as to allow the authorities concerned to do so in a manner, wherefore the statute was enacted. 16. The Gauhati High Court, in the case of Continental Milkose (India) Ltd. Vs. CIT & ors.: (2013) 351 ITR 292, in a case where search and seizure operation was carried on Continental Milkose (India) group on March 9, 2012 at New Delhi and all the directors of the company were residing at Dibrugarh and entire group was being assessed at Dibrugarh since inception but were attending proceedings at New-Delhi and it was noticed that the company had registered office at New Delhi with the business activities in Noida and specific evidence had been gathered regarding tax evasion by the group at New Delhi and the Revenue was of the view that enquiries were required to be conducted at New Delhi and to 14 some extent in North East i.e. Dibrugarh, Revenue came to a conclusion that since major business activities in and around Delhi and the control is also at Delhi, the cases are required to be centralized at Delhi for effective and coordinated investigation and administrative convenience and the High Court, after analyzing the provisions of Section 127(2) held that the order centralizing all the cases from Commissioner of Income Tax, Dibrugarh to Commissioner of Income Tax, Delhi was justifiable as there was material to show that there was a search and seizure at Delhi and revenue has been able to unearth tax evasion at Delhi which is being investigated at Delhi. 17. The Madhya Pradesh High Court, in the case of Ambika Solvex & ors. Vs. CIT & ors.: (2014) 267 CTR 258, after analyzing the facts came to the conclusion that search and seizure matters which by their very nature require indepth study of seized material and hence such cases deserves to be centralized with same AO's of the charge and upheld the claim of the Revenue. 18. The Delhi High Court, in the case of ATS Infrastructure Ltd. Vs. CIT: (2009) 318 ITR 299 (Delhi), after applying the decisions laid down by different courts, held 15 that the decision to transfer the cases out of Delhi, would become unassailable, keeping in view the outcome of the searches made in Delhi and in several other parts of UP under the Commissioner, Kanpur and further found that no material came to the possession to transfer the cases out of Delhi was mala fide and accordingly upheld the contention of the Revenue. 19. The Hon'ble Apex Court, in the case of State of UP & Anr. Vs. Johri mal: AIR 2004 (SC) 3800 has observed as under:- “It is well-settled that while exercising the power of judicial review the Court is more concerned with the decision making process than the merit of the decision itself. In doing so, it is often argued by the defender of an impugned decision that the Court is not competent to exercise its power when there are serious disputed questions of facts; when the decision of the Tribunal or the decision of the fact finding body or the arbitrator is given finality by the statute which governs a given situation or which, by nature of the activity the decision maker's opinion on facts is final. But while examining and scrutinizing the decision making process it becomes inevitable to also appreciate the facts of a given case as otherwise the decision 16 cannot be tested under the grounds of illegality, irrationality or procedural impropriety. How far the Court of judicial review can reappreciate the findings of facts depends on the ground of judicial review. For example, if a decision is challenged as irrational, it would be wellnigh impossible to record a finding whether a decision is rational or irrational without first evaluating the facts of the case and coming to a plausible conclusion and then testing the decision of the authority on the touch-stone of the tests laid down by the Court with special reference to a given case. This position is well settled in Indian administrative law. Therefore, to a limited extent of scrutinizing the decision making process, it is always open to the Court to review the evaluation of facts by the decision maker” 20. In our view, the exercise of power under sub- section (1) and sub-section (2) of Section 127 of the Act comes with certain procedural requirements, namely, of granting a reasonable opportunity of being heard in the matter, of recording of reasons for passing such order and communicating such reasons to the assessee. Subject to fulfillment of such procedural requirements, the authority under Section 127 enjoys considerable discretion while 17 exercising the power contained in sub-section (1) or sub- section (2) thereof. Such discretion, in our view, of-course has to be exercised for achieving the public purpose and not for any arbitrary or irrelevant consideration. On the other hand, it can also be seen that transfer of a pending case from one AO to another AO outside the State is likely to cause considerable inconvenience to an assessee. Therefore, even though an assessee may not have a vested right to insist that his assessment be completed only at one place or by a particular AO, nevertheless, the reasons for transfer must be weighty enough to offset against such personal inconvenience of an assessee. In exercise of power under section 127, we are concerned with larger public interest on one hand and personal inconvenience on the other. However, as long as such powers are exercised bona fide, for public purpose and in the interest of Revenue, the role of the Court in reaching to a different conclusion would be extremely limited. It is well settled that judicial review against the administrative orders in exercise of writ jurisdiction, the court is concerned with the decision making process and not the final decision itself. Unless the reasons which prompted the competent authority to transfer the case can be stated to be wholly irrelevant or arbitrary, the Court would not interfere with such reasons. 18 21. We are in full agreement with the order passed by the ld. Single Judge, which needs no interference and in the light of what we have observed herein above, the judgments relied upon by counsel for the assessee, in our view, are distinguishable on facts and are inapplicable to the facts of the instant case. 22. Accordingly, for the reasons aforesaid, we do not find any infirmity in the order impugned passed by the ld. Single judge so as to call for interference by this Court in the instant intra-court appeal. Consequently, the instant intra- court appeal, being devoid of any merit, is hereby dismissed with no order as to costs. (J.K. Ranka), J. (Ajay Rastogi), J. Raghu Certificate:All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed. Raghu, Sr. PA. 19 "