M/s. Kamaljeet Singh Ahluwalia and M/s. Kamal Sponge Steel & Power Ltd. and Kamaljeet Singh Ahluwalia V. UOI & Ors.

SAW/188/2011

AI Insights

The case involves a series of appeals against the decision to transfer the income tax assessment cases of the Ahluwalia group from Jaipur to Rourkela. The transfer was initiated following a search and seizure operation in Bhubneshwar, which revealed significant concealed income. The appellants argued that the transfer was unjustified and inconvenient, citing long-standing business ties and assessments in Jaipur. However, the respondents contended that the transfer was necessary for a coordinated investigation and proper assessment, given the location of business activities and the need for physical inspections in Orissa. The court upheld the transfer, emphasizing the procedural compliance with Section 127(2)(a) of the Income Tax Act and the logistical necessities of the investigation.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 701714 (HC-JAIPUR)
• Appeal Type: Others
• Pronouncement Date: 18-02-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Shimla Vs. Greenworld Corporation, Parwanoo, ATS Infrastructure Ltd. Vs. Commissioner of Income Tax, Bhatia Minerals Vs. Commissioner of Income Tax & Ors., K.V. Kader Haji (DECD.) (by legal heir) Vs. Commissioner of Income Tax, K.P. Mohammed Salim Vs. Commissioner of Income Tax, Sahara Airlines Ltd. & Ors. Vs. Director General of Income Tax (Investigation) & Ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J K SINGHI; ANUROOP SINGHI
• Assessee Lawyers: SM MEHTA; ANANT KASLIWAL
• Keywords: Centralization of Cases; Concealed income; Coordinated investigation; Search and seizure; Transfer of cases
• Section: 132; 127(2)(a)

Judgement Text

"1. IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR JUDGMENT 1.D.B. Special Appeal (W) No.187/2011 (M/s. Kamaljeet Singh Ahluwalia Vs. UOI & Ors.) 2.DB Special Appeal (W) No.188/2011 (M/s. Kamal Sponge Steel & Power Ltd. Vs. UOI & Ors.) 3.DB Special Appeal (W) No.189/2011 (Kamaljeet Singh Ahluwalia Vs. UOI & Ors.) Date of Judgment : 18/02/2011 PRESENT HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRA HON'BLE Mr. JUSTICE RAGHUVENDRA S. RATHORE Mr. S.M. Mehta, Sr. Adv. with Mr. Anant Kasliwal, for appellants. Mr. J.K. Singhi with Mr. Anuroop Singhi, for respondents. Reportable In the intra-court appeals, the sustainability of the order passed by the Single Bench dismissing the civil writ petitions No.13410/2010, 13272/10 and 13411/2010 has been called in question in the matter of transfer of the case of the assessee from Jaipur to Rourkela under the provisions of Section 127(2)(a) of the Income Tax Act, 1961 (for brevity, hereinafter referred to as the Act). Vide order dated 26.9.2010 passed by the Commissioner of Income-tax, Jaipur-I, Jaipur in 2. exercise of powers under Section 127(2) of the Act, the cases were transferred from the office of Deputy Commissioner, Income Tax, Circle-2, Jaipur to DC/ACIT, Rourkela (Orissa). Search and seizure operation under Section 132 of the Act was carried out in the case of Ahluwalia group by the investigation wing of the department at Bhubneshwar, during which, it was alleged that they made a disclosure of Rs.150 crores of concealed income. Since there was evasion of tax, to ensure coordinated investigation and proper assessment, it was proposed to centralize the cases of Ahluwalia group and request of centralization was made by the ADIT (Inv.) Unit-I(1), Bhubneshwar to the Chief Commissioner, Income Tax, Bhubneshwar by writing a letter dated 8.12.2009 pursuant thereto, a letter dated 15.12.2009 was sent to the Commissioner of Income Tax, Sambalpur for centralization of the cases with ACIT/DCIT, Rourkela Circle. Thereafter, the CIT, Sambalpur requested the CIT-I, Jaipur to pass necessary orders under Section 127(2) of the Act. Notice was served upon Shri KJS Ahluwalia as to proposal of centralization of the cases. 3. Shri KJS Ahluwalia submitted objections pursuant to the notice dated 11.1.2010. The objections were sent for comments to the Commissioner of Income Tax, Sambalpur. The final comments were sent by the Director of Income Tax (Inv.), Bhubaneshwar. Thereafter, the Commissioner of Income Tax, Jaipur passed common order transferring the seven cases. The Single Bench by the impugned order, has dismissed three aforesaid writ petitions and in other writ petitions, the impugned order has been quashed and liberty has been given to the respondent to proceed in the matter of transfer of cases in accordance with law as in those four cases no proper notice was issued. Dissatisfied with the dismissal of the above three writ petitions, the intra-court appeals have been preferred. Shri Sagar Mal Mehta, learned senior counsel appearing with Shri Anant Kasliwal on behalf of the appellants submitted that transfer was directed by the CBDT and the agreement which was necessary under Section 127(2)(a) was foisted upon the concerned authorities. Thus, it could not be said that there was 4. any agreement as required in the eye of law. Apart from that, the assessee had been assessed at Jaipur for the last three decades. There was no rhyme or reason to transfer the assessment case to Rourkela. It would not be convenient to Shri Kamaljeet Singh aged 70 years suffering from diabetes to attend the assessment proceedings at Rourkela. Besides the account of the appellant assessee are at Jaipur, their CA and legal consultants are also located at Jaipur. Thus, it could not be said to be appropriate to transfer the cases from Jaipur to Rourkela particularly when the order of transfer with respect to four groups out of seven have been set aside by the Single Bench. Shri J.K. Singhi learned counsel appearing with Shri Anuroop Singhi on behalf of the respondents has submitted that transfer of cases was made considering the fact that search and seizure was made at Rourkela (Orissa) by the concerned authorities located at Bhubaneshwar, business was transacted from Orissa, spot inspection may be necessary. Various reasons have been mentioned in the order and the communications by the concerned authorities for 5. transfer of the assessment cases from Jaipur to Rourkela. The assessment has to be made at the place of business and since business was carried out at Rourkela and considering various other aspects and taking note of the earlier decision of this court, a decision to transfer the cases from Jaipur to Rourkela has been taken. Merely because a letter was written by the CBDT, it could not be said that there was no agreement under Section 127(2)(a) of the Act. It is open to the higher authorities to write letter in the matter. There was consent of the relevant transferor and the transferee authorities. The provisions of Section 127(2)(a) have been fully complied with and the assessee cannot claim any fundamental right to be assessed at a particular place. Considering the huge concealment of income and various other aspects for the reasons assigned, the cases have been transferred. No case for interference is made out on the ground of convenience of assessee at Jaipur as the business is carried out at Rourkela. Thus, it cannot be said that any inconvenience is going to be caused to the assessee. For the sake of coordinated investigation, 6. spot inspection, etc. which are necessary in the case, rightly the impugned order has been passed. Even in other four cases, liberty has been granted to pass appropriate order after due notice to the assessees and fresh notices have already been served for transfer of those other four cases also with respect to which the writ petitions were allowed and liberty was granted by the Single Bench to pass fresh order in accordance with law after hearing the assessee. No case for interference is made out in the appeals. The first question for consideration is whether there is violation of provisions of Section 127 (2)(a) of the Act. Section 127(2)(a) is quoted below:- “127. Power to transfer cases – (1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner.- 7. (a) Where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;” It is not in dispute in the instant case that the Commissioner of Income Tax, Jaipur and the concerned authorities under whom the assessing officer is located at Bhubaneshwar have consented for transferring the cases in question. There is agreement in this regard. In fact, proposal was initiated by the concerned authorities at Orissa for transfer of the cases and objections, etc. were also sent for comments of the Director of Income Tax (Inv.), Bhubaneshwar, who wrote letter dated 2.9.2010 pointing out various aspects for the purpose of transfer. No doubt about it that a letter was also written by the CBDT pointing out that the cases are required to be centralized but, that would not affect the consent given by the Commissioner of Income Tax, Jaipur and the concerned authorities in the State of Orissa. We do not find any 8. illegality in this regard. There was an agreement as per Section 127(2)(a) which is not in dispute. It could not be said that agreement was foisted upon them by the direction issued by the CBDT. While exercise of statutory powers the authorities act differently than in the administrative capacity and there is agreement for transfer of the cases. We are of the considered opinion that the agreement to transfer cases cannot be said to be vitiated or illegal in any manner. Shri S.M. Mehta, learned Senior Counsel, has also relied upon the decision of the Apex Court in Commissioner of Income Tax, Shimla Vs. Greenworld Corporation, Parwanoo (2009 (7) SCC 69) in which the Apex Court has laid down in the wake of notices which were issued under Section 263 of the Act that the CIT, Shimla had no jurisdiction. The notices issued under Section 148 of the Act pursuant thereto would be bad in law. The aforesaid decision has been laid down by the Apex Court in different context and under different provision. Thus, the ratio is not attracted in the case under Section 127(2)(a) of the Act. Merely by the fact that consent was obtained 9. before passing of the order, the order cannot be said to be vitiated. Consent was required to be obtained before passing of the order of transfer. In fact, there was agreement between the Commissioner of Income Tax at Jaipur as well as the concerned authorities at Orissa for transferring the cases. Thus, it cannot be said that procedural requirement has not been followed in the instant case. For transfer of the case from Jaipur to Rourkela, there were various reasons. The main business activity of assessee is of iron ore mining which is being carried on mainly at Barbil (Orissa). Huge expenditure under the head “Rejects Removal” has been claimed in the profit & loss account of the mining concerns. Allegedly, rejects generated in the process of mining are carried by certain parties to some imaginary dump-yards. The assessing officer needs to verify the fact relating to this issue for which, physical enquiries are necessary in and around the iron ore mines which are situated in Orissa. It may be necessary to examine other local persons also as search and seizure was carried out at Orissa by the 10. Orissa authorities. The technical personnel of mining contractors and the persons dealing with accounts are all located in and around Barbil, Orissa. There was possibility during the assessment proceedings of doing spot verification and further investigation at Barbil, Orissa which would be difficult if the cases are centralized with an assessing officer at Jaipur. Apart from that, it is also clear that the assessees sold iron ores mostly to the buyers located in Orissa. Incriminating documents have been allegedly seized during the course of search which suggests that the assessee group indulged in large scale suppression of sales, to be specific, under-invoicing of sales. Therefore, the assessing officer will have to examine at least some of such buyers before arriving at any conclusion. Several other facts have also been mentioned in the letter dated 2.9.2010 by the Director of Income Tax (Investigation), Bhubaneshwar written to the Commissioner of Income Tax, Sambalpur (Orissa). It was also observed in the letter that the sole purpose of the assessee in objecting to the proposed centralization appears to be to shift the focus from the 11. field of activities relating to suppression of taxable income, so as to pose insurmountable hindrance before the revenue authorities to investigate the case thoroughly and/or to go to the bottom of the matter. The geographical distance between Rajasthan and Orissa is itself a daunting factor in the way of physical inspection, verification, inquiries and investigation into different aspects of the case and collection of further clinching evidence to succeed in making a sustainable assessment and collection of appropriate taxes. While passing the impugned order also note has been taken of the aforesaid facts by the Commissioner of Income Tax, Jaipur-(I). It has been considered in the impugned order passed by the Commissioner of Income Tax that the main business activity of the assessee is of iron ore mining and same is being carried out mainly at Barbil (Orissa). None of the brothers associated with mining activities of the group ordinarily resides at Jaipur. Shri Prashant Ahluwalia who manages the day to day affairs of the iron mines at Barbil resides at Rourkela and Barbil in Orissa. Huge expenditure under the head 12. “Rejects Removal” has been claimed in the profit & loss account of the mining concerns and on examination of statements of some of the parties, a question mark was put on the genuiness of these expenses as some of the parties at Kolkata, Hyderabad and Banglore, in whose names these expenses have been shown have denied to give services to the assessee and they have admitted that they have acted as entry provider only. Considering various discrepancies, the physical inspection of mines and enquiries from various parties in whose name the expenses specifically “Removal of Rejects” have been booked would be required to be verified by assessing officer. Further, statements of key employees of Ahluwalia group located in Orissa have been recorded during investigation which will have immense importance in the assessment proceedings. The assessing officer may require to re-examine or allow cross examination of the same persons during the assessment stage. Thus, for coordinated investigation, the order has been passed. We find that the order cannot be said to be illegal or based on extraneous considerations. It is based on objective 13. criteria. In the facts of the instant case, transfer of cases from Jaipur to Rourkela cannot be said to be illegal. Coming to the question whether the assessee has any fundamental right in getting assessed at a particular place, the question is answered by the Apex Court in Pannalal Binjaraj Vs. Union of India (1957 (31) ITR 565 (SC) in which the Apex Court has observed thus: “Prima facie it would appear that an assessee is entitled under those provisions to be assessed by the Income-tax Officer or the particular area where he resides or carries on business. Even where a question arises as to the place of assessment such question is under section 64(3) to be determined by the Commissioner or the Commissioners concerned if the question is between places in more States than one or by the Central Board of Revenue if the latter are not in agreement and the assessee is given an opportunity of representing his views before any such question is determined. This provision also goes to show that the convenience of the assessee is the main consideration in determining the place of assessment. Even so the exigencies of tax collection have got to be considered and the primary object of the Act, viz., the assessment of income-tax, has got to be achieved. The hierarchy of income tax authorities which is set up under Chapter II of the Act has been so set up with a view to assess the proper income-tax payable by the assessee and whether the one or the other of the authorities will proceed to assess a particular assessee has 14. got to be determined not only having regard to the convenience of the assessee but also the exigencies of tax collection. In order to assess the tax payable by an assessee more conveniently and efficiently it may be necessary to have him assessed by an Income tax Officer of an area other than the one in which he resides or carries on business. It may be that the nature and volume of his business other than the one where he resides or carries on business or that he is so connected with various other individuals or organisations in the way of his earning his income as to render such extra territorial investigation necessary before he may be properly assessed. There is no fundamental right in an assessee to be assessed in a particular area or locality. Even considered in the context of section 64(1) and (2) of the Act this right which is conferred upon the assessee to be assessed in a particular area or locality is not an absolute right but a subject to the exigencies of tax collection.” It is apparent that prima facie the assessee is entitled under the provisions of the Act to be assessed by the Income-tax Officer of the particular area where he resides or carries on business and there is no fundamental right to an assessee to be assessed in a particular area or locality. Even considered in the context of section 64(1) and (2) of the Act, this right which is conferred upon the assessee to be assessed in a particular area or locality is not an absolute right 15. but, subject to the exigencies of tax collection. In the instant case, the assessee carries on business at Barbil (Orissa). Search and seizure has been made by the authorities at Orissa at various places. Sale transactions are from Orissa. Considering the above facts, the assessee cannot claim any fundamental right to be assessed at Jaipur only on the ground that he has been assessed at Jaipur for last three decades. For coordinated investigation, spot inspection, considering the location of the witnesses to be examined, considering the exigencies of tax collection, the impugned order has been passed which cannot be said to be suffering from any illegality. The Delhi High Court in ATS Infrastructure Ltd. Vs. Commissioner of Income Tax ((2009) (318) ITR 299 (Delhi)), has followed the aforesaid decision of the Apex Court in Pannalal Binjraj (supra) and has observed that considering the exigencies of tax collection, search and seizure and in absence of malafide, the decision of transfer of the cases of assessment to Meerut was not faulted. The power to transfer the cases has been 16. upheld for the sake of appropriate and coordinated investigation by the High Court of Allahabad in Bhatia Minerals Vs. Commissioner of Income Tax & Ors. ((1993) 200 ITR 591) (All.)). The decision was upheld by the Apex Court in (1992) 195 ITR (St) 137. In Redwood Hotel (P.) Ltd. Vs. Chief Commissioner of Income Tax & Ors. ((2003) 259 ITR 191) (Ker.)), it was held that inconvenience caused to the petitioners by transfer will not give them any right to prevent transfer of files for better and more efficient handling of cases. Power to transfer cases of block assessment was also upheld in K.V. Kader Haji (DECD.) (by legal heir) Vs. Commissioner of Income Tax ((2004) 268 ITR 465) by the Division Bench of the Kerala High Court. The Apex Court in K.P. Mohammed Salim Vs. Commissioner of Income Tax ((2008) 300 ITR 302 (SC)) upheld the power to transfer cases in respect of block assessments also. In Sahara Airlines Ltd. & Ors. Vs. Director General of Income Tax (Investigation) & Ors. ((2006) 286 ITR 33 (All.)), the Lucknow Bench of the High Court of Allahabad has 17. held that if there are several assessees in a group and they are having their business transactions and activities at different places in which there is an element of inter-lacing of funds and intermixing of activities with other entities, in such cases, for correct, proper and just assessment of tax, it is necessary to get assessment proceedings transferred at any one place under one single officer which is found to be appropriate by income tax authorities for coordinated investigation. The view of the Commissioner that such an assessment should be made by a single officer could not be faulted and he was fully justified to provide a place for assessment under one officer. There was no arbitrariness or illegality in the orders of transfer and the same were found valid. The submission raised by Shri S.M. Mehta, learned Senior Counsel, that inconvenience would be caused to Sh. KJS Ahluwalia as he is aged 70 years cannot be accepted due to aforesaid reasons and particularly when the business is being carried out and managed at Barbil (Orissa). We do not find that any inconvenience is going to be caused by transfer of 18. assessment proceedings to Orissa. Resultantly, we find no merit in the intra- court appeals. They are liable to be dismissed and are hereby dismissed. Stay applications also stand dismissed. (RAGHUVENDRA S. RATHORE) J. (ARUN MISHRA) CJ. GS 19. DB Special Appeal (W) No.188/2011 (M/s. Kamal Sponge Steel & Power Ltd. Vs. UOI & Ors.) Date:18/02/2011 HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRA HON'BLE Mr. JUSTICE RAGHUVENDRA S. RATHORE Mr. S.M. Mehta, Sr. Adv. with Mr. Anant Kasliwal, for appellants. Mr. J.K. Singhi with Mr. Anuroop Singhi, for respondents. In view of order passed by this court today in DB Special Appeal (W) No.187/11, M/s. Kamaljeet Singh Ahluwalia Vs. UOI & Ors., this appeal also stands dismissed. The stay application also stands dismissed. (RAGHUVENDRA S. RATHORE) J. (ARUN MISHRA) CJ. GS 20. DB Special Appeal (W) No.189/2011 (Kamaljeet Singh Ahluwalia Vs. UOI & Ors.) Date:18/02/2011 HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRA HON'BLE Mr. JUSTICE RAGHUVENDRA S. RATHORE Mr. S.M. Mehta, Sr. Adv. with Mr. Anant Kasliwal, for appellants. Mr. J.K. Singhi with Mr. Anuroop Singhi, for respondents. In view of order passed by this court today in DB Special Appeal (W) No.187/11, M/s. Kamaljeet Singh Ahluwalia Vs. UOI & Ors., this appeal also stands dismissed. The stay application also stands dismissed. (RAGHUVENDRA S. RATHORE) J. (ARUN MISHRA) CJ. GS "