Facts of the Case

  • Impugned Transfer Order: On January 19, 2009, the Commissioner of Income Tax (CIT), Delhi-II, New Delhi, issued an order under Section 127 of the Income Tax Act, 1961, transferring the tax cases of nine assessees from New Delhi to the Central Circle, Alwar.
  • The Petitioners: The petitioners—Kali Metals Pvt. Ltd. (W.P.(C) 13721/2009), Kamdhenu Cement Ltd. (W.P.(C) 13724/2009), and Kamdhenu Industries Ltd. (W.P.(C) 13730/2009)—were among those transferred.
  • Lack of Communication & Notice: The petitioners contended that the transfer orders were communicated to them significantly later, on November 18, 2009, and that they were never given a reasonable opportunity of being heard before the passing of the transfer order.
  • Subsequent Developments: Initially, the High Court quashed the transfer order on December 16, 2009, granting the CIT liberty to pass a fresh order after providing a hearing on December 18, 2009. On that date, the petitioners' representative requested time to file a representation, but the CIT ignored the request and immediately passed another transfer order on December 21, 2009. This forced the petitioners to approach the High Court again through Miscellaneous Applications (CMs).

Issues Involved

  1. Whether affording a prior reasonable opportunity of being heard to an assessee is mandatory before exercising power and passing a transfer order under Section 127 of the Income Tax Act, 1961.
  2. Whether a transfer order passed in violation of the principles of natural justice (audi alteram partem) is legally sustainable.
  3. Whether the action of the CIT in passing a fresh order on December 21, 2009, without granting adequate time to file a representation, complied with the spirit of the Court's direction to provide an effective opportunity of being heard.

Petitioner’s Arguments

  • Violation of Natural Justice: The learned counsel for the petitioners, Mr. Rahul Kumar, argued that providing a reasonable opportunity of hearing to the assessee is a mandatory prerequisite before transferring cases under Section 127.
  • Absence of Due Process: It was forcefully contended that no such notice or hearing was afforded prior to the January 19, 2009 order.
  • Ineffective Post-Remand Hearing: Regarding the subsequent actions, the petitioners argued that when their authorized representative appeared before the CIT on December 18, 2009, their request for time to submit a proper representation was completely ignored, and an adverse order was mechanical passed on December 21, 2009, rendering the "opportunity of hearing" a mere formality.

Respondent’s Arguments

  • Concession on Facts: Mr. Sanjeev Sabharwal, Senior Standing Counsel representing the Revenue, fairly conceded during the initial hearing that no prior opportunity of being heard was granted to the assessees before passing the original transfer order under Section 127.
  • Consensual Framework for Resolution: During the final application proceedings, the Revenue agreed to a mutual resolution wherein a firm, fixed date could be designated by the High Court for filing documents and concluding arguments to ensure an expedited and legally compliant adjudication.

Court Order / Findings

  • Quashing of Original Order: Initially, on December 16, 2009, noting the Revenue’s concession that no hearing took place, the High Court made the rule absolute and quashed the transfer order dated January 19, 2009.
  • Quashing of Subsequent Order: Upon evaluating the subsequent application, the Court found the rushed order dated December 21, 2009, unsustainable and quashed it.
  • Peremptory Directions for Fresh Adjudication: With the mutual consent of both parties, the High Court established a strict timeline:
    • The petitioners or their authorized representatives were directed to appear before the concerned Commissioner on October 27, 2010 (between 10:30 A.M. and 11:30 A.M.) to formally file their documents.
    • The CIT was directed to proceed with the arguments, close the matter on that very day, and pass an appropriate, reasoned order within one week thereafter.

Important Clarification

  • Limitation Period Exclusion: The High Court explicitly directed that the entire duration of time spent by the parties litigating these proceedings before the High Court must be completely deducted while computing the period of limitation for the purpose of completing the relevant income tax assessments. Both counsels consented to this protective condition.

Section Involved

  • Section 127 of the Income Tax Act, 1961 (Power to transfer cases).

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2009:DHC:8200-DB/AKS16122009CW137302009_104631.pdf

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