Darsan Jitendra Jhaveri Vs Commissioner of Income Tax and 2 Ors.

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Digitally 1 / 8 signed by GAURI GAURI AMIT GAEKWAD AMIT Date: GAEKWAD 2021.09.29 14:47:20 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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902.WP-1965-2019.doc

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WRIT PETITION NO.1965 OF 2019

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`Darshan Jitendra Jhaveri`	`)`
`Non-Resident Indian, residing at 20A, Block`	`)`
`1, Caremen’s Garden, 9, Cox Road, Cowloon,` `Hong Kong and presently in Mumbai at`	`)` `)`
`3/11, Sea View, Dongersi Road, Walkeshwar,` `Mumbai – 400 006` `V/s.`	`)` `) ….Petitioner`
`1. Commissioner of Income Tax` `(International Taxation) – 3 Mumbai, having`	`)` `)`
`his office at Room No.1601, 16`^th`Floor, Air` `India Building, Nariman Point, Mumbai –` `400 021`	`)` `)` `)`
`2. Income Tax Officer (HQ)`	`)`
`(International Taxation) – 3 Mumbai, having` `his office at Room No.1601, 16`^th`Floor, Air` `India Building, Nariman Point, Mumbai –` `400 021`	`)` `)` `)` `)`
`3. Union of India`	`)`
`having its office at 3`^rd`Floor, Aayakar Bhavan,`	`)`
`M.K. Road, Mumbai – 400 020` `Also`	`)` `)`
`through Secretary, Ministry of Finance, North` `Block, New Delhi – 110 001`	`)` `) ….Respondents`

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Mr. Vikram Nankani, Senior Advocate a/w. Mr. Prithwiraj Choudhary,
Ms. Divya Shah, Mr. Kinnar Shah and Mr. Jimish Shah i/b. Divya Shah
Associates for petitioner.
Mr. P. C. Chhotaray for respondents-Revenue.

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 CORAM : K.R. SHRIRAM &
 M.S. KARNIK, JJ.
 DATED : 22nd SEPTEMBER 2021

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ORAL JUDGMENT : (PER K.R. SHRIRAM, J.)

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1Since pleadings are completed, we decided to dispose this
petition at the admission stage itself.

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Gauri Gaekwad

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Rule.

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Rule made returnable forthwith. Heard by consent of parties.

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2Petitioner is a non resident Indian since 2001 residing in Hong
Kong. Petitioner has been conducting business through and in the name of
various legal entities, of which petitioner was either the sole shareholder
and/or one of the shareholders. These corporate entities were set up either
in Hong Kong or in British Virgin Islands (BVI). It is stated in the petition
that since 2013-2014 petitioner’s only source of income is out of
investments in India and outside India. Petitioner has been filing income tax
returns as NRI since 2001. According to petitioner, all assessments are
completed including in respect of the returns filed for Assessment Year
2018-2019.

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3Petitioner received an intimation dated 20th June 2019 under
Section 127 (1) of the Income Tax Act, 1961 (the Act) informing petitioner
that a search and seizure action under Section 132 of the Act was conducted
on 27th July 2017 in the case of Salagaocar Group of Companies by Pr. DIT
(Inv.) Panji and these cases are proposed to be centralized with ACIT
(Central) Circle, Goa. Paragraphs 1, 2 and 3 of the intimation dated
20th June 2019 read as under :

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A Search & Seizure action u/s. 132 of the IT Act, 1961 was
conducted on 27.07.2017 in the case of Salagaocar Group of
Companies, by Pr. DIT (Inv.) Panji, and these cases are
proposed to be centralized with ACIT (Central) Circle, Goa.
It is informed to this office that you are connected to this
group therefore your case has been identified now for
centralization. As per jurisdiction your case is lying with
ITO(IT) 3(1)(1), Mumbai, which is also going to be

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Gauri Gaekwad

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centralized to ACIT Central Circle, Goa.

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I am directed to request you to file your objections, if any to
the proposed centralization, to this office either personally
or through authorized representative or through a written
submission on or before 25.06.2019.

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This letter is an opportunity, prescribed u/s. 127(1) of the IT
Act, 1961. As such, if nothing is heard from you till
01.07.2019, the matter would be decided on merits.

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4Petitioner filed a reply on 28th June 2019 stating that his only
transaction with Salagaocar Group is purchase of iron ore by his companies
based in BVI during the period before 2012, which iron ore were exported
from India by the Salagaocar Group to these BVI companies and all
payments were made by BVI companies through banking channels. He has
also stated that he has stopped dealing with Salagaocar Group in or about
June-July 2012 and his assessment has been completed until Assessment
Year 2018-2019. Petitioner has also brought to the notice of the show cause
notice issuing authority that he was at a loss to effectively defend his case in
the absence of any reasons or grounds disclosed in the show cause notice as
to how he was connected with the Salagaocar Group as alleged. Petitioner
also has reserved his rights to file a further and detailed reply, if so advised,
after reasons or grounds showing so called alleged connection between him
and Salagaocar Group companies are communicated to him. He has also
sought personal hearing before any decision was taken in the matter.

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5Respondent no.1, thereafter issued an order dated 3rd July
2019, which is impugned in this petition, in which respondent no.1 says that
he is passing the order in exercise of powers conferred by Sub Section 2 of

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Section 127 of the Act and at the same time, an opportunity was provided to
the assessee under Section 127 (1) of the Act regarding objections, if any. In
the impugned order, respondent no.1 only says petitioner has stated that
transferring his case to Goa will create genuine hardship in case any
compliance in future is required to be made and that objection raised by
petitioner is not acceptable since petitioner is connected with Salagaocar
Group of companies. Respondent no.1 has not dealt with any other points
that petitioner raised in his reply dated 28th June 2019 like seeking details
as to how he was connected with Salagaocar Group, or that he has stopped
dealing with Salagaocar Group in 2012, or how could a buyer of goods, who
has no share holding in the seller organisation, can be stated to be
connected to the seller and, that a personal hearing is required to be
granted. The impugned order has been passed without granting a personal
hearing though petitioner had requested for the same.

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Sub-Section 1 and 2 (a) of Section 127 which is relevant to the

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case at hand read as under :

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127. Power to transfer cases :

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(1) The Principal Director General or Director General or
Principal Chief Commissioner or Chief Commissioner or
Principal 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
Officer or Assessing Officers (whether with or without
concurrent jurisdiction) also subordinate to him.

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(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 Principal Director General or

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Director General or Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner -

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(a) where the Principal Directors General or Directors
General or Principal Chief Commissioners or Chief
Commissioners or Principal Commissioners or Commissioners
to whom such Assessing Officers are subordinate are in
agreement, then the Principal Director General or Director
General or Principal Chief Commissioner or Chief
Commissioner or Principal 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.

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6Sub Section (1) of Section 127 is not applicable to the case at
hand because the transfer proposed is from one commissionerate to another
commissionerate. Sub Section 1 applies only where a transfer is proposed to
be made from one Assessing Officer subordinate to the same Commissioner
to any other Assessing Officer also subordinate to the same Commissioner.
In this case, the transfer was proposed to be made by one Commissioner to
an Assessing Officer under another Commissioner and both Assessing
Officers are not subordinate to the same Commissioner. Sub Section 2 (a)
also requires that such an order can be passed after giving the assessee a
reasonable opportunity of being heard in the matter and after recording his
reasons for doing so. In our view, reasonable opportunity would mean that
the show cause notice or the intimation issued should contain such details
that would enable the assessee to know the reasons for which the case is
being transferred. In the intimation notice dated 20th June 2019, apart from
stating “you are connected to this group” there are no other details as to
how petitioner is connected to the Salagaocar Group. The word “connected”

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has varied and a wide meaning. Respondents ought to have mentioned in
the show cause notice how petitioner was connected to Salagaocar Group of
companies. The purpose of show cause notice is to enable a party to
effectively deal with the case made out by respondent. If a vague show
cause notice is given without specifying anything or the grounds, then it can
be held that reasonable opportunity of showing cause against an order of
transfer being made by the Commissioner was not given, because the
assessee would be totally unaware of the grounds which prompted the
Commissioner to arrive at prima facie conclusion that the power under
Section 127 (2) of the Act was required to be exercised. Issuance of show
cause notice is the preliminary step which is required to be undertaken
before giving opportunity of hearing under Section 127 (2) of the Act. It is
not an empty formality. We find support for this opinion in Om Shri Jigar
Association V/s. The Union of India and Ors1.

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We have to also note that the show cause notice issued is under
Section 127 (1) when all applicable provisions are under Section 127 (2)
(a) of the Act. Even in the order impugned, respondent no.1 states that the
assessee was provided opportunity under Section 127 (1) but he exercised
his powers under Sub Section 2 of Section 127. In our view, that also shows
non application of mind by respondent no.1. Respondent no.1 also should
have dealt with all the points raised by petitioner in his reply, which he has
failed to do. Moreover, the show cause notice has been issued by one

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1. (1994) SCC Online Guj. 77

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Income Tax Officer (HQ), International Taxation – 3 and not by the
Commissioner of Income Tax, who was exercising his power. On that ground
also the show cause notice itself is defective.

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7Mr. Chhotaray states that petitioner had also been raided in
connection with the investigation against Salagaocar Group of companies
and therefore, he should be aware as to how he is connected to Salagaocar
Group of companies. In our view, when the statute states a reasonable
opportunity of being heard in the matter, the show cause notice should spell
out all details to enable the recipient of the show cause notice to effectively
respond to the show cause notice. We cannot accept that petitioner should
be aware in view of the past events as to what respondents mean by
“connected with the Salagaocar Group”. In any event, petitioner had sought
a personal hearing, which has not been granted.

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8 Therefore, in our view, the order impugned has to be quashed
and set aside and is hereby quashed and set aside. It is open to respondents
to take such steps as advised in accordance with law but in any show cause
notice they may issue, all details will have to be provided to petitioner and
once the reply is filed, petitioner shall also be given a personal hearing. All
rights and contentions of petitioner are also kept open.

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9 Petition disposed.

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10 Mr. Chhotaray states that the file has already been transferred
to Goa. Respondents are directed to re-transfer the file back to its original

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Gauri Gaekwad

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Assessing Officer on or before 27th September 2021. Mr. Nankani states that
even the PAN card of petitioner has been transferred to Goa. Even that shall
be transferred back to the original office on or before 27th September 2021.
Until that is done, the concerned office in Goa shall not take any further
action on petitioner’s case.

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11All to act on authenticated copy of this order.

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(M.S. KARNIK, J.)

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 (K.R. SHRIRAM, J.)

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Gauri Gaekwad

Darsan Jitendra Jhaveri v. Commissioner of Income Tax and 2 Ors.

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Darsan Jitendra Jhaveri v. Commissioner of Income Tax and 2 Ors.

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