Rentworks India Private Limited vs. Pr CIT (Bombay High Court)

(i) There is no dispute that subsection 2 of section 127 is applicable. The condition precedent for exercising power under clause (a) of subsection 2 of section 127 for passing an order of transfer is an agreement which is contemplated by clause (a) of subsection 2 of section 127. In the present case, as far as the existence of the agreement is concerned, the submission is crystalised in clause (o) of affidavit in reply. Clause (o) reads thus:

“(o) With reference to paragraph (15) O,P and Q of the writ petition the agreement of the concerned jurisdictional Pr CITs is by necessary implication. Proceedings u/s 127 (2) were initiated in this jurisdiction upon receipt of reference from the office of the DGIT (Inv.), Chennai seeking notification of the case. This necessarily implies agreement between the respective Pr.CITs. It is only in the case of lack of agreement that a separate procedure is provided in the Act. Further as the petitioner received notice u/s.143(2) from DCIT Central Cir 2(1), Chennai, which fact also underscores the agreement with the Pr.CIT Centra 2 Chennai.” (underline supplied)

(ii) The law on this aspect is laid down in the case of Noorul Islam Educational Trust vs. Commissioner of Income Tax [2016] 388 ITR 489 (SC). Paragraphs 4 and 5 of the said decision reads thus:

“4 As the Incometax/ assessment file of the appellant – assessee has been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and the two Assessing Officers are not subordinate to the same Director General or Chief Commissioner or Commissioner of Income Tax under section 127(2) (a) of the Act an agreement between Director General, Chief Commissioner or Commissioner, as the case may be, of the two jurisdictions is necessary.

5 The counter affidavit filed on behalf of the Revenue does not disclose that there was any such agreement. In fact, it has been consistently and repeatedly stated in the said counter affidavit that there is no disagreement between the two Commissioners. Absence of disagreement cannot tantamount to agreement as visualized under Section 127(2) (2) (a) of the Act which contemplates a positive state of mind of the two jurisdictional Commissioners of Income Tax which is conspicuously absent.” (underline supplied)

(iii) In view of the absence of the agreement as contemplated by clause (a) of subsection (2) of section 127, the Apex Court proceeded to interfere with the order of transfer of goods by setting aside the same.

(iv) The Apex Court has categorically held that the absence of disagreement will not be tantamount to an agreement as visualized under section 127(2)(a) which contemplates positive state of mind of the two jurisdictional Principal Commissioners of Income Tax. The agreement contemplated by clause (a) of subsection (2) of section 127 may not be a drawn up agreement. What is necessary is that there has to be an agreement which will involve positive state of mind of the two jurisdictional Principal Commissioners. Both of them must consent to the transfer after application of mind.

(v) In the present case, it is not even the case made out in the show cause notice that the agreement as contemplated by the first part of clause (a) of subsection (2) of section 127 exists. The existence of such agreement between two jurisdictional Commissioners is a condition precedent for passing the order of transfer. Except for the request which came from the investigation office, Chennai of transferring the case, there is no reference whatsoever to any such agreement. Clause (b) of subsection (2) of section 127 provides for consequences when there is no such agreement. When the jurisdiction to pass an order of transfer under clause (a) of subsection (2) of Section 127 can be exercised only when there is such an agreement, the fact that such an agreement exists ought to have been stated in the the show cause notice as the same is a jurisdictional fact. Apart from the failure to mention the same in the show cause notice, the only stand of the revenue is that there is an agreement by implication. This stand is completely contrary to paragraph 5 of the decision of the Apex Court in the case of Noorul Islam Educational Trust (supra). The decision in the case of Ramswaroop (supra) will also bind this Court for the reasons stated above.

(vi) Coming to the decision in the case of Jharkhand Mukti Morcha vs. Commissioner of Income Tax [1997] 95 Taxman 132 (PAT.), relevant facts are in paragraph 12. In the said case, specific reliance was placed on a document dated 27th November 2016. It is on the basis of the written document that a finding was recorded that there was an agreement between the Jurisdictional Commissioners of Ranchi and Delhi. In the present case, even going by the case made out by the respondent, no such agreement is spelt out. In absence of any such agreement, the first respondent had no jurisdiction to pass the order of transfer.

(vii) As the impugned order cannot be sustained on above ground, it is not necessary to to into other challenges.