SLP Dismissed: Transfer of Jurisdiction from Delhi to Faridabad Valid; Director’s Link in Search Case Justifies Centralization

SLP Dismissed: Transfer of Jurisdiction from Delhi to Faridabad Valid; Director’s Link in Search Case Justifies Centralization

ISSUE

Whether an order under Section 127(2) transferring the jurisdiction of the assessee-company from New Delhi to Faridabad (Central Circle) is valid when the transfer is based on a search conducted on a Director (‘P’), despite the assessee’s claim of having no connection with the searched person.

FACTS

• The Search: A search and seizure operation under Section 132 was conducted in the case of one Mr. P and other related persons in Haryana.

• The Transfer: Consequently, the Assessing Officer (New Delhi) passed an order under Section 127(2) transferring the jurisdiction of the assessee-companies (registered in New Delhi) to the Deputy Commissioner (Central), Faridabad.

• Assessee’s Plea: The assessee challenged the transfer, arguing that they had no connection with the searched person and that their registered office was in Delhi.

• The Nexus: The Revenue pointed out that:

  1. Mr. P (the searched person) was a Director on the Board of one of the assessee-companies.

  2. The Income Tax Return (ITR) of the assessee for the relevant year was signed by Mr. P.

  3. The Board Resolution authorizing the filing of the current petition was also signed by Mr. P.

DECISION

• High Court’s View: The High Court held that the order explicitly stated the centralization was for the purpose of “coordinated investigation” and assessment. Given the undeniable link (Director signing ITR and petitions), the transfer was not arbitrary.

• Supreme Court’s View: The Supreme Court found no good ground to interfere with the High Court’s order upholding the transfer.

• Verdict: The Special Leave Petition (SLP) filed by the assessee was dismissed. [In Favour of Revenue]

KEY TAKEAWAYS

1. Coordinated Investigation is Key: Courts rarely interfere with administrative orders under Section 127 if the Revenue can show that “coordinated investigation” is necessary. The link need not be direct financial fraud; a managerial link (common director) is often sufficient to centralize cases.

2. Director’s Shadow: If a Director is searched, the companies they manage are vulnerable to being transferred to the Central Circle (Investigation Wing). Claiming “separate legal entity” usually fails in the face of Section 127 powers.

3. Scope of Review: The Supreme Court’s dismissal confirms that transfer of jurisdiction is an administrative prerogative. Unless there is malafide or a complete lack of nexus, courts will not stop the centralization of search cases.