Income Tax: HC Quashes Transfer Order Passed Without Hearing Assessee Under Section 127

Income Tax: HC Quashes Transfer Order Passed Without Hearing Assessee Under Section 127

The petitioner challenged a reassessment notice issued under Section 148 for A.Y. 2021–22, along with a transfer order passed under Section 127(2) transferring his case from Ahmedabad to Rajkot. The reassessment proceedings were initiated based on alleged incriminating material found during a search on a third-party group, though the petitioner denied any such transactions.

During the course of proceedings, the case was transferred without granting the petitioner any opportunity of hearing. The Department, in its affidavit, admitted that the transfer order wrongly recorded that it was passed “on request of the assessee,” which was in fact a typographical error. The petitioner also pointed out that his objections to the reassessment notice were still pending and had not been disposed of.

Issue Raised: Whether a transfer order under Section 127(2) of the Income Tax Act can be sustained when passed without granting an opportunity of hearing and based on an admitted factual error.

HC’s Ruling: The Gujarat High Court held that granting a reasonable opportunity of hearing before passing a transfer order under Section 127(2) is mandatory. In the present case, the Department itself admitted that the transfer order incorrectly recorded that it was made at the request of the assessee, when no such request existed. In view of this clear lapse and violation of statutory requirements, the Court quashed the transfer order.

It further directed the authorities to grant a proper hearing to the petitioner before passing any fresh transfer order. The Court also directed that the petitioner’s objections to the reassessment proceedings be decided in accordance with law within a stipulated time. Liberty was reserved to the petitioner to take appropriate steps depending on the outcome. The writ petition was accordingly allowed.

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