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Coordinated Investigation and Administrative Convenience: Delhi High Court Upholds Centralization of Cases


Recently, the Delhi High Court(‘HC’) rendered a judgement in the case of Dollar Gulati & Ors v. Principal Commissioner of Income Tax[i], wherein it outlined the scope and objective of s.127 of the Income-tax Act, 1961 (‘Act’). This judgment delves into the legislative mandate of s. 127 of the Act, the principles governing the transfer of cases, and the judicial precedents that inform the exercise of such powers.  

Factual Matrix

  • On 11.04.2023, a search operation under s.132 of the Act was conducted on the premises of M/s Zee Lab Group (‘Searched Party’) at Karnal, Haryana. During the search operation, certain incriminating materials were found linking Dollar Gulati and Mark Gulati (‘assessees’).

  • Subsequently, on 26.04.2023 a notice under s.131(1A) of the Act was issued to the assessee, directing him to furnish details of income earned by him since assessment year (‘A.Y.’) 2017-18. The assessee replied to the notice and provided relevant information details such as financial statements, bank account details, investment particulars, and unsecured loan transactions.

  • On 02.02.2024, a show cause notice (‘SCN’) was issued to the assessee to centralize the assessee’s case at DCIT, Central Circle, Karnal, Haryana for administrative convenience and coordinated investigation. The assessee objected to the proposed transfer, arguing it was not bonafide and there was no connection between him and the searched party.

  • Despite the objections, the Revenue passed orders dated 20.02.2024 and 11.03.2024 (‘impugned orders’) under s. 127 of the Act, transferring the assessee’s case from the Income Tax Officer (ITO) Ward-51(1) Delhi to DCIT, Central Circle, Karnal, Haryana.

  • Aggrieved by the same, the assessees filed writ petitions before the HC challenging the orders dated 20.02.2024 and 11.03.2024, passed under s. 127 of the Act.


  • The HC dismissed the writ petitions filed by the assessees and held that the exercise of power under s.127 of the Act vide issuance of the impugned orders cannot be said to be wholly arbitrary, irrational, without jurisdiction or suffers with mala fide intention.

  • The HC relied on the decisions rendered by the Hon’ble Supreme Court (‘SC’) in Kashiram Aggarwalla v. Union of India[ii] and K.P. Mohammed Salim v. CIT[iii] and Pannalal Binjraj v. Union of India[iv], wherein the SC emphasized the scope of s.127 of the Act and nature of order passed under s.127 of the Act.  It held that orders passed under s.127 of the Act are purely for administrative conveniences and there is no fundamental right to be assessed at a particular place. When powers are invoked under s. 127 of the Act, territorial nexus becomes irrelevant and what becomes more prominent are the interests of adjudication and collection of taxes. It was further held that orders passed under s.127 of the Act are passed in the public interest and should fulfil the bonafide objectives of the Act.

  • The HC highlighted the provisions of Chapter XIII of the Act, emphasizing the jurisdictional powers of income tax authorities and the scope of s. 127 of the Act regarding the transfer of cases. The HC noted that the power under s. 127 of the Act is exercised for public interest and administrative convenience, aiming for effective tax collection. In this regard, the HC placed reliance on Sameer Leasing Co. Ltd. v. Chairman, CBDT[v], Bhatia Minerals v. Commissioner of Income-Tax[vi] and Jharkhand Mukti Morcha v. Commissioner of Income-Tax, Ranchi[vii]. Thus, it held that coordinated investigation is a valid ground for the transfer of cases.

  • The HC after analysing the characteristics of an order passed under s.127 of the Act and assessing the facts and circumstances in the present case, held that the assessee was given a reasonable opportunity to be heard and the Revenue had duly considered the objections raised before transferring the case.  

  • The HC concluded that the transfer was justified on the grounds of coordinated enquiries, investigations, and administrative convenience. It further determined that the exercise of statutory powers by the authority was neither arbitrary nor irrational, nor did it suffer from mala fide intentions.

Our Analysis

The HC’s decision reinforced the administrative character of s. 127 orders, emphasizing the importance of public interest and the administrative needs of tax authorities over the logistical preferences of assessees. The ruling aligned with the established judicial precedent that prioritizes effective tax administration through coordinated investigations.

This judgment underscores the judiciary’s support for administrative convenience in tax matters, potentially leading to more frequent centralization of cases for coordinated investigations. It highlights the limited scope of judicial review in administrative transfers, provided procedural fairness is maintained.

End Notes

[i] 2024 SCC OnLine Del 3379

[ii] 1964 SCC OnLine SC 26

[iii] (2008) 11 SCC 573

[iv] (1957) SCR 233

[v] 1990 SCC OnLine Del 440

[vi] 1992 SCC OnLine All 970

[vii] 1997 SCC OnLine Pat 23

Authored by Kushagra Gahlot, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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