Madras High Court Asks IT Dept Not To Pass Orders Regarding Centralisation Of Accounts Of DMK & DMK Charitable Trust

The bench of Chief Justice Manindra Mohan Shrivastava and Justice G Arul Murugan was hearing an appeal preferred by the Principal Chief Commissioner of Income Tax and Others against an order of the single judge in which the single judge had quashed the orders and notifications of the department whereby the accounts of DMK and DMK Charitable Trust were transferred from the Jurisdictional Income Tax Officer (Exemptions) to the Assistant Commissioner of Income Tax

The court has issued notice to the party in the department's appeal and has adjourned the case to October 28, 2025.

Background

On January 19, 2021, the Commissioner of Income Tax (Exemptions) passed two orders transferring the cases of DMK and DMK Charitable Trust to the Assistant Commissioner of Income Tax, Central Circle. According to the department, the transfer was necessary for a coordinated investigation in connection with the case of Duraimurugan, the Party General Secretary and the permanent trustee of the Charitable Trust. It may be noted that the IT department had conducted searches at the premises of Muraimurugan and the trust run by him on March 30, 2019 and April 1, 2019.

Challenging the transfer, the party and the charitable trust approached the High Court in 2021. It was argued that administrative convenience and coordinated investigation could not be the only reason for transferring a case and that the assessee must be apprised of the basic and broad facts which necessitated the transfer.

The party had argued that the there was nothing to show that there was an agreement between two jurisdictional commissioners of income tax, which was necessary for such a transfer.

It was also argued that the transfer was a blatant violation of the mandatory procedural safeguards, including the requirement to prove a reasonable opportunity. It was argued that the vague and unsubstantiated justification of “coordinated investigation” fails to meet the statutory and judicially established standard for valid transfer.

The party also argued that the transfer was made in connection with a search and seizure that took place 2 years before the transfer. Alleging political foul play, the party accused the department of joining hand with the political party in power at the centre and ordering such transfer right when the 2021 Assembly elections were around the corner.

On the other hand, the authorities supported the transfer and said that it was necessary in order to investigate the source and application of the cash seized from the premises of Duraimurugan. It was also argued that transfer of jurisdiction of PAN from jurisdictional assessing officer to the central circle did not, by itself, constitute any prejudice. It was also submitted that all rights of the party with respect to opportunity of hearing, opportunity to file submissions, etc were still available.

The single judge had noted that as per Section 127(2) of the IT Act, there had to be an agreement between the heads of the Transferor or Transferee, Assessing Officer. The court also said that the reasons given by the Department in the impugned orders, necessitating the transfer was not sufficient. The court also noted that the requirement of opportunity of hearng as provided under Section 127 (3) was not fulfilled before passing the orders.

Thus, noting the procedural irregularities, the court had quashed the orders passed by the department and remitted the matter back to the Commissioner of Income Tax(Exemptions) for passing fresh orders.

This order has now been challenged by the department.

Case Title: The Principal Chief Commissioner of Income Tax and Others v. Dravida Munnetra Kazhagam

Case No: WA 2717 of 2025