TaxTMI 
TaxTMI 
2023 (5) TMI 1118
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AND 25581/2021 For the Petitioner Through: Mr. Arvind Datar, Sr. Advocate with Ms. Kavita Jha, Mr. Vaibhav Kulkarni and Mr. Anant Mann, Advocates. For the Respondents Through: Mr. Tushar Mehta, SG with Mr. Balbir Singh, ASG and Mr. Zoheb Hossain, Sr. Standing Counsel, Mr. Vipul Agrawal, Mr. Sanjeev Menon, Mr. Prasanjeet Mohapatra, Mr. Shyam Gopal, Mr. Vivek Gurnani and Ms. Monica Benjimin, Advocates. JUDGMENT MANMOHAN, J: THE ISSUE 1. The primary issue that arises for consideration in the present batch of writ petitions is whether the assessments of the petitioners could be transferred to the Central Circle by way of the impugned orders passed under Section 127 of the Income Tax Act, 1961 (hereinafter be referred to as 'the Act') without sanction of the Central Board of Direct Taxes ('CBDT'). RELEVANT FACTS 2. It is pertinent to mention that the present batch of writ petitions has been preferred by five Charitable trusts viz. Sanjay Gandhi Memorial Trust, Jawahar Bhawan Trust, Rajiv Gandhi Foundation, Rajiv Gandhi Charitable Trust, Young India as well as three individuals viz. Mrs. Sonia Gandhi, Mr. Rahul Gandhi, Mrs. Priyanka Gandhi Vadra and a political p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the resources through economies of scale and functional specialisation; (c) introducing a team-based assessment with dynamic jurisdiction. (3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, [2021]. (3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament." (emphasis supplied) 4.4 On 12th September, 2019, the E-assessment Scheme, 2019 was notified and implemented by the Central Government vide two Notifications No. 61 and 62 of 2019. The relevant portions of the said Notifications are reproduced hereinbelow:- A. Notification No. 61/2019 "S.O. 3264(E).-In exercise of the powers conferred by sub-section (3A) of section 143 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt, to perform the function of verification, which includes enquiry, cross verification, examination of books of accounts, examination of witnesses and recording of statements, and such other functions as may be required for the purposes of verification. (v) technical units, as it may deem necessary to facilitate the conduct of E-assessment, to perform the function of providing technical assistance which includes any assistance or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or any other technical matter which may be required in a particular case or a class of cases, under this Scheme; and (vi) review units, as it may deem necessary to facilitate the conduct of E-assessment, to perform the function of review of the draft assessment order, which includes checking whether the relevant and material evidence has been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft order, whether the issues on which addition or disallowance should be made have been discussed in the draft order, whether the applicable judicial decisions have been considered a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... directions, namely:- 1. The provisions of clause (7A) of section 2, section 92CA, section 120, section 124, section 127, section 129, section 131, section 133, section 133A, section 133C, section 134, section 142, section 142A, section 143, section 144A, section 144BA section 144C and Chapter XXI of the Act shall apply to the assessment made in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely: - "A. (1) The assessment shall be made as per the following procedure, namely:.... (xxi) Notwithstanding anything contained in paragraph (xx), the National E-assessment Centre may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case." (emphasis supplied) 4.5 In the Budget Speech, 2019, referring to the fact that the existing system of scrutiny assessments in the Income Tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials, the Finance Minister introduced the concept of Faceless Assessment, with the int....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Notification No. 61/2020 "S.O. 2746(E). -In exercise of the powers conferred by sub-section (3B) of section 143 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, published in the Gazette of India, Extraordinary, vide number S.O 3265 (E) dated the 12th September, 2019, namely:- 1. In the said notification, - (1) in the opening portion, for the word "E-assessment", the words "Faceless Assessment" shall be substituted. (2) for clause 1, the following clause shall be substituted, namely:- "1. The provisions of clause (7A) of section 2, section 92CA, section 120, section 124, section 127, section 129, section 131, section 133, section 133A, section 133C, section 134, Chapter XIV, and Chapter XXI of the Act shall apply to the assessment made in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely: "A. (1) The assessment shall be made as per the following procedure, namely:- ... (xxvi) The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er dated 8th January, 2021 passed under Section 127 of the Act and the impugned notice dated 3rd February, 2021 issued by Respondent No. 4 under section 142(1) of the Act. ARGUMENTS BY LEARNED SENIOR COUNSEL FOR GANDHIS AND FIVE CHARITABLE TRUSTS 5. Mr. Arvind Datar, learned Senior Counsel for Mrs. Sonia Gandhi, Mr. Rahul Gandhi and Mrs. Priyanka Gandhi Vadra and for the five charitable trusts stated that in the Budget speech of 2019, the Finance Minister set out the concept of the Faceless e-assessment Scheme as under: "124. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, and to give shape to the vision of the Hon'ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such e-assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies. 125. Cases selected for scrutiny shall be allocate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....strategy specified by the Board, including by way of automated examination tool; i. Thereafter, the review unit may concur or suggest modifications in the assessment order and send its suggestions to the National e-Assessment Centre; j. Pursuant thereto, the National e-Assessment Centre, after considering the suggestions, assign the case to Regional e-Assessment Centre other than the one who has made the draft assessment order; k. After completion of assessment, the National e-Assessment Centre shall transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case. 7. According to him the aforesaid highlighted the intention of the Central Government to eliminate personal interaction in Faceless Assessments and Appeals which is now the new method of assessing income tax cases and deciding appeals. He emphasised that the assessments have to be processed only on the basis of written submissions and in electronic mode. Thus, the existing assessment of a person in Jaipur will no longer be carried out by the Jurisdictional Assessing Officer, ITO in Jaipur, but the assessment will be completed by the National e-A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, assessment proceedings in such cases will be conducted by NeAC. The Assessing Officer shall upload the Survey Report in the ITBA at the time of issue of notice u/s 143(2) of the Act. 2 Cases pertaining to Search and Seizure Assessments in Search and Seizure cases to be made under section(s) 153A, 153C read with section 143(3) of the Act and also for return filed for assessment year relevant to previous year in which authorization for Search and Seizure was executed under section 132 or 132A of the Act. The cases falling u/s 153C, if lying outside Central Charges, shall be transferred to Central Charges u/s 127 of the Act within 15 days of issue of notice u/s 143(2) for compulsory selection. 3 Cases in which notices u/s 142(1) of the Act, calling for return, have been issued (i) Cases where no return has been furnished in response to a notice u/s 142(1) of the Act. These cases will be taken up for compulsory scrutiny by NeAC. (ii) Cases where return has been furnished in response to notice u/s 142(1) of the Act and where notice u/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or have been cancelled/withdrawn by the Competent Authority, yet the assessee has been found to be claiming tax-exemption/deduction in the return. However, where such orders of withdrawal of registration/approval have been reversed/set aside in appellate proceedings, those cases will not be selected under this clause. After the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, assessment proceedings in such cases will be conducted by NeAC. 3. Without prejudice to the above, the cases which are selected for compulsory scrutiny by the International Taxation and Central Circle charges following the above prescribed guidelines, shall, as earlier, continue to be handled by these charges. 4. The exercise of selection of cases for compulsory scrutiny on the basis of the above parameters shall be completed by 30th September 2020. 5. These instructions may be brought to the notice of all concerned for necessary compliance. Sd/- (Rajarajeswari R.) Under Secretary-ITA.II, CBDT" 9. He stated that in view of the aforesaid, all assessments will now be subject to the Faceless Assessment procedure excep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed out that though in the writ petitions filed by Trusts and Gandhis, the orders of transfer were sought to be justified on the basis that they were concerned with the Sanjay Bhandari group of cases, yet no material was forthcoming as to what is the connection with these appeals and the Sanjay Bhandari group of cases. He contended that even in the latest counter, no factual details of such a connection had been placed on record. 18. He lastly contended that just because transfer of Shri Robert Vadra's case had not been objected to, the cases of the Gandhis and the Trusts could not be transferred. He submitted that there can be no 'guilt by association' or 'guilt due to relationship'. In support of his submission, he relied upon the judgment of the Supreme Court in Chintalapati Srinivasa Raju vs. Securities and Exchange Board of India, (2018) 7 SCC 443. ARGUMENTS BY LEARNED COUNSEL FOR THE AAM ADMI PARTY 19. Learned counsel Mr. Amar Dave, who appeared for the Aam Admi Party in W.P.(C) 6921/2021 submitted that the cogent rights have been embedded in the statutory framework under which the Faceless Assessment Mechanism has been incorporated in the Scheme of the Act itself, wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exercise has to demonstrate no other alternate as also overwhelming justifiable reasons for doing so). 25. He submitted that the earlier judgment in the case of Kashiram Agarwalla (supra) has no bearing post such amendments. He further submitted that alternatively, assuming the power under Section 127 of the Act can continue to be exercised even post amendment, the same requires a different interpretation bearing in mind the nature and scope of the assessment mechanism now prevailing. 26. He emphasised that the very nature of the Faceless Assessment Mechanism shows that the contemplation of transfer under Section 127 of the Act cannot have the same meaning as it was prior to such insertion of the Faceless Assessment Mechanism, and therefore, by the very special nature of the Faceless Assessment Mechanism, the earlier interpretation of transfer within the city or between different cities etc. will clearly have a separate connotation in the background of the special nature of the scheme itself. He argued that when the matter is examined from these angles, bearing in mind the purport and scope of the special scheme, there is no question of contending that the ratio of the judgm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nfrastructure Ltd. v. Commissioner of Income Tax, (2009) 318 ITR 299 (Delhi) whilst distilling the principles of transfer under Section 127 of the Act has held that firstly, there is no fundamental right of an assessee to be assessed at a particular place. Under Section 124 of the Act, the assessment must be carried out at the principal place of business but when powers under Section 127 of the Act are invoked, territorial nexus becomes irrelevant. Secondly, the determination of the venue of the assessment would be governed by the greatest effectivity for collection of taxes. Thirdly, whilst the convenience of the assessee should be kept in mind, it would always be subservient to the interests of adjudication and collection of taxes. 32. He relied on the judgment in K.P. Mohammed Salim -vs- CIT, [2008] 300 ITR 302 wherein the Supreme Court has held that the "power of transfer in effect provides for a machinery provision. It must be given full effect. It must be construed in a manner so as to make it workable. Even Section 127 of the Act is the machinery provision. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Notifications which empower the board to apply the Faceless Assessment Scheme in respect of certain classes of cases and exclude certain other classes of cases. In exercise of such power contained in Clause (3) of the Notification dated 12th September, 2019, the Board has decided to exclude Central Charges and International Taxation charges from the Faceless Assessment Scheme. There is neither a challenge to clause (3) as stated above, nor a challenge to the CBDT order dated 13th August, 2020 passed under clause (3) of the Faceless Assessment Scheme, 2019, which excludes Central Charges and International Taxation charges from Faceless Assessment Scheme. Therefore, the argument that faceless assessment is a vested right, fails to consider that the statute itself provides for certain exceptions. Hence, when by way of a legal exercise of power under Section 127 of the Act for the purpose of coordinated investigation, certain parties are centralized then as a legal consequence, they are no longer assessed under the faceless regime. He emphasised that there is no vested right to choose either manner of assessment or the Assessing Officer so long as the statutory provisions are followed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anuary, 2021 (in the cases of Mrs. Sonia Gandhi, Mr. Rahul Gandhi and Mrs. Priyanka Gandhi Vadra and five charitable trusts) and 22nd February, 2021 (in Aam Aadmi Party), the Faceless Assessment Scheme was governed by the Notifications issued under Sections 143(3A) & 143(3B) of the Act. 43. It is pertinent to mention that the Faceless Assessment Scheme was incorporated in the Act vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from 1st April, 2021. Consequently, this Court is of the view that it is necessary to examine the scope, ambit as well as interpretation of Section 127 of the Act and whether in view of the two Notifications each dated 12th September, 2019 and 13th August, 2020, the power of transfer under Section 127 of the Act has been denuded. 44. The Constitution Bench of the Supreme Court in Kashiram Aggarwalla vs. Union of India and Others, (1965) 1 SCR 671 has authoritatively interpreted as well as outlined the scope and ambit of Section 127 of the Act. The Supreme Court has held that a transfer order under Section 127 of the Act is a mere administrative order invariably made on ground of administrative conv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... xxx xxx xxx xxx 9. It is in the light of these considerations that we have to construe the proviso to Section 127(1). As we have already indicated, the construction for which Mr Jain contends is a reasonably possible construction. In fact, if the words used in the proviso are literally read, Mr Jain would be justified in contending that the requirement that reasons must be recorded applies even to cases falling under it. On the other hand, if the obvious object of the proviso is taken into account and the relevant previous background is borne in mind, it would also seem reasonable to hold that in regard to cases falling under the proviso, an opportunity need not be given to the assessee, and the consequential need to record reasons for the transfer is also unnecessary, and this view is plainly consistent with the scheme of the provision and the true intent of its requirements. We would according hold that the impugned orders cannot be challenged on the ground that the Board has not recorded reasons in directing the transfer of the cases pending against the assessee from one Income Tax Officer to another in the same locality." (emphasis supplied) 45. Almost all th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....investigation. v. Any other case which is required to be centralized for administrative requirement or other reasons stated by the DsGIT. CCsIT, as the case may be." (emphasis supplied) POWER UNDER SECTION 127 OF THE ACT IS IN NO MANNER TRAMMELLED UPON OR NEGATED BY THE TWO NOTIFICATIONS EACH DATED 12th SEPTEMBER, 2019 AND 13th AUGUST, 2020 47. Now, the question that arises is whether the power under Section 127 of the Act is in any manner trammelled upon or negated by introduction of the E-assessment and Faceless Assessment Scheme vide two Notifications each dated 12th September, 2019 and 13th August, 2020. 48. This Court is of the view that though in the year 2019, the concept of E-assessment and in 2020, the concept of Faceless Assessment were introduced, yet the Jurisdictional Assessing Officer continues to exercise concurrent jurisdiction with Faceless Assessing Officer. In fact, pursuant to exercise of power under Section 120(5) of the Act which empowers CBDT to confer concurrent jurisdiction on two or more Assessing Officers for proper management of the work, the CBDT has vide Notification No.64/2020 dated 13th August, 2020 conferred power upon the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment Centre is limited to facilitating the conduct of E-assessment. 52. Consequently, this Court is of the view that the two Notifications dated 12th September, 2019 enlarge and supplement the power of transfer by authorising the National e-Assessment Centre to transfer at any stage of assessment the case of the assessee to the Assessing Officer having jurisdiction over such case i.e., from Faceless Assessing Officer to Jurisdictional Assessing Officer (an Assessing Officer always having concurrent jurisdiction). 53. To the same effect are the Notifications dated 13th August, 2020, which clarify, "The provisions of .....Section 127 of the Act shall apply to the assessment made in accordance the said Scheme subject to the following exceptions, modifications and adaptations....". Clause (2) of the Notifications No. 60 and 61 of 2020 dated 13th August, 2020 enable the Principal Chief Commissioner or Principal Director General in charge of National e-Assessment Centre, at any stage of the assessment i.e. during assessment, to send back the case to the Assessing Officer having jurisdiction over such case, with prior approval of the Board. Clause (2) of the Scheme only authorises ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Notifications. 58. Consequently, the transfer of a case under Section 127 of the Act is an altogether different power which continues to exist even after introduction of the E-assessment/Faceless regime. Accordingly, the said Scheme does not in any manner trammel upon or negate the existing powers contained in Section 127 of the Act to transfer the cases as provided for thereunder. Consequently, the power of transfer under Section 127 of the Act is not in any manner denuded by the Faceless Assessment Scheme when the transfer is sought to be made from a Jurisdictional Assessing Officer under one Principal Commissioner of Income Tax to another Assessing Officer under a different Principal Commissioner of Income Tax who are not exercising concurrent jurisdiction over the case. RELIANCE PLACED BY PETITIONERS UPON THE GUIDELINES DATED 17th SEPTEMBER, 2020 IS MISPLACED. 59. The submission of the petitioners that Section 127 of the Act requires that transfer order can be made only if there is seized material qua an assessee is untenable in law. The reliance placed by learned counsel for the petitioners upon the guidelines dated 17th September, 2020 is misplaced as the said guide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted through the e-proceeding functionality, and as such, the assessee or its authorised representative would not be bound to physically appear before the Assessing Officer on each date of hearing. In view of the above, no prejudice shall be caused to the assessees on account of their cases being transferred to the Central Circle. UNDOUBTEDLY, THERE CAN BE NO 'GUILT BY ASSOCIATION' OR 'GUILT DUE TO RELATIONSHIP', YET IN THE PRESENT MATTERS THE ASSESSMENTS HAVE BEEN TRANSFERRED FOR THE PURPOSES OF COORDINATED INVESTIGATION 63. Undoubtedly, the principle of law laid down by the Supreme Court in Chintalapati Srinivasa Raju vs. Securities and Exchange Board of India (supra) is that there can be no 'guilt by association' or 'guilt due to relationship', yet in the present batch of writ petitions, the assessments of the petitioners have been transferred only for the purposes of coordinated investigation and meaningful assessment. 64. Transfer in the present batch of writ petitions would also not be violative of the guidelines issued by the CBDT, as the transfers according to the counter affidavit have taken place for the purposes of better coordination and meaningful assessment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpleted on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year." 67. Also, as stated hereinabove, neither the E-assessment nor the Faceless Assessment Scheme in any manner modifies the power to transfer cases from one Assessing Officer under a Principal Commissioner of Income Tax to another Assessing Officer under another Principal Commissioner of Income Tax who are holding non-concurrent charges. The aforesaid Schemes only authorise transfer back of the case to the Jurisdictional Assessing Officer holding original jurisdiction which he never loses as only the function of assessment is carried out by the Faceless Assessing Officer holding concurrent jurisdiction. But, when a 'case' is transferred under Section 127 of the Act, "all proceedings under this Act" gets transferred. The power under Section 127 of the Act to transfer the "case" or "all proceedings under the Act" is nowhere provided for under the aforesaid schemes. Moreover, the submission that the Notifications dated 12th September, 2019 and 13th August, 2020 permits transfer in the first instance only from National....