Delhi High court rules that no assessee has any fundamental or vested legal right to be assessed by a Faceless Assessing Officer by virtue of amendment of Sections 143(3A) and 143 (3B) of the Income Tax Act.

Sanjay Gandhi Memorial Trust ( Petitioner) Vs. Commissioner of Income Tax (Exemption) and Others (Respondents).

(W.P. 3535/2021 & CM APPL. 10693/2021 or 2023 SCC OnLine Del 3161)

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(2JB, MANMOHAN AND DINESH KUMAR SHARMA, JJ., delivered by MANMOHAN, J.)

Facts: 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 party – Aam Aadmi Party (AAP) challenging the transfer orders passed under Section 127 of the Income Tax Act, 1961, whereby the jurisdiction of the petitioners have been transferred from Exemption Circle (in cases of Trusts) and ACIT Circle 52(1) (in cases of individuals) to DCIT Central Circle-27 and in the case of Aam Aadmi Party from Exemption Circle to DCIT, Central Circle -03.

Issue: 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, without sanction of the Central Board of Direct Taxes (‘CBDT’)?

Arguments on behalf of counsel for petitioner:

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Arvind Datar for the Gandhis

It is submitted that in the Budget speech of 2019, the finance minister set out the concept of the Faceless e-assessment Scheme. Further, in the Budget for 2020, the concept of Faceless Appeals was introduced on the lines of Faceless Assessment, which 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. Further, the CBDT has issued instruction dated 17 September, 2020, setting out guidelines for the compulsory selection of returns for complete scrutiny for Financial Year 2020-2021 under the Faceless Assessment Scheme, in view of which all assessments will now be subject to the Faceless Assessment procedure except those relating to international taxation and assessments which are required to be dealt with by the Central Circle. Further, it is submitted that none of the assessees herein has been subjected to any raid or search but their cases are being sought to be transferred to the Central Circle, and that transfers are completely contrary to statutory provisions and vitiated by legal malice. Lastly, it was 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, and that there can be no ‘guilt by association’ or ‘guilt due to relationship’. Reliance was placed upon the judgment of the Supreme Court in Chintalapati Srinivasa Raju v. Securities and Exchange Board of India, (2018)

Amar Dave for the Aam Admi Party

It is 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, which undeniably leads to a conclusion that any deviation from giving the benefit to an assessee of this mechanism must be construed strictly. Further, it is submitted that the very nature of the Faceless Assessment Mechanism incorporated in the provisions of the Act itself, provides for a wide ranging statutory rights, deprivation of which qua an assessee will obviously affect the assessee prejudicially. Further, it was contended that the scheme clearly incorporates various checks and balances including a multi-layered review mechanism before reaching to a conclusion on the assessment process. It was 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, 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.

Arguments on behalf of counsel for respondents: Tushar Mehta, SG with Mr. Balbir Singh, ASG

It was stated that the reason mentioned in the impugned orders is ‘better coordination, effective investigation and meaningful assessment which reflects administrative convenience and exigency viz. the need of the assessment taking place under the same Assessing Officer and any future possibility of conflicting views/treatment in similar transactions is averted. Reliance was placed on Constitution Bench judgment of the Supreme Court in Kashiram Agarwala wherein the Supreme Court has held that neither is there any requirement for recording of reasons under Section 127 of the Act nor any requirement that a reasonable opportunity is to be given to the assessee, when the transfer is within the same city, locality or place. Further, the court in ATS Infrastructure Ltd. v. Commissioner of Income Tax, (2009) 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.

Held: The court, while dismissing the present writ petitions, has held that “this Court is of the view that the assessments of the petitioners have been transferred to the Central Circle in accordance with law by way of the impugned orders passed under Section 127 of the Act.” Further, it is observed that “it is settled law that a transfer order under Section 127 of the Act does not affect any fundamental or legal right of an assessee and the Courts ordinarily refrain from interfering with exercise of such power”, and that “Central Circle jurisdiction is not confined to search cases only.”, and that “no assessee has any fundamental or vested legal right to be assessed by a Faceless Assessing Officer by virtue of amendment of Sections 143(3A) and 143 (3B) of the Act.”, and that “the assessments of the petitioners have been transferred only for the purposes of coordinated investigation and meaningful assessment.” And that “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 nonconcurrent charges.”

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