2023 (5) TMI 1118 - HC - Income Tax

Transfer u/s 127 - Power to transfer case under Faceless Assessment Scheme - assessments of the petitioners transferred to the Central Circle without sanction of the Central Board of Direct Taxes (‘CBDT’) - HELD THAT:- Almost all the High Courts have held that transfer under Section 127 of the Act for the purpose of coordinated investigation is a sufficient reason for passing of such an administrative order. Consequently, 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.

Whether Central Circle jurisdiction is not confined to search cases only? - Central Charge is also conferred with jurisdiction over non-search case where coordinated investigation is required. The Circular dated 25th April, 2014 makes it clear that there is no restriction upon transferring of non-search cases to Central Circle.

Whether the power u/s 127 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? - 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 - pursuant to exercise of power u/s 120(5) which empowers CBDT to confer concurrent jurisdiction on two or more AO for proper management of the work, the CBDT has vide Notification No.64/2020 dated 13th August, 2020 conferred power upon the Income-tax Authorities of the National e-Assessment Centre to exercise the power and function of assessment “concurrently” while the original jurisdiction continues with the Jurisdictional Assessing Officer.

If the Faceless Assessment Scheme has not modified Section 127 of the Act, the powers under the said Section would continue to apply to all cases in an unmodified manner.

Clause (xxi) of the Notifications No. 61/2019 and 62/2019 dated 12th September, 2019 issued in exercise of powers under Sections 143(3A) and 143(3B) of the Act in order to give effect to the E-assessment Scheme authorises the National e-Assessment Centre to transfer the case of the assessee at any stage of the assessment (i.e., only when the assessment proceeding is pending before the National e-Assessment Centre) to the Assessing Officer having jurisdiction over such case, as the scope of power and functions of National e-Assessment Centre is limited to facilitating the conduct of E-assessment.

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).

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.

Fundamental or vested legal right to be assessed by faceless AO u/s 143(3A) AND 143(3B) as amendment - As 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) - Section 143(3A) of the Act stipulates that the Central Government ‘may make a Scheme’ to eliminate the interface between the Assessing Officer and the Assessee. This implies that the Central Government has the discretion to frame or not to frame a Faceless Assessment Scheme. Consequently, the argument that Faceless Assessment is a vested right, fails to consider the language of the statute itself.

Secondly, the Notification No. 61/2019 dated 12th September, 2019 itself clarifies under the heading ‘3. Scope of the Scheme – The assessment under this Scheme shall be made in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the Board’.

Even under the Central Charges, the assessment proceedings are conducted 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.

‘Guilt by association’ or ‘guilt due to relationship’ - Undoubtedly, the principle of law laid down by the Supreme Court in Chintalapati Srinivasa Raju vs. Securities and Exchange Board of India[2018 (5) TMI 931 - SUPREME COURT] 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.

This Court clarifies that in the present batch of writ petitions, it has not relied upon the original files produced by the respondents, as there are sufficient reasons to justify the administrative decision to transfer the cases of the petitioners from Jurisdictional Assessing Officer to Central Circle.

Power to transfer cases u/s 127 as a two step process - 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 e-Assessment Centre to the Jurisdictional Assessing Officer is untenable in law as there may be cases where no assessment is pending before the Faceless Assessing Officer, yet the case of the Assessee is transferred to Central Circle. Consequently, Section 127 of the Act to the extent it permits transfer 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 remains untouched and continues to apply in its pristine form.

Conclusion - 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 u/s 127 of the Act. Accordingly, the present writ petitions along with pending applications are dismissed.