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TMI Blog2023 (5) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 party - Aam Aadmi Party (AAP). 3. In the present b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely:- 1. Short title and commence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 and dealt with in the draft order, checking for arithmetical correctness of modifications proposed, if any, and such other functions as may be required for the purposes of review, and specify their respective jurisdiction. .... 5. Procedure for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 intention of eliminating such instances. 4.6 On 23rd September, 2019, notice under Section 143(2) of the Act was issued to the petitioner, as per the E-assessment Scheme, for scrutiny assessment for the Assessment Year 2018-19. 4.7 On 13th August, 2020, with the goal of making the tax system faceless, painless and seamless, the Hon'ble Prime Minister launched the Faceless Assessment S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act; (2) Notwithstanding anything contained in sub-paragraph (1), the Principal Chief Commissioner or the Principal Director General, in charge of National E-assessment Centre, may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny 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 allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Department." 6. He further stated that in the Budget for 2020, the concept of Faceless Appeals was introduced on the lines of Faceless Assessment. After referring to the Notifications No. 61/2019 and 62/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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-Assessment Centre and through the Regional Assessment Centres and also units of assessment. The location where the assessment is done and the Assessing Officer will remain unknown. 8. He stated that the CBDT has issued instruction dated 17th September, 2020, setting out guidelines for the compulsory selection of returns for complete scrutiny for Financial Year 2020-21 under the Faceless Assessment Scheme as under:- "F. NO. 225/126/2020/ITA-II Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (ITA-II division) North Block, New Delhi, the 17th September, 2020 To All Pr. Chief-Commissioners of Income-tax/ Chie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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/s 142(1) of the Act was issued due to the information contained in NMS Cycle/AIR information/information received from Directorate of IC&I. These cases will not be taken up for compulsory scrutiny and the selection of such cases for scrutiny will be through CASS cycle. (iii) Cases where return has been furnished in response to notice u/s 142(1) of the Act and where notice u/s 142(1) of the Act was issued due to the specific information received from Law Enforcement Agencies, including the Investigation Wing; Intelligence/ Regulatory Authority/Agency; Audit Objection; etc. 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 conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lsory 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 except those relating to international taxation and assessments which are required to be dealt with by the Central Circle. He emphasised that the CBDT has issued circulars to decide the types of cases that ought to be dealt with by the Central Circle. He stated that usually cases where income-tax raids or searches have been carried out, are dealt with by the Central Circle. He contended that the CBDT circulars indicate that the transfer to the Central Circle are not to be at the whim of any ITO or Commissioner, but the stipulated guidelines of the CBDT have to be strictly followed. 10. He stated 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. He submitted that transfers are completely contrary to statutory provisions and v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, (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, which undeniably leads to a conclusion that any deviation from giving the benefit to an assessee of this mechanism must be construed strictly. 20. He also 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 such as inter-alia: (i) the assessment being carried out in a dynamic and team-based manner i.e. the exercise being undertaken simultaneously with the assistance of various specialised units itself; (ii) multiple layers of scrutiny before finalisation of the assessment; (iii) the automated assignment of the case eliminating any prejudice etc. No Manual Selection of Cases. (iv) Draft assessment order whereby opportunity is given to Assessee before Finalizing the Assessment Order in case of order prejudicial to Assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 judgment in Kashiram Agarwalla (supra) applies even after the introduction of such a special scheme. ARGUMENTS BY LEARNED SOLICITOR GENERAL AND LEARNED ADDITIONAL SOLICITOR GENERAL 27. Learned Solicitor General submitted that the impugned orders transferred the cases from Exemption Circle in case of Trusts or ACIT Circle 52(1) in cases of individuals in New Delhi to DCIT, Central Circle-27 and both the officers are indisputably within the same city, namely, New Delhi, at about 3 kms distance only, under different PCITs. He 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. 28. He submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 manner wherefor the statute was enacted". 33. Without prejudice to the above, he submitted that nevertheless the transfer order categorically records that the transfer as mentioned is effected for the purpose of better coordination and meaningful assessment. 34. He argued that the requirement of a coordinated investigation or coordinated assessment has been held to meet the requirement of law for the purpose of transfer. To substantiate his submission, he placed reliance on the judgment of Division Bench of the Chhattisgarh High Court in the case of Commissioner of Income Tax v. Union of India & Ors., (2013) 358 ITR 341 wherein it has been observed that the expression 'coordinated investigation' is not a vague expression and that transfer orders using similar expressions have been upheld by almost all the High Courts in the country. He submitted that similar views have been taken by the Madras High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 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. 38. He contended that even when the function of assessment is outsourced to the Faceless Assessment Officer, the Jurisdictional Assessing Officer continues to exercise concurrent jurisdiction and perform several functions after completion of assessment like i) imposition of penalty; ii) collection and recovery of demand; iii) rectification of mistake; iv) giving effect to appeal orders; v) proposal seeking sanction for launch of prosecution and filing of complaint before the Court etc. 39. He also contended that Section 127 of the Act falls under Chapter XIII which relates to Jurisdiction of Income Tax authorities and in contrast, Chapter XIV is only a procedural chapter limited to only assessment function. He submitted that Section 144B under Chapter XIV provides for faceless scheme of assessment and the jurisdiction continues to be governed under Chapter XIII. 40. He argued that allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 convenience. Neither is there any requirement of recording of reasons under Section 127 nor any requirement that a reasonable opportunity is to be given to the assessee, when the transfer is within the same city - like in the present batch of writ petitions. The relevant portion of the said judgment is reproduced as under:- "6. There is another consideration which is also relevant. Section 124 of the Act deals with the jurisdiction of Income Tax Officers. Section 124(3) provides that within the limits of the area assigned to him the Income Tax Officer shall have jurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. This pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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 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. CENTRAL CIRCLE JURISDICTION IS NOT CONFINED TO SEARCH CASES 46. Further, 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. The relevant portion of the said Circular is reproduced hereinbelow: "2. The matter has been considered by the Board and it is clarified that the transfer/centralization of cases is done as per provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. The relevant portion of the said Notification is reproduced hereinbelow:- S.O. 2756(E).-In pursuance of the powers conferred by sub-sections (1), (2) and (5) of section 120 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the said Act), the Central Board of Direct Taxes hereby directs that the Income-tax Authorities of the National e-Assessment Centre (hereinafter referred to as the NeAC) specified in Column (2) of the Schedule below, having its headquarters at the place mentioned in column (3) of the said Schedule, shall exercise the powers and functions of Assessing Officer concurrently, to facilitate the conduct of Faceless Assessment proceedings)... (emphasis supplied) 49. It is clarified in the E-assessment and Faceless Assessment Scheme that once a case is selected for scrutiny, for the limited purpose of passing assessment order f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion over such case, with prior approval of the Board. Clause (2) of the Scheme only authorises a transfer back to the Jurisdictional Assessing Officer holding original jurisdiction, which he never loses as it is only the function of assessment that is to be carried out by the Faceless Assessing Officer having concurrent jurisdiction. Consequently, Clause (2) of the Scheme only re-transfers the function of assessment to the Jurisdictional Assessing Officer holding concurrent jurisdiction. Further, the said clause confers power of transfer upon Principal Chief Commissioner or Principal Director General of National e-Assessment Centre and not upon any other Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. 54. Also, this power under Clause (2) is nowhere akin to the power to transfer under Section 127(2) of the Act wherein the jurisdiction over a 'case' of an assessee is transferred by Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from one Assessing Officer under one Commissioner to another Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers upon the guidelines dated 17th September, 2020 is misplaced as the said guidelines are limited for the purpose of compulsory selection of returns for complete scrutiny during the FY 2020-21. The aforesaid guidelines do not in any manner curtail or control the power of transfer under Section 127 of Act. Para 3 of the aforesaid guidelines clearly provides that "without prejudice to the above, cases which are selected for compulsory scrutiny by the international taxation and central charges following the above prescribed guidelines shall as earlier continue to be handled by these charges". This reiterates the position of the statutory scheme that cases which are transferred to the Central Circle are not required to be assessed in a faceless manner. 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) 60. This Court is also of the opinion 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. Firstly, Section 143(3A) of the Act stipulates that the Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of better coordination and meaningful assessment of the present cases either with those of Sh.Robert Vadra [the husband of the petitioner in W.P.(C) No. 4083 of 2021] and Sh.Sanjay Bhandari and Satyendar Kumar Jain, Member of AAP and former Cabinet Minister in Govt. of Delhi. No final view has been or can be taken without a fair and adequate opportunity given to the assessees to explain that they are not connected in any manner with the said cases for the purpose of assessment during the assessment proceedings. Consequently, there are absolutely no adverse civil consequences against the petitioners thereby making this judgment inapplicable to the present batch of writ petitions. 65. 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. THE ARGUMENT THAT THE POWER OF TRANSFER UNDER THE NOTIFICATIONS IS A TWO-STEP PROCESS IS UNTENABLE IN LAW. 66. The argument of the petitioners that the power to transfer cases under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 68. Keeping in view the aforesaid conclusions, 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. Accordingly, the present writ petitions along with pending applications are dismissed, without any order as to costs and the interim orders passed by this Court stand vacated. However, this Court clarifies that it has not examined the controversy between the parties on merits and they shall be at liberty to raise all their co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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