Facts of the Case

  • Multiple writ petitions were filed by:
    • Charitable Trusts: Sanjay Gandhi Memorial Trust, Rajiv Gandhi Foundation, etc.
    • Individuals: Sonia Gandhi, Rahul Gandhi, Priyanka Gandhi Vadra
    • Political Party: Aam Aadmi Party
  • Petitioners were undergoing faceless assessment proceedings under the E-Assessment/Faceless Scheme.
  • During pendency, transfer orders under Section 127 were passed transferring jurisdiction:
    • From Exemption Circle / Jurisdictional AO
    • To Central Circle (DCIT Central Circle)
  • Transfer was justified for coordinated investigation and meaningful assessment.
  • Petitioners challenged:
    • Transfer order dated 08.01.2021
    • Subsequent notices under Section 142(1)

 Issues Involved

  1. Whether transfer of assessment to Central Circle under Section 127 requires prior approval of CBDT?
  2. Whether such transfer is permissible during faceless assessment proceedings?
  3. Whether assessee has a right to faceless assessment?
  4. Whether transfer without search/raid violates CBDT guidelines?

 Petitioner’s Arguments

  • Faceless Assessment Scheme mandates no human interface and automated jurisdiction.
  • Transfer to Central Circle defeats the purpose of faceless assessment.
  • As per 2020 Notification, prior approval of CBDT is mandatory.
  • No search/raid conducted → transfer to Central Circle unjustified.
  • CBDT guidelines restrict Central Circle jurisdiction to specific cases (like search cases).
  • Transfer is arbitrary and amounts to legal malice.
  • No “guilt by association” can justify transfer.
  • Notifications have statutory force and override administrative discretion.

 

 Respondent’s Arguments

  • Power under Section 127 is wide and independent.
  • Transfer was for coordinated investigation across related cases.
  • Faceless scheme does not restrict statutory powers of transfer.
  • CBDT approval not mandatory in all situations.
  • Reliance placed on judicial precedent interpreting Section 127.

 

 Court Findings / Judgment

 1. Scope of Section 127

  • Section 127 provides broad power of transfer of cases.
  • Not restricted only to search or seizure cases.

 2. Faceless Assessment vs Transfer Power

  • Faceless Assessment Scheme does not override Section 127.
  • No absolute right to faceless assessment.

 3. No Vested Right in Faceless Assessment

  • Assessee has no fundamental or vested right to be assessed through faceless mechanism.

 4. CBDT Approval Requirement

  • Transfer power is not invalid merely for lack of CBDT approval, depending on facts.

 5. Central Circle Jurisdiction

  • Central Circle jurisdiction is not limited to search cases only.

 6. Coordinated Investigation Justification

  • Transfer justified for effective and coordinated investigation.

 7. Guilt by Association Argument

  • Court clarified:
    • No “guilt by association”
    • However, transfer permissible for investigative coordination

 8. Two-Step Transfer Argument Rejected

  • Argument that transfer must follow a two-step process was held untenable in law.

 

Court Order

  • All writ petitions were dismissed.
  • Transfer orders under Section 127 were upheld as valid.

 

 Important Clarifications by Court

  • Faceless assessment is procedural, not a right
  • Section 127 power remains intact and independent
  • Administrative coordination is a valid ground for transfer
  • CBDT guidelines do not override statutory provisions

Sections Involved

  • Section 127, Income Tax Act, 1961 (Power to Transfer Cases)
  • Section 143(3), 143(3A), 143(3B), Income Tax Act, 1961
  • Section 142(1), Income Tax Act, 1961
  • Section 119, Income Tax Act, 1961
  • Faceless Assessment Scheme, 2019 & 2020 Notifications

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH26052023CW35352021_124210.pdf

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