Facts of the Case

  • The writ petitions were filed by multiple entities including:
    • Sanjay Gandhi Memorial Trust
    • Jawahar Bhawan Trust
    • Rajiv Gandhi Foundation
    • Rajiv Gandhi Charitable Trust
    • Young Indian
    • Individuals: Sonia Gandhi, Rahul Gandhi, Priyanka Gandhi Vadra
    • Political Party: Aam Aadmi Party
  • Petitioners were assessed under the faceless assessment scheme introduced via amendments to Section 143.
  • During pendency of faceless assessment proceedings for AY 2018–19, jurisdiction was transferred:
    • From Exemption Circle / regular jurisdiction
    • To Central Circle (DCIT Central Circle) under Section 127
  • The stated reason for transfer:
    • “Better coordination, effective investigation and meaningful assessment” in connection with another group of cases
  • Petitioners challenged:
    • Transfer order dated 08.01.2021 under Section 127
    • Subsequent notices issued post transfer

Issues Involved

  1. Whether transfer of assessment to Central Circle under Section 127 is valid without prior approval of CBDT.
  2. Whether such transfer violates the Faceless Assessment Scheme under Section 143(3A)/(3B).
  3. Whether transfer to Central Circle is permissible in absence of search/raid or statutory criteria.
  4. Whether taxpayers have a right to faceless assessment.

 

Petitioner’s Arguments

  • Faceless Assessment Scheme eliminates personal interaction and mandates electronic proceedings.
  • Transfer to Central Circle defeats the purpose of faceless assessment.
  • Prior approval of CBDT is mandatory under amended scheme (2020 notification).
  • No search, seizure, or conditions exist to justify Central Circle transfer.
  • CBDT guidelines restrict arbitrary transfer; statutory scheme must prevail.
  • Transfer is arbitrary, mala fide, and based on “guilt by association,” which is impermissible.
  • Notifications under Sections 143(3A)/(3B) have statutory force and cannot be overridden by administrative action.

Respondent’s Arguments

  • Power under Section 127 is wide and enables transfer for coordinated investigation.
  • Central Circle jurisdiction is not limited to search cases alone.
  • Transfer was necessary for effective and meaningful investigation.
  • Reliance placed on judicial precedent interpreting Section 127.
  • Faceless assessment scheme does not eliminate statutory powers of transfer.

Court Findings / Order

  • Section 127 grants wide powers for transfer of cases for administrative efficiency and coordinated investigation.
  • Central Circle jurisdiction is not restricted only to search or seizure cases.
  • Power of transfer is not curtailed by faceless assessment notifications.
  • No assessee has a vested or fundamental right to faceless assessment.
  • Requirement of prior approval does not invalidate transfer in the manner argued by petitioners.
  • Transfer for coordinated investigation is legally permissible even in absence of direct involvement.
  • Argument of “two-step process” for transfer was rejected.

Important Clarifications by Court

  • Faceless assessment is a procedural mechanism, not an absolute right.
  • Section 127 operates independently and retains full force.
  • Administrative coordination and investigation justify transfer.
  • “Guilt by association” is not applied, but connection for investigation can justify transfer.

Sections Involved

  • Section 127, Income Tax Act, 1961
  • Section 143(3), 143(3A), 143(3B), 143(3C)
  • Section 142(1), 143(2)
  • Section 119 (CBDT Circulars)

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

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