Facts of the Case

  • Multiple petitioners including:
    • 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 subject to faceless assessment proceedings for AY 2018-19.
  • During pendency of such proceedings, transfer orders under Section 127 were passed.
  • Jurisdiction was shifted:
    • From Exemption Circle / Jurisdictional AO
    • To Central Circle (DCIT Central Circle)
  • Transfer was justified on grounds of:
    • Coordinated investigation
    • Connection with “Sanjay Bhandari Group”
  • Petitioners challenged:
    • Transfer orders dated 08.01.2021
    • Subsequent notices under Section 142(1)

Issues Involved

  1. Whether transfer of assessment to Central Circle under Section 127 is valid without CBDT approval?
  2. Whether faceless assessment scheme restricts such transfer?
  3. Whether transfer to Central Circle is permissible in absence of search/raid?
  4. Whether such transfer violates statutory scheme and procedural safeguards?

Petitioner’s Arguments

  • Violation of Faceless Assessment Scheme:
    • Assessments must be conducted electronically without human interface.
  • CBDT Approval Mandatory:
    • Transfer under amended scheme requires prior approval of CBDT.
  • Improper Use of Section 127:
    • Transfer cannot override statutory scheme of faceless assessment.
  • No Basis for Central Circle Transfer:
    • No search/raid conducted.
    • CBDT guidelines restrict Central Circle jurisdiction.
  • Legal Malice:
    • Transfer arbitrary and not based on objective criteria.
  • No “Guilt by Association”:
    • Mere alleged connection with another group cannot justify transfer.
  • Statutory Notifications Prevail:
    • CBDT circulars cannot override statutory notifications.

Respondent’s Arguments

  • Wide Power under Section 127:
    • Authorities have discretion to transfer cases for effective investigation.
  • Coordinated Investigation:
    • Transfer necessary for meaningful and coordinated inquiry.
  • No Absolute Right to Faceless Assessment:
    • Assessee does not have vested right to faceless proceedings.
  • Reliance on Judicial Precedents:
    • Including interpretation of Section 127 powers.

Court’s Findings / Order

  • Section 127 Power is Broad:
    • Transfer of cases is permissible for coordinated investigation.
  • Central Circle Not Limited to Search Cases:
    • Jurisdiction is not confined only to search and seizure matters.
  • Faceless Assessment Not an Absolute Right:
    • Assessee has no fundamental or vested right to faceless assessment.
  • CBDT Approval Interpretation:
    • Power of transfer not curtailed by notifications.
  • No “Guilt by Association” Rule – but:
    • Transfer justified if required for coordinated investigation.
  • Two-step Transfer Argument Rejected:
    • Court held such interpretation legally untenable.

Final Outcome

  • Writ petitions dismissed
  • Transfer orders upheld

Important Clarifications by Court

  • Faceless assessment is a procedural mechanism, not a legal right.
  • Section 127 power remains independent and overriding.
  • Transfer can be justified even without:
    • Search
    • Direct evidence of wrongdoing
  • Coordination of investigation is a valid ground.
  • Notifications do not dilute statutory power of transfer.

Sections Involved

  • Section 127 – Power to transfer cases
  • Section 143(3), 143(3A), 143(3B) – Assessment & Faceless Assessment
  • Section 142(1) – Inquiry before assessment
  • Section 12A – Registration of charitable trust
  • Relevant Notifications (Faceless Assessment Scheme 2019 & 2020)

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

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