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), and a political party (Aam Aadmi Party) challenged transfer orders.
  • The petitioners were undergoing faceless e-assessment for AY 2018–19.
  • During pendency of such proceedings, the Commissioner passed orders under Section 127, transferring cases to Central Circle, Delhi.
  • The stated reason:
    • “better coordination, effective investigation and meaningful assessment” in relation to the Sanjay Bhandari group cases.
  • Petitioners challenged:
    • Transfer order dated 08.01.2021
    • Subsequent notices issued by Central Circle authorities

Issues Involved

  1. Whether transfer of assessment under Section 127 to Central Circle is valid without prior approval of CBDT?
  2. Whether such transfer violates the Faceless Assessment Scheme?
  3. Whether transfer during ongoing faceless proceedings is legally sustainable?
  4. Whether absence of search/raid justifies transfer to Central Circle?

Petitioner’s Arguments

  • Faceless Assessment Scheme eliminates human interface; transfer defeats legislative intent.
  • Transfer under amended scheme (2020 notifications) requires prior CBDT approval, which was absent.
  • Transfer can only be to jurisdictional Assessing Officer, not Central Circle.
  • CBDT guidelines restrict Central Circle cases mainly to search/seizure matters.
  • No search or raid conducted on petitioners.
  • Transfer based on vague “association” with another group is illegal (“no guilt by association”).
  • Notifications under Sections 143(3A)/(3B) have statutory force and override administrative circulars.

Respondent’s Arguments

  • Power under Section 127 is wide and enables transfer for coordinated investigation.
  • Central Circle jurisdiction is not limited to search cases.
  • Transfer justified for effective and meaningful investigation.
  • Reliance placed on precedent: Kashiram Aggarwalla vs Union of India.
  • Faceless assessment does not create a vested right in favour of assessee.

Court’s Findings / Order

  • Power under Section 127 is wide and not restricted only to search cases.
  • Central Circle jurisdiction can be invoked for coordinated investigation.
  • Faceless assessment does not confer any absolute or vested right on assessee.
  • Notifications of 2019 and 2020 do not curtail Section 127 powers.
  • Requirement of CBDT approval was interpreted within statutory framework and not violated in substance.
  • Argument of “two-step transfer process” rejected.
  • Court upheld validity of transfer orders.

Important Clarifications by Court

  • No absolute right to faceless assessment exists.
  • Transfer can be made even without search if required for investigation.
  • “Guilt by association” is not permissible in principle, but transfer for coordination is valid if justified.
  • CBDT guidelines cannot override statutory provisions.

Sections Involved

  • Section 127, Income Tax Act, 1961 (Transfer of Cases)
  • Section 143(2), 143(3), 143(3A), 143(3B), 143(3C)
  • Section 142(1)
  • Section 12A
  • Section 119
  • Notifications:
    • E-Assessment Scheme, 2019
    • Faceless Assessment Scheme, 2020

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

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