Facts of the Case

  • Petitioners included:
    • Charitable trusts (Sanjay Gandhi Memorial Trust, Rajiv Gandhi Foundation, etc.)
    • Individuals (Sonia Gandhi, Rahul Gandhi, Priyanka Gandhi Vadra)
    • Political party (Aam Aadmi Party)
  • They were undergoing faceless assessment proceedings for AY 2018-19.
  • During pendency, orders dated 08.01.2021 under Section 127 transferred their cases:
    • From Exemption Circle / Jurisdictional AO
    • To Central Circle (DCIT Central Circle-27/03)
  • Reason cited:
    • “Better coordination, effective investigation and meaningful assessment”
  • Petitioners challenged:
    • Transfer orders under Section 127
    • Subsequent notices issued by Central Circle

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 taxpayers have a right to faceless assessment?
  4. Whether transfer can be justified for coordinated investigation without search proceedings?

Petitioner’s Arguments

  • Violation of Faceless Assessment Scheme:
    • Scheme eliminates human interface and mandates automated allocation.
  • CBDT Approval Mandatory:
    • Transfer under amended scheme requires prior CBDT approval, which was absent.
  • Improper Transfer to Central Circle:
    • Central Circle is meant for search/seizure cases, not routine cases.
  • Statutory Scheme Cannot be Overridden:
    • Notifications under Sections 143(3A)/(3B) have statutory force.
  • No Nexus with Investigation:
    • Alleged connection with “Sanjay Bhandari group” not substantiated.
  • No ‘Guilt by Association’:
    • Transfer based on relationships is arbitrary 

Respondent’s Arguments

  • Wide Power under Section 127:
    • Transfer for coordinated investigation is permissible.
  • Faceless Scheme not Absolute:
    • Does not restrict statutory powers of transfer.
  • Centralization Justified:
    • Ensures effective investigation and meaningful assessment.
  • Reliance on Precedent:
    • Cited Kashiram Aggarwalla case for scope of Section 127.

Court’s Findings

  • Scope of Section 127:
    • Power is wide and not restricted to search cases.
  • Faceless Assessment is not a Right:
    • No fundamental or vested right to be assessed facelessly.
  • CBDT Approval Not Mandatory in All Cases:
    • Notifications do not override Section 127 powers.
  • Central Circle Transfer Valid:
    • Even without search, transfer for coordinated investigation is valid.
  • No ‘Guilt by Association’, Yet:
    • Transfer justified due to interconnected transactions and investigation needs.
  • Notifications Do Not Curtail Power:
    • E-assessment notifications do not limit statutory transfer power.

Court Order / Conclusion

  • All writ petitions dismissed.
  • Transfer orders under Section 127 upheld.
  • Assessments by Central Circle held valid.

Important Clarifications

  • Faceless assessment is procedural, not a vested right.
  • Section 127 power:
    • Can be exercised even without search proceedings
    • Can override procedural schemes for administrative efficiency
  • Transfer for coordinated investigation is a valid ground
  • CBDT notifications do not dilute statutory authority

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

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