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HomeJudiciaryFaceless I-T assessment 'not vested right' — HC rejects Gandhis', AAP's pleas...

Faceless I-T assessment ‘not vested right’ — HC rejects Gandhis’, AAP’s pleas against transfer

Delhi HC upholds income tax dept's decision to transfer tax assessments of Gandhis & AAP to central circle, says 'order invariably made on grounds of administrative convenience'.

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New Delhi: The Delhi High Court Friday held that no assessee has any fundamental or vested legal right to be assessed under the faceless assessment scheme rejecting a batch of petitions including those by Congress leaders Sonia Gandhi, Rahul Gandhi, Priyanka Gandhi Vadra, and the Aam Aadmi Party (AAP). The petitions challenged the Income Tax Department’s decision to transfer their 2018-19 tax assessments from faceless assessment scheme to its central circle.

A bench of justices Manmohan and D.K. Sharma held that the assessments of the petitioners have been “transferred only for the purposes of coordinated investigation and meaningful assessment.” 

“Consequently, the argument that Faceless Assessment is a vested right, fails to consider the language of the statute (Income Tax Act) itself,” the bench said.

The central government proposed the scheme of faceless tax assessment in the 2019 Union Budget. Under this, an assessing officer is selected at random by Artificial Intelligence (AI) to scrutnise a taxpayer’s (assessee’s) returns.

Implemented in August 2020, the scheme aims to eliminate the interface between tax officials and the taxpayer, thus ensuring a transparent and corruption-free process as well as speedy completion of cases.

The high court Friday also upheld the I-T department’s decision to transfer tax assessments of non-profits organisations associated with the Gandhi family — Sanjay Gandhi Memorial Trust, Rajiv Gandhi Foundation, Rajiv Gandhi Charitable Trust, Young Indian and Jawahar Bhawan Trust.

Gandhis, the non-profit organisations, and AAP had approached the HC in March 2021 against two orders of the I-T department dated 8 January and 3 February, 2021.

The I-T order dated 8 January, 2021, transferred the assessments of the petitioners from Deputy Commissioner of Income Tax (exemption) — under the faceless assessment scheme — to Deputy Commissioner of Income Tax, central circle. The one dated 5 February, 2021, required the petitioners to submit certain additional information for the assessment year 2018-19.


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I-T dept orders & arguments on both sides

In the 8 January, 2021, transfer order, the I-T department claimed the transfer of assessments was being done for “better coordination, effective investigation and meaningful assessment of the cases.” This order was passed under section 127 of the Income Tax Act, while the e-assessment against the petitioners was pending under the faceless assessment scheme.

According to the petitioners, they first received a letter in October 2020 from the National e-Assessment Centre (NeAC) stating that pending e-assessment for the Assessment Year 2018-19 will be completed under the Faceless Assessment Scheme. But in January, it was transferred to the central circle.

The petitioners argued that the concept of faceless appeals was introduced on the lines of faceless assessment. This was done to eliminate personal interaction, they said. Referring to the guidelines issued under the new scheme, only the international taxation and assessments are required to be dealt with by the central circle.

The petitioners emphasised cases where I-T raids or searches have been carried out, and are dealt with by the central circle.

Further, transfer to the central circle cannot be at the whim of any Income Tax Officer or Commissioner, but the stipulated guidelines released by the Central Bureau of (CBDT) have to be strictly followed, they said.

They also contended that no raid or search was carried out on the assessors and yet their cases are being sought to be transferred to the central circle, which was contrary to the statutory provisions and vitiated by legal malice.

Solicitor General Tushar Mehta and Additional Solicitor General Balbir Singh — appearing on the behalf of the I-T department — defended the transfer order which, they said, reflects administrative convenience and exigency. It was done to avert any future possibility of conflicting views and treatment in similar transactions, they told the HC.  

Quoting a 1960 Supreme Court judgment, the law officers said that according to section 127 of the I-T Act, under which the transfer order was made, the I-T Department was not required to record reasons for the transfer. Also, there is no requirement that a reasonable opportunity is to be given to the assessee, when the transfer is within the same city, locality or place.

Since the power of transfer under Section 127 of the Act cannot be likened to a quasi-judicial power, hence even the “briefest of reasons and discernible public interest would be sufficient for exercise of such power” and courts would not interfere with such exercise of power, the defence lawyers argued.

Delving on the principles of transfer under the law, the law officers submitted that there was no fundamental right of the assessee to be assessed at a particular place and that the assessment must be carried out at the principal place of business.

While the convenience of the assessee should be kept in mind, it would always be subservient to the interests of adjudication and collection of taxes, the court was told.

Moreover, the paramount consideration for transfer of a case under Section 127 is public interest and a reason to have coordinated investigation in the matter of family members or group of companies, the court was told.

After considering arguments of both sides, the court held that the the power of transfer under Section 127 of the Act is not in any manner denuded by the Faceless Assessment Scheme when the transfer is sought to be made from a Jurisdictional Assessing Officer under one Principal Commissioner of Income Tax to another Assessing Officer under a different Principal Commissioner of Income Tax, who is not exercising concurrent jurisdiction over the case.

Even under the central circle, the court noted, assessment proceedings are conducted through the e-proceeding functionality, and as such, the assessee or its authorised representative would not be bound to physically appear before the assessing officer on each date of hearing.

It agreed with the central government’s contention that the transfer order under Section 127 of the Act is a mere “administrative order invariably made on grounds of administrative convenience.”

“Neither is there any requirement of recording of reasons under Section 127 nor any requirement that a reasonable opportunity is to be given to the assessee, when the transfer is within the same city — like in the present batch of writ petitions,” the court said. Also, such a transfer does not affect any fundamental or legal right of an assessee.

It declined to accept the petitioners’ view that central circle jurisdiction is only confined to search cases only. “Central Charge is also conferred with jurisdiction over non-search cases where coordinated investigation is required,” the court concluded.

(Edited by Anumeha Saxena)


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