Sanjay Gandhi Memorial Trust Vs CIT (Delhi High Court)
Delhi High Court held that case can duly be transferred from Jurisdictional Assessing Officer to Central Circle by way of passing order under section 127 of the Income Tax Act.
Facts- The primary issue that arises for consideration in the present batch of writ petitions is whether the assessments of the petitioners could be transferred to the Central Circle by way of the impugned orders passed under Section 127 of the Income Tax Act, 1961 without sanction of the Central Board of Direct Taxes (‘CBDT’).
Conclusion- This Court is of the view that the assessments of the petitioners have been transferred to the Central Circle in accordance with law by way of the impugned orders passed under Section 127 of the Act. Accordingly, the present writ petitions along with pending applications are dismissed, without any order as to costs and the interim orders passed by this Court stand vacated. However, this Court clarifies that it has not examined the controversy between the parties on merits and they shall be at liberty to raise all their contentions and submissions before the concerned statutory authorities.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
THE ISSUE
1. The primary issue that arises for consideration in the present batch of writ petitions is whether the assessments of the petitioners could be transferred to the Central Circle by way of the impugned orders passed under Section 127 of the Income Tax Act, 1961 (hereinafter be referred to as ‘the Act’) without sanction of the Central Board of Direct Taxes (‘CBDT’).
RELEVANT FACTS
2. It is pertinent to mention that the present batch of writ petitions has been preferred by five Charitable trusts viz. Sanjay Gandhi Memorial Trust, Jawahar Bhawan Trust, Rajiv Gandhi Foundation, Rajiv Gandhi Charitable Trust, Young India as well as three individuals viz. Mrs. Sonia Gandhi, Mr. Rahul Gandhi, Mrs. Priyanka Gandhi Vadra and a political party – Aam Aadmi Party (AAP).
3. In the present batch of writ petitions, the petitioners have challenged the transfer orders passed under Section 127 of the Act, whereby the jurisdiction of the petitioners have been transferred from Exemption Circle (in cases of Trusts) and ACIT Circle 52(1) (in cases of individuals) to DCIT Central Circle-27 and in the case of Aam Aadmi Party from Exemption Circle to DCIT, Central Circle -03. All the Income Tax Officers i.e. both transferor and transferee are located within the same city, namely, Delhi.
4. Since a common question of law arises in the present batch of writ petitions, the facts of Writ Petition (C) 3535 of 2021 (which was treated as the lead writ petition with the consent of parties) are reproduced here in below.-
4.1 The Petitioner (Sanjay Gandhi Trust) was established with the intent of providing health services, education and employment to the people of rural Uttar Pradesh. The Trust manages rural medical centre, the Sanjay Gandhi Hospital, educational institutes such as Indira Gandhi School and College of Nursing, Indira Gandhi Institute of Paramedical Sciences, Indira Gandhi Technical Institute and Rajiv Gandhi Computer Shiksha Kendra.
4.2 The petitioner is registered as a charitable institution under Section 12A of the Act and assessments have been completed under Section 143(3)/143(1) of the Act till the Assessment Year 2017-18. Charitable purpose of the petitioner has never been doubted by the revenue till the said Assessment Year.
4.3 By way of Finance Act, 2018, the concept of E-assessment was introduced in the Act by insertion of sub-Sections (3A), (3B) and (3C) to Section 143 of the Act and the Central Government was delegated with the power to make and notify a Scheme for conducting of E-assessments. Sub-Sections (3A), (3B) and (3C) to Section 143 of the Act are reproduced here in below:-
“Assessment
143….
(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) [or section 144] so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based assessment with dynamic jurisdiction.
(d) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, [2021].
(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.”
(emphasis suppled)
4.4 On 12th September, 2019, the E-assessment Scheme, 2019 was notified and implemented by the Central Government vide two Notifications No.61 and 62 of 2019. The relevant portions of the said Notifications are reproduced here in below:-
A. Notification No.61/2019
“S.O. 3264(E).–In exercise of the powers conferred by sub-section (3A) of section 143 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely:-
1. Short title and commencement.–– (1) This Scheme may be called the E- assessment Scheme, 2019.
…
2. Definitions .–– (1) In this Scheme, unless the context otherwise requires, –– …
(iii) “assessment” means assessment of total income or loss of the assessee under sub-section (3) of section 143 of the Act;
….
(v) “automated allocation system” means an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources;
(vi) “automated examination tool” means an algorithm for standardised examination of draft orders, by using suitable technological tools, including artificial intelligence and machine learning, with a view to reduce the scope of discretion;
…
(xiii) “e-assessment” means the assessment proceedings conducted electronically in ‘e-Proceeding’ facility through assessee’s registered account in designated portal;
….
4. E-assessment Centres.– (1) For the purposes of this Scheme, the Board may set up-
(i) a National e-assessment Centre to facilitate the conduct of e-assessment proceedings in a centralised manner, which shall be vested with the jurisdiction to make assessment in accordance with the provisions of this Scheme;
(ii) Regional e-assessment Centres as it may deem necessary to facilitate the conduct of e-assessment proceedings in the cadre controlling region of a Principal Chief Commissioner, which shall be vested with the jurisdiction to make assessment in accordance with the provisions of this Scheme;
(iii) assessment units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function of making assessment, which includes identification of points or issues material for the determination of any liability (including refund) under the Act, seeking information or clarification on points or issues so identified, analysis of the material furnished by the assessee or any other person, and such other functions as may be required for the purposes of making assessment;
(iv) verification units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function of verification, which includes enquiry, cross verification, examination of books of accounts, examination of witnesses and recording of statements, and such other functions as may be required for the purposes of verification.
(v) technical units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function of providing technical assistance which includes any assistance or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or any other technical matter which may be required in a particular case or a class of cases, under this Scheme; and
(vi) review units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function of review of the draft assessment order, which includes checking whether the relevant and material evidence has been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft order, whether the issues on which addition or disallowance should be made have been discussed in the draft order, whether the applicable judicial decisions have been considered and dealt with in the draft order, checking for arithmetical correctness of modifications proposed, if any, and such other functions as may be required for the purposes of review, and specify their respective jurisdiction.
….
5. Procedure for assessment.––(1) The assessment under this Scheme shall be made as per the following procedure, namely:-
….
(xix) The National e-assessment Centre shall, upon receiving the revised draft assessment order,-
(a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, finalise the assessment as per the procedure laid down in sub-paragraph (a) of paragraph (x); or
(b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, provide an opportunity to the assessee, as per the procedure laid down in subparagraph (b) of paragraph (x);
(c) the response furnished by the assessee shall be dealt with as per the procedure laid down in paragraphs (xvi),(xvii), and (xviii);
(xx) The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over such case., for –
(a) imposition of penalty;
(b) collection and recovery of demand;
(c) rectification of mistake;
(d) giving effect to appellate orders;
(e) submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts, as the case may be;
(f) proposal seeking sanction for launch of prosecution and filing of complaint before the Court;
(xxi) Notwithstanding anything contained in paragraph (xx), the National e-assessment Centre may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case.”
B. Notification No.62/2019
“S.O. 3265(E).—In exercise of the powers conferred by sub-section (3B) of section 143 of the Income-tax Act, 1961 (43 of 1961), for the purposes of giving effect to the E-assessment Scheme, 2019 made under sub-section (3A) of section 143 of the Act, the Central Government hereby makes the following directions, namely:-
1. The provisions of clause (7A) of section 2, section 92CA, section 120, section 124, section 127, section 129, section 131, section 133, section 133A, section 133C, section 134, section 142, section 142A, section 143, section 144A, section 144BA section 144C and Chapter XXI of the Act shall apply to the assessment made in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely: –
“A. (1) The assessment shall be made as per the following procedure, namely:-
….
(xxi) Notwithstanding anything contained in paragraph (xx), the National e- assessment Centre may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case.”
(emphasis supplied)
4.5 In the Budget Speech, 2019, referring to the fact that the existing system of scrutiny assessments in the Income Tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials, the Finance Minister introduced the concept of Faceless Assessment, with the intention of eliminating such instances.
4.6 On 23rd September, 2019, notice under Section 143(2) of the Act was issued to the petitioner, as per the E-assessment Scheme, for scrutiny assessment for the Assessment Year 2018-19.
4.7 On 13th August, 2020, with the goal of making the tax system faceless, painless and seamless, the Hon’ble Prime Minister launched the Faceless Assessment Scheme. The most important feature of the Faceless Assessment Scheme is that there is no communication/contact between the Assessing Officer and the assessee and the allotment of the Assessing Officer for any case is done by an automated system. The two above mentioned notifications issued in 2019 were amended by two other notifications No.60 and 61 of 2020 dated 13th August, 2020. The relevant portions of the new notifications are reproduced hereinbelow:-
A. Notification No.60/2020
“S.O. 2745 (E). —In exercise of the powers conferred by sub-section (3A) of section 143 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendments in the E-assessment Scheme, 2019 published vide notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, in the Gazette of India, Extraordinary, vide number S.O 3264 (E) dated the 12th September, 2019, namely:-
1. In the said Scheme, —
(1) in sub-paragraph (1) of paragraph 1, for the word “E-assessment”, the words “Faceless Assessment” shall be substituted;
…
(4) for paragraph 5, the following paragraph shall be substituted, namely,—
“5. Procedure for assessment. — (1) The assessment under this Scheme shall be made as per the following procedure, namely: —
…
(xxvi) The National e-assessment Centre shall, after completion ofassessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act;”
(2) Notwithstanding anything contained in sub-paragraph (1), the Principal Chief Commissioner or the Principal Director General, in charge ofNational e-assessment Centre, may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case, with the prior approval of the Board.”
B. Notification No.61/2020
“S.O. 2746(E). —In exercise of the powers conferred by sub-section (3B) of section 143 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Central Board of Direct Taxes, published in the Gazette of India, Extraordinary, vide number S.O 3265 (E) dated the 12th September, 2019, namely:- 1. In the said notification, —
(1) in the opening portion, for the word “E-assessment”, the words “Faceless Assessment” shall be substituted.
(2) for clause 1, the following clause shall be substituted, namely:— “1. The provisions of clause (7A) of section 2, section 92CA, section 120, section 124, section 127, section 129, section 131, section 133, section 133A, section 133C, section 134, Chapter XIV, and Chapter XXI of the Act shall apply to the assessment made in accordance with the said Scheme subject to the following exceptions, modifications and adaptations, namely:
“A. (1) The assessment shall be made as per the following procedure, namely:—
…
(xxvi) The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act;
(2) Notwithstanding anything contained in sub-paragraph (1), the Principal Chief Commissioner or the Principal Director General, in charge of National e-assessment Centre, may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case, with the prior approval of the Board.”
(emphasis supplied)
4.8 On 14th October, 2020, the petitioner received a letter from National e-Assessment Centre stating that pending E-assessment for the Assessment Year 2018-19 will now be completed under the Faceless Assessment Scheme.
4.9 On 23rd November and 30th December, 2020, the petitioner received notices from National e-Assessment Centre under Section 142(1) of the Act, calling upon to submit certain documents/details for the ongoing assessment proceedings for the Assessment Year 2018-19, which according to the Petitioner-Trust were duly complied with.
4.10 On 8th January, 2021, i.e. during the pending of ongoing E-assessment, Respondent No. 1/Commissioner of Income Tax, (Exemption), New Delhi passed the impugned order under Section 127 of the Act, transferring jurisdiction of the Petitioner from Respondent No. 3/Deputy Commissioner of Income Tax (Exemption), New Delhi to Respondent No.4/Deputy Commissioner of Income Tax, Central Circle-27, New Delhi, stating the following reason for transfer:
“…transfer the following cases (supplementary cases in Sanjay Bhandari Group of cases)…for –better coordination, effective investigation and meaningful assessment of the cases and with prior approval of CCIT(C) Delhi…”
(emphasis supplied)
4.11 On 13th January and 25th January, 2021, by way of notices under Section 142(1) of the Act, the National e-Assessment Centre called upon the petitioner to submit certain additional information for the ongoing E-assessment proceedings for the Assessment Year 2018-19. On 3rd February, 2021, Respondent No. 4 issued impugned notice under Section 142(1) of the Act to the petitioner for the Assessment Year 2018-19.
4.12 By way of the present petition, the petitioner has challenged the impugned order dated 8th January, 2021 passed under Section 127 of the Act and the impugned notice dated 3rd February, 2021 issued by Respondent No.4 under section 142(1) of the Act.
ARGUMENTS BY LEARNED SENIOR COUNSEL FOR GANDHIS AND FIVE CHARITABLE TRUSTS
5. Mr. Arvind Datar, learned Senior Counsel for Mrs. Sonia Gandhi, Mr. Rahul Gandhi and Mrs. Priyanka Gandhi Vadra and for the five charitable trusts stated that in the Budget speech of 2019, the Finance Minister set out the concept of the Faceless e-assessment Scheme as under:
“124. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, and to give shape to the vision of the Hon’ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such e-assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies.
125. Cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Department.”
6. He further stated that in the Budget for 2020, the concept of Faceless Appeals was introduced on the lines of Faceless Assessment. After referring to the Notifications No. 61/2019 and 62/2019 issued in 2019 as well as the Notifications Nos. 60 and 61 of 2020 issued in 2020 to give effect to the concept of Faceless Assessment, he summarised the Faceless Assessment procedure as under:
a. A National e-Assessment Centre, to facilitate and conduct assessment proceedings in a centralized manner shall be vested with jurisdiction to make assessment;
b. Notices under section 143(2) of the Act shall be issued by the National e-Assessment Centre;
c. After receiving reply from the assessee, the National e- Assessment Centre shall assign the case selected for the purpose of e-assessment towards specific assessment unit in any one Regional e-Assessment Centre through an automated allocation system;
d. After assignment of a case, if any information/enquiry required to be conducted, the Regional e-Assessment Centre, may make such request to National e-Assessment Centre;
e. Thereafter, the National e-Assessment Centre shall issue appropriate notice to the assessee requesting for the required information;
f. The information called upon by the National e- Assessment Centre shall be submitted by the assessee to the National e-Assessment Centre, which shall thereafter be forwarded to the Assessment Unit;
g. In case of enquiry or technical assistance required by the Regional e-Assessment Centre, such request is also required to forwarded to the National e-Assessment Centre, which shall thereafter be allocated by the National e-Assessment Centre to other Unit through an automated allocated system;
h. Pursuant to receipt of the information and report from National e-Assessment Centre, the Regional e- Assessment Centre will prepare a draft assessment order, which shall thereafter be examined in accordance with risk management strategy specified by the Board, including by way of automated examination tool;
i. Thereafter, the review unit may concur or suggest modifications in the assessment order and send its suggestions to the National e-Assessment Centre;
j. Pursuant thereto, the National e-Assessment Centre, after considering the suggestions, assign the case to Regional e-Assessment Centre other than the one who has made the draft assessment order;
k. After completion of assessment, the National e- Assessment Centre shall transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case.
7. According to him the aforesaid highlighted the intention of the Central Government to eliminate personal interaction in Faceless Assessments and Appeals which is now the new method of assessing income tax cases and deciding appeals. He emphasised that the assessments have to be processed only on the basis of written submissions and in electronic mode. Thus, the existing assessment of a person in Jaipur will no longer be carried out by the Jurisdictional Assessing Officer, ITO in Jaipur, but the assessment will be completed by the National e-Assessment Centre and through the Regional Assessment Centres and also units of assessment. The location where the assessment is done and the Assessing Officer will remain unknown.
8. He stated that the CBDT has issued instruction dated 17th September, 2020, setting out guidelines for the compulsory selection of returns for complete scrutiny for Financial Year 2020-21 under the Faceless Assessment Scheme as under:-
“F. NO. 225/126/2020/ITA-II
Government of India
Ministry of Finance
Department ofRevenue
Central Board of Direct Taxes (ITA-II division)
North Block, New Delhi, the 17th September, 2020
To
All Pr. Chief-Commissioners of Income-tax/ Chief-Commissioners of Income-tax
All Pr. Director-Generals of Income tax/Director-Generals of Income –tax.
Madam/Sir
Subject: Guidelines for compulsory selection of returns for Complete Scrutiny during the Financial Year 2020-21 — conduct of assessment proceedings in such cases – regarding.-
Kindly refer to above.
2. Keeping in view of the Faceless Assessment Scheme, 2020 implemented by the Department and the difficulties being faced amid COVID-19 pandemic, the parameters for compulsory selection of returns for Complete Scrutiny during Financial Year 2020-21 and conduct of assessment proceedings in such cases are prescribed as under:
