AVINASH MODI vs. ASSISTANT COMMISSIONER OF INCOME TAX

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CW/2/2023HC Rajasthan2025:RJ-JD:41530-DB17 September 2025Author: K.R. SHRIRAM, RAVI CHIRANIA6 pages
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What did the High Court hold?

The Tribunal held that the order dated July 12, 2022, passed under Section 148A(d) and the notice dated July 12, 2022, issued under Section 148 of the Act are liable to be quashed and set aside. The Court found that the facts of the Gujarat High Court case (Talati and Talati LLP) were entirely different from the present case. The Gujarat High Court's reasoning was based on Explanation 2 to Section 148 (as it existed then) and an understanding that the pre-requisites for issuing a notice under Section 148 in search cases could not be met by a Faceless Assessing Officer (FAO). However, the Rajasthan High Court disagreed with this reasoning. The Court noted that the Gujarat High Court was not made aware of the Bombay High Court's reasoning in Abhin Anilkumar Shah vs. Income Tax Officer, which dealt with exceptions to the faceless regime for certain assessment proceedings. Furthermore, the Court took note of the dismissal of an SLP by the Supreme Court against a Telangana High Court order based on the reasoning in Venkataramana Reddy Patloola, which supported the assessee's position. The Court quashed the impugned order and notice, keeping open all rights and contentions of the parties, with liberty to the revenue to revive the notice if the Apex Court interferes with the judgments in Hexaware Technologies Ltd., Sharda Devi Chhajer, or Shree Cement Limited.

What were the facts?

The petitioner, Avinash Modi, challenged an order dated July 12, 2022, passed under Section 148A(d) and a notice dated July 12, 2022, issued under Section 148 of the Income Tax Act, 1961. The petitioner argued that the notice was issued by the Jurisdictional Assessing Officer (JAO) and not a Faceless Assessing Officer (FAO), rendering it invalid. The petitioner relied on previous judgments from the Rajasthan High Court (Shree Cement Limited and Sharda Devi Chhajer) which followed a Bombay High Court decision (Hexaware Technologies Ltd.). The revenue cited a Gujarat High Court judgment (Talati and Talati LLP) where the court did not interfere with a similar notice but directed the assessee to reply. The Rajasthan High Court noted that the facts in the Gujarat High Court case were different.

What were the issues?

1. Whether a notice issued under Section 148 of the Income Tax Act, 1961, by a Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) is invalid, and consequently, any assessment order passed pursuant to such a notice is also bad in law, as per Section 148A(d) and Section 148 of the Act? Assessee's Contention: The petitioner argued that notices issued by JAOs are invalid, relying on Shree Cement Limited vs. Assistant Commissioner of Income-Tax & Others and Sharda Devi Chhajer vs. The Income Tax Officer & Another, which followed Hexaware Technologies Ltd. vs. Assistant Commissioner of Income-Tax. They contended that an assessment order based on an invalid notice would also be unlawful. Revenue's Contention: The revenue referred to Talati and Talati LLP vs. Office of Assistant Commissioner of Income Tax, where the Gujarat High Court did not quash the notice but directed the assessee to file a reply. The revenue also pointed to a Gujarat High Court judgment that considered the validity of a show cause notice under Section 148 and proceedings under Section 153A.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 153A,Section 132,Section 132A,Section 151A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
[2025:RJ-JD:41530-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 2/2023 Avinash Modi S/o Arun Kumar Modi, Aged About 43 Years, R/o A- 21, Sadul Ganj Bikaner 334001, Rajasthan, 334001. ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Circle-1, Aayakar Bhawan, Rani Bazar, Bikaner, Rajasthan 334001 2. Central Board Of Direct Taxes, Through Chairperson, Type-7, Bungalow No. 75, New Moti Bagh, New Delhi- 110021 ----Respondents For Petitioner : Mr. Saksham Pandey For Respondents : Mr. K.K Bissa HON'BLE THE CHIEF JUSTICE MR. K.R. SHRIRAM HON'BLE MR. JUSTICE RAVI CHIRANIA

Order 17/09/2025

1.

Mr. Pandey submits that petitioner is unhappy with order dated 12th July 2022 passed under Section 148A(d) and notice dated 12th July 2022 issued under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’).

2.

Mr. Pandey further submits that apart from various grounds taken in the petition, one of the grounds is that notice has been issued by Jurisdictional Assessing Officer (JAO) and not Faceless Assessing Officer (FAO). He also submits that this Court in Shree Cement Limited vs. Assistant Commissioner of Income-Tax & Others1 and Sharda Devi Chhajer vs. The Income Tax Officer & Another2 following judgment of Bombay High Court in 1 DB Civil Writ Petition No.10540/2024, dated 05.08.2025 at Jaipur Bench (unreported)

2025 SCCOnLine Raj3386 [2025:RJ-JD:41530-DB] (2 of 6) [CW-2/2023] Income-Tax, Circle 15(1)(2)3 has held that such a notice held that notification dated 29th March 2022 (prescribing e- assessment scheme) does not cover a case where notice under Section 148 is issued by the JAO, the information received by him in the matter of search and seizure under Section 132 of the Act, 1961, or requisitioned under Section 132A.

5.

The Gujarat High Court has relied on Explanation 2 to Section 148 (as it existed at the relevant time) to approve the contention of the Revenue that the concept of automated allocation, i.e. application of algorithm for randomized allocation of cases by using suitable technological tools including Artificial Intelligence and Machine Learning, as defined in Clause 2(1)(b) of 3 [2024] 162 taxmann.com 225 (Bombay)

MANU/GJ/2382/2024 [2025:RJ-JD:41530-DB] (3 of 6) [CW-2/2023] the Scheme dated 29th March 2022, cannot be applied in a case of search and seizure under Section 132. 6. While upholding the said contention the Gujarat High Court was perhaps under an understanding that the FAO does not draw a satisfaction note before proceeding to issue a notice under Section 148 in search cases. The Gujarat High Court has taken cognizance of the contention that pre-requisite conditions before issuance of notice under Section 148, as provided in Explanation 2 of Section 148 would require human application of mind and cannot be fulfilled by algorithm under the Faceless Regime.

7.

The decision of the Division Bench of the Bombay High Court in the case of Hexaware Technologies Ltd. (supra) has been distinguished as having been rendered in a case, which falls within the arena of Explanation 1 to Section 148 and not where Explanation 2 to Section 148 of the Income Tax Act' 1961, would International Tax Ward Circle-4(2)(1), Mumbai and Ors.5 where the orders dated 31st March 2021 and 06th September 2021 issued by the CBDT creating exception for the assessment proceedings undertaken by the International taxation charges/Central Charges were subject matter of deliberation.

9.

In Abhin Anilkumar Shah (supra) the Court held that said orders dated 31st March 2021 and 06th September 2021 issued by the CBDT only carve out exception in relation to the assessment [2024]468ITR350(Bom)

[2025:RJ-JD:41530-DB] (4 of 6) [CW-2/2023] proceedings. What has been done by order dated 06th September 2021 is to modify the order dated 31st March 2021 to the extent of what is set out in paragraph 3 thereof, namely, that in addition to such exceptions to the applicability of the faceless mechanism to assessment orders in relation to Central Charges and International Tax Charges, an additional exception was added, namely, to the assessment order in cases where pendency could not be created on ITBA because of technical reasons or cases not having a PAN, as the case may be. Thus, the scheme as framed under section 151A and notified under the notification dated 29th March 2022 does not include the applicability, inclusion or even reference to the orders dated 31st March 2021 and 06th September 2021. It was further held that it would be doing violence to the language of the notification/scheme dated 29th March 2022 to read into such notification what has not been expressly provided for and/or be dismissed by the Hon’ble Supreme Court vide order dated 16th [2024]468ITR181 [2025:RJ-JD:41530-DB] (5 of 6) [CW-2/2023] July 2025 in SLP (Civil) Diary No. 33956/2025 stating the following- 1. “Delay condoned.

2.

Exemption Application is allowed.

3.

Having heard the learned counsel appearing for the petitioners – Revenue and having gone through the materials on record, we find no good reason to interfere with the impugned order passed by the High Court.

3.

The Special Leave Petition is, accordingly, dismissed.

4.

Pending applications, if any, shall also stand disposed of.”

12.

Thus the judgment passed by the Gujarat High Court is not based on the reading of notification dated 29th March 2022 along with orders dated 31st March 2021/ 06th September 2021 but is based on the simple reading of Explanation 2 to Section 148 along with understanding that the pre-requisites for issuing notice under Section 148 in search cases cannot be met by the FAO. With due respect, we do not agree.

13.

In these circumstances, order dated 12th July 2022 passed under Section 148A(d) and notice dated 12th July 2022 passed under Section 148 of the Act are liable to be quashed and set aside.

14.

At this stage, Mr. Bissa submits that in judgment of Hexaware Technologies Ltd. (supra), Revenue has preferred a Special Leave Petition and notice has been issued. Counsel states that in view of the law as it stands today, Court may grant the prayer of petitioner but in case the Apex Court interferes with judgment in Hexaware Technologies Ltd. (supra), Sharda Devi Chhajer (supra) or Shree Cement Limited (supra), then Revenue should be given liberty to revive the notice issued under Section 148 of the Act.

[2025:RJ-JD:41530-DB] (6 of 6) [CW-2/2023]

15.

In view of above, counsel for petitioner states that other grounds raised are not being pressed upon and they will be taken at appropriate stage, if required.

16.

Therefore, keeping open all rights and contentions of parties, we quash and set aside order dated 12th July 2022 passed under Section 148A(d) of the Act and notice dated 12th July 2022 passed under Section 148 of the Act with liberty as prayed.

17.

Petition disposed.

18.

Consequently, all pending applications, if any, also stand disposed. (RAVI CHIRANIA),J (K.R. SHRIRAM),CJ 5-divyaP/- Powered by TCPDF (www.tcpdf.org)

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