JUGAL KISHORE JHANWAR vs. DEPUTY COMMISSIONER OF INCOME TAX

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CW/21519/2025HC Rajasthan2025:RJ-JD:47473-DB04 November 2025Author: PUSHPENDRA SINGH BHATI, ANUROOP SINGHI6 pages
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What did the High Court hold?

The Tribunal quashed and set aside the notice dated March 24, 2024, issued under Section 148 and the assessment order dated March 28, 2025, passed under Section 147 of the Income Tax Act, 1961. The Tribunal found that the Gujarat High Court's decision in Talati and Talati LLP was not based on the reading of the notification dated March 29, 2022, along with earlier CBDT orders (March 31, 2021/September 06, 2021) but rather on a simple reading of Explanation 2 to Section 148 and an understanding that pre-requisites for issuing notice under Section 148 in search cases could not be met by the FAO. The Tribunal respectfully disagreed with this reasoning. The Tribunal noted that the Gujarat High Court was not made aware of the Bombay High Court's reasoning in Abhin Anilkumar Shah, which dealt with exceptions to the faceless mechanism. The Tribunal also took note of the Supreme Court's dismissal of an SLP against a Telangana High Court order based on the Hexaware Technologies Ltd. judgment. The revenue was granted liberty to revive the notice if the Apex Court were to interfere with the judgments in Hexaware Technologies Ltd., Sharda Devi Chhajer, or Shree Cement Limited. The petitioner stated that other grounds were not pressed and would be taken up at an appropriate stage.

What were the facts?

The petitioner, Jugal Kishore Jhanwar, is challenging a notice dated March 24, 2024, issued under Section 148 and an assessment order dated March 28, 2025, passed under Section 147 of the Income Tax Act, 1961. The petitioner's primary contention is that the notice was issued by the Jurisdictional Assessing Officer (JAO) and not by a Faceless Assessing Officer (FAO), rendering it invalid. The petitioner relies on previous judgments from the Rajasthan High Court (Shree Cement Limited, Sharda Devi Chhajer) and the Bombay High Court (Hexaware Technologies Ltd.) which held similar notices issued by JAOs to be invalid. The respondent, Deputy Commissioner of Income Tax, argued that the Gujarat High Court in Talati and Talati LLP had taken a different view, not interfering with a notice issued by a JAO in certain circumstances.

What were the issues?

1. Whether a notice issued under Section 148 of the Income Tax Act, 1961, by a Jurisdictional Assessing Officer (JAO) is invalid, and consequently, any assessment order passed pursuant to such a notice is also bad in law, particularly in light of the faceless assessment regime? (Question of law and mixed fact and law, turning on Section 148 and the faceless assessment scheme). Assessee's Contentions: - The notice under Section 148 was issued by the JAO, not the FAO, making it invalid. - This Court has previously held in Shree Cement Limited and Sharda Devi Chhajer, following the Bombay High Court's decision in Hexaware Technologies Ltd., that such notices issued by JAOs are invalid. - An assessment order passed on an invalid notice is consequently bad in law. Revenue's Contentions: - The Gujarat High Court in Talati and Talati LLP did not interfere with a notice issued by a JAO and directed the assessee to file a reply. - The Gujarat High Court's reasoning in Talati and Talati LLP was based on Explanation 2 to Section 148 and the understanding that automated allocation cannot apply to search and seizure cases.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,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:47473-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 21519/2025 Jugal Kishore Jhanwar S/o Madan Lal Jhanwar, Aged About 69 Years, Resident Of 96, Nehru Park, Jodhpur 342003. ----Petitioner Versus Deputy Commissioner Of Income Tax, Central Circle - 1, Jodhpur Having Its Address Aayakar Bhawan, Paota C Road, Jodhpur- 342010. ----Respondent For Petitioner(s) : Mr. Harsh Vardhan Singh For Respondent(s) : Mr. KK Bissa HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI HON'BLE MR. JUSTICE ANUROOP SINGHI

Order 04/11/2025

1.

Mr. Harsh Vardhan Singh, learned counsel for the petitioner submits that petitioner is unhappy with notice dated 24th March 2024 issued under Section 148 and assessment order dated 28th March 2025 passed under Section 147 of the Income Tax Act, 1961 (for short ‘the Act’).

2.

Mr. Singh 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 & Others and Sharda Devi Chhajer vs. The Income Tax Officer & Another following judgment of Bombay High Court in (Uploaded on 07/11/2025 at 04:21:37 PM) (Downloaded on 28/10/2026 at 12:31:09 AM)

[2025:RJ-JD:47473-DB] (2 of 6) [CW-21519/2025] Income-Tax, Circle 15(1)(2) has held that such a notice issued 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 the Scheme dated 29th March 2022, cannot be applied in a case of search and seizure under Section 132. (Uploaded on 07/11/2025 at 04:21:37 PM) (Downloaded on 28/10/2026 at 12:31:09 AM)

[2025:RJ-JD:47473-DB] (3 of 6) [CW-21519/2025]

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. 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 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 (Uploaded on 07/11/2025 at 04:21:37 PM) (Downloaded on 28/10/2026 at 12:31:09 AM)

[2025:RJ-JD:47473-DB] (4 of 6) [CW-21519/2025] 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 something which is kept outside the be dismissed by the Hon’ble Supreme Court vide order dated 16th July 2025 in SLP (Civil) Diary No. 33956/2025 stating the following- 1. “Delay condoned.

2.

Exemption Application is allowed. (Uploaded on 07/11/2025 at 04:21:37 PM) (Downloaded on 28/10/2026 at 12:31:09 AM)

[2025:RJ-JD:47473-DB] (5 of 6) [CW-21519/2025]

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, notice dated 24th March 2024 issued under Section 148 of the Act and assessment order dated 28th March 2025 passed under Section 147 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. (Uploaded on 07/11/2025 at 04:21:37 PM) (Downloaded on 28/10/2026 at 12:31:09 AM)

[2025:RJ-JD:47473-DB] (6 of 6) [CW-21519/2025]

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 notice dated 24th March 2024 issued under Section 148 of the Act and assessment order dated 28th March 2025 passed under Section 147 of the Act with liberty as prayed.

17.

In view of above, Mr. Harsh Vardhan Singh undertakes to apply within two weeks to withdraw the appeal already filed.

18.

Undertaking accepted.

19.

Petition disposed.

20.

Consequently, all pending applications, if any, also stand disposed. (ANUROOP SINGHI),J (DR.PUSHPENDRA SINGH BHATI),J 115-nirmala/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 07/11/2025 at 04:21:37 PM) (Downloaded on 28/10/2026 at 12:31:09 AM)

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