GAURAV JAIN vs. THE DEPUTY COMMISSIONER OF INCOME TAX

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CW/23399/2025HC Rajasthan2025:RJ-JD:53941-DB15 December 2025Author: PUSHPENDRA SINGH BHATI, SANJEET PUROHIT6 pages
AI SummaryRemanded

What did the High Court hold?

The Rajasthan High Court quashed and set aside the notice dated March 24, 2024, issued under Section 148 and the assessment order dated March 7, 2025, passed under Section 147, along with consequential proceedings. The Court found that the Gujarat High Court's decision in Talati and Talati LLP was based on a reading of Explanation 2 to Section 148 without considering the combined effect of the notification dated March 29, 2022, and CBDT orders dated March 31, 2021, and September 6, 2021. The Court distinguished the Gujarat High Court's reasoning, stating that the Bombay High Court in Abhin Anilkumar Shah had held that these earlier CBDT orders did not alter the scope of the faceless scheme notification. The Court disagreed with the Gujarat High Court's understanding that the FAO cannot fulfill the pre-requisites for issuing a Section 148 notice in search cases. The Court granted 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. The petitioner undertook to withdraw the appeal filed.

What were the facts?

The petitioner, Gaurav Jain, challenged a notice dated March 24, 2024, issued under Section 148 of the Income Tax Act, 1961, and an assessment order dated March 7, 2025, passed under Section 147 of the Act. 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 judgments from the Rajasthan High Court (Shree Cement Limited and Sharda Devi Chhajer) and the Bombay High Court (Hexaware Technologies Ltd.). The revenue contended that a Gujarat High Court judgment in Talati and Talati LLP supported their position, though the court noted factual differences. The Rajasthan High Court considered the interplay of Section 148, Explanation 2, and the e-assessment scheme notified on March 29, 2022, along with earlier CBDT orders.

What were the issues?

1. Whether a notice issued under Section 148 of the Income Tax Act, 1961, by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) is invalid, and consequently, any assessment order passed pursuant to such notice is also bad in law? (Question of law) Assessee's Contentions: - The petitioner argued that the notice under Section 148 was issued by the JAO and not the FAO. - Relied on Shree Cement Limited vs. Assistant Commissioner of Income-Tax & Others and Sharda Devi Chhajer vs. The Income Tax Officer & Anr., which followed the Bombay High Court's decision in Hexaware Technologies Ltd. vs. Assistant Commissioner of Income-Tax, holding such notices issued by JAO to be invalid. Revenue's Contentions: - The revenue cited the Gujarat High Court judgment in Talati and Talati LLP vs. Office of Assistant Commissioner of Income Tax, which did not interfere with a similar notice but directed the assessee to file a reply. - The revenue argued that Explanation 2 to Section 148, as it existed, supported the contention that automated allocation (faceless regime) could not apply in cases of search and seizure under Section 132, implying a need for human application of mind by the JAO.

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:53941-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 23399/2025 Gaurav Jain S/o Balwantraj Jain, Aged About 36 Years, R/o Kumbhat Sadan, City Police Jodhpur, Rajasthan. ----Petitioner Versus 1. The Deputy Commissioner Of Income Tax, Central Circle 1, Jodhpur Having Its Address At, Aaykar Bhawan, Paota C Road, Jodhpur, Rajasthan. 2. Pr. Commissioner Of Income Tax, Central, Jaipur Having Its Address At Lic Building, Jeevan Nidhi 2Nd, Near Ambedkar Circle, Jaipur Rajasthan. ----Respondents For Petitioner(s) : Mr. Shivang Soni Jalora. For Respondent(s) : Mr. K.K. Bissa. HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI HON'BLE MR. JUSTICE SANJEET PUROHIT

Order 15/12/2025

1.

Learned counsel for the petitioner submits that petitioner is unhappy with notice dated 24th March 2024 issued under Section 148 of the Income Tax Act, 1961 and assessment order dated 07th March 2025 passed under Section 147 of the Income Tax Act, 1961 (for short ‘the Act’).

2.

Income-Tax & Others (D.B. Civil Writ Petition No.10540/2024, (Uploaded on 20/12/2025 at 04:04:50 PM) (Downloaded on 28/10/2026 at 12:34:59 AM)

[2025:RJ-JD:53941-DB] (2 of 6) [CW-23399/2025] dated 05.08.2025, at Jaipur Bench) and Sharda Devi Chhajer vs. The Income Tax Officer & Anr., reported in 2025 SCC Income-Tax, Circle 15(1)(2), reported in (2024) 162 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 (Uploaded on 20/12/2025 at 04:04:50 PM) (Downloaded on 28/10/2026 at 12:34:59 AM)

[2025:RJ-JD:53941-DB] (3 of 6) [CW-23399/2025] 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. 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. reported in (2024) 468 ITR 350 (Bom) where the orders dated 31st March 2021 and 06th September 2021 issued by the CBDT creating exception for the assessment proceedings undertaken by (Uploaded on 20/12/2025 at 04:04:50 PM) (Downloaded on 28/10/2026 at 12:34:59 AM)

[2025:RJ-JD:53941-DB] (4 of 6) [CW-23399/2025] 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 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 purview of the said notification, namely, the orders dated 31st March 2021 and 06th September 2021. It would be uncalled for to read into the scheme dated 29th March 2022, something which is not included.

10.

The Bombay High Court also relied upon the order passed by the Telangana High Court in the case of Venkataramana Reddy (Uploaded on 20/12/2025 at 04:04:50 PM) (Downloaded on 28/10/2026 at 12:34:59 AM)

[2025:RJ-JD:53941-DB] (5 of 6) [CW-23399/2025] 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.

12.

In these circumstances, notice dated 24th March 2024 issued under Section 148 of the Act and assessment order dated 07th March 2025 passed under Section 147 of the Act along with consequential proceedings are liable to be quashed and set aside.

13.

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.

14.

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.

15.

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 07th (Uploaded on 20/12/2025 at 04:04:50 PM) (Downloaded on 28/10/2026 at 12:34:59 AM)

[2025:RJ-JD:53941-DB] (6 of 6) [CW-23399/2025] March 2025 passed under Section 147 of the Act along with consequential proceedings, with liberty as prayed.

16.

In view of above, learned counsel for the petitioner undertakes to apply within two weeks to withdraw the appeal already filed.

17.

Undertaking accepted.

18.

Petition disposed.

19.

Consequently, all pending applications, if any, also stand disposed. (SANJEET PUROHIT),J (DR.PUSHPENDRA SINGH BHATI),J 20-sumer/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 20/12/2025 at 04:04:50 PM) (Downloaded on 28/10/2026 at 12:34:59 AM)

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