M/S SARVODAYA MINING SERVICES vs. ASSISTANT COMMISSIONER OF INCOME-TAX

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CW/8022/2025HC Rajasthan2025:RJ-JD:41175-DB16 September 2025Author: K.R. SHRIRAM, RAVI CHIRANIA6 pages
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What did the High Court hold?

The Tribunal quashed and set aside the order dated August 28, 2024, passed under Section 148A(d) and the notice dated August 28, 2024, issued under Section 148 of the Income Tax Act, 1961. The Tribunal found the facts of the Gujarat High Court case in Talati and Talati LLP to be entirely different from the present case. The Tribunal noted that the Gujarat High Court's reasoning was based on an understanding that the Faceless Assessing Officer (FAO) does not draw a satisfaction note before issuing a notice under Section 148 in search cases and that the pre-requisite conditions for such a notice require human application of mind, not an algorithm. The Tribunal disagreed with this reasoning. The Tribunal also highlighted 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 for assessment proceedings in Central Charges and International Tax Charges, as well as the Supreme Court's dismissal of the Revenue's SLP against the Telangana High Court's order in Venkataramana Reddy Patloola. The Tribunal concluded that the notice and order were liable to be quashed. 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 other grounds raised by the petitioner were not pressed.

What were the facts?

The petitioner, M/s Sarvodaya Mining Services, challenged an order dated August 28, 2024, passed under Section 148A(d) and a notice dated August 28, 2024, 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 the Faceless Assessing Officer (FAO), rendering it invalid. The petitioner relied on previous judgments from the Rajasthan High Court in Shree Cement Limited and Sharda Devi Chhajer, which followed the Bombay High Court's decision in Hexaware Technologies Ltd., holding such notices issued by JAO to be invalid. The revenue cited a Gujarat High Court judgment in Talati and Talati LLP, which did not interfere with a similar notice but directed the assessee to reply.

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, thereby rendering any subsequent assessment order bad in law? (Question of law, concerning Sections 148 and 148A of the Income Tax Act, 1961). Assessee's Contention: The notice is invalid because it was issued by the JAO, not the FAO. This position is supported by the Rajasthan High Court's decisions in Shree Cement Limited and Sharda Devi Chhajer, which followed the Bombay High Court's ruling in Hexaware Technologies Ltd. An assessment order based on an invalid notice is also bad in law. Revenue's Contention: The revenue referred to a Gujarat High Court judgment in Talati and Talati LLP, where the court did not interfere with a notice issued under Section 148 but directed the assessee to file a reply. The revenue implicitly suggests that the notice may be valid or that the matter should proceed to a reply stage.

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:41175-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 8022/2025 M/s Sarvodaya Mining Services, Having Its Registered Office At Petch Area Dak Bunglow Road, Nimbahera, Chittorgarh (Raj.)- 312601 Through Its Partner Puran Mal Anjana S/o Ram Lal Anjana, Aged About 55, R/o Village Kesunda, Choti Sadri, Pratapgarh (Rajasthan) - 312604 ----Petitioner Versus 1. Assistant Commissioner Of Income-Tax, Central Circle - 1, Udaipur, (Rajasthan). 2. Director General Of Income Tax (Inv.), Jaipur (Rajasthan) 3. Central Board Of Direct Taxes, Through Chairman, Department Of Revenue, Ministry Of Finance, North Block, New Delhi ----Respondents For Petitioner : Mr. Vikas Balia, Sr. Adv assisted by Mr. Priyansh Arora, Mr. Prateek Gattani For Respondents : Mr. K.K Bissa HON'BLE THE CHIEF JUSTICE MR. K.R. SHRIRAM HON'BLE MR. JUSTICE RAVI CHIRANIA

Order 16/09/2025

1.

Mr. Balia submits that petitioner is unhappy with order dated 28th August 2024 passed under Section 148A(d) and notice dated 28th August 2024 issued under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’).

2.

Mr. Balia 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 [2025:RJ-JD:41175-DB] (2 of 6) [CW-8022/2025] & Others1 and Sharda Devi Chhajer vs. The Income Tax Officer & Another2 following judgment of Bombay High Court in 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 1 DB Civil Writ Petition No.10540/2024, dated 05.08.2025 at Jaipur Bench (unreported) 2 2025 SCCOnLine Raj3386 3 [2024] 162 taxmann.com 225 (Bombay)

MANU/GJ/2382/2024 [2025:RJ-JD:41175-DB] (3 of 6) [CW-8022/2025] 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.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.

[2024]468ITR350(Bom)

[2025:RJ-JD:41175-DB] (4 of 6) [CW-8022/2025]

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 [2024]468ITR181 [2025:RJ-JD:41175-DB] (5 of 6) [CW-8022/2025]

11.

The Revenue filed an SLP against another order passed by Telangana High Court based on the aforesaid Order in Venkataramana Reddy Patloola (supra). The said SLP came to 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.

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 28th August 2024 passed under Section 148A(d) and notice dated 28th August 2024 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 [2025:RJ-JD:41175-DB] (6 of 6) [CW-8022/2025] 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.

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 28th August 2024 passed under Section 148A(d) of the Act and notice dated 28th August 2024 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 4-divyaP/- Powered by TCPDF (www.tcpdf.org)

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