KUNAL LUNIYA vs. DEPUTY COMMISSIONER OF INCOME-TAX

At the very outset, learned counsel for the petitioner submits that the issue involved in the present petition is no more res integra as the same stands squarely covered by series of the judgments passed by this Hon'ble Court. Reliance has been placed upon the judgment passed in D.B. Civil Writ Petition No.19953/2025 (Ravindra Singh vs. Principal Commissioner of Income Tax (Central, Jaipur & Ors.), wherein referring to the judgment passed by Co-ordinate Bench of this Court in the case of (Central) Jaipur & Ors. (D.B. Civil Writ Petition No.18987/2025, the re-assessment proceedings initiated in respect of search cases was quashed and set aside. (Uploaded on 04/11/2025 at 04:30:00 PM) (Downloaded on 28/10/2026 at 12:37:31 AM)

The Judgment passed in the case of Ravindra Singh's case (supra) reads as under:- "

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. 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) 4 MANU/GJ/2382/2024 (Uploaded on 04/11/2025 at 04:30:00 PM) (Downloaded on 28/10/2026 at 12:37:31 AM)

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.

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 be 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.

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 be dismissed by the Hon’ble Supreme Court vide order dated 16th July 2025 in SLP (Civil) Diary No. 33956/2025 stating the following- 5 [2024]468ITR350(Bom) 6 [2024]468ITR181 (Uploaded on 04/11/2025 at 04:30:00 PM) (Downloaded on 28/10/2026 at 12:37:31 AM)

Exemption Application is allowed.

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.

The Special Leave Petition is, accordingly, dismissed.

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

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.

In these circumstances, notice dated 26th March 2025 passed under Section 148 of the Act is liable to be quashed and set aside.

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.

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.

Therefore, keeping open all rights and contentions of parties, we quash and set aside notice dated 26th March 2025 passed under Section 148 of the Act with liberty as prayed.

Petition disposed.

Consequently, all pending applications, if any, also stand disposed."

Learned counsel for the respondents is not in a position to refute the above submission.

In view of the above, the present writ petition is disposed of on the same terms. "

Further reliance has been placed upon the order passed in the case of Manoj Kumar Jain vs. Income Tax Officer & Ors. in D.B. Civil Writ Petition No.20145/2025 dated 10.10.2025, wherein the impugned notices so also the re-assessment order was also quashed and set aside.

Learned counsel for the respondent on being confronted with the said judgments fairly agrees about the factum of controversy being settled by the above referred judgments. (Uploaded on 04/11/2025 at 04:30:00 PM) (Downloaded on 28/10/2026 at 12:37:31 AM)

Therefore, keeping open all rights and contentions of parties, we quash and set aside notice dated 24.03.2024 (Annexure-2) issued under Section 148 of the Act and assessment order dated 17.03.2025 (Annexure-4) passed under Section 147 of the Act.

Petition disposed of.

Consequently, all pending applications, if any, also stand disposed of. (ANUROOP SINGHI),J (DR.PUSHPENDRA SINGH BHATI),J 74-Zeeshan Powered by TCPDF (www.tcpdf.org) (Uploaded on 04/11/2025 at 04:30:00 PM) (Downloaded on 28/10/2026 at 12:37:31 AM)