RATAN LAL PRAJAPAT vs. INCOME TAX OFFICER

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CW/17256/2025HC Rajasthan2026:RJ-JD:1543-DB12 January 2026Author: PUSHPENDRA SINGH BHATI, SANDEEP SHAH6 pages
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What did the High Court hold?

The Tribunal quashed and set aside the notice dated March 30, 2025, issued under Section 148 of the Income Tax Act, 1961. The Court found the facts of the Gujarat High Court case in Talati and Talati LLP to be entirely different from the present case. The Gujarat High Court's reasoning, which relied on Explanation 2 to Section 148 and the understanding that pre-requisites for issuing a Section 148 notice in search cases cannot be met by the FAO, was not agreed with by the Rajasthan High Court. The Court 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 Supreme Court's dismissal of an SLP against a Telangana High Court order based on Venkataramana Reddy Patloola further supported the assessee's position. 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, Ratan Lal Prajapat, challenged a notice dated March 30, 2025, issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2021-2022. The primary ground for challenge was that the notice was issued by the Jurisdictional Assessing Officer (JAO) and not a Faceless Assessing Officer (FAO). The petitioner relied on High Court judgments from Shree Cement Limited and Sharda Devi Chhajer, which followed a Bombay High Court ruling in Hexaware Technologies Ltd., holding such notices issued by JAO to be invalid. The respondent 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, particularly in light of the faceless assessment scheme? Assessee's Contention: The assessee argued that a notice issued by the JAO is 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 the Bombay High Court's decision in Hexaware Technologies Ltd. vs. Assistant Commissioner of Income-Tax. Revenue's Contention: The revenue referred to the Gujarat High Court's judgment in Talati and Talati LLP vs. Office of Assistant Commissioner of Income Tax, which considered the validity of a Section 148 notice and proceedings under Section 153A, and did not interfere with the notice but directed the assessee to file a reply. The revenue also relied on the Gujarat High Court's interpretation of Explanation 2 to Section 148 and the e-assessment scheme notification dated March 29, 2022.

Which sections of the Income-tax Act were involved?

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
[2026:RJ-JD:1543-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 17256/2025 Ratan Lal Prajapat S/o Ram Gopal Kumhar, Aged About 29 Years, R/o Office No.-35, Ground Floor, Popular Arcade, Tata Road No. 1, Roxy Cinema, Opera House, Mumbai - 400004. ----Petitioner Versus Income Tax Officer, Ward 1, Bhilwara, Kawa Khera Chouraha, Shastri Nagar, Bhilwara-311001. ----Respondent For Petitioner(s) : Mr. Rajat Sharma (through VC) For Respondent(s) : Mr. K.K. Bissa HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI HON'BLE MR. JUSTICE SANDEEP SHAH

Order 12/01/2026

1.

Mr. Rajat Sharma submits that petitioner is unhappy with notice dated 30th March 2025 issued under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) for Assessment Year 2021-2022. 2. Income-Tax & Others1 and Sharda Devi Chhajer vs. The Income Tax Officer & Another2 following judgment of Bombay (Uploaded on 15/01/2026 at 03:15:50 PM) (Downloaded on 28/10/2026 at 12:42:48 AM)

[2026:RJ-JD:1543-DB] (2 of 6) [CW-17256/2025] Commissioner of Income-Tax, Circle 15(1)(2)3 has held that 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 15/01/2026 at 03:15:50 PM) (Downloaded on 28/10/2026 at 12:42:48 AM)

[2026:RJ-JD:1543-DB] (3 of 6) [CW-17256/2025]

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 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 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 (Uploaded on 15/01/2026 at 03:15:50 PM) (Downloaded on 28/10/2026 at 12:42:48 AM)

[2026:RJ-JD:1543-DB] (4 of 6) [CW-17256/2025] 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- 1. “Delay condoned.

2.

Exemption Application is allowed. (Uploaded on 15/01/2026 at 03:15:50 PM) (Downloaded on 28/10/2026 at 12:42:48 AM)

[2026:RJ-JD:1543-DB] (5 of 6) [CW-17256/2025]

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, impugned notice dated 24th June 2025 issued under Section 148 of the Act is 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.

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. (Uploaded on 15/01/2026 at 03:15:50 PM) (Downloaded on 28/10/2026 at 12:42:48 AM)

[2026:RJ-JD:1543-DB] (6 of 6) [CW-17256/2025]

16.

Therefore, keeping open all rights and contentions of parties, we quash and set aside notice dated 30th March 2025 issued under Section 148 of the Act with liberty as prayed.

17.

Petition disposed.

18.

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

19.

In case, if any re-assessment order is passed, the same will also stand quashed and set aside. (SANDEEP SHAH),J (DR.PUSHPENDRA SINGH BHATI),J 173-devrajP/- Powered by TCPDF (www.tcpdf.org) (Uploaded on 15/01/2026 at 03:15:50 PM) (Downloaded on 28/10/2026 at 12:42:48 AM)

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