Sanjay Nathalal Shah Vs ACIT (Bombay High Court)
The Bombay High Court held that a special audit ordered under Section 142(2A) of the Income-tax Act, 1961 is void ab initio if the mandatory prior approval of the Principal Commissioner of Income Tax does not bear a valid Document Identification Number (DIN) as required under CBDT Circular No. 19/2019 dated 14.08.2019. The petitioner challenged the validity of the order dated 10.02.2025 directing a special audit for Assessment Year 2023–24 and the consequential special audit report dated 06.06.2025.
A key contention was that the jurisdictional pre-condition for directing a special audit was not satisfied because the approval dated 06.02.2025, relied upon by the Revenue, did not contain a DIN. It was argued that under CBDT Circular No. 19/2019, any communication, including an approval, issued without a DIN after 01.10.2019 is invalid and deemed never to have been issued. The Revenue countered that the approval was an internal document and not a “communication” within the meaning of the Circular, and that since the final special audit order carried a valid DIN, there was sufficient compliance.
The Court found it undisputed that the approval dated 06.02.2025 did not bear a DIN and also did not record any exceptional circumstances or follow the procedure prescribed under paragraph 3 of the Circular for manual issuance. The Court examined the scope and binding nature of CBDT Circular No. 19/2019, issued under Section 119 of the Act, which mandates quoting of a computer-generated DIN on all communications, expressly including approvals, and provides that non-compliant communications are invalid and deemed never issued.
