Introduction: The Income Tax Appellate Tribunal (ITAT) in Pune recently issued a significant decision in the case of Pandharinath Mahadeo Ovhal vs. Income Tax Officer (ITO). This case centered around an assessment order issued under Section 144 read with Section 147 of the Income Tax Act, 1961. The crux of the matter was the absence of a Document Identification Number (DIN) on the assessment order, which led to its invalidation. This article provides an overview of the case, a detailed analysis of the ITAT’s decision, and its implications.
1. Background: The case involves an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The initial assessment order was passed under Section 144 read with Section 147 of the Income Tax Act on November 25, 2019. The assessee raised several grounds of appeal, including objections to an ex-parte order, adoption of property valuation under Section 50C, treatment of gross receipts as capital gain, and other aspects.
2. The Issue of DIN: The crucial point of contention revolved around the absence of a Document Identification Number (DIN) on the assessment order. The Central Board of Direct Taxes (CBDT) had issued Circular No. 19/2019, which mandated that no communication related to assessment, appeals, orders, exemptions, and more could be issued without a computer-generated DIN. Further, the circular specified that any communication without a DIN would be treated as invalid and deemed never to have been issued.
3. ITAT’s Verdict on DIN: The ITAT, in line with the CBDT’s circular, held that the assessment order without a DIN is invalid and is deemed never to have been issued. This decision was in accordance with a ruling by the Hon’ble Bombay High Court in the case of Ashok Commercial Enterprises vs. ACIT.
4. Cost of Acquisition Argument: The assessee argued that the land in question was inherited from their ancestors, who had received it as a “Vatan” from the King. Consequently, the assessee’s ancestors obtained the land free of cost, and therefore, the cost of acquisition should be treated as nil. Citing relevant Supreme Court decisions, the assessee contended that no capital gains should be levied when the cost of acquisition is nil.
5. Academic Grounds: Given the ITAT’s ruling on the absence of a DIN, all other grounds raised by the assessee were deemed academic and were not further adjudicated.
Conclusion: The ITAT’s decision to invalidate the assessment order due to the absence of a Document Identification Number (DIN) underscores the importance of adhering to the CBDT’s circular and legal procedures. This verdict reiterates that compliance with such directives is paramount in income tax proceedings. Furthermore, the consideration of the cost of acquisition in cases of inherited property was a significant argument, which the ITAT, in light of its DIN ruling, did not delve into. The case serves as a reminder of the essential role of procedural compliance in the context of income tax assessments.
In conclusion, the ITAT’s decision in the Pandharinath Mahadeo Ovhal vs. ITO case highlights the significance of adhering to legal procedures and the need for compliance with specific directives, such as the requirement for a Document Identification Number (DIN) in official communications.
FULL TEXT OF THE ORDER OF ITAT PUNE
This an appeal filed by the assessee against the order of ld.Commissioner of Income Tax(Appeals)[NFAC] under section 250 of the Income Tax Act, 1961 for A.Y.2012-13 dated 23.03.2023 emanating from the assessment order under section 144 r.w.s 147 of the Income Tax Act, 1961 dated 25.11.2019. The assessee has raised the following grounds of appeal :
“1. On the facts and the circumstances of the case and in law, Learned Assessing Off erred in passing ex-parte order and also erred in not adjudicating the issue on merit, this action is being violative of principal of natural justice. Your appellant prays for granting opportunity of hearing before lower authorities.
Without prejudice to the above grounds of appeal, following grounds are also taken on merit:
2. On the facts and in the circumstances of the case and in law the Learned Assessing Officer erred in adopting the valuation as per provision of sec 50C without referring the matter to the DVO this being in violation of provisions of section 50C2 such adoption of value is not permitted 2 On the facts and in the circumstances of the case and in law. The Learned Assessing officer erred in treating Gross Receipts as income of appellant under the head Capital Gain without realizing the fact that the property sold was an agriculture land under Mahar Vatan and there were various disputes and litigation and therefore effective possession of property was not given to the seller Therefore it is claimed that no transfer has taken place us 247 and therefore there is no incidence of capital gain.”
1.1 The assessee has raised the additional grounds of appeal:
“1. On the facts and in the circumstances of the case and in law the learned Assessing Officer erred in issuing the Order u/s.144 rws 147 without generating the Document Identification Number (DIN), which is in violation of CBDT circular No. 19/2019 dated 14th August, 2019, in view of this impugned order is invalid.
2. On the facts and in the circumstances of the case and in law the Learned Assessing Officer erred in taxing the entire gross receipts of Rs. 2,21,09,500 as capital gain without realizing the fact that since this was “Mahar Vatan” land received by assesse from his ancestor’s which was received as inam by them, therefore there was no cost of acquisition and therefore charge of capital gain fails.
3. On the facts and in the circumstances of the case and in law the Learned Assessing Officer erred in taxing the entire gross receipts of Rs. 2,21,09,500 as capital gain of the assesse without realizing the fact that assesse has receive only part of the consideration and due to dispute the transaction is not yet complete, so if at all any capital gain tax is to be charged same shall be restricted to actual amount received and since assesse has invested entire amount received in purchase of new house he is entitled to claim deduction under section 54F of The IT Act, same may kindly be allowed.”
Findings & Analysis :
2. We have heard both the parties and perused the records. It is observed from the assessment order that Document Identification Number(DIN) has not been mentioned on it. Ld.Departmental Representative of the Revenue submitted that DIN was separately generated and it was informed to the assessee by a separate letter dated 28.11.2019. Therefore, ld.DR submitted that CBDT Circular has been complied.
2.1 Central Board of Direct Taxes(CBDT) as per section 119 of the Income Tax Act, 1961 had issued a Circular No.19/2019. The relevant part is reproduced as under :
“2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), has decided that no communication shall be issued by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1st day of October, 2019 unless a computer-generated Document Identification Number(DIN) has been allotted and is duly quoted in the body of such communication.
4. Any communication which is not in conformity with Para-2 and Para-3 above, shall be treated as invalid and shall be deemed to have never been issued.”
3. Thus, CBDT has specifically stated that any communication without DIN shall be deemed to have never been issued. It means communication without DIN is void ab initio. The assessment order is treated as communication in Circular No.19/2019. In this case, the assessment order is dated 25.11.2019. The effective date of the Circular No.19/2019 was 1st October, 2019. Thus, the assessment order was issued after the 1st October, 2019. It is an admitted fact that there is no DIN mentioned in the order. Though ld.DR submitted copy of a letter that DIN was subsequently generated on 28.11.2019 and communicated to the assessee. We asked ld.DR whether any written approval of Chief Commissioner of Income Tax was obtained for such letter as, as per Circular No.19/2019 any communication which is manually issued without DIN shall be issued with prior written approval of Chief Commissioner of Income Tax. However, no such approval was produced before us.
4. The Hon’ble Bombay High Court in the case of Ashok Commercial Enterprises Vs. ACIT in Writ Petition No.2595 of 2021 dated 04.09.2023 has held that assessment order without DIN shall be treated as invalid and deemed never to have been issued.
5. Respectfully following the Hon’ble Bombay High Court, as in the case of assessee, assessment order is without DIN, it shall be treated as invalid and deemed never to have been issued. Accordingly, assessee’s additional Ground No.1 is allowed.
6. It has been claimed by assessee that assessee received the land in inheritance from his Ancestors. The assessee’s Ancestors received the land as “Vatan” from the King. Therefore, ld.Authorised Representative of the assessee pleaded that assessee’s Ancestors had received the land free of cost, therefore, cost of acquisition shall be treated as Nil. The ld.AR submitted that as per the Hon’ble Supreme Court’s decision in the case of CIT Vs. B.C.Srinivas Setty 128 ITR 294 & PNB Finance Ltd. Vs. CIT 307 ITR 75 (SC), since cost of acquisition is Nil, there will not be any capital gain. Since we have decided the legal ground in favour of the assessee, all other grounds becomes academic in nature and we do not intend to adjudicate them.
7. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 12th October, 2023.