Case Law Details
Sidda Venkata Surya Prakasa Rao Vs ACIT (ITAT Hyderabad)
ITAT Hyderabad held that non-generation/ non-quoting of Document Identification Number (DIN) in the order will render the order invalid and will be treated as never to have been issued.
Facts- The assessee mainly contested that an order passed under section 263 of the Act should be treated as ‘nonest’ in the eye of law for violation of the procedure prescribed by the CBDT vide Circular No. 19/2019, dated 14/08/2019 and submitted that to prevent the instances of not maintaining a proper audit trail of communication like notice, order, summons, letter and any correspondence issued, it is mandated to maintain proper audit trail of all communication to the assessee without quoting a computer generated DIN on or after 01/10/2019.
Conclusion- In the case of CIT vs. Brandix Mauritius Holdings Ltd. (supra), Hon’ble Delhi High Court addressed this issue where the Revenue pleaded that is only a mistake, and held that to such case also paragraph 4 of the 2019 circular would apply. As referred to by us, paragraph 4 of the circular clearly reads that any communication which is not in conformity with paragraph 2 and paragraph 3 shall be treated as invalid and shall be deemed to have never been issued. It is, therefore, clear that any reason what-so-ever other than the exceptions mentioned in paragraph 3 would save the communication issued without DIN.
In these circumstances, we are of the considered opinion that for want of generation/quoting the DIN in the order dated 23/03/2020, such an order shall be treated to have never been issued and, therefore, shall not take any affect. In view of this finding, we deem it not necessary to delve deeper into the merits of the case.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 02/06/2020 passed by the learned Principal Commissioner of Income Tax-Guntur, (“Ld. PCIT”) under section 263 of the Income Tax Act, 1961 (for short “the Act”) in the case of Venkata Surya Prakasa Rao Sidda (“the assessee”) for the assessment year 2015-16, assessee preferred this appeal.
2. Legal existence of the order dated 23/03/2020 by learned PCIT under section 263 of the Act, passed without the Document Identification Number (DIN) is challenged in this appeal, basing on the Circular No. 19/2019, dated 14/08/2019 issued by the Central Board of Direct Taxes (CBDT) and the decision of Hon’ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd., in ITA No. 163/2023, dated 20/03/2023.
3. Brief facts of the case are that the assessment order for the assessment year 2015-16 in the case of Sri Sidda Venkata Surya Prakasa Rao was passed on 28/12/2017under section 143(3) of the. On a perusal of such order and the assessment record, learned PCIT by way of order dated 23/03/2020 recorded a finding that such an order is erroneous insofar as it is prejudicial to the interest of Revenue and while cancelling the assessment made, gave a direction to the learned Assessing Officer to re-do the assessment after making necessary arrangements as to the identity, creditworthiness and genuineness of the transactions pertaining to the unsecured loans.
4. Such an order passed under section 263 of the Act is called in question by the assessee on several grounds, but primarily assailing the same on the ground that the said order has to be treated as ‘nonest’ in the eye of law for violation of the procedure prescribed by the CBDT vide Circular No. 19/2019, dated 14/08/2019 and submitted that to prevent the instances of not maintaining a proper audit trail of communication like notice, order, summons, letter and any correspondence issued, it IS mandated to maintain proper audit trail of all communication to the assessee without quoting a computer generated DIN on or after 01/10/2019. He also placed reliance on the decision of Hon’ble Delhi High Court in the case of Brandix Mauritius Holdings Ltd (supra).
5. Per contra, learned DR submitted that it could be seen from the impugned order that the order under section 263 of the Act dated 23/03/2020 was having document number [DIN & Document No. ITBA/REV/M/REV5/2020-21 /1027201902(1)] and, therefore, there is no violation of the circular. He further submitted thatwhen the order under section 263 of the Act is otherwise legal and valid, merely because of the discrepancy in respect of the DIN, a meritorious case cannot be thrown out without delving into the merits of the same.
6. We have gone through the record in the light of the submissions made on either side. There is no denial of the fact that nowhere in the order dated 23/03/2020 under section 263 of the Act that there is any whisper about the generation or non generation of DIN nor is there any reference to the reasons for not generating any computer based DIN at the time of passing of such order. It is only by way of subsequent communication dated 02/06/2020 containing the DIN No. ITBA/REV/S/91/2020-21/1027201917(1), it was communicated to the assessee that the order dated 23/03/2020 passed under section 263 of the Act was having DIN No. ITBA/REV/M/REV5/2020-21/1027201902(1). It is, therefore, clear that the order dated 02/06/2020 having proper DIN is a valid communication and there cannot be any doubt on that aspect. However, the question is, for want of generating the computer based DIN in respect of the order under section 263 of the Act or not quoting the same in the order, whether such an order is valid.
7. A reading of the CBDT Circular No. 19/2019, dated 14/08/2019 clearly shows that with effect from 01/10/2019, all the communication shall contain the computer generated DIN, without which, vide paragraph No.4 thereof, such a communication shall be deemed to have never been Paragraph 3, however, refers to five exceptional circumstances. It is stated therein that in such exceptional circumstances, the communication may be issued manually, but shall contending a statement referring to the exceptional circumstances and also the fact that it was so issued without DIN with the approval of the Chief Commissioner/Director General of Income Tax. Vide paragraph 5, it is contemplated that when the communication is issued without the DIN, under exceptional circumstances mentioned in paragraph 3(i) to paragraph 3(iii), it has to be regularised within fifteen days, and in case of paragraph 3(v), manual communication for the reason thereof to be sent to Principal Director General of Income Tax (Systems) within seven days of such issuance of the communication. Paragraph 4, in unequivocal terms, mentions that any communication which is not in conformity with paragraph 2 and 3 shall be treated as invalid and shall be deemed to have never been issued.
8. In the case of CIT vs. Brandix Mauritius Holdings Ltd., (supra), the Hon’ble Delhi High Court held that the communication in relation to assessments, appeals, orders etc., which finds mention in paragraph 2 of the 2019 circular, albeit without DIN, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 circular. It is further observed by the Hon’ble High Court that in view of the decision of Hon’ble Supreme Court in the case of K.P. Varghese vs. ITO, Ernakulam (1981) 4 SCC 173 and in the case of Back Office IT Solutions Pvt. Ltd. vs. Union of India (2021) SCC OnLine Del 2742, the circulars issued by the CBDT binds the Revenue in their administration or implementation, and such circulars cannot be side-stepped causing prejudice to the assessee by bringing to naught the object for which such circulars are issued.
9. Now coming to the case on hand as observed above, there are two documents before us. One is the order dated 23/03/2020 passed under section 263 of the Act and the other is a communication dated 02/06/2020. The communication dated 02/06/2020 states that the order under section 263 of the Act dated 23/03/2020 was having a particular But the question is whether such a later reference will relate back to the date of order i.e., 23/03/2020 passed under section 263 of the Act and validates the same. Since it is not the case of Revenue that DIN [ITBA /REV/M/REV5/2020-21 /1027201902(1)] was generated on 23/03/2020 and the document dated 02/06/2020 is not specific on this aspect, we are of the considered opinion that it is imperative for us to look at the circumstances under which the DIN was generated separately.
10. Neither the order under section 263 of the Act nor the communication dated 02/06/2020 spell out the reasons for not either generating the DIN or quoting the same in the order dated 23/03/2020. Circular categorically mentions that subsequent to 01/10/2019, the computer generated DIN not only be allotted but be duly quoted in the body of the communication itself. In the communication dated 23/03/2020 any reference to DIN is conspicuously absent. To meet the events where the computer generated DIN could not be generated on the date of issuance of communication, five exceptions are provided by paragraph 3 of the circular. It is also specifically stated that if the case of the Revenue falls in any of these exceptions, the said fact has to be recorded in the communication itself in the prescribed format.
11. Neither the reasons nor the statement in the prescribed format is to be found in the order passed under section 263 of the Act, spelling out the particular category of exception that prevented allotting the DIN on that day. It is yet another violation. In the case of CIT vs. Brandix Mauritius Holdings Ltd. (supra), Hon’ble Delhi High Court addressed this issue where the Revenue pleaded that is only a mistake, and held that to such case also paragraph 4 of the 2019 circular would apply. As referred to by us, paragraph 4 of the circular clearly reads that any communication which is not in conformity with paragraph 2 and paragraph 3 shall be treated as invalid and shall be deemed to have never been issued. It is, therefore, clear that any reason what-so-ever other than the exceptions mentioned in paragraph 3 would save the communication issued without DIN.
12. In these circumstances, we are of the considered opinion that for want of generation/quoting the DIN in the order dated 23/03/2020, such an order shall be treated to have never been issued and, therefore, shall not take any affect. In view of this finding, we deem it not necessary to delve deeper into the merits of the case.
13. In the result, appeal of assessee is allowed.
Order pronounced in the open court on this the 28th day of April, 2023.
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