DCIT Vs IndusInd Bank Ltd. (ITAT Mumbai)
In DCIT Vs IndusInd Bank Ltd., the Income Tax Appellate Tribunal, Mumbai, held that a reassessment order issued manually without quoting a computer-generated Document Identification Number (DIN) in its body was invalid under CBDT Circular No. 19/2019 dated 14.08.2019. The Tribunal rejected the Revenue’s argument that a subsequent intimation letter containing a DIN could validate the earlier assessment order. Applying the Bombay High Court’s decision in Ashok Commercial Enterprises v. ACIT and the Delhi High Court’s decision in CIT v. Brandix Mauritius Holdings Ltd., the Tribunal set aside the reassessment order dated 05.12.2019. Consequently, the assessee’s cross-objection was allowed and the Revenue’s appeal was dismissed.
Background and Original Assessment: IndusInd Bank Ltd., engaged in banking, filed its return of income on 28.11.2014 for assessment year 2014-15 declaring total income of Rs. 2105,16,22,590. The return was selected for scrutiny under CASS, and the original assessment under Section 143(3) of the Income Tax Act, 1961 was completed on 29.12.2017 determining total income at Rs. 2317,05,50,835. Subsequently, a notice under Section 148 was issued on 31.03.2019 initiating reassessment proceedings under Section 147. The reassessment order dated 05.12.2019, passed under Section 143(3) read with Section 147, determined total income at Rs. 2330,69,73,520 after making disallowances under Section 35D and Section 36(1).
Proceedings Before the Tribunal: The Revenue challenged the relief granted by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, through the appellate order dated 07.03.2023. The assessee filed a cross-objection challenging both the initiation of reassessment proceedings and the validity of the manually issued assessment order. Since the DIN objection was jurisdictional and went to the root of the matter, the Tribunal considered it first.
Assessment Order Issued Without DIN: The reassessment order dated 05.12.2019 did not mention a DIN. A demand notice under Section 156 was also issued manually on 08.12.2019. Subsequently, the assessee received an intimation letter dated 09.12.2019 enclosing a computation sheet bearing DIN 20141096127. That letter stated that the DIN could be treated as common to the assessment order and all its annexures. The assessee argued that a DIN communicated subsequently could not satisfy the requirement that it appear in the body of the assessment order itself. The Revenue relied upon the subsequent intimation as evidence of compliance.
Mandatory Requirements Under CBDT Circular No. 19/2019: The Tribunal examined the CBDT Circular No. 19/2019, issued under Section 119 of the Income Tax Act, 1961. Paragraph 2 required every covered communication issued by an income tax authority on or after 01.10.2019, including assessment communications, to contain a computer-generated DIN duly quoted in its body. Paragraph 3 permitted manual communications only in specified exceptional circumstances, subject to recording reasons in writing and obtaining prior written approval from the Chief Commissioner or Director General of Income Tax. The manual communication was required to state the relevant circumstances and the date of approval. Paragraph 4 expressly provided that communications not complying with paragraphs 2 and 3 would be invalid and deemed never to have been issued.
Judicial Precedents: The Tribunal relied on the jurisdictional Bombay High Court’s decision in Ashok Commercial Enterprises v. ACIT, [2023] 154 taxmann.com 144, which recognized the importance of the DIN requirement for maintaining an audit trail and held that departures from the prescribed procedure required compliance with the Circular’s safeguards. The Tribunal also relied on CIT v. Brandix Mauritius Holdings Ltd., [2023] 149 taxmann.com 238 (Delhi), regarding the consequences of issuing assessment communications without complying with the DIN requirements.
Tribunal’s Findings: The Tribunal observed that the assessment order dated 05.12.2019 admittedly did not quote a DIN in its body. The order also did not mention any exceptional circumstances permitting manual issuance or the date of obtaining the required prior approval. The subsequent intimation dated 09.12.2019 could not cure the defect because the Circular expressly required the DIN to be quoted in the body of the original communication. The Tribunal therefore held that the reassessment order passed under Section 143(3) read with Section 147 was not compliant with the Circular and set it aside.
Final Decision: After allowing the DIN objection, the Tribunal treated the remaining jurisdictional grounds raised in the assessee’s cross-objection as academic and left them open. Grounds 4 and 5 of the cross-objection were dismissed as not pressed. Since the reassessment order was quashed, the Revenue’s appeal challenging the relief granted on merits also became academic and was dismissed. The assessee’s cross-objection was allowed, while the Revenue’s appeal was dismissed. The ruling establishes that, under the Circular applicable to the assessment order in question, a subsequent communication containing a DIN was insufficient where the original assessment order itself did not comply with the prescribed procedure.
Cases Discussed
- Ashok Commercial Enterprises v. ACIT, [2023] 154 taxmann.com 144 (Bombay High Court) — Followed. The jurisdictional High Court held that the DIN requirement under CBDT Circular No. 19/2019 was intended to maintain a proper audit trail and quashed a communication issued without complying with the prescribed procedure.
- CIT v. Brandix Mauritius Holdings Ltd., [2023] 149 taxmann.com 238 (Delhi High Court) — Relied upon as supporting authority for treating communications issued without compliance with the mandatory DIN requirements as invalid.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal by the Revenue and cross objection by the assessee have been filed challenging the impugned order dated 07/03/2023, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, New Delhi, [“learned CIT(A)”], for the assessment year 2014-15.
2. In its appeal, the Revenue has raised the grounds challenging the relief granted by the learned CIT(A) on merits. While the assessee has filed the cross objection challenging the initiation of reassessment proceedings under section 147 of the Act. Apart from the aforesaid jurisdictional ground, the assessee has also challenged the assessment order passed manually on 05/12/2019 without mentioning the Document Identification Number (“DIN”) in terms of the CBDT Circular No.19 of 2019 dated 14/08/2019. As the aforesaid issue raised by the assessee vide its cross objection is the jurisdictional issue, which goes to the root of the matter. Therefore, we are considering the same at the outset.
3. Having considered the submissions of both sides and perused the material available on record, we find that the assessee is engaged in the business of banking. During the year under consideration, the assessee filed its return of income on 28/11/2014 declaring a total income of Rs. 2105,16,22,590. The return filed by the assessee was selected for scrutiny under CASS and accordingly, the assessment was completed under section 143(3) of the Act vide order dated 29/12/2017 determining the total income of the assessee at Rs. 2317,05,50,835. Subsequently, vide notice dated 31/03/2019 issued under section 148 of the Act proceedings under section 147 of the Act were initiated in the case of the assessee. Vide order dated 05/12/2019 passed under section 143(3) read with section 147 of the Act the total income of the assessee was assessed at Rs 2330,69,73,520 after making disallowance under section 35D and section 36(1) of the Act.
4. It is evident from the record that the aforesaid order dated 05/12/2019 was passed manually. We further find that a demand notice under section 156 of the Act was also issued manually on 08/12/2019. Thereafter, vide intimation letter dated 09/12/2019 computation sheet was provided to the assessee having DIN 20141096127. The said intimation letter further mentioned that this DIN may be treated as a common DIN for the relevant order and all its annexures.
5. As per the assessee, since the assessment order dated 05/12/2019 passed under section 143(3) read with section 147 of the Act was passed without mentioning DIN, the same is in contravention to the CBDT Circular No. 19 of 2019 and thus is bad in law. On the other hand, the Revenue placed reliance upon the aforesaid intimation letter dated 09/12/2019, wherein it was mentioned that the DIN generated in respect of the computation sheet of the order under section 143(3) read with section 147 of the Act may be treated as common DIN for the relevant order and all its annexures.
6. From the perusal of the CBDT Circular No.19 of 2019 dated 14/08/2019, we find that in order to maintain a proper audit trail of all the communication, the CBDT in the exercise of its power under section 119 of the Act had decided that no communication shall be issued by any income tax authority, inter-alia, relating to assessment to the assessee or any other person, on or after 01/10/2019 unless a computer-generated DIN has been allotted and duly quoted in the body of such communication. In the present case, it is undisputed that such a DIN as required in para 2 of the aforesaid Circular is not mentioned in the body of the assessment order dated 05/12/2019. Further, para 3 of the aforesaid circular provided certain exceptional circumstances under which communication may be issued manually but only after recording reasons in writing and with the prior written approval of the Chief Commissioner/Director General of Income Tax. It is further provided that the communication issued under these exceptional circumstances shall state the fact that the communication is issued manually without a DIN and shall also mention the date of obtaining the written approval of the Chief Commissioner/Director General of the Income Tax for issuance of manual communication in the format as provided in the aforesaid Circular. In the present case, ostensibly there is no such mention of exceptional circumstances under which the assessment order was issued manually without mentioning the DIN or the date of obtaining required approval, as provided in para 3 of the aforesaid Circular, in the assessment order.
7. It is pertinent to note that para 4 ofCBDT’s Circular No.19 of 2019specifically provides that any communication which is not in conformity with para 2 and para 3 shall be treated as invalid and shall be deemed to have never been issued. In Ashok Commercial Enterprises v/s ACIT, [2023] 154 taxmann.com 144 (Bombay), the Hon’ble jurisdictional High Court held that the object of the said Circular is clear and laudatory and intended to ensure that proper trail of all assessment and other orders are maintained and further that any deviation therefrom can only be undertaken after prior written approval of the higher authorities under the Act. Accordingly, the Hon’ble jurisdictional High Court quashed the communication issued without mentioning DIN as perCBDT’s Circular No.19 of 2019. To a similar effect is the decision of the Hon’ble Delhi High Court in CIT v/sBrandix Mauritius Holdings Ltd., [2023] 149 taxmann.com 238 (Delhi).
8. Further, it is pertinent to note that para 2 of CBDT Circular No.19 of 2019 specifically mentions that the computer-generated DIN is to be duly quoted in the body of communication, which in the present case is the assessment order dated 05/12/2019. Therefore, we are of the considered view that the intimation letter dated 09/12/2019 intimating that the DIN generated in respect of the computation sheet may be treated as common DIN for the relevant order and all its annexures is not sufficient compliance with the aforesaid Circular No.19 of 2019, as no DIN is mentioned in the body of assessment order passed on 05/12/2019. Accordingly, the assessment order dated 05/12/2019 passed under section 143(3) read with section 147 of the Act is set aside as being not in compliance with the CBDT Circular No.19 of 2019.
9. As the relief has been granted to the assessee on this short issue, the other jurisdictional grounds raised in the assessee’s cross objection are rendered academic and therefore are left open. Grounds no.4 and 5 raised in assessee’s cross objection are dismissed as not pressed. As the assessment order is quashed, the ground raised in Revenue’s appeal on merits is rendered academic and therefore is dismissed.
10. In the result, the cross objection by the assessee is allowed, while the appeal by the Revenue is dismissed.
Order pronounced in the open Court on 18/12/2023
