G.P.TRONICS PVT LTD.,KOLKATA vs. ACIT CIR 2(1), KOLAKATA

Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Principal Commissioner of Income Tax-1, Kolkata dated 18.02.2020 passed under section 263 of the Income Tax Act in assessment year 2015-16.

Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited

3. In Ground No. 1, the assessee has pleaded that the ld. CIT has erred in taking cognizance under section 263 and thereby setting aside the impugned assessment order dated 29.12.2017 passed under section 143(3) of the Income Tax Act.

4. The ld. Counsel for the assessee at the time of hearing submitted that after the Circular No. 19 of 2019 issued by the CBDT, every correspondence or show-cause notice is mandatorily required to mention Document Identification Number (DIN) and if no DIN is generated, then such a show-cause notice is to be construed as without jurisdiction. He further submitted that this aspect has been elaborately considered by the Tribunal in the case of Tata Medical Centre Trust –vs.- CIT reported in [2022] 140 taxmann.com 431 (Kolkata Trib.). In this judgment, ITAT, Kolkata has considered the scope of Circular dated 14.08.2019 and thereafter held that if a show-cause notice is being issued without DIN, then it is to be considered void ab initio. Similarly the Tribunal has observed that if the impugned order does not bear DIN, then it is not sustainable. The Tribunal has reproduced copy of the show-cause notice in its order as well as copy of the Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited impugned order passed under section 263 in the case of Tata Medical Centre Trust.

5. The ld. Counsel for the assessee further submitted that this order of the Tata Medical Centre Trust has been further followed in the case of Smt. Sunita Agarwal –vs.- ITO rendered in ITA No. 432/KOL/2020. The Tribunal in this case has reproduced the finding of the ITAT, Kolkata in the case of Tata Medical Centre Trust. On the strength of these two judgments, he drew our attention towards copy of the show-cause notice available on the record. Similarly he made reference to the Cause Title of the impugned order passed under section 263 and submitted that both these documents do not bear DIN, therefore, the impugned order deserves to be quashed.

6. The ld. CIT(DR) was unable to controvert this factual submission.

7. We have duly considered the rival contentions and gone through the record carefully. A perusal of the copy of show-cause notice dated 03.01.2020 reveals that it does not bear DIN. Similarly the impugned order does not bear DIN. Therefore, in view of two decisions of ITAT, Kolkata referred above, the impugned order is not sustainable and it is quashed. However, for the purpose of completeness of the finding and demonstrating the reasoning, we deem it appropriate to take note of the 3 Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited following finding from dated 22.11.2022, which reads as under:-

5. We have considered the rival submission. We find that the issue is squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Tata Medical Centre Trust vs. CIT (supra). The relevant part of the order of the Tribunal for the sake of ready reference is reproduced as under: “11. We have heard the rival submissions and perused the material available on record and given our thoughtful consideration to the submissions made by both the parties. Before adverting on the issue in hand, the CBDT Circle No. 19/2009 dated 14.08.2019, copy of which is placed in the paper book pages 68-69, is reproduced hereunder for ready reference: Circular No. 19/2019 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, dated the 14th August, 2019 Subject: Generation/Allotment/Quoting of Document Identification Number in Notice/Order/Summons/letter/correspondence issued by the Income-tax Department -reg. With the launch of various e-governance initiatives, Income-tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax- administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board or Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as communication") were found to have been issued manually, without maintaining a proper audit trail of such communication.

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 Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the I st day of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body or such communication.

8. Hindi version to follow. Sarita Kumari Director (ITA.II), CBDT (F. No. 225/95/2019-ITA.II)

Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited

GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1). EXEMPT. KOLKATA To. TATA MEDICAL CENTRE TRUST 1 BISHOP LEFROY ROAD.LEFROY ROAD KOLKATA KOLKATA 700020.West Bengal Ir.dia PAN; Assessment Year: Dated: DIN & Notice No : AABTT2222Q 2016-17 08/10/2020 ITBA/COM/F/17/202Q-21/1028167761(1)

Sir/Madam/ M/s, Sub.: Proceedings under section 154 - Notice The assesssment/refund order under section 143(3) for the assessment year 2016-17 requires to be amended as there is a mistake apparent form the record within the meaning of section 154/155 of me Income Tax Act, 1961. The rectification of the mistakes, as per particular given below, will have the effect of enhancing the assessment/reducing the refund/ increasing your liability. If you wish to be heard, you are requested to file your submission online or or before 09.10.2020 at 11:30 a.m. Alternatively you may send a written reply so as to read me on or before the date mentioned above. Particulars of mistake proposed to be rectified 1. On verification of records, it is revealed t4hat the assessee had earned interest income amounting to Rs.91.37 lacs on corpus funds and Rs.27.3 lacs on ‘other earmarked funds’. It is observed that though interest received under Rs.91.37 lacs had been added back to the income side as per I&F account in the assessment order. Interest income received or earmarked fund (Rs.21.31 lacs) has not been taken as income. The same needs to be treated as part of income.

OFFICE OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA 6™ FLOOR, I OB, MIDDLETON ROW, KOLKATA- 700071 Ph: (033)2229-2926, FAX(033)2229-1719 1. Name of assessee : Tata Medical Centre Trust 6. Whether Resident/Resident but not ordinarily resident/non-resident: Resident 7. Method of accounting : Mercantile Address : 1, Bishop Lefroy Road, Kolkata-700020 3. PAN/GIR No. AABTT2222Q 8. Previous year : 2015-16 9. Date(s) of hearing : As per records 4. Status : Trust (a)If HUF, is higher rate of tax applicable? (b)If company, whether (i)Domestic/Others (ii)Public substantially interested/ Public not substantially interested (iii)Industrial/Non-Industrial (iv)Section 108/other than Sec. 108

(ii) Scrutiny of the assessment order revealed that, an amount of Rs.5,18.29.615 has been deducted towards Apportion from patient care fund (SL. 461) of the table at paragraph 4 of the order from Total income as per I&E A/c', while computing taxable income of the assessee for the AY 2016-17. Further scrutiny revealed that the assessee had actually added the said amount as receipt" under the head.

(iii) In view of the above, the Assessing Officer has erred in allowing capital expenditure Rs. 4989.53 lakhs towards addition to fixed assets and Rs. 447.4 lakhs towards WIP which resulted in loss of revenue and therefore, is prejudicial to the interest of revenue. The Assessing Officer is hereby directed to compute income with allowing capital expenditure and WIP. (iv) The assessee Trust created several Trust and Corpus Fund as well as Earmarked Funds in which contributions from donors with direction for utilization for specific purposes are accumulated for future utilization in accordance to the direction of donors. These receipts are not taken to the income since considered as exempt u/s, 11(1 )(d) being capital receipt in nature. Interest accrued/ earned on such fund being revenue in nature is considered as Income from Other Sources. While computing income, the assessee Trust separately included interest of Rs. 91.37 lakhs in computation of income recognising the same as revenue recceipt, but interest earned on other earmarked funds to the tune of Rs. 27.31 lakhs was not included in income as well as in computation of income separately. During the course of proceedings u/s. 263, it has been contended that apportionment of the interest amount to the I/E Accounts would not change the colour of the receipt. The assessee has also relied upon several court decision to establish that the interesl accrued on corpus fund would be corpus in nature. However, the treatment towards interest on corpus fund being revenue in nature in accepted accounting norms, which has been recognized by the assessee itself in other part. The Assessing Officer also has not noticed the same in assessment erroneously and, therefore, the revenue interest income remained outside the ambit for fulfillment of conditions mentioned in section 11(1) for compulsory application of income @ 85% and also outside the ambit of taxation. As such, the Assessing Officer is directed to compute income taking Rs. 27.31 lakhs as income. In view of the above facts and circumstances of the case, the Assessment Order passed by the A.O. is therefore erroneous and prejudicial to the interests of the revenue. The A.O. is directed to give effect to the order as per the provision of the Act, and compute income on the basis of issue wise discussions above. Ordered accordingly, Sd/- [Pankaj Kumar] Commissioner of Income Tax (Exemptions), Kolkata M. No. CIT(E)/Kol/263/2020-21/403-405 dated 31.03.2021 Copy forwarded to: 9. Addl.CIT (Exemptions), Range-1, Kolkata 10. AC/DC Circle-l(l), Kolkata.

Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act, which are binding on the authorities in the administration of the Act. Under section 119(2)(a) , however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities.

13.3. In the matter of Nay ana P. Dedhia [2004] 270 ITR 572 (AP), the Hon’ble Andhra Pradesh High Court held that the guidelines issued by the Board in exercise of powers in terms of section 119 of the Act 11 Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited relaxing the rigours of law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board. 13.4. In the decision of DCIT v. Sunita Finlease Ltd. [2011] 330 ITR 491 (CG,) it was held by the Hon’ble High Court of Chhattisgarh in para 16 that the administrative Instruction No. 9/2004 issued by the Central Board of Direct Taxes is binding on administrative officer in view of the statutory provision contained in section 143(2), which provides for limitation of 12 months for issuance of notice under section 143(2). While giving its finding, the Hon’ble High Court of Chhattisgarh placed reliance on the decisions in the case of UCO Bank (supra) and Nayana P. Dedhia (supra). 13.5. Hon’ble jurisdictional High Court of Calcutta in the case of Amal Kumar Ghosh [2014] 361 ITR 458 (Cal) dealt with the issue relating to CBDT circular which according to the Department cannot defeat the provisions of law. While giving its observations and finding on the issue, the Hon’ble Court referred to the decision of Hon’ble Chhattisgarh High Court in the case of Sunita Finlease Ltd (supra), which are as under: 7.We have considered the rival submissions advanced by the learned Advocates. Even assuming that the intention of CBDT was to restrict the time for selection of the cases for scrutiny within a period of three months, it cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four comers of Circulars No. 9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon the department under section 119 of the I.T. Act. 8.Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the conseguences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a 12 Assessment Year: 2015-2016 G.P. Tronics Pvt. Limited standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act. [emphasis supplied by us by underline] 14.Considering the facts on record, perusal of the impugned order, submissions made by the Ld. Counsel and the department, CBDT circular and the judicial precedents including that of Hon’ble Supreme Court and the jurisdictional High Court of Calcutta, we are inclined to adjudicate on the additional ground in favour of the assessee by holding that the order passed by the Ld. CIT(E) is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to the CBDT circular no. 19 of 2019. Accordingly, additional ground taken by the assessee is allowed. Having so held on the legal issue raised by the assessee in the additional ground, the grounds relating to the merits of the case requires no adjudication. Accordingly, the appeal of the assessee is allowed in terms of above observations and findings.”

Order pronounced in the open Court on 27thMarch, 2023.