M/S. UNISYS INDIA PRIVATE LIMITED,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-7(1)(1), BENGALURU

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against the final assessment order of ACIT Circle-7(1)(1), Bengaluru dated 19.7.2022 for the assessment year 2017-18. The assessee has raised following grounds of appeal:- a) General grounds with regard to passing of DRP directions without Document Identification Number (DIN). b) Grounds on Transfer Pricing Adjustments c) Ground on Corporate tax adjustments Page 2 of 9 d) Disallowance of legal and professional charges paid to the non- residents under section 40(a)(i) of the Act for non-deduction of taxes at source under section 195 of the Act. e) Disallowance of legal & professional charges paid to residents. f) Deduction under section 10AA of the Act g) Computation under section 115JB of the Act h) Others

2.2 During the year under consideration, the case was referred to the transfer pricing officer for determination of arm's length price and in accordance with the provision of section 92CA of the Act. 2.3 The TPO has passed his order u/s 92CA(3) of the Act, wherein he has made an adjustment of Rs. 59,54.35,766/-. After satisfying on the facts of the case penalty proceedings u/s 270(A) of the Act Page 3 of 9 are initiated separately for under reporting of income and the addition was at Rs.59,54,35,766/-. 2.4 The draft assessment order u/s 144C of the Act was passed on 15/09/2021 since Transfer pricing adjustment of Rs. 59,54,35.766/- was involved in this order. The assessee has filed objection before the Ld. DRP against the draft assessment order dated 21/10/2021. The Ld. DRP has issued direction vide order dated 29.06.2022 which is uploaded on ITBA vide DIN & Document No ITBA/DRP/S/91/2022- 23/1043677134(1) dated 30.06.2022. The Ld, DRP has given the directions on TP adjustment and corporate issues. The Ld. TPO has passed order giving effect vide DIN No.ITBA/COM/F/17/2022- 231/1043904862(1) dated 18/07/2022 stating that total adjustment on TP issue is Rs. 51,02,83,239/- after giving effect to the directions of the ld. DRP. Summary of Adjustment after post DRP direction: Sl.No. Description Adjustment Adjustment u/s 92CA (in post DRP Rs.) direction 1 SWD segment 20,17,70,516 20,17,70,516/- 2 ITeS segment 39,36,65,250 30,85,12,723/- Total 51,02,83,239/-

2.5. Further, there was also addition towards disallowance of CST expenditure of Rs.1,50,56,157/-, disallowance of legal & professional fee at Rs.2,61,44,548/-, disallowance of legal & professional fees paid to residents at Rs.10,74,049/-. Against this assessee is in appeal before us.

Page 5 of 9 5.1 Thus, it means that the ld. DRP’s order was manually passed on 29.6.2022 and at that time, no DIN was generated, which was subsequently generated on 30.6.2022. As per circular no.19/2019 dated 14.8.2019 issued by the Central Board of Direct Taxes (CBDT) it has been strictly mentioned that any communication issued by any Income Tax Authority (ITA) without DIN shall be treated as invalid and shall be deemed to never have been issued.

5.2 Further, in the circular 19/2019 the CBDT has also prescribed some exceptional circumstances wherein the AO can issue any manual communication without DIN but there will be proper recording of reasons in the specified format and prior approval of designated authorities has to be taken before issuance of such communication. Thereafter, such manual communication has to be regularized within 15 days of its issuance.

5.3 Similar issue came for consideration in ITA No.1542/Del/2020 dated 16.9.2022 for the AY 2011-12 before Delhi bench of ITAT in the case of Brandix Mauritious Holdings Ltd. Vs. Deputy Commissioner of Income-tax (Internationa Taxation) Circle 1(1)(2), New Delhi, which is a company against which draft asessment order was passed by the Assessing Officer (AO/Revenue) on 30.12.2018. The assessee had filed its objections before Dispute Resolution Panel (DRP) which were disposed of by the DRP via order dated 20.9.2019. Thereafter, the final assessment order was passed by the AO on 15.10.2019 u/s 147/144(C)(13)/143(3) of the Act. The major issue which has been originated in the final assessment order was, that it was issued by the AO without quoting Document Identification Number (DIN) in body of such communication.

5.4 Aggrieved by the order of AO the Assessee preferred an appeal before the Income Tax Appellate Tribunal (ITAT) wherein the Hon'ble Page 6 of 9 ITAT simply applied the guidelines of circular 19/2019 and held that assessment order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Act is invalid and deemed to have never been issued as it fails to mention the DIN in its body by adhering to circular 19/2019.

5.5 Thereafter, the revenue filed an Appeal u/s 260A of the Act before the Hon'ble High Court of Delhi with the supporting that circular 19/2019 only applies to the communications emanating from the revenue, not to the substantive orders passed to the Assessee. Further, it is also submitted by the revenue that failure to generate and allocate DIN in this case is a mistake or at best, a defect and/or an omission (which can be covered or cured u/s 292B of the Act), which ought not to invalidate the assessment proceedings.

5.6 In response to the contention of the revenue, the Assessee submitted that circular 19/2019 is binding on the revenue and error (i.e., not quoting DIN in order) is jurisdictional in nature and therefore, cannot be corrected by taking recourse to Section 292B of the Act. In support of their contentions the Assessee relied on various case laws of Hon'ble Supreme Court which have similar facts/issues.

Issue before the Hon'ble High Court:

5.7 Whether the order of the ITAT to not sustain the final assessment order dated 15.10.2019 in compliance with the circular 19/2019 passed by the AO call for the interference of the Hon'ble High Court i.e., whether any substantial question of law arises for consideration, which, inter alia, would require the Hon'ble High Court to examine whether the issue is debatable or if there is an alternate view possible?

Page 7 of 9 Decision of the Hon'ble High Court: 5.8 The Hon'ble court observed that it is well established that circulars issued by the CBDT in exercise of its powers u/s 119 of the Act are binding on the revenue and this principle stands enunciated in a long line of judgements including the judgements of Hon'ble Supreme Court in various cases.

5.9 It has been further observed that the argument advanced on behalf the revenue, that recourse can be taken to Section 292B of the Act, is untenable, having regard to the phraseology used in paragraph 4 of the circular 19/2019. The object and purpose of the issuance of the 2019 Circular was to create an audit trail. Therefore, the communication relating to assessments, appeals, orders, etc. which find mention in paragraph 2 of the 2019 Circular, without DIN, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 Circular.

5.10 Thereafter, the Hon'ble court held that given the language employed in the 2019 Circular, there is neither any scope for debate nor is there any leeway for an alternate view which is different than the view which has been taken by ITAT.

5.11 Hence, the Hon'ble Court has dismissed the appeal of the revenue by mentioning that "we find no error in the view adopted by the Tribunal. The Tribunal has simply applied the provisions of the 2019 Circular and thus, reached a conclusion in favour of the Assessee". 5.12 In this regard, we rely on the following orders of the coordinate benches of this Tribunal, wherein similar view has been taken by the Tribunal:

Page 8 of 9 a) Circular No.19/2019 dated 14.8.2019 issued by the CBDT b) Dilip Kothari vs. Principal CIT in ITA No.405/Bang/2022 (Bangalore ITAT) dated 31.10.2022. c) H.K. Suresh vs. Principal CIT in ITA No.625/Bang/2021 (Bangalore ITAT) dated 06.12.2022 d) Tata Medical Centre Trust vs. CIT in ITA No.238/Kol/2021 (Kolkata ITAT) dated 18.07.2022 e) Teleperformance Global Services Pvt. Ltd. vs. ACIT in ITA No.2815/Mum/2022 (Mumbai ITAT) dated 24.4.2023 f) Gerah Enterprises P. Ltd. vs. Principal CIT in ITA No.740/Mum/2021 (Mumbai ITAT) dated 30.3.2022 g) Shri Bangalore Narayan Das Vs. ITO in IT(IT)A Nos.120 & 121/Bang/2022 dated 17.3.2023 of ITAT Bangalore 5.13 In view of this, we quash the impugned final assessment order. Since, we have allowed the legal issue in ground Nos.2 & 3, we refrain from going to other grounds of appeal raised before us, which are kept open.

Order pronounced in the open court on 31st May, 2023

Sd/- Sd/- (George George K.) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 31st May, 2023. VG/SPS Copy to:

Asst. Registrar, ITAT, Bangalore.