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Income Tax Appellate Tribunal, KOLKATA BENCH “B”, KOLKATA
Before: SHRI SANJAY GARG & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “B”, KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.238/Kol/2021 Assessment Year: 2016-17 Tata Medical Centre Trust Commissioner of Income- Plot No. DH 7 DH 8, 14 tax, (Exemption), Major Arterial Road (EW) Vs. Kolkata. Action Area I, West Bengal-700156 (PAN: AABTT2222Q) (Appellant) (Respondent)
Present for: Appellant by :Shri Akshay Ringasia, CA & Tarak Nath Jaiswal, Advocate Respondent by : Shri Deb Kr. Sonowal, CIT, DR Date of Hearing : 30.06.2022 Date of Pronouncement : 18.07.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the assessee is arising out of the order of ld. CIT(E), Kolkata, passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 31.03.2021 against the order of ACIT, Circle-1(1), Exempt, Kolkata, passed u/s 143(3) of the Act, dated 04.12.2018, for AY 2016-17.
There is a delay of 61 days in filing the present appeal before the Tribunal for which a petition for condonation of delay along with an affidavit is placed on record. The present appeal was filed on 30.07.2021 which was due by 30.05.2021. Ld. Counsel for the assessee submitted that the delay is on account of Pandemic of COVID-19 for which the Hon’ble Supreme Court has directed that the period from 15.03.2020 to 28.02.2022 is to be excluded for the purpose of computing the
2 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 limitation period during the COVID-19 pandemic. Further, a period of 90 days is allowed after 28.02.2022 vide same order. Considering the facts and the explanation of the assessee placed on record, we condone the delay in filing the appeal and admit it for adjudication.
Before us, Shri Akshay Ringasia, CA & Shri Tarak Nath Jaiswal, Advocate represented the assessee and Shri Deb Kr. Sonowal, CIT, DR represented the department.
The solitary ground taken by the assessee in Form 36 filed in the present appeal is on challenging the jurisdiction assumed by the ld. CIT(E) for invoking the provisions of section 263 of the Act and passing the order therein. In the course of hearing before the Tribunal, assessee took an additional ground vide its submission dated 30.06.2022 and prayed for its admission and adjudication. The additional ground taken by the assessee is reproduced as under:
“That the order passed by the Ld. PCIT is null and void as it fails to mention any DIN number on its body or adhere to Circular No. 19/2019 by the CBDT.”
Assessee states that it is filing an additional ground with the leave of this Tribunal under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 (hereinafter referred to as the “ITAT Rules”) and by placing reliance on the ratio laid down by the Hon’ble Supreme Court in the case of NTPC reported in 229 ITR 383. Assessee also submitted that this additional ground goes to the root of the matter and permeates from the facts already on record before the lower authorities and this Tribunal and thus, prays for its admission and adjudication in the interest of justice. In this respect, for ease of reference, Rule 11 of the ITAT Rules is reproduced as under:
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“11. The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule :
Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.”
On going through the above Rule, we note that assessee can take any ground not set forth in the Memorandum of Appeal but only with the leave of the Tribunal for which sufficient opportunity of being heard is to be granted to the party being affected thereby. To this effect, submissions of the Ld. Counsel of the assessee were confronted to the Ld. CIT, DR who did not object upon. Thus, in terms of Rule 11 and further, by respectfully following the decision of Hon’ble Supreme Court in the case of NTPC (supra) and also in the interest of natural justice and fair play, we find it proper to admit the additional ground raised by the assessee as reproduced above for its adjudication since it goes to the root of the matter for which facts relating thereto are already on record.
Brief facts of the case as culled out from the records are that assessee is a charitable trust registered u/s. 12AA of the Act with effect from 27.10.2005. The assessee trust operates under the Tata Cancer Hospital looking after the treatment of cancer patients. The objectives of the trust are to promote prevention, early diagnosis, treatment, rehabilitation and research for cancer patients. Assessee filed its return of income on 29.09.2016 reporting total income for Rs. Nil. Assessee is assessed to income-tax by the Assistant Commissioner of Income-tax, Circle-1(1) (Exempt), Kolkata. Case of assessee was selected for scrutiny
4 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 for which statutory notices were issued and were complied by the assessee. Assessment was completed for which the order was passed u/s. 143(3) of the Act dated 04.12.2018 determining total income at Rs. NIL. Subsequently, Ld. CIT(E), Kolkata initiated revisionary proceeding u/s. 263 of the Act proposing to revise the aforementioned assessment order for which a show cause notice dated 23.03.2021 was issued on the assessee, placed in the paper book at pages 55 to 57. The said show cause notice required the assessee to submit its reply within six days i.e. by 30.03.2021. Assessee filed its reply on 30.03.2021 and the Ld. CIT(E) passed the impugned order u/s. 263 of the Act on 31.03.2021 by rejecting the contentions of the assessee. Aggrieved, assessee is in appeal before this Tribunal.
Before delving into the grounds of appeal set forth in the Memorandum of Appeal in Form 36 filed by the assessee, Ld. Counsel for the assessee insisted and prayed to adjudicate upon the additional ground (supra) which goes to the root of the matter, it being a legal issue affecting the validity of the impugned order. Ld. CIT, DR had no objection on this prayer by the Ld. Counsel and, therefore, we proceed to deal with the additional ground so raised by the assessee.
Ld. Counsel for the assessee submitted that for initiation of proceedings u/s. 263 of the Act, a show cause notice was issued which came to the knowledge of the assessee only on 27.03.2021 and for which the reply was to be submitted by 11 AM of 30.03.2021. Ld. Counsel submitted that assessee filed its reply on 30.03.2021 and the impugned order was passed on the last date of the time barring period i.e. on 31.03.2021 with a direction to Ld. AO to make addition under different heads. In view of the additional ground taken, Ld. Counsel stated that the impugned order passed u/s. 263 of the Act did not contain any Document Identification No. (DIN) nor any reason for non-
5 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 issuance of DIN along with the impugned order. According to the ld. Counsel, impugned order is without any DIN which is in violation of the very basic object of CBDT Circular No.19/2019 dated 14.08.2019. He further stated that non-issuance of DIN has not been acknowledged in the body of the impugned order so as to clarify the reason for its non- issuance. He submitted that the whole objective of the said CBDT Circular requiring a mandatory quoting of DIN in all the communications of the department is to maintain the audit trail which otherwise gets lost. In order to tackle this ambiguity, the said circular vide para 4 renders such orders without a DIN as “invalid or deemed to have never been issued”. The arguments made by the Ld. Counsel in respect of the additional ground in the written submission placed on record are reproduced as under:
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Ld. CIT, DR strongly opposed the submissions made by the Ld. Counsel and stated that this is a mere procedural irregularity which cannot render the impugned order passed u/s. 263 of the Act as ‘invalid or deemed to have never been issued’ as claimed by the Ld. Counsel in terms of CBDT Circular No. 19/2019. He referred to the exceptional circumstances which are listed in the circular itself and stated that there are technological and other difficulties which are faced on certain occasions in generating/allotting/quoting the DIN which can in no way make the lawful proceeding conducted and completed by the Income-tax Authority, as invalid. Ld. CIT, DR further submitted that the case records can be referred to ascertain if the DIN was actually generated or not and it is merely an inadvertent mistake because of which it remained to be quoted in the impugned order. He thus strongly
9 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 opposed to the contentions made by the Ld. Counsel claiming to hold the impugned order as ‘invalid or deemed to have never been issued’.
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 lndia 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 /\ct"), 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 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. 3. In exceptional circumstances such as, - (i) when there are technical difficulties in generating/allotting/quoting the DIN and issuance or communication electronically; or (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties; or
10 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 (iii) when due to delay in PAN n1igration PAN is lying with non-jurisdictional Assessing Officer; or (iv) when PAN or assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner/ Director General of income- tax. In cases where manual communication·is required to be issued due to delay in PAN migration, the proposal seeking approval for issuance of manual communication shall include the reason for delay in PAN migration. The communication issued under aforesaid circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner/ Director General or Income-Tax for isse uor manual communication in the following format-
“ .. This communication issues manually without a DIN on account of reason/reasons given in para 3(i)/3(ii)/3(iii)/3(iv)/3(v) of the CBDT Circular No ...dated ............ (strike off those which are not applicable) and with the approval of the Chief Commissioner I Director General of Income Tax vide number .... dated ............ " 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. The communication issued manually in the three situations specified in para 3- (i), (ii) or 5. (iii) above shall have to be regularised within 15 working days of its issuance, by - i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro-forma available on the System. 6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance. 7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31th October, 2019. 8. Hindi version to follow. (Sarita Kumari) Director (ITA.II), CBDT (F.No. 225/95/2019-ITA.II)
From the perusal of above circular, we note that CBDT came out with this circular to mitigate the issues/instances where certain notices, orders, summons, letters and other correspondences which
11 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 have been issued manually do not have proper audit trail of their communication despite various e-governance initiatives and computerization of its work. Therefore, in order to prevent such instances and to maintain proper audit trail of all the communications, CBDT directed 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 01.10.2019 unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. We note that para 3 of the said circular provides for certain exceptional circumstances when the communication is issued manually, in which case such manually issued communications should contain the fact that the said communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner/Director General of Income-tax for issue of said manual communication in the prescribed format. Thus, it is observed from the said circular that all the communications mentioned therein have to be either generated and issued electronically with DIN or in certain exceptional circumstances the communication may be issued manually without DIN, fact of which along with its written approval has to be stated in the body of the said communication, failing which, para 4 of the said circular states that such communication shall be treated as ‘invalid’ and shall be deemed to have never been issued’.
12.1 On a specific query by the bench to the Ld. CIT, DR to point out if there was any exceptional circumstance which led to the manual issue of the order u/s. 263 of the Act, he pointed out that the only possibility of exceptional circumstance as mentioned in the CBDT Circular, could be as listed in para 3(i) which mentioned that “when there are technical
12 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 difficulties in generating /allotting/quoting the DIN and issuance of communication electronically”. For this he requested for verification of the case records. 12.2 On this aspect, Ld. Counsel for the assessee submitted that it is undisputed and verifiable fact that the impugned order is not an electronic communication but a manual order as is evident from the perusal of the order itself. It is an order which has been passed manually and page 9 of the said order does not even bare a full and proper signature of the Ld. CIT(E), Kolkata. Page 10 of the said order bears the signature of TRO(E), Kolkata, dated 31.03.2021, and therefore, the exception pointed out by the Ld. CIT, DR does not apply in the present case since it is relevant only to a communication which is issued electronically. He further pointed out that within this para 3 of the CBDT Circular, it is mentioned that when the communication is issued manually, such communication in its body must state the fact that the said communication is issued manually without a DIN and the date of obtaining of the written approval of the prescribed authority for issue of manual communication in the prescribed format has to be stated therein. In the present case, no such fact of issuing the present order manually without a DIN by obtaining an approval from prescribed authority in the prescribed format is mentioned/quoted in the body of the impugned order and, therefore, even if the case records are verified, it will not serve any purpose since the impugned order itself does not contain any such factual notation as contemplated in para 3 of the CBDT circular. 12.3 In order to demonstrate how a communication issued electronically containing a DIN would look like, the Ld. Counsel referred to one such notice u/s. 154 dated 08.10.2020 issued on the assessee, placed at paper book page 53, scanned copy of which is reproduced hereunder for ease of reference:
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12.4 From this notice, Ld. Counsel pointed out that on the top left corner it bears a Bar Code. Further, in the box on the top of right hand side it bears a DIN and Notice No. Also, in the body of the notice, it mentions about the fact that document is digitally signed. Further, in the left bottom of the said notice, there is a legend put with an asterisk (*) mark which says ‘DIN’.
12.5 In contrast to this, attention of the bench was invited, both to the show cause notice issued pursuant to revisionary proceeding u/s. 263 of the Act dated 23.03.2021 placed at pages 55 to 57 of the paper book, which was issued manually and does not bear any reference to DIN in terms of CBDT circular so also the impugned order passed u/s. 263 which is also issued manually and does not bear any reference to DIN as required by the CBDT circular. The first page and the last two pages of the impugned order are reproduced hereunder for reference, in the context of quoting DIN as contemplated by CBDT circular:
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16 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17
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From the above submissions and arguments, we note that it is an undisputed fact that the impugned order u/s. 263 of the Act has been issued manually which does not bear the signature of the authority passing the order. Further, from the perusal of the entire order, in its body, there is no reference to the fact of this order issued manually without a DIN for which the written approval of Chief Commissioner/Director General of Income-tax was required to be obtained in the prescribed format in terms of the CBDT circular. We also note that in terms of para 4 of the CBDT circular, such a lapse renders this impugned order as invalid and deemed to have never been issued.
13.1 It is also important to note about the binding nature of CBDT circular on the Income-tax Authorities for which gainful guidance is taken from the decision of Hon’ble Supreme Court in the case of CIT v. Hero Cycles [1997] 228 ITR 463 (SC) wherein it was held that circulars bind the ITO but will not bind the appellate authority or the Tribunal or the Court or even the assessee.
18 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 13.2 In the case of UCO Bank [1999] 237 ITR 889 (SC), Hon’ble Supreme Court while dealing with the legal status of such circulars, observed thus (page 896): "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 Nayana 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 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).
19 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 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:
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 corners 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.
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 consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a 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]
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
20 ITA No.238/KOL/2021 Tata Medical Centre Trust AY 2016-17 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.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 18th July, 2022 Sd/- Sd/- (SANJAY GARG) (GIRISH AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated: 18.07.2022. JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent: 3. The ACIT, Circle-1(1), Kolkata 4. The CIT (E) – , Kolkata 5. The DR, ITAT, Kolkata. 5. //True Copy// [ By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata