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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI M BALAGANESH & MS. ASTHA CHANDRA
Assessee by: Shri Ved Jain, Advocate Shri Aman Garg, CA Department by: Shri P.N. Barnwal, CIT-DR Date of Hearing: 22.11.2013 Date of 30.11.2023 pronouncement: O R D E R PER ASTHA CHANDRA, JM
The appeal filed by the assessee is directed against the order dated 21.06.2022 of the Ld. Commissioner of Income Tax (Appeals)-24, New Delhi (“CIT(A)”) pertaining to Assessment Year (“AY”) 2015-16.
The assessee has taken the following grounds of appeal:
“1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in 1 the eyes of law and on facts. 2. On the facts and circumstances of the case, the issue of notice and proceedings initiated thereto under section 153C of the Act is bad in law, being barred by limitation and hence the assessment order passed in consequence thereto is liable to be quashed
3. On the facts and circumstances of the case and in law, the assessment order passed by the AO is barred by limitation.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153C and the assessment order passed in consequence thereto are bad in law in the absence of any incriminating material belonging to the assessee being found during the search. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in dismissing the appeal preferred by the assessee without considering the fact that the impugned assessment order has been passed without issuance of statutory notices as required under the law 6. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in making addition of Rs. 6,70,000/- treating the same unexplained money u/s 60A of the Act. (ii) That the above addition has been confirmed by arbitrarily rejecting the explanations and the evidences brought on record by the assessee. 7. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming addition of Rs. 10,050/- on account of commission treating the same as unexplained money u/s 69C of the Act. (ii) That the said addition has been made at the rate of 1.5% on the above alleged amounts of unexplained money without there being any basis for the same. 8. On the facts and circumstances of the case, the learned CIT(A) has grossly erred both on facts and in law in confirming the above additions ignoring the fact that assessee's name is not appearing anywhere in any of the statements recorded during the course of search. 9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that assessment order has been passed by AO on the basis of surmises and conjectures, without there being any adverse material on record. 10. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the addition made by AO is bad in law in the absence of giving opportunity of cross examination to the assessee.
11. On the facts and circumstances of the case, the learned CIT(A) has grossly erred both on facts and in law in confirming the above additions ignoring the fact that the AO himself having accepted the income on account of long term capital gains on sale of old jewelry, was not justified in taxing the same transaction as unexplained income in the hands of assessee.
12. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
The assessee filed an application (undated) seeking permission to raise the following additional ground as the same is a legal ground going to the root of the matter and all the facts relating to the same are already on record:-
13. On the facts and circumstances of the case, the assessment order is null and void as the same is in violation of CBDT Circular No.19/2019 requiring mandatory DIN.
We have heard the Ld. Representative of the parties. The additional ground raised by the assessee is purely legal and jurisdictional issue going to the root of the matter and all the facts are on record. In National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC), the Hon’ble Supreme Court observed that the Tribunal should not be prevented from considering questions of law arising in assessment proceedings. Where the Tribunal is only required to consider the question of law arising from the facts which are on record in the assessment proceedings there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. We, therefore following the decision (supra) of the Hon’ble Apex Court admitted the additional ground and proceed to consider the same.
The Ld. AR invited our attention to the order of the Ld. AO dated 24.12.2021 for AY 2015-16 passed under section 153C/143(3) of the Income Tax Act, 1961 (the “Act”) which was the subject matter of appeal before the Ld. CIT(A). He pointed out that it will be observed that there is no mention of Document Identification Number (“DIN”) in the body of the assessment order which is in violation of para 2 of the CBDT Circular No. 19/2021 dated 14.08.2019. He further submitted that perusal of the order would also reveal that there is no mention of any reason for non-issuance of DIN and the date of approval of Director General / Chief Commissioner of Income Tax for issuing the order without DIN. He submitted that the DIN was issued by the Ld. AO subsequently through a separate communication dated 03.02.2022 which is also not within 15 working days of the issuance of the assessment order. Therefore, the requisite condition mentioned in para 3 of the CBDT Circular No. 19/2019 dated 14.08.2019 has also not been complied with. He contended that this is in violation of the binding CBDT Circular No. 19/2019. As a consequence, the impugned order of the Ld. AO is invalid and ‘non-est’ in the eye of law and deserves to be quashed. He also relied upon a number of judicial precedents wherein the courts/authorities have decided the impugned issue in favour of the assessee. He submitted that this issue is also covered by the favourable decision of the Coordinate Bench of Tribunal in assessee’s own case for AY 2016-17. He, therefore, vehemently argued that in the light of the facts and circumstances of the assessee’s case, the order passed by the Ld. AO be held as null and void.
The Ld. CIT-DR, on the other hand, submitted a copy of the email dated 23.08.2023 received from the Ld. AO whereby the Ld. AO has provided his comments, which reads as under: “Please find the attached intimation letter generated suo-moto by the ITBA system addressed to the Assessee. The same contains the DIN number for the Assessment Order passed u/s 153C in case of Sh. Pratap Singh Yadav (PAN- AAHPY8387M). Further, the Assessment Order was passed on 24.12.2021 which is clearly mentioned in the intimation letter. Even the Assessee can check via its E-filing portal, which will show the above DIN no. generated for the order dated 24.12.2021. Thus, the contention of the Assessee is factually incorrect and should be rejected.”
We have considered the submissions of the parties and perused the records. As a matter of fact, we observe that mention of DIN is conspicuous by its absence in the body of the impugned assessment order. 4
We have also gone through the CBDT Circular No. 19/2019 dated 14.08.2019, which reads as under:-
In para 2 thereof it is stated that in order to prevent instances (narrated in the opening para) and to maintain audit trail of all communication, no communication shall be issued by any Income Tax Authority to the assessee or any other person on or after the 1st day of October, 2019 unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. In the present case at hand, undoubtedly, the impugned assessment order is one such communication which has been issued by the Ld. AO without allotting a computer generated DIN and duly quoting in the body of the impugned assessment order. There is thus clear violation of the specific requirement under the CBDT Circular No. 19/2019 to quote the DIN in the body of the impugned assessment order.
Para 3(i),(ii),(iii),(iv) and (v) of the Circular No. 19/2019 enumerate the exceptional circumstances in which the Income Tax Authority may issue the communication manually but only after recording reasons in writing in the file and with the prior written approval of Chief Commissioner/Director General of Income Tax. The communication issued manually in situations specified in para 3 (i), (ii) or (iii) of the Circular, the Income Tax Authority is required to take steps to regularise the failure to quote DIN within fifteen (15) working days of its issuance in the manner laid down in para 5 of the said Circular, namely 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 as per electronically generated proforma available on the system.
Para 4 of the Circular says in unequivocal terms 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.
12. The case of the assessee is that the communication, namely, the assessment order dated 24.12.2021 for AY 2015-16 is not only without mention of DIN in the body of the order, there is no material on the record mentioning the reason for issuance of order without DIN and the date of approval of Director General / Commissioner of Income Tax for issuance of order without DIN. Though the assessment order was passed on 24.12.2021, however, the Ld. AO subsequently issued DIN through a separate communication (i.e. intimation letter generated suo-moto by the ITBA system) dated 03.02.2022. There is thus violation of the mandate enshrined in para 2 and para 3 of the CBDT Circular No. 19/2019 dated 14.08.2019. Therefore, the consequence mentioned in para 4 of the said Circular, namely that the impugned assessment order dated 24.12.2021 be treated as invalid and non-est in the eye of law should follow.
13. We do not find any substance in the reasons stated by the Ld. AO in his email dated 03.08.2023 for issuance of assessment order without DIN as it is a matter of record that the impugned assessment order neither contain any DIN and nor any reason for non-mentioning of DIN thereof. Rather, we are in complete agreement with the above contentions of the assessee. In our view, the subsequent communication dated 03.02.2022 issued by the Ld. AO generating DIN for the impugned assessment order cannot make good the deficiency in the assessment order issued without generating DIN. In taking this view we are supported by the ratio decidendi of the decision of Hon’ble Delhi High Court in CIT (International Taxation) vs. Brandix Mauritius Holdings Ltd. dated 20.03.2023 reported in (2023) 293 Taxman 385 (Delhi) wherein the Hon’ble Delhi High Court dismissed the Revenue’s appeal observing and holding as under:- "8.1 In a nutshell, communications referred to in the 2019 Circular would fall in the following slots: i. Those which do not fall in the exceptions carved out in paragraph 3(i) to (v) ii Those which fall in the exceptions embedded in paragraph 30 to (v), but do not adhere to the regime set forth in the 2019 Circular. 8.2 Therefore, whenever communications are issued in the circumstances alluded to in paragraph 3(i) to (v), i.e., are issued manually without a DIN, they require to be backed by the approval of the Chief Commissioner/Director General. The manual communication is required to furnish the reference number and the date when the approval was granted by the concerned officer. The formatted endorsement which is required to be engrossed on such a manual communication, should read as follows: “....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/Director General of Income Tax vide number.... dated.....”
We have heard learned counsel for the parties. The present appeal is preferred under Section 260A of the Act. The Court’s mandate, thus, is to consider whether or not a substantial question of law arises for consideration. 12.1 As noted above, the impugned order has not been passed on merits.
13. The Tribunal has applied the plain provisions of the 2019 Circular, based on which, it has allowed the appeal preferred by the respondent/assessee.
14. The broad contours of the 2019 Circular have been adverted to by us hereinabove. 14.1 Insofar as the instant case is concerned, admittedly, the draft assessment order was passed on 30.12.2018.
15. The respondent/assessee had filed its objections qua the same, which were disposed of by the Dispute Resolution Panel [DRP] via order dated 20.09.2019.
16. The final assessment order was passed by the Assessing Officer (AO) on 15.10.2019, under Section 147/144(C)(13)/143(3) of the Act. Concededly, the final assessment order does not bear a DIN. There is nothing on record to show that the appellant/revenue took steps to demonstrate before the Tribunal that there were exceptional circumstances, as referred to in paragraph 3 of the 2019 Circular, which would sustain the communication of the final assessment order manually, albeit, without DIN. 16.1 Given this situation, clearly paragraph 4 of the 2019 Circular would apply.
Paragraph 4 of the 2019 Circular, as extracted hereinabove, decidedly provides 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. The phraseology of paragraph 4 of the 2019 Circular fairly puts such communication, which includes communication of assessment order, in the category of communication which are non-est in law. 17.1 It is also well established that circulars issued by the CBDT in exercise of its powers under Section 119 of the Act are binding on the" revenue. 17.2 The aforementioned principle stands enunciated in a long line of judgements, including the Supreme Court’s judgment rendered in K.P. Varghese v. Income Tax Officer, Ernakulam and Anr., (1981) 4 SCC 173. The relevant extracts are set forth hereafter: “12. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars
of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well settled as a result of two decisions of this Court, one in Navnitlal C. Javeri v. K.K. Sen [AIR 1965 SC 1375 : (1965) 1 SCR 909 : 56 ITR 198] and the other in Ellerman Lines Ltd. v. CIT[(1979) 4 SCC 565] that circulars issued by the Central Board of Direct Taxes under Section 119 of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act. The question which arose in Navnitlal C. Javeri case [AIR 1965 SC 1375 : (1965) 1 SCR 909 : 56 ITR 198] was in regard to the constitutional validity of Sections 2(6-A)(e) and 12(1-B) which were introduced in the Indian Income Tax Act, 1922 by the Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under the Act and this would include any loan or advance made in any previous year relevant to any assessment year prior to Assessment Year 1955-56, if such loan or advance remained outstanding on the first day of the previous year relevant to Assessment Year 1955-56. The constitutional validity of these two sections was assailed on the ground that they imposed unreasonable restrictions on the fundamental right of the assessee under Article 19(1)(f) and (g) of the Constitution by taxing outstanding loans or advances of past years as dividend. The Revenue however relied on a circular issued by the Central Board of Revenue under Section 5(8) of the Indian Income Tax Act, 1922 which corresponded to Section 119 of the present Act and this circular provided that if any such outstanding loans or advances of past years were repaid on or before June 30, 1955, they would not be taken into account in determining the tax liability of the shareholders to whom such loans or advances were given. This circular was clearly contrary to the plain language of Section 2(6-A)(e) and Section 12(1-B), but even so this Court held that it was binding on the Revenue and since: “past transactions which would normally have attracted the stringent provisions of Section 12(1-B) as it was introduced in 1955, were substantially granted exemption from the operation of the said provisions by making it clear to all the companies and their shareholders that if the past loans were genuinely refunded to the companies they would not he taken into account under Section 12(1 -B), ” Sections 2(6-A)(e) and 12(1-B) did not suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines case [(1972) 4 SCC 474 : 1974 SCC (Tax) 304 : 82 ITR 913] where referring to another circular issued by the Central Board of Revenue under Section 5(8) of the Indian Income Tax Act, 1922 on which reliance was placed on behalf of the assessee, this Court observed: “Now, coming to the question as to the effect of instructions issued under Section 5(8) of the Act, this Court observed in Navnitlal C. Javeri v. K.K. Sen, Appellate Assistant Commissioner, Bombay [AIR 1965 SC 1375 : (1965) 1 SCR 909 : 56 ITR 198] : ‘It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under Section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision. ’ The directions given in that circular clearly deviated from the provisions of the Act, yet this Court held that the circular was binding on the Income Tax Officer. ” The two circulars of the Central Board of Direct Taxes referred to above must therefore be held to be binding on the Revenue in the administration or implementation of sub-section (2) and this subsection must be read as applicable only to cases where there is understatement of the consideration in respect of the transfer. ” [Emphasis is ours] 17.3 Also see the following observations of a coordinate bench in Back Office IT Solutions Pvt. Ltd. v. Union of India, 2021 SCC OnLine Del 2742, in the context of the impact of circulars issued by the revenue: “24....In this context, tax administrators have to bear in mind the well- established dicta that circulars issued by the statutory authorities are binding on them, although, they cannot dictate the manner in which assessment has to be carried out in a particular case. A Circular cannot be side-stepped causing prejudice to the assessee by bringing to naught the object for which it is issued. [See: K.P. Varghese vs. Income-tax Officer 1, [1981] 7 Taxman 13 (SC); Also see: UCO Bank, Calcutta v. Commissioner of Income Tax, W.B., (1999) 4 SCC 599]. ”
The argument advanced on behalf the appellant/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 2019 Circular.
The object and purpose of the issuance of the 2019 Circular, as indicated hereinabove, inter alia, was to create an audit trail. Therefore, the communication relating to assessments, appeals, orders, etcetera which find 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.
The logical sequitur of the aforesaid reasoning can only be that the Tribunal's decision to not sustain the final assessment order dated 15.10.2019, is a view that cannot call for our interference.
As noted above, in the instant appeal all that we are required to consider is whether any substantial question of law arises for consideration, which, inter alls, would require the Court to examine whether the issue is debatable or if there is an alternate view possible. Given the language employed in the 2019 Circular, there is neither any scope for debate not is there any leeway for an alternate view.
21.1 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 respondent/assessee. 22. Accordingly, the appeal filed by the appellant/revenue is closed.”
Apart from decision of the Hon’ble jurisdictional Delhi High (supra), the case of the assessee also finds support from various judicial precedents cited before us by the Ld. AR. Though it is not necessary to multiply authorities on the point, however to the similar effect is the subsequent decision of the Hon’ble Calcutta High Court in the case of PCIT vs. M/s. Tata Medical Centre Trust (ITAT/202/2023) dated 26.09.2023 and Hon’ble Bombay High Court in the case of Ashok Commercial Enterprises vs. ACIT (WP. No. 2595 of 2021 with WP. No. 2953 of 2021, 2847, 2588, 2598, 2597, 2696, 2625, 2594 of 2021) wherein the Hon’ble Bombay High Court, inter- alia held that subsequent generation of the DIN will not be sufficient as the requirement of the CBDT Circular, is quoting of the DIN, in the body of such communication and / or order.
We also note that the case of the assessee is squarely covered by the decision dated 30.05.2023 of the Co-ordinate Bench in his own case for the AY 2016-17 in wherein the Tribunal recorded its findings as under: “11. A perusal of the impugned assessment order makes it clear that in the body of the assessment order the Assessing Officer has neither recorded the reasons for issuing the assessment order manually without DIN nor the date and number of approval of the Chief Commissioner/Director General of Income-tax. The subsequent communication dated 03.02.2022 issued by the Assessing Officer generating DIN of the assessment order cannot make good the deficiency in the assessment order issued without generating DIN, as, the Assessing Officer has failed to adhere to the conditions of paragraph No. 3 of the extant Circular, wherein, it has been specifically mandated that in a case where the Assessing Officer has to issue the communication manually without generating DIN with the prior approval of the CCIT/DGIT, not only he has to record the reasons for doing so in the file, but, he also has to incorporate in the body of such communication the reasons and number and date of approval by the CCIT/DGIT in the specified format. In the facts of the present appeal, admittedly, the assessment order issued manually by the Assessing Officer without generating DIN does not contain any reasons recorded by the Assessing Officer for issuing the order manually without DIN and the number & date of the approval granted by the CCIT. Thus, there cannot be any manner of doubt that the Assessing Officer has issued the assessment order without complying with the conditions enshrined in paragraph No. 2 & 3 of CBDT Circular, referred to above. That being the factual position, in terms of paragraph No. 4 of the said Circular, the assessment order has to be declared as invalid and shall be deemed to have never been issued.
12. Pertinently, while dealing with an identical issue in case of CIT vs. Brandix Mauritius Holdings Ltd. (supra), Hon’ble jurisdictional High Court has held as under: “12. ...
Thus, keeping in view the aforesaid observations of the Hon’ble Delhi High Court and in terms of paragraph 4 of the circular No. 19/2019 dated 14.08.2019, we have no hesitation in holding that the impugned assessment order is invalid and shall be deemed to have never been issued. Accordingly, we quash the impugned assessment order. As a natural corollary, the order of ld. Commissioner (Appeals) is set aside.”
In view of the above factual matrix of the assessee’s case and in the light of the various decisions (supra) of the Hon’ble High Courts as well as the binding CBDT Circular 19/2019 and following the decision (supra) of the Co-ordinate bench of Delhi Tribunal, we are inclined to quash the assessment order dated 24.12.2021 passed by the Ld. AO under section 153C/143(3) of the Act. As a natural corollary, the impugned order of the Ld. CIT(A) dated 21.06.2022 which is the subject matter of appeal before the Tribunal would have no legs to stand. Accordingly, it is set aside.
17. The additional ground No. 13 taken by the assessee raising purely legal issue is allowed. We are not adjudicating the appeal on merits.