INNIO JENBACHER GMBH & CO. OG,AUSTRIA vs. ACIT, CIRCLE 1(3)(1), INTERNATIONAL TAXATION, NEW DELHI

PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These appeals by the assessee are directed against the respective orders of the Assessing Officer pursuant to the directions issued by the DRP for the respective assessment years.

3. Although the assessee has raised many grounds, ld. Counsel for the assessee has prayed for additional grounds, which are similar in all the assessment years, and submitted that it go to the root of the validity of jurisdiction in this case. The additional grounds read as under:-

“10. On the facts and in the circumstances of the case and in law, the Ld. DRP erred in not quoting a valid computer- generated DIN on the body of the DRP directions dated December 16, 2022 passed under section 144C(5) of the Act, in contravention to Circular No. 19 of 2019 issued by the CBDT, thus rendering such an order/direction to be invalid and never to have been issued as per para 4 to the said Circular.

11. On the facts and in the circumstances of the case and in law, the final assessment order dated January 20, 2023 under section 147 read with section 144C (13) of the Act, passed by the Ld. AO pursuant to the invalid and non-est directions passed by Hon'ble DRP, is bad in law, null and void and liable to be quashed. "

ITA Nos.762, 763 & 764/Del/2023

4. Since the additional ground goes to the root of the matter, we admit the same and adjudicate as under.

5. The DRP order in the cases is dated 15/12/2022 / 16.12.2022. At the outset, ld. Counsel of the assessee submitted that there is no DIN mentioned in the DRP order which is contrary to the CBDT Circular No.19/2019 dated 14th August 2019. Hence, he submitted that the said DRP order is void ab initio. He further submitted that in such a situation, jurisdiction assumed is invalid and whole proceedings are vitiated. For this, ld. Counsel of the assessee relied upon catena of case laws.

6. Ld. DR for the Revenue relied upon the orders of the authorities below and submitted as under :-.

“Sub:- Request for the information in case of M/s Innio Jenbacher GMBH & CO OHG in 763, 764, 781 & 920/Del/2023 for A.Y. 2013-14, 2015-16, 2016-17 & 2017-18 - Reg. Kindly refer to your office email dated 24.08.2023 and the subject mentioned above.

2. In this connection, it is submitted that Dispute Resolution Panel consists of three CITs, the directions/order prepared by the Panel needs to be signed b all the Members/CITs of the Panel and eventually also signed by the Secretary of the DRP while dispatching the order/direction. Prior to the order being uploaded, the signature of each of the Panel members is taken on the DRP order. To prevent any further inadvertent editing from happening after signatures have been taken, the document is uploaded on ITBA in a PDF format. After being uploaded on ITBA portal, the DIN is generated on ITBA portal itself. In this case, the directions/orders u/s 144C(5) for A.Y. 2013-14, 2015-16, 2016-17 and 2017-18 were uploaded on the system on different dates for which DIN [Documents Identification Numbers] were generated by the system. The details of DIN generated are as under:-

, 763 & 764/Del/2023 ITA No.920/Del/2023

Sl.No. A.Y. Date of DINs generated through ITBA for uploading on uploading manual direction/order ITBA 1. 2013-14 16.12.2022 ITBA/DRP/M/144C(5)/2022-23/ 1048078560(1) 15.12.2022 2. 2015-16 ITBA/DRP/M/144C(5)/2022-23/ 1048079341(1) 15.12.2022 3. 2016-17 ITBA/DRP/M/144C(5)/2022/ 1048079035(1) 16.12.2022 4. 2017-18 ITBA/DRP/M/144C(5)/2022/ 1048078096(1)

3. Further, to communicate the above mentioned DIN of the directions/order to the assessee intimation letters were generated on different dates for which the system generated DINs. The details of the same are pasted below:-

Sl.No. A.Y. Date of DINs generated through ITBA for uploading on uploading manual direction/order ITBA 1. 2013-14 19.12.2022 ITBA/DRP/S/91/2022-23/1048078595(1) 19.12.2022 2. 2015-16 ITBA/DRP/S/91/2022-23/1048079374(1) 19.12.2022 3. 2016-17 ITBA/DRP/S/2022-23/ 1048079054(1) 19.12.2022 4. 2017-18 ITBA/DRP/S/2022-23/ 1048078168(1)

4. Thus, two DINs were generated by the system for a A.Y., one for generating the order u/s 144C(5) of the Act and the other generated while issuing intimation letter of the order to the assessee.

5. In view of the above, it is evident that the DRP has not passed its directions without quoting/mentioning DINs generated through ITBA portal and the directions/order passed and served upon the assessee are in consonance with the requirements of law laid down by the CBDT vide its Circular No. 19/2019 dated 14.08.2019.”

Submitted for your kind information and necessary action.”

ITA Nos.762, 763 & 764/Del/2023 “Circular No. 19 /2019 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, dated the 14th of 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 fax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of 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.

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 stale 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 of Income-Tax for issue of 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 / Director General of Income Tax vide number .... dated .... ”

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 31st October, 2019.

8. Hindi version to follow.

ITA Nos.762, 763 & 764/Del/2023 Sd/- (Sarita Kumari) Director (ITA, II) CBDT (F. No. 225/95/2019-1TA.H) Copy to:- i. PS to FM/OSD to FM/PS to MoS(F)/OSD to MoS(F) ii. PS to Secretary (Revenue) iii. Chairman, CBDT & All Members. CBDT iv. All Pr.CCsIT/Pr.DsGIT v. All Joint Secretaries/CslT, CBDT vi. C&AG vii. CIT (M&TP), Official Spokesperson of CBDT viii. O/o Pr. DGIT(Systems) for uploading on official website ix. Addl.CIT (Database Cell) for uploading on the departmental website Sd/- (Sarita Kumari) Director (ITA, II) CBDT”

7. The compliance is not in accordance with the Circular. The Circular mandates that in the body of the order / communication, it has to be stated that the communication is issued manually without a DIN and the date of obtaining of the written approval of Chief Commissioner / Director General of Income-Tax for issue of 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 / Director General of Income Tax vide number .... dated .... ”

8. Furthermore, a reading of the aforesaid circular makes it clear that the object behind bringing the circular is for creating an audit trail. In paragraph 2, it has been very clearly mentioned that no communication shall be issued by any income-tax authority relating to assessment, appeals,

ITA Nos.762, 763 & 764/Del/2023 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 1st day of October, 2019, unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. Paragraph 3 of the circular carves out certain exceptions to paragraph 2 by providing that under certain exceptional circumstances, enumerated in clause (i) to (v) of paragraph 3, the communication may be issued manually but only after recording reasons in writing not only in the file and with prior written approval of the Chief Commissioner/Director General of Income-tax, but, the communication issued manually in such circumstances must also state the reasons why communication is issued manually without a DIN and must also mention the date and number of written approval of the Chief Commissioner/Director General of Income-tax for issuing manual communication. In fact, in paragraph 3 of the aforesaid circular, the format for recording such reasons has been specified. Paragraph 4 of the circular makes it clear that any communication issued which, is not in conformity with paragraph 2 and paragraph 3 of the circular, shall be treated as invalid and shall be deemed to have never been issued. It is fairly well settled, a circular issued u/s. 119 of the Act has statutory force and binding on subordinate authorities working under the Central Board of Direct Taxes.

ITA Nos.762, 763 & 764/Del/2023

“12. 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.

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, ITA Nos.762, 763 & 764/Del/2023 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.

17. 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

ITA Nos.762, 763 & 764/Del/2023 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] :

ITA Nos.762, 763 & 764/Del/2023 ‘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 sub-section 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], ”

18. 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.

ITA Nos.762, 763 & 764/Del/2023 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.

“ 15.1 In this context from the aforesaid Circular no. 19/2019 it can be noted that it mandates that if the ‘communication’ is issued under aforesaid three exceptions the ‘communication’ shall state the fact that the ‘communication’ is issued manually without a DIN ITA Nos.762, 763 & 764/Del/2023 and the date of obtaining of the written approval of the Chief Commissioner / Director General of Income-Tax for issue of 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 / Director General of Income Tax vide number ....dated .. .. " 15.2 To make it crystal clear here the words ‘Communication’ is not used to define merely the mode of transmission of the information but the circular No 19 of 2019 makes it clear by defining it in following words “However, it has been brought to the notice of the Central Boa rd of 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"). So the assessment order itself is a communication and all compliances expected have to be specific to the assessment order. 15.3 Coming back to the assessment orders, in fact as para no. 1 to 3.1 of the assessment order dated 09.08.2021 are considered they mention that notice u/s 153A of the Act was issued through ITBA portal. Subsequent notice u/s 143(2) of the Act was also issued through ITBA Portal. Thus, the notices for the purpose of assessment were issued through ITBA Portal and if thereafter the assessment was carried out manually the assessment order should have mentioned the aforesaid fact to comply with the mandate of Circular with regard to communications issued manually.

5. In the light of the aforesaid order, we are of the opinion that simultaneous issue of the DIN number is insignificant and superfluous exercise, in the absence of mentioning the DIN number on the body of the communication.”

ITA Nos.762, 763 & 764/Del/2023