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2022 (11) TMI 33 - AT - Income TaxRevision u/s 263 - additional income being his share of 14% of cash received from Mr. D V Harish, MD of Davanam Constructions with whom a JDA is being entered into by the partnership firm - PCIT noticed that the AO has not conducted any enquiry with regard to the cash paid and to that extent he treated the assessment order as being erroneous and prejudicial to the interests of the revenue - HELD THAT - There is no dispute about the fact that the impugned order u/s. 263 of the Act has been issued manually. It is also noticed that the DIN for the order is generated through two separate intimations one bearing the same date as the date of the order u/s.263 and the other is dated 25.03.2022. The argument of the DR that the intimation dated 24.03.2022 is part of the order and that there is no violation cannot be accepted as generating the DIN by separate intimation is allowed to be done to regularise the manual order provided the manual order is issued in accordance with the procedure as contained - On perusal of the order u/s.263, it is noted that the order neither contains the DIN in the body of the order, nor contains the fact in the specific format as stated in Para 3 that the communication is issued manually without a DIN after obtaining the necessary approvals. Therefore, we are of considered view that the impugned order is not in conformity with Para 2 and Para 3 of the CBDT circular. As we hold that the orders passed u/s.263 for the assessment years 2014-15 to 2016-17 are invalid and shall be deemed to have never been issued as per Para 4 of the CBDT circular as the order is not conformity with Para 2 and Para 3. It is ordered accordingly.
Issues Involved:
1. Legality of the order passed under Section 263 of the Income-tax Act, 1961. 2. Compliance with the CBDT Circular No.19/2019 regarding Document Identification Number (DIN). 3. Validity of the assessment order based on retracted statements and loose sheets. Issue-wise Detailed Analysis: 1. Legality of the Order Passed Under Section 263: The appeals by the assessee challenge the orders of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income-tax Act for the assessment years 2014-15 to 2016-17. The PCIT deemed the assessment orders erroneous and prejudicial to the interests of the revenue because the Assessing Officer (AO) did not conduct an enquiry into the cash payments related to a Joint Development Agreement (JDA). The PCIT set aside the AO's order and directed a fresh assessment after verification. The assessee contended that the PCIT's reliance on a retracted statement and loose sheets was not tenable and that the AO had complete information about the JDA transaction. 2. Compliance with the CBDT Circular No.19/2019 Regarding DIN: The assessee raised additional legal grounds regarding the validity of the order under Section 263 due to non-compliance with CBDT Circular No.19/2019, which mandates quoting a DIN in all communications. The assessee argued that the order did not contain a DIN or mention the exceptional circumstances under which it was issued manually. The PCIT had issued two separate intimations with different DINs for the same order, which the assessee claimed was not in conformity with the Circular. The Tribunal admitted the additional grounds for adjudication, following the Supreme Court judgment in the case of National Thermal Power Co. Ltd. vs. CIT. 3. Validity of the Assessment Order Based on Retracted Statements and Loose Sheets: The PCIT's order under Section 263 was based on statements and documents found during a search operation, including a retracted statement from Mr. Pramod Bhandari and loose sheets. The assessee argued that these were not admissible evidence and that the AO had already considered and accepted the submissions without making any additions. The Tribunal noted that the PCIT did not provide a copy of the statement from Mr. Harish Davanam or an opportunity to cross-examine him, which further questioned the validity of the PCIT's order. Tribunal's Findings: The Tribunal first addressed the legal issue regarding the DIN. It found that the order under Section 263 was issued manually without quoting a DIN in the body of the order, and there was no mention of the exceptional circumstances or necessary approvals as required by the CBDT Circular. The Tribunal cited similar cases, including Tata Medical Centre Trust vs. CIT and M/s. Brandix Mauritius Holdings Ltd. vs. DCIT, where orders without DIN were deemed invalid. The Tribunal concluded that the impugned orders were not in conformity with the Circular and thus invalid. Conclusion: The Tribunal held that the orders passed under Section 263 for the assessment years 2014-15 to 2016-17 were invalid due to non-compliance with the CBDT Circular regarding DIN. Consequently, the other issues on merits became academic and were dismissed. The appeals were partly allowed, and the orders under Section 263 were deemed to have never been issued. Pronouncement: The judgment was pronounced in the open court on October 21, 2022.
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