2023 (12) TMI 706 - AT - Income Tax

Non quoting of DIN on internal communications between the AO and Addl. Commissioner seeking approval u/s 153D - HELD THAT - The CBDT Circular no. 19/2019 casts obligations that every income tax authority shall allot a new computer generated Document Identification Number (DIN)in respect of every communication by way of notice, order, letter or any correspondence issued by him to any other income tax authority or assessee or any other person and such number should be quoted thereon. The issue thus raised in the additional ground is thus no longer res integra . The Hon ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. 2023 (4) TMI 579 - DELHI HIGH COURT clearly underscored the binding nature of CBDT Circular No.19/2019 dated 14.08.2019 and stated in unequivocal terms that the assessment order passed without DIN is unsustainable in law owning to failure of the Department to allocate DIN and such failure cannot be regarded as an error which can be corrected by taking recourse of section 292B of the Act. The Hon ble Delhi High Court explained the binding effect of CBDT Circular and held that in the light of CBDT Circular, any communication issued by any Income-tax Authority relating to assessment, appeals, orders, statutory or otherwise, explanations, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person on or after the first day of October, 2019 shall have no standing in law unless a computer generated Document Identification Number (DIN) has been allotted and is duly reflected in the body of such communication subject to exceptional circumstances referred to in para 3 of CBDT Circular. It is an admitted position that the approval granted u/s 153D by the Addl. CIT to the draft assessment order is without issuance of DIN. The approval under section 153D which is the fulcrum for passing final assessment order dated 19.02.2021 in question is thus apparently non-est in law in the absence of DIN allocated to such communication at all. The final assessment order so passed under s. 153A in question on the basis of such invalid and non-est approval under section 153D is thus without sanction of law. The assessment order dated 19.02.2021 passed u/s 153A is thus liable to be quashed at threshold. Similarly, notice of demand u/s 156 without DIN and on the basis of non-est assessment order is also to be reckoned as a nullity. Having held the assessment order passed is vitiated owning to non conformity with the CBDT Circular No.19 of 2019, we do not consider it necessary to go into other aspect of objections raised on behalf of the assessee in its main grounds of appeal and additional grounds. Assessee appeal allowed.

Summary

Issues Involved:
1. Addition/Disallowance on account of cash deposit in the bank account.
2. Disallowances in business promotion expenses.
3. Initiation of penalty proceedings under Section 270A(2).
4. Validity of assessment order due to non-compliance with CBDT Circular No.19 of 2019 regarding Document Identification Number (DIN).

Summary:

1. Addition/Disallowance on Account of Cash Deposit:
The assessee challenged the addition of Rs. 78,69,000/- confirmed by the CIT(A) under Section 68 read with Section 115BBE of the Income Tax Act, 1961, related to cash deposits in the bank account.

2. Disallowances in Business Promotion Expenses:
The assessee also contested the disallowance of Rs. 4,32,773/- in business promotion expenses.

3. Initiation of Penalty Proceedings:
The assessee raised grievances regarding the initiation of penalty proceedings under Section 270A(2) of the Act.

4. Validity of Assessment Order Due to Non-Compliance with CBDT Circular:
The assessee moved an application for admission of additional grounds under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, challenging the validity of the assessment order due to non-compliance with CBDT Circular No.19 of 2019. The Tribunal admitted these additional grounds for adjudication.

The assessee argued that the assessment order and the notice of demand under Section 156 did not bear the mandatory Document Identification Number (DIN), rendering them non-est and invalid. The Tribunal noted that the CBDT Circular No.19/2019 mandates that every communication by income tax authorities must bear a DIN to maintain proper audit trails. The Tribunal referred to several judicial pronouncements, including CIT vs. Brandix Mauritius Holdings Ltd. and Ashok Commercial Enterprises vs. ACIT, which emphasized the binding nature of the CBDT Circular and the necessity of DIN in such communications.

The Tribunal found that the approval granted under Section 153D by the Addl. CIT for the draft assessment order did not bear a DIN, making the final assessment order dated 19.02.2021 invalid. Consequently, the assessment order and the notice of demand under Section 156 were quashed as they were based on non-est approval.

Conclusion:
The Tribunal held that the assessment order was invalid due to non-compliance with the CBDT Circular No.19 of 2019, and therefore, the appeal of the assessee was allowed. The Tribunal did not consider it necessary to address other objections raised by the assessee in its main grounds of appeal and additional grounds.