2022 (11) TMI 34 - AT - Income Tax

Validity of Order framed u/s 147/144C(13)/143(3) - Non quoting the mandatory document identification number ( DIN ) in conformity with Para-2 and Para-3 of Circular No. 19/2019 dated 14 August 2019 and thus, the said final assessment order deserves to be held as invalid, bad in law and void-ab-initio - HELD THAT - A perusal of the CBDT Circular No. 19/2019 clearly shows that the CBDT has considered the exceptional circumstances as mentioned in Para 3 of the Circular and therefore, in our considered opinion, only those circumstances which have been mentioned therein would be considered for non-mentioning of DIN. The Board has made it very clear that in cases where communication is issued manually, it may be done only after obtaining necessary approval of the relevant authorities and communication so issued must indicate the exceptional circumstances provided in the Circular itself. It has been made very clear by the Board that any communication which is not in conformity with Para 2. and 3 of the Circular shall be treated as invalid and shall be deemed to have never been issued. The impugned order is hit by this mandate of the Board and, therefore, we are inclined to adjudicate Ground No. 8 supra in favour of the assessee by holding that the order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Act is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to Circular No. 19/2009 dated 14.08.2019.

Summary

Issues Involved:
1. Validity of the re-assessment proceedings.
2. Taxability of capital gains from buy-back under the Income-tax Act.
3. Taxability of capital gains from buy-back under the India-Mauritius tax treaty.
4. Erroneous observations regarding the taxable entity and timing of the buy-back decision.
5. Levy of interest under sections 234A and 234B of the Act.
6. Initiation of proceedings under section 271(1)(c) of the Act.
7. Non-provision of mandatory sanction under section 151 of the Act.
8. Issuance of the final assessment order without quoting the mandatory Document Identification Number (DIN).
9. Non-allowance of additional credit of tax deducted at source.
10. Classification of capital gains as short-term instead of long-term.

Detailed Analysis:

1. Validity of the Re-assessment Proceedings:
The assessee challenged the re-assessment proceedings as arbitrary, contrary to law, facts, and circumstances, and claimed they were time-barred. The Tribunal did not address this issue directly in the judgment.

2. Taxability of Capital Gains from Buy-back under the Income-tax Act:
The assessee argued that the buy-back transaction does not result in taxable income under the Act, citing that Section 46A merely characterizes the gain as 'capital gains' without creating a charge of tax. Additionally, it was argued that the transaction should be exempt under clause (iv) of section 47 since it involved the parent company and its subsidiary. This issue was not directly adjudicated due to the decision on Ground No. 8.

3. Taxability of Capital Gains from Buy-back under the India-Mauritius Tax Treaty:
The assessee contended that the AO and DRP erred in holding the capital gains taxable in India, disregarding the provisions of the India-Mauritius tax treaty. They also argued against the applicability of Circular No. 789 only to Foreign Institutional Investors. This issue was also not addressed due to the decision on Ground No. 8.

4. Erroneous Observations:
The assessee pointed out errors in the AO's observations, including the imposition of tax on capital gains in the hands of the assessee instead of the holding company and the incorrect timing of the buy-back decision. These issues were not adjudicated due to the decision on Ground No. 8.

5. Levy of Interest under Sections 234A and 234B:
The assessee challenged the levy of interest under sections 234A and 234B, which had significant tax effects. This issue was not addressed due to the decision on Ground No. 8.

6. Initiation of Proceedings under Section 271(1)(c):
The assessee contested the initiation of penalty proceedings under section 271(1)(c). This issue was not adjudicated due to the decision on Ground No. 8.

7. Non-provision of Mandatory Sanction under Section 151:
The assessee raised an additional ground that the AO did not provide a copy of the mandatory sanction under section 151, making the re-assessment proceedings invalid. This issue was not addressed directly due to the decision on Ground No. 8.

8. Issuance of the Final Assessment Order without Quoting the Mandatory DIN:
Ground No. 8 was pivotal as it questioned the validity of the assessment order issued without a DIN, mandatory as per CBDT Circular No. 19/2019. The Tribunal found that the final assessment order dated 15.10.2019 was issued without quoting the DIN, which is mandatory. The Circular stipulates that any communication without a DIN shall be treated as invalid and deemed never issued. The Tribunal held the assessment order invalid and null and void, thus deciding in favor of the assessee.

9. Non-allowance of Additional Credit of Tax Deducted at Source:
The assessee raised an additional ground regarding the non-allowance of additional credit of tax deducted at source, which was not addressed due to the decision on Ground No. 8.

10. Classification of Capital Gains as Short-term Instead of Long-term:
The assessee argued that the capital gains should be classified as long-term and taxed at 20% instead of 40%. This issue was not adjudicated due to the decision on Ground No. 8.

Conclusion:
The Tribunal allowed the appeal of the assessee based on Ground No. 8, declaring the assessment order dated 15.10.2019 as invalid and null and void due to the absence of a mandatory DIN, as required by CBDT Circular No. 19/2019. Consequently, other issues raised by the assessee were not adjudicated.