Tax Orders Invalidated for Non-Compliance with DIN Requirement; Appeals Partly Allowed for 2014-16 Tax Years.

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 the Document Identification Number (DIN). The orders were issued manually without quoting a DIN, and there was no mention of exceptional circumstances or necessary approvals. Consequently, the orders were deemed to have never been issued, and the appeals were partly allowed. The other issues on merits became academic and were dismissed. Judgment was pronounced on October 21, 2022.

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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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