2023 (11) TMI 997 - AT - Income Tax

DRP orders without Document Identification Number invalid, final assessment orders also bad in law

Keller Asia Pacific Limited Versus ACIT, Central International Taxation 2 (1) (2), Delhi

ITAT Delhi held that DRP orders passed without quoting Document Identification Number (DIN) are invalid in law. Following CBDT Circular No. 19/2019 and ... Validity of the orders passed by DRP without quoting DIN - HELD THAT:- After analyzing the clauses of the CBDT Circular No. 19/2019 dated 14.08.2019, as decided in Brandix Mauritius Holdings Ltd. [2023 (4) TMI 579 - DELHI HIGH COURT] that the orders/communications issued without quoting the DIN on the body of the order are not valid orders. Similar issue has been considered by the Tribunal recently in the case of Smt. Sharda Devi Bajaj & Ors. [2023 (11) TMI 645 - ITAT DELHI] Thus directions/orders passed by the DRP for the assessment years 2019-20 and 2020-21 under Section 144C(5) are bad in law. Consequently, the final assessment orders passed by the AO u/s 143(3) r.w.s.144C(13) pursuant to such directions/orders of the DRP are also bad in law - Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether Directions issued by the Dispute Resolution Panel (DRP) under Section 144C(5) of the Income-Tax Act, 1961, which do not quote a computer-generated Document Identification Number (DIN) in the body of the directions, are valid in law in view of CBDT Circular mandating quoting of DIN in the body of communications and orders. 2. Whether a final assessment order passed under Section 143(3) read with Section 144C(13) of the Act pursuant to DRP directions that are invalid for non-quoting of DIN is vitiated and liable to be quashed. 3. Whether subsequent generation of a DIN and/or issuance of a separate intimation letter containing a DIN after the date of the DRP directions cures the defect of omission of DIN from the body of the directions. 4. Whether additional legal grounds raised after framing of issues - challenging validity of DRP directions for omission of DIN - are admissible for consideration without fresh fact enquiry. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of DRP directions issued without quoting DIN Legal framework: CBDT Circular mandates generation/allotment/quoting of computer-generated DIN in the body of all communications and orders (including notices/letters/orders). The Circular provides limited exceptions permitting manual issuance only with recorded reasons and prior approval by specified authorities; non-compliance renders communication invalid and to be treated as never issued. Precedent treatment: Multiple higher judicial and coordinate tribunal decisions have interpreted the Circular to require that DIN must appear in the body of the order/communication and that absence of DIN renders the order invalid; exceptional functionality for generating separate intimation letters has been examined and held not to cure non-compliance where exceptions are not recorded. Interpretation and reasoning: The DRP directions under Section 144C(5) lacked the DIN in the body; there is no record of reasons or prior written approval required for manual issuance under the Circular's exceptions. The subsequent issuance of separate communications/intimation letters evidencing a DIN shows that a DIN was generated only after the directions were passed. The controlling purpose of the Circular - transparency, traceability and authentication of official communications - is not met by post-facto generation of DINs or separate intimation letters when the conditions for exceptions have not been satisfied. Ratio vs. Obiter: Ratio - Orders/directions lacking DIN in the body in contravention of the Circular are invalid and to be treated as never issued unless the limited, recorded exceptions apply. Obiter - discussion of administrative functionality for generation of intimation letters and systemic roll-out considerations is explanatory, not determinative where exceptions are not shown. Conclusions: DRP directions issued without quoting the DIN in the body are invalid in law absent the recorded exceptional circumstances and prior approvals mandated by the Circular. Issue 2 - Consequence for assessment orders passed pursuant to invalid DRP directions Legal framework: Section 144C(5) empowers DRP to issue directions; Section 144C(13) contemplates final assessment orders passed by the Assessing Officer pursuant to DRP directions. Validity of the final assessment depends on the validity of the DRP directions on which it is founded. Precedent treatment: Tribunal and High Court authorities have held that final assessment orders founded on invalid DRP directions are themselves vitiated and liable to be set aside. Interpretation and reasoning: Since the DRP directions were held invalid for non-compliance with the DIN requirement, the Assessing Officer's final assessment orders, being consequential to and based upon those directions, suffer from the same defect. The invalidity of the foundational directions is a jurisdictional vice that renders the downstream assessment orders nullity; merits of the additions need not be considered once jurisdictional invalidity is established. Ratio vs. Obiter: Ratio - Final assessment orders made pursuant to invalid DRP directions are bad in law and liable to be quashed. Obiter - comments that merits of substantive additions are academic where jurisdictional defect is established. Conclusions: The final assessment orders passed under Section 143(3) r/w 144C(13) pursuant to DRP directions that did not quote DIN are quashed as being bad in law; substantive additions were not decided for being academic after quashal. Issue 3 - Whether subsequent generation/communication of DIN cures the omission Legal framework: The Circular contemplates quoting of computer-generated DIN in the body of the communication/order; it also provides limited functionality and conditions for issuance of communications manually, subject to recording of reasons and prior approvals. Administrative communications describing system roll-out or functionality do not expand or diminish the Circular's substantive requirement. Precedent treatment: Authorities have held that subsequent generation of DIN or issuance of a separate intimation letter containing a DIN after the order's date does not cure the defect of omission of DIN in the body of the original order where the Circular's conditions for manual issuance were not complied with. Interpretation and reasoning: The DIN must appear in the operative body of the issued directions to satisfy the Circular. The subsequent generation of DIN or separate intimation does not retroactively place DIN in the body of the direction and thus fails to meet the Circular's mandatory requirement. The availability of a system feature to generate intimation letters for documents issued outside the system cannot substitute the statutory/administrative mandate unless the exception conditions are established on record. Ratio vs. Obiter: Ratio - Subsequent generation or separate communication of DIN does not validate an earlier order lacking DIN in its body absent compliance with the Circular's exception protocol. Obiter - observations on system facility/roll-out communications are explanatory and do not alter the mandatory textual requirement. Conclusions: Subsequent generation or separate intimation containing DIN does not cure the omission; the defect remains fatal unless the exception conditions in the Circular are satisfied and recorded. Issue 4 - Admissibility of additional legal grounds alleging DIN omission Legal framework: Principles permit admission of additional grounds if they are pure questions of law and do not require fresh factual enquiry; appellate tribunals may admit such grounds in the interest of justice. Precedent treatment: Authorities recognize that pure legal grounds can be admitted even if raised after initial stages provided no new facts need verification. Interpretation and reasoning: The additional grounds challenged the legal validity of DRP directions for failure to quote DIN - a pure legal issue not requiring fresh fact finding. Admission was appropriate and consistent with settled practice for resolution on merits. Ratio vs. Obiter: Ratio - Additional grounds raising pure legal issues were properly admitted and decided. Obiter - none material. Conclusions: The additional grounds were admitted and determined on merits; they succeeded, leading to quashal of DRP directions and consequent final assessment orders.