Assessment order quashed as section 153D approval lacked mandatory Document Identification Number under CBDT Circular

ITAT Delhi quashed an assessment order passed under section 153A after finding that the Addl. CIT's approval under section 153D lacked a Document Identification Number (DIN) as required by CBDT Circular 19/2019. The tribunal held that following Delhi HC precedent in CIT vs. Brandix Mauritius Holdings Ltd., any communication by income tax authorities without DIN has no legal standing. Since the approval under section 153D was invalid without DIN, the subsequent assessment order based on such approval was deemed without sanction of law. The demand notice under section 156 was also nullified. The assessee's appeal was allowed.

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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.

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