DRP orders without valid computer-generated DIN are invalid and non-est, making subsequent section 144C(13) assessments void ab-initio

ITAT Chennai held that DRP orders passed without valid computer-generated DIN are invalid and non-est. The tribunal rejected revenue's arguments that DRP directions are internal communications exempt from CBDT Circular No.19/2019, ruling that DRP is an income-tax authority bound by CBDT circulars. The court found no merit in revenue's claim that electronic orders don't require DIN, noting other DRP offices successfully generate DIN numbers. Since DRP directions were deemed never issued due to missing DIN, final assessment orders passed pursuant to such invalid directions under section 144C(13) were held void ab-initio and liable to be quashed.

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Issues Involved:
1. Delay in filing appeals.
2. Admission of additional grounds based on CBDT Circular No.19/2019.
3. Validity of orders without a valid Document Identification Number (DIN).
4. Whether DRP directions are considered internal communications.
5. Whether DRP is an income-tax authority under section 116 of the Act.
6. Applicability of the CBDT Circular to electronically communicated orders.
7. Maintainability of appeals before the ITAT.

Detailed Analysis:

1. Delay in Filing Appeals:
The Tribunal acknowledged delays in filing certain appeals due to the COVID-19 pandemic and the consequent lockdowns. It referred to the Hon'ble Supreme Court's suo motu Writ Petition No.3 of 2020, which extended the limitation period for various proceedings. The Tribunal condoned the delays, considering the reasons provided by the appellants and in the interest of natural justice.

2. Admission of Additional Grounds Based on CBDT Circular No.19/2019:
The appellants raised additional grounds challenging the validity of orders passed by the DRP/AO without a valid computer-generated DIN, as mandated by CBDT Circular No.19/2019 dated 14.08.2019. The Tribunal admitted these additional grounds, referencing the Supreme Court decision in NTPC Ltd. vs. CIT, which allows new legal grounds based on existing records.

3. Validity of Orders Without a Valid Document Identification Number (DIN):
The Tribunal examined the core issue of whether orders issued without a valid DIN are invalid. It emphasized that the CBDT Circular No.19/2019 mandates that all communications from income-tax authorities must have a computer-generated DIN. The Tribunal found that the orders in question did not comply with this requirement, rendering them invalid, non-est, and deemed to have never been issued. The Tribunal referenced multiple judicial precedents, including decisions from the Delhi High Court and Calcutta High Court, which supported this interpretation.

4. Whether DRP Directions Are Considered Internal Communications:
The Tribunal rejected the argument that DRP directions are internal communications. It noted that DRP directions are communicated to the assessee and are intended to guide the AO in completing assessments. The Tribunal referenced Rule 11 and Rule 13 of the Income-tax (Dispute Resolution Panel) Rules, 2009, which mandate communication of DRP directions to the assessee, thus invalidating the claim of internal communication.

5. Whether DRP is an Income-Tax Authority Under Section 116 of the Act:
The Tribunal held that the DRP is indeed an income-tax authority as defined under Section 116 of the Act. It noted that the DRP comprises Principal Commissioners or Commissioners of Income-tax, who are classified as income-tax authorities. The Tribunal dismissed the argument that the DRP is not bound by the CBDT circulars, stating that all persons employed in the execution of the Act must follow such directions.

6. Applicability of the CBDT Circular to Electronically Communicated Orders:
The Tribunal found no merit in the argument that the CBDT Circular does not apply to electronically communicated orders. It highlighted that the circular does not provide any such exception and mandates a DIN for all communications, whether electronic or manual. The Tribunal referenced instructions from the Directorate of Income-tax (Systems), which facilitate the generation of DIN for both electronically and manually issued orders.

7. Maintainability of Appeals Before the ITAT:
The Tribunal addressed the argument regarding the maintainability of appeals, stating that while DRP orders themselves are not appealable, the final assessment orders passed by the AO pursuant to DRP directions are. The Tribunal held that invalid DRP directions render the subsequent assessment orders invalid and time-barred. It referenced the Supreme Court decision in Bhikajee Dadabhai & Co. vs. CIT, which supports the principle that an illegal order remains in force until set aside in appeal.

Conclusion:
The Tribunal quashed the final assessment orders passed by the AO for all assessment years and in all assessee cases due to the invalidity of DRP directions issued without a valid DIN. Consequently, the appeals filed by the assessees were allowed, and the stay petitions became infructuous and were dismissed. The order was pronounced in open court on 22nd December 2023 at Chennai.

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