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of <h1>Rectification order without proper DIN held void; also time barred u/s154(7) and violated hearing requirement s.154(3)</h1> HC held the rectification order u/s 154 invalid and void ab initio as it did not bear a DIN in the prescribed manner, rendering it deemed never to have ... Validity of an rectification order passed u/s 154 w/o quoting DIN - Effect on Assessment Order which does not bear a DIN - time barred order - HELD THAT:- We are supported by a decision of this Court in Ashok Commercial Enterprises [2023 (9) TMI 335 - BOMBAY HIGH COURT] wherein it was held that if the AO does not bear a DIN or the required format set out in paragraph 3 of the Circular is not complied with, then, the order should be treated as invalid and deemed never to have been issued. Judgment of this Court in Hexaware Technologies Ltd [2024 (5) TMI 302 - BOMBAY HIGH COURT] dealt with a case where the Assessing Officer issued a reopening notice u/s 148 of the IT Act without a DIN and the same was treated as invalid and bad in law. As in PCIT (E) v. Tata Medical Centre Trust [2023 (9) TMI 1324 - CALCUTTA HIGH COURT] has also held that the DIN intimation letter issued along with the manual order cannot satisfy the categorical requirement of incorporating the DIN as mandated by Circular 19/2019 and, therefore, the order passed u/s 263 manually without a DIN was invalid. Only inference that can be drawn is that the impugned order is back dated. It is apparent that the time limit provided for in Section 154(7), viz., a period of 4 years from the end of the relevant Financial Year expired on 31.03.2024, as the order sought to be amended was dated 16.03.2020. Impugned order was not passed till 20.06.2024 as the same AO, viz., Mr. Virender Singh who has passed the impugned order allegedly on 29.03.2024, has issued a Show Cause Notice seeking to commence rectification proceedings under Section 154 of the IT Act. We also agree with the submission of Petitioner that a separate Notice under Section 154(3) of the IT Act would have to be issued by Respondent No. 1 granting an opportunity of being heard to the Petitioner even though the rectification order that was proposed to be passed was to give effect to an order passed by the TPO. As the effect of the order would have been to increase the total income, the mandate of Section 154(3) would have to be complied with by Respondent No. 1. The fact that the Notice was issued on 20.06.2024 itself shows that the impugned order could not have been passed before this date and by the time this Notice dated 20.06.2024 was issued, the time limit u/s 154(7) had already expired. Therefore, we agree with the submission of the Petitioner that on the basis of the notice dated 20.06.2024 an inference must be drawn that the impugned order could never have been passed on 29.03.2024 and the same has been back dated to save it from being time barred. The order quashed and set aside. 1. ISSUES PRESENTED AND CONSIDERED (1) Whether a rectification order under Section 154 of the Income-tax Act, 1961, issued after 1.10.2019 without a Document Identification Number (DIN), and without satisfying the exceptions in CBDT Circular No. 19/2019, is invalid and deemed never to have been issued. (2) Whether the subsequent generation/communication of a DIN through a separate intimation letter beyond the prescribed time and without prior approval/recorded reasons can cure the defect of a manually issued order without DIN, by invoking CBDT Circular No. 19/2019 or Section 292B of the Act. (3) Whether, on the facts, the rectification order purportedly dated 29.03.2024 was backdated and therefore barred by limitation under Section 154(7), and passed without mandatory prior notice/opportunity under Section 154(3). (4) Whether the existence of an alternate remedy before the Tribunal bars the exercise of writ jurisdiction when the impugned rectification order is ex facie without jurisdiction and contrary to mandatory statutory/CBDT requirements. 2. ISSUE-WISE DETAILED ANALYSIS Issue (1): Validity of rectification order without DIN under CBDT Circular No. 19/2019 Legal framework (a) CBDT Circular No. 19/2019, issued under Section 119, mandates that with effect from 01.10.2019 no 'communication' (defined to include notice, order, summons, letter and any correspondence) shall be issued by any income-tax authority unless a computer-generated DIN has been allotted and is duly quoted in the body of such communication (para 2). (b) In specified exceptional circumstances (technical difficulties, officer outside office, PAN migration issues, PAN not available, functionality not available), manual communication is permissible only after recording reasons in writing and with prior written approval of the Chief Commissioner/Director General of Income Tax, and the communication must itself state that it is issued manually without DIN in the prescribed format (para 3). (c) Any communication not in conformity with paras 2 and 3 'shall be treated as invalid and shall be deemed to have never been issued' (para 4). (d) Manually issued communications in specified cases must be regularised within 15 working days by uploading on the system, generating a DIN and communicating the DIN to the assessee (para 5). Interpretation and reasoning (e) The impugned rectification order under Section 154, being an 'order' and 'communication' within the meaning of the Circular, falls squarely within para 2 and must bear a DIN on its face. (f) The impugned order does not contain any DIN, does not refer to any exceptional circumstance under para 3, does not carry the mandated para 3 format, and no written approval of the Chief Commissioner/Director General has been placed on record in either of the affidavits; the Court therefore presumed none exists. (g) Even assuming an exceptional circumstance existed, the mandatory regularisation by generation and communication of DIN within 15 working days was not complied with; the DIN was later sought to be furnished only via an intimation letter dated 10.07.2024, which itself was not properly served and in any event issued well beyond the 15-working-day window. (h) The Court interpreted 'communication' in the Circular to cover the very issuance of notices/orders and not merely their later communication to the assessee, rejecting the contention that DIN is needed only at the stage of communication and not at the stage of passing/issuing the order. (i) The object of the Circular is to ensure a proper audit trail and prevent precisely the kind of manipulation/backdating revealed in the present case; failure to generate and quote DIN cannot be treated as a curable or minor irregularity. (j) The Court declined to follow the contrary view of the Jharkhand High Court in Prakash Lal Khandelwal, holding that it misread the Circular by restricting the DIN requirement to the act of communication rather than to all communications issued, and was in any event distinguishable on facts (single day delay in upload versus substantial delay and backdating here). (k) The Court relied on and followed binding and persuasive precedents holding communications without DIN (and without para 3 compliance) to be invalid and non est, including decisions where: (i) assessment orders without DIN were held invalid; (ii) notices under Section 148 without DIN were held bad in law; (iii) directions/orders without DIN could not be cured by separate intimation letters or by Section 292B. Conclusions (l) The impugned rectification order under Section 154, issued without a DIN and without satisfying or recording any exception under para 3 of the Circular, is in direct contravention of paras 2, 3 and 4 of CBDT Circular No. 19/2019. (m) By force of para 4 of the Circular, the impugned order is invalid and deemed never to have been issued. Issue (2): Effect of delayed DIN/intimation letter and applicability of Section 292B Legal framework (a) CBDT Circular No. 19/2019 para 5 allows regularisation of manual communications issued in limited exceptional cases by uploading, generating and communicating DIN within 15 working days. (b) Section 292B allows certain technical defects in returns, assessments, notices, etc., to be ignored if they are in substance and effect in conformity with the Act. Interpretation and reasoning (c) The Department contended that non-generation of DIN was due to a technical glitch and that the later intimation letter dated 10.07.2024, mentioning a DIN, regularised the defect; reliance was placed on Section 292B and on Prakash Lal Khandelwal. (d) The Court found that the intimation letter: (i) was itself not served on the correct email address and bounced; (ii) was uploaded only on 16.07.2024; and (iii) was issued far beyond the 15-working-day period contemplated in para 5, even if an exception were assumed. (e) The impugned order does not carry any recital of exceptional circumstances, or the requisite para 3 language, or any reference to approval of higher authority; therefore, the basic preconditions for manual issuance and subsequent regularisation were never satisfied. (f) Following earlier precedent, the Court held that a separate DIN intimation letter cannot retrospectively validate an order which never mentioned DIN and never complied with para 3; later communication of DIN does not cure the original violation of the Circular. (g) Given the categorical language of para 4 (communication non-conforming to paras 2 and 3 is invalid and deemed never issued) and the binding nature of Section 119 circulars on the Department, Section 292B cannot be invoked to override or dilute the Circular's specific consequence of invalidity. Conclusions (h) The delayed generation/communication of DIN via the intimation letter dated 10.07.2024 does not regularise or validate the impugned order. (i) Section 292B is inapplicable; the defect is substantive and jurisdictional under a binding CBDT Circular, not a mere procedural or technical irregularity. Issue (3): Limitation under Section 154(7), backdating, and non-compliance with Section 154(3) Legal framework (a) Section 154(7) mandates that no amendment under Section 154 shall be made after expiry of four years from the end of the financial year in which the order sought to be amended was passed. (b) Section 154(3) requires that where the amendment has the effect of enhancing an assessment, reducing a refund or otherwise prejudicing the assessee, the authority must give the assessee a reasonable opportunity of being heard. Interpretation and reasoning (c) The order sought to be rectified was dated 16.03.2020; the four-year limitation under Section 154(7) therefore expired on 31.03.2024. (d) The impugned rectification order is purportedly dated 29.03.2024. However, the same Assessing Officer subsequently issued a notice under Section 154 on 20.06.2024, granting time up to 01.07.2024 to show cause why rectification of the 16.03.2020 order should not be undertaken. (e) The issuance of a show-cause notice on 20.06.2024 by the very officer who allegedly passed the rectification order on 29.03.2024 is inherently inconsistent with the Department's case that the order was in fact passed on that earlier date; it demonstrates that as of 20.06.2024 no such rectification order existed. (f) The DIN generated for the impugned order bears the financial year '2024-25' in its string, whereas orders admittedly passed in FY 2023-24 (e.g., notices/orders dated 21.03.2024 and 27.03.2024) carry DINs referable to FY 2023-24. This indicates that the DIN and thus the order were generated only in FY 2024-25, i.e., after 01.04.2024. (g) The Court held that, cumulatively, the circumstances (absence of contemporaneous DIN, later DIN indicating FY 2024-25, and the 20.06.2024 show-cause notice by the same officer) compel an inference that the impugned order was actually made after 31.03.2024 and then backdated to 29.03.2024 to avoid limitation. (h) As regards Section 154(3), the Court accepted that, since the proposed rectification would enhance the total income (and thereby prejudicially affect the assessee) even though it followed a TPO's order, the Assessing Officer was independently required to issue a notice and grant an opportunity of hearing before passing the rectification order. (i) The show-cause notice under Section 154 was admittedly issued only on 20.06.2024, making it impossible for the rectification order to have been validly passed on 29.03.2024 in compliance with Section 154(3). (j) The Department's explanation that the 20.06.2024 notice was an inadvertent oversight by subordinates was rejected as factually incorrect; the notice was issued by the same officer who is shown as having passed the impugned order, further supporting the conclusion of backdating and non-compliance with Section 154(3). Conclusions (k) The rectification order could not, in law or on facts, have been passed on 29.03.2024; it was in reality made after the expiry of the limitation period under Section 154(7) and is therefore time-barred. (l) The mandatory requirement of prior notice and opportunity under Section 154(3) was not complied with; the order is vitiated on this independent ground as well. (m) On these grounds alone, the impugned rectification order is without jurisdiction and liable to be quashed. Issue (4): Maintainability of writ petition despite alternate remedy Legal framework (a) Article 226 of the Constitution confers writ jurisdiction on High Courts. (b) As per the principles affirmed in Whirlpool Corporation, the existence of an alternate remedy does not bar writ jurisdiction where, inter alia, the impugned order is wholly without jurisdiction or has been passed in violation of mandatory provisions or principles of natural justice. Interpretation and reasoning (c) The Department urged that the assessee had an alternate remedy by way of a pending appeal before the Tribunal. (d) The Court noted that the pending appeal relates, inter alia, to the order of the CIT(A), whereas the present writ challenges the later rectification order dated 29.03.2024 and the DIN intimation letter dated 10.07.2024, both alleged to be void ab initio. (e) Given the findings that: (i) the impugned order is invalid and deemed never issued for breach of CBDT Circular No. 19/2019; (ii) the order is time-barred and backdated under Section 154(7); and (iii) the mandatory hearing requirement under Section 154(3) was not met, the Court held that the Assessing Officer had acted beyond jurisdiction. (f) In such circumstances, the case falls within the recognised exceptions where writ jurisdiction may be exercised notwithstanding the availability of an alternate remedy. Conclusions (g) The writ petition is maintainable despite the pendency of appellate proceedings before the Tribunal, as the impugned rectification order and the accompanying DIN intimation letter are ex facie without jurisdiction and contrary to mandatory requirements. (h) The Court accordingly exercised writ jurisdiction, quashed the impugned rectification order dated 29.03.2024 and the intimation letter dated 10.07.2024, while making no observations on the merits of the underlying transfer pricing additions.
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