AI Drafter 
TaxTMI 
TaxTMI 
2024 (1) TMI 156
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....d seized. Thereafter in the post search proceedings, it was revealed that the assessee has created a web of sub-contractor firms having its registered address either at the residential / office premises of the then Chartered Accountant of the Company or at the residential address of the company's main accountant. The alleged sub contractors firms have been used by the assessee company to book bogus expenses to bring down its overall profits. Thereafter basis this information in his possession, the AO issued notice under section 148 dt. 20/03/2019 stating that on analysis of the report of the Investigation Wing and the returned income, it is clear that the bogus expenses of Rs. 10,30,66,089/- has been booked by the assessee company during the year under consideration and therefore, he has reason to believe that the amount of Rs. 10,30,66,089/- has escaped assessment within the meaning of Section 147 of the Act read with Clause (c) of Explanation 2 to Section 147. In the reasons so recorded, it has been stated by the AO that the escapement of income has happened due to failure on the part of the assessee company to disclose truly & fully the materials facts regarding accommodation en....
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....on the file in as much he was not justified to uphold the action of the Learned Assessing Officer in making an addition of Rs. 10,30,66,089/- on account of payments made to the sub- contractor firms by holding that the same are allegedly bogus. 2. That the Learned CIT(A) further gravely erred in upholding the action of the Learned Assessing Officer in resorting to initiation of proceedings u/s 148. 3. That the Learned CIT(A) further gravely erred in upholding the action of the Learned Assessing Officer in proceeding with the re-assessment u/s 148 despite the fact that the entire reliance has been made by the Learned Assessing Officer on some alleged documents found during the course of search u/s 132 at the premises of the third party, and if at all any action was warranted, should have been by resort to Section 153-C. 4. That the Learned CIT(A) further gravely erred in upholding the impugned addition of Rs. 10,30,66,089/- despite the fact that no opportunity was provided to cross examine the person on whose statement the reliance has been placed by the Learned Assessing Officer. 5. That the Learned CIT(A) further gravely erred in upholding the v....
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....us in nature. For one of the proceedings, the date had expired and the appellant approached the Ld. AO to take the documents in manual mode, which was declined. However, the appellant was given another opportunity to file its reply online, which was duly done. Thus, it is the submission of the appellant that the same principal should apply to both sides and therefore in the absence of an order being passed in digital mode, the assessment order should be treated as null and void. 7.3 It was further submitted that CBDT circular No. 19/2019 dated 14.08.2019 also mandated very officer issuing any communication, order, etc to anyone to mention DIN in the body of the order. In the case of the appellant's order, there is no DIN mentioned on the assessment order passed u/s 148 of the Act. In fact, there is a DIN mentioned on the demand notice, but not on the assessment order. The DIN that is mentioned on the demand notice is also written manually and does not appear to meet the requirements of the statute. 7.4 It was submitted that both the assessment order and the notice of demand were issued under separate sections and therefore require a different DIN. The appellant has filed ....
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....rough email. It is not clear as to why the order was not uploaded on the portal and it is not there till date and the said fact was also established before the Ld. CIT (A). 7.8 It was submitted that a table capturing various communications is detailed at page 9 of the paper book and also in written submissions before Ld. CIT(A) which reveals that the Ld. AO has conducted the entire proceedings electronically, but the orders have been generated and passed manually without mentioning the DIN. 7.9 In this regard, our reference was further drawn to the written submissions filed before the Ld. CIT(A) and the contents thereof read as under: "The above ground challenges the Assessment Order as being non-est and bad in law in as much as the same has been passed in violation of the provisions of the Act and by-passing the procedures laid down in various circulars issued by the Central Board of Direct Taxes (CBDT) relating to the conduct of assessment proceedings through 'e-proceeding facility' during the Financial Year 2019-20 which were mandatory for compliance by the Ld. AO. The Income Tax Department, as a part of its initiative towards digital transformation of bu....
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....med under section 143(3) of the Act during the Financial Year 2019-20, it is hereby directed that such assessment proceedings shall be conducted electronically subject to exceptions in para below. Consequently, assessees are required to produce/ cause to produce their response/ evidence to any notice/ communication/ show-cause issued by the Assessing Officer electronically (unless specified otherwise) through their 'E-filing' account on the 'E-filing' portal. For smooth conduct of assessment proceedings through 'E-Proceeding', it is further directed that requisition of information in cases under ' E-Proceeding' should be sought after a careful scrutiny of case records. In following cases, where assessment is to be framed during the financial year 2019- 20, 'E-Proceeding' shall not be mandatory: a. Where assessment is to be framed under section(s) 153A, 153C and 144 of the Act. In respect of assessments to be framed under section 147 of the Act, any relaxation from e-proceeding due to the difficulties in migration of data from ITO to ITBA etc. shall be dealt as per clause (f) below; b. In set-aside assessments; ....
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....ly submitted that it was incumbent on the Ld. AO per the principles of natural justice that in case there was to be any deviation from the prescribed mode of conducting e-proceedings, to intimate either electronically or otherwise of his decision after obtaining requisite approval, to dispense with the e-proceedings mode. It is humbly submitted that a review of the record of the entire proceedings, in any mode, makes it clear that there is no whisper about intimation of his intention to do so thereby laying bare her decision to stick to the e-proceedings mode for conduct and culmination of the assessment proceedings. In this connection, before proceeding ahead, Your Honour's kind attention is invited to the provisions of Section 153(2) of the Act which provides that no order for assessment, re-assessment and re-computation shall be made u/s 147 of the Act after the expiry of nine months from the end of the Financial Year in which the notice u/s 148 of the Act was served. In the instant case, the notice u/s 148 of the Act was served on the Appellant on 20.03.2019 and accordingly it was mandatory on the part of the Ld. AO to pass the order on or before December 31, 2019. ....
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....he assessee or any other person, on or after the 1st day of October, 20 19 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of' such communication. 3. In exceptional circumstances such as, - (i) when there are technical difficulties in generating/ allotting/ quoting the DIN and issuance of communication electronically; or (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties; or (iii) when due to delay in PAN migration, PAN is lying with non-jurisdictional Assessing Officer; or (iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner / Director General of income tax. In cases wh....
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....never been issued. Also, an intimation of issuance of manual communication for reasons recorded is also required to be sent to the Principal Director General of Income Tax (Systems) within seven days from the date of its issuance. In the instant case it may be noted the Assessment order bears no DIN. The circular reproduced above clearly states that in the event notice is not issued in accordance with the procedures prescribed which involve generation of DIN, any sort of communication shall be invalid and shall be deemed to have never been issued. Accordingly, this makes the Assessment order without any DIN invalid and bad and will deemed to have never been issued. It may however be noted that DIN has only been manually written on the demand notice u/s 156, which again is not in compliance with the guidelines in the circular. Further, as per the information available with the Appellant, no approval has been obtained from the CCIT/ DGIT neither any intimation has been given to the Principal DGIT to deviate from the procedure prescribed in Circular No. 19/2019 issued by the CBDT. Moreover, the notice was not served on the Appellant on the 'e-filing' portal, rather it was sen....
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....ired to submit certain information however due to paucity of time, while the Appellant was just collating the information, the portal was closed for the Appellant and it was not able to file the response in time. It was only when the Authorised Representative of the Appellant made a specific request by personally visiting the Ld. AO, the window was re-enabled to allow the Appellant to file submissions. The Appellant wishes to humbly submit that while the department expected the Appellant to be extremely cautious of the e-proceedings procedure and wanted it to upload submissions in time, when it was department's turn as regards following the e-proceedings procedure by uploading the order on the portal, it not only failed to do so but by-passed all prescribed guidelines to create an arbitrary demand on the Appellant. It is important to highlight the fact that when all the communications from the Department (right from issue of notice u/s 148 to supply of reasons to disposal of objections to other notices issued during the conduct of assessment)came with a valid communication reference, then why the assessment order was passed without issuing a valid computer-generated DIN. The table ....
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....ions of assessee on this issue is factually incorrect and deserves to be rejected. Point 2: It has been alleged (page 8) by the appellant that assessment order in this case has been passed without DIN. Reply to Point 2: In this regard, on perusal of the available case records, it is seen that the DIN in this case has been generated on system bearing no. ITBA/AST/M/147/2019- 20/1022605522(1). In fact, the assessee has himself provided the said DIN while filing appeal in Form No. 35. If assessment order had been passed without DIN then how come the assessee quoted DIN no. while filing appeal before your goodself in Form No. 35. Without prejudice to above, a copy of screenshot of system showing DIN no. of the said order is attached herewith as Annexure-2 for reference. Thus, submissions of assessee are factually incorrect, hence denied." 7.11 Further, our reference was drawn to the submission filed by the assessee in response to the remand report and the contents thereof read as under: "The Ld. Assessing Officer has shared screen shot showing the fact that the order was dispatched by mail on 18th December2021. However, the Ld. A....
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....eeding under die Act (other than verification under section 131 or section 133 of die Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may he issued manually but only after recording reasons in writing in. the file and with prior written approval of the Chief Commissioner / Director General of income-tax. In cases where manual communication is required to be issued due to delay in PAN migration, the proposal seeking approval, for issuance of manual communication shall include the reason for delay In PAN migration. The communication issued under aforesaid circumstances shall stale the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner / Director General of Income-fax for issue of manual communication in the following format- " .. This communication issues manually without a DIN on account of reason/reasons given in para 3(i)/3(ii)/3(iii)/3(iv)/3(v) of the CBDT Circular No ...dated (strike off those which are not applicable) and with the approval of the Chief Commissioner / Director Gener....
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.... order and our reference was drawn to the findings of the Ld. CIT(A) and the contents thereof read as under: "8.1 In this ground of appeal the appellant has stated that the assessment order was passed by the AO dated 17.12.2019 is non-est and bad in law as the assessment proceeding have not been conducted in the manner prescribed by the Department from time to time; which are mandatory for compliance by the AO. It was stated that the assessment order has not been uploaded on the efiling portal of the appellant but has been served manually on it through the courier. It has been further stated that in accordance with the provision of section 143[3A) of the Act read with circular no. 27/2019 dated 26.09.2019 of the CBDT, the assessment proceedings were to be conducted electronically. Further as per circular no. 19/2019 of the CBDT all communication by the Income Tax Authorities after 01.10.2019 shall mandatorily are to be sent through the computer generated DIN no. which should be duly quoted in the body of such communication except where due to technical difficulties in generating the DIN no., the communication may be issued manually but only after recording reasons in writi....
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.... 17.12.2019/19.12.2019. Merely because separate DIN no has not been generated for the assessment order would not make the assessment order invalid. As discussed above the demand notice and the assessment order cannot be seen in isolation. 8.3 Further there is no merit in the argument of the Ld. AR that as the DIN no. has been generated on 18.12.2019 whereas assessment order has been passed on 17.12.2019, the assessment order was bad in law. The objective behind mandatory requirement of generation and quoting of computer generated no. DIN no. in various notices, orders or correspondence issued by the Income Tax Department is to maintain proper audit trail of all such communications. It is clearly mentioned in para no. 2 of circular no. 19/2019 that no communication shall be issued by the Income Tax Authorities on or after 01.10.2019 unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. Therefore the AO was to generate such DIN no. before issuing/ communicating such assessment order along with demand notice to the appellant. It is observed that the AO has complied with the requirement of circular no. 19/2019 by generating the....
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....he Act. 8.2 It was submitted that the DIN number has been duly generated on 17/12/2019 and duly mentioned in the demand notice. It was submitted that both the assessment order and the demand notice have to be read together and cannot be seen in isolation and merely because no separate DIN number has been mentioned on the body of the assessment order, the same would not make the assessment order invalid. 8.3 It was further submitted that even if it is held that the AO was required to mention the DIN on the body of the assessment order, such omission on the part of the AO is covered by the provisions of Section 292B of the Act, as such assessment order was in substance and effect in conformity or according to the intent and purpose of the Act. 8.4 It was further submitted that there is no merit in the contention of the Ld. AR that the assessment proceedings have not been conducted electronically as the various notices have been issued through the assessment module of the ITBA portal and reassessment order has also been duly uploaded on such portal on 17/12/2019 and which has been dispatched to the assessee on 18/12/2019 electronically to the registered email account of the a....
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....se, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1st day of October, 20 19 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of' such communication. 3. In exceptional circumstances such as, - (i) when there are technical difficulties in generating/allotting/quoting the DIN and issuance of communication electronically; or (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties; or (iii) when due to delay in PAN migration, PAN is lying with non-jurisdictional Assessing Officer; or (iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in....
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....uly quoted in the body of such communication. Therefore, before any communication is issued, there are certain laid down steps and procedure which has been prescribed by the CBDT, in terms of generating the DIN through the computerization process and specifying the DIN so generated on the body of the communication, which has to be necessarily followed by the income tax authority and no relaxation therein has been envisaged and thus, has to be strictly followed by the income tax authority as part of standard operating standards and procedures. 12. In paragraph 3 of the aforesaid circular, the CBDT has envisaged and provided for certain exceptional circumstances where the communication may be issued manually by the income tax authority. For the purposes of issuing the manual communication, it has been further provided that such manual communication can be issued only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner / Director General of income tax. It has been further provided that the communication issued under aforesaid exceptional circumstances shall state the fact that the communication is issued manually without a DIN an....
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....n a period of 15 days by way of uploading the manual communication on the system, generating the DIN on the system and communicating the DIN so generated to the assessee. 15. In the instant case, on perusal of the reassessment order passed u/s 143(3) r/w 147 of the Act by the Deputy Commissioner of Income Tax, Central Circle 1, Chandigarh dated 17/12/2019, it is noted that there is no mention of any computer generated DIN which is allotted for the said communication and no DIN has thus been quoted in the body of reassessment order so issued. The communication so issued is thus not in compliance with paragraph 2 of the aforesaid circular issued by the CBDT. 16. Further, the reassessment order passed u/s 143(3) r/w 147 of the Act by the Deputy Commissioner of Income Tax, Central Circle 1, Chandigarh dated 17/12/2019 nowhere state in the body of the order/communication that it is issued manually without a DIN, what are the exceptional circumstances, and the fact of obtaining any written approval of the Chief Commissioner / Director General of Income-Tax in this regard for issue of manual communication in the specified format as so provided in the aforesaid circular. The communic....
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....e available at pages 954- 962 of the APB. In our considered view that the determination of tax demand and consequent interest liability is no doubt a result of assessment proceedings and the findings given in the assessment order and thus are closely connected and cannot be read in isolation. The same is the case with any reassessment proceedings. The demand is the outcome of the additions or disallowance so made by the Assessing officer to the returned income and determination of assessed income during the course of assessment proceedings and is thus dependent on the assessment proceedings. At the same time, assessment order quantifies the assessed income and the basis thereof and passed under relevant provisions, in the instant case u/s 143(3) r/w 147 and the notice of demand quantifies the tax demand passed u/s 156 of the Act. The notice of demand has to follow the assessment order and only in a scenario, the assessment order has been passed, the notice of demand can be issued. There are thus close connection between the two and one cannot be read in absence of the other. If one has to challenge the findings of the AO in the assessment order, effectively, the person is challengi....
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....nications. In view of the admitted position that there is no DIN on body of the assessment order (even though there is DIN on body of the notice of demand), the same will continue to be non-compliant with paragraph 2 of the CBDT Circular no. 19/2019 and carry the same consequences in terms of paragraph 4 of the CBDT Circular and will be held as invalid and never been issued. 22. Now, coming to Circular no. 27/2019 dated 26/09/2019 which has been issued by the Central Board of Direct Taxes in exercise of its powers u/s 119 and in accordance with provisions of section 2(23C) of the Act on the subject of conduct of assessment proceedings through "E-proceeding" facility during the financial year 2019-20, which is relevant to impugned assessment year 2012-13 as the reassessment proceedings have been conducted and completed during the financial year 2019-20 with passing of the reassessment order dated 17/122019. The contents thereof read as under: "The Central Board of Direct Taxes ('Board'), in exercise of its powers under section 119 of the Income-tax Act,1961 ('Act') and in accordance with provision of section 2(23C) of the Act, hereby directs as under: (i) In all....
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....rding generation/ allotment/ quoting of Document Identification Number (DIN). (iv) In cases where assessment proceedings are being carried out through the 'E-Proceeding' as per para 1 (i) above, personal hearing/ attendance may take place in following situation(s): a. Where books of accounts have to be examined; b. Where Assessing Officer invokes provisions of section 131 of the Act; c. Where examination of witness is required to be made by the assessee or the Department; d. Where a show-cause notice contemplating any adverse view is issued by the Assessing Officer and assessee requests through their 'E-filing' account for personal hearing to explain the matter. However, the details pertaining to above shall be uploaded on ITBA subsequently. 2. This may be brought to the notice of all concerned for immediate compliance." 23. In paragraph (i) of the aforesaid circular, the CBDT has directed that in all cases (other than the cases covered under the 'e-Assessment scheme, 2019' as so notified), where assessment is to be framed under section 143(3) of the Act during the financial year 2019-20, such assessment proceedings ....
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....r directions shall be issued- (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of [the Joint Commissioner (Appeals) or] the Commissioner (Appeals) in the exercise of his appellate functions. (2) Without prejudice to the generality of the foregoing power, (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 3 [115P, 115S, 115WD, 115WE, 115WF, 115WG, 115WH, 115WJ, 115WK,] 4 [139,] 143, 144, 147, 148, 154, 155 5 [, 158BFA], 6 [sub-section (1A) of section 201, sections 210, 211, 234A, 234B, 234C 7 [, 234E]], 8 [270A,] 271 9 [, 271C, 271CA] and 273 or otherwise), general or special orders in respect of 10[any class of incomes or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other....
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....ns as to the guidelines, principles, or procedure to be followed by other income tax authorities in work relating to assessment or collection of taxes, etc. It has been provided that the CBDT can issue such instructions and directions where in its opinion, it is necessary in public interest and such instructions and directions are published and circulated for general information. It has also been provided that such instructions and directions cannot require any income tax authority to make a particular assessment or dispose off a particular case in a particular manner and thus, cannot interfere in the judicial discharge of functions by any of the sub-ordinate authorities. It has also been provided that such instructions and directions shall not be prejudicial to the interest of the assessee. We therefore find that the doctrine of prejudice has been duly considered by the legislation while enshrining the powers to the CBDT to issue instructions and directions u/s 119 of the Act. Therefore, at the very threshold, the powers to the CBDT to issue instructions and directions u/s 119 of the Act are to be tested as to whether the same cause any prejudice to the assessee. Once the said thr....
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....nature, scope, extent and frequency of the activity. 3.1. There are industry and trade associations who claim exemption from tax u/s 11 on the ground that their objects are for charitable purpose as these are covered under 'any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional con....
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....endments, the combined effect of the two provisions was that three kinds of payments made to shareholders companies to which those applied, were treated as taxable dividend to the extent of the accumulated profits held by the company. The provision was challenged. It was noticed that while introducing the amendment, the Finance Minister assured that outstanding loans and advances - otherwise liable to taxation as dividends in AY 1955-56, would not be subjected to tax if it were shown that they had been genuinely refunded to the respective companies before 30.06.1955. The government felt that unless such a step was taken, the operation of Section 12(1B) would lead to extreme hardship, as it would cover the aggregate of all outstanding loans of past years and could have led to unreasonably high liability on shareholders to whom the loans might have been advanced. A circular [No. 20(XXI-6) /55] was issued by the Central Board of Revenue on 10.05.1955. The court, in that context, observed that: "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under s. 5(8) of the Act. This c....
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....r alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under Section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act. Under Section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forego the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in Section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest." 119. The view expressed in Navnit Lal Jhaveri (supra), and later elaborated in UCO Bank (supra) appears to have found resonance in other decisions 111 of this court. A recent instance where this court took aid of explanatory circulars is in CIT v. Vatika Township112 when after holding that the amendment in question applied prospectively, the court also supported that holding by citing the revenue's understanding about su....
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....toms v. Indian Oil Corporation114 , which articulated the position with some degree of clarity. Commenting on Navnit Lal Jhaveri (supra) and other decisions, it was observed that: "30. No proposition was laid down in that case that even if the circular was clearly contrary to the provisions of the Act it should prevail, On the other hand, the learned Judges were inclined to view the circular as granting the benefit of exemption from the operation of the impugned provisions subject to fulfilment of certain conditions. Navnit Lal's case was referred to and construed in two cases decided by Benches of two learned Judges. The first one was the case of Ellerman Lines Ltd. v. Commissioner of Income Tax, West Bengal [1971]82ITR913(SC) and the other is K.P. Varghese v. I.T. Officer, Ernakulam [1981]131ITR597(SC) . In both these cases it was assumed that Navnit Lal's case was an authority for the proposition that even if the directions given in the circular clearly deviate from the provisions of the Act, yet, the Revenue is bound by it. These three decisions were repeatedly referred to and relied on in the subsequent decisions in which the issue arose as regards the binding....
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.... within the framework of the statutory provision. However, if they are contrary to the plain words of a statute, they are not binding. Furthermore, they cannot bind the courts, which have to independently interpret the statute, in their own terms. At best, in such a task, they may be considered as departmental understanding on the subject and have limited persuasive value. At the highest, they are binding on tax administrators and authorities, if they accord with and are not at odds with the statute; at the worst, if they cut down the plain meaning of a statute, or fly on the face of their express terms, they are to be ignored." 28. In the instant case, we find that the concept of DIN was introduced in the statue by the Finance (No. 2) Act of 2009 whereby Section 282B was inserted with effect from 1/10/2010 and the same has been explained in CBDT Circular no. 5/20210 dated 3/06/2010. Thereafter, by the Finance Act of 2011, Section 282B got omitted with effect from 1/04/2011 and the reasons for such omission can be seen from the CBDT Circular no. 2/2012 dated 22/05/2012. Thereafter, the CBDT came out with the Circular no. 19/2019 dated 14/08/2019 which is under consideration befo....
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....ary in the said provisions, infact, the Circular can only be read in supplementing the said provisions and furthering the objective as so stated in terms of strengthening the transparency in the tax administration by way of establishing the digital foot prints which are difficult to erase and can be verified where so challenged, should the need for the same arise in future. We find that it is even not the case of the Revenue as set out before us that said Circular is contrary to any express provisions in the statue and thus, not binding on the Assessing Officer. Therefore, we have no hesitation to hold that the said CBDT Circular binds the Assessing officer by all intents and purposes it seek to achieve and where the Assessing officer fails in his duty to adhere and comply with the same, the said action cannot be ignored and the necessary consequences have to follow. 30. Now, coming to the contention advanced by the Ld. CIT/ DR that non-mentioning of DIN in the body of the assessment order is merely a mistake or at best a defect and/or omission which ought not to invalidate the assessment proceedings and substantive order and reference was drawn to Section 292B of the Act. We fi....
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....ll established that circulars issued by the CBDT in exercise of its powers under Section 119 of the Act are binding on the revenue. 17.2 The aforementioned principle stands enunciated in a long line of judgements, including the Supreme Court's judgment rendered in K.P. Varghese v. Income Tax Officer, Ernakulam and Anr., (1981) 4 SCC 173. The relevant extracts are set forth hereafter: "12. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well settled as a result of two decisions of this Court, one in Navnitlal C. Javeri v. K.K. Sen [AIR 1965 SC 1375 : (1965) 1 SCR 909 : 56 ITR 198] and the other in Ellerman Lines Ltd. v. CIT [(1979) 4 SCC 565] that circulars issued by the Central Board of Direct Taxes under Section 119 of the Act are binding on all officers and persons em....
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....rcular issued by the Central Board of Revenue under Section 5(8) of the Indian Income Tax Act, 1922 on which reliance was placed on behalf of the assessee, this Court observed: "Now, coming to the question as to the effect of instructions issued under Section 5(8) of the Act, this Court observed in Navnitlal C. Javeri v. K.K. Sen, Appellate Assistant Commissioner, Bombay [AIR 1965 SC 1375 : (1965) 1 SCR 909 : 56 ITR 198] : "It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under Section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision." The directions given in that circular clearly deviated from the provisions of the Act, yet this Court held that the circular was binding on the Income Tax Officer." The two circulars of the Central Board of Direct Taxes referred to above must therefore ....
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....19 Circular and thus, reached a conclusion in favour of the respondent/assessee. 22. Accordingly, the appeal filed by the appellant/revenue is closed. 23. Needless to state, that if the AO is in a position to take next steps in law, it would embark upon the same only in accordance with the law." 31. In the aforesaid case, the facts of the matter were that the final assessment order passed by the Assessing officer u/s 147/144C(13)/143(3) was without quoting DIN on the body of the order and the Coordinate Delhi Benches held that the order so issued is hit by mandate of the Board and is invalid and deemed to have never been issued as it fails to mention DIN in the body adhering to CBDT Circular no. 19/2009 dated 14/08/2019. The matter was thereafter carried in appeal by the Revenue before the Hon'ble Delhi High Court and it was contended on behalf of the Revenue that failure to allocate and mention DIN was a mere mistake and such a mistake can be corrected by taking recourse to section 292B of the Act which was however not found acceptable to the Hon'ble High Court. The Hon'ble High Court referred to the CBDT Circular and held that there is nothing on record that ....
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....s, Income tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax-administration Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice. order, summons, letter and any correspondence (hereinafter referred to as "communication" were found to have been issued manually, without maintaining a proper audit trail of such communication. 2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the income-tax Act, 1961 (hereinafter referred to as "the Act"), has decided that no communication shall be issued by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry. investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any ....
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.... ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro-forma available on the System. 6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance. 7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31th October, 2019. Paragraph 3 of the Circular sets out five exceptional circumstances where the aforementioned mandatory requirement may not be adhered to, but requires that if an order/communication is to be issued without a DIN, it can be done only after recording reasons in writing in the file and with the prior written approval of the Chief Commissioner/Director General of Income Tax. Further, paragraph 3 requires that if such exceptional circumstances are claimed, the orders/communication issued with....
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.... of the Act, is untenable, having regard to the phraseology used in paragraph 4 of the 2019 Circular. 19. The object and purpose of the issuance of the 2019 Circular, as indicated hereinabove, inter alia, was to create an audit trail. Therefore, the communication relating to assessments, appeals, orders, etcetera which find mention in paragraph 2 of the 2019 Circular, albeit without DIN, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 Circular. (c) During the course of hearing, Mr. Suresh Kumar produced an intimation letter dated 13th October 2021 stating that the order dated 28th September 2021 under Section 153C of the Act has a DIN, which is set out therein. Even if this is held to be in compliance with paragraph 5 of the Circular, which deals with regularization of communications without DIN, this can only seek to regularize the failure to generate a DIN, but yet the requirements of paragraph 3 of the Circular will still remain contravened and consequently, the order dated 28th September 2021 ought to be treated as invalid and never issued; (d) The said Circular also applies to the satisfaction note dated 13th J....
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....by the Assessing officer and in the process, has laid down the proposition that the quoting of DIN has to be qua each communication and just because there is simultaneous communication of assessment order and notice of demand, the same wouldn't satisfy the requirement as so laid down in the CBDT Circular. In the instant case, as well, we find that where there is simultaneous communication of assessment order and notice of demand and the assessment order doesn't carry DIN on body of the assessment order though the notice of demand carries the DIN, the assessment order has is to be treated as invalid and never be deemed to be issued. We therefore find that the said decision support our view, as we have discussed in paragraph 18-20 supra, that assessment order and notice of demand are two separate communications qua the assessee and carry separate physical existence and identity, even though issued on the same date by the same Assessing officer pertaining to same assessment year and therefore, necessarily have to carry separate DIN on the body of the said communications. 34. Again, in the context of CBDT Circular no. 19/2019 dated 14/08/2019, we find that the matter came up for con....
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....ction 263 of the Act. The learned Tribunal upon examining the facts held that the order does not incorporate the DIN number and it is in violation of the Circular No. 19 of 2019, dated 14th August, 2019. In the said Circular, in paragraph 4 it has been stated that any communication which is not in conformity with Para 2 and Para 3 of the said Circular shall be treated as invalid and shall be deemed to have never been issued. The Tribunal on examination of the facts held that the requirement as mentioned in the Circular namely, quoting of the Document Identification Number, has not been followed and therefore allowed the assessee's appeal. The learned counsel for the appellant submitted that the intimation letter should be treated as part and parcel of the substantive order. However, in the intimation letter there is nothing mentioned as to why in the substantive order the Document Identification Number was not mentioned as mandated in the Circular. The revenue filed miscellaneous application seeking for rectification of the said order. Once again the Tribunal has undertaken a factual exercise and in fact, raised a specific query to the revenue to point out how....
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....d on the decision of Hon'ble Chattisgarh High Court in case of DCIT Vs. Sunita Finlease Ltd. [2011] 330 ITR 491 wherein it was held that the administrative Instruction No. 9/2004 issued by the CBDT is binding on administrative officer in view of the statutory provision contained in section 143(2) which provides for limitation of 12 months for issuance of notice under section 143(2) of the Act. Further reliance was also placed on the Hon'ble Calcutta High Court decision in case of Amal Kumar Ghosh [2014] 361 ITR 458 (Cal) wherein the Hon'ble High Court, rebutting the contention advanced by the Ld. Advocate on behalf of the Revenue that the Circulars are not meant for purpose of permitting the unscrupulous assessee's from evading tax, held that even assuming that to be so, it cannot be said that the department which is State can be permitted to selectively apply the standards set by themselves for their own conduct. It was held by the Hon'ble High Court that where this type of deviation is permitted, the consequences will be that, floodgate of corruption will be opened which is not desirable to encourage. It was held by the Hon'ble High Court that when the department has set down a s....
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....where there is no mention of DIN on body of the assessment order and even there is no mention of any exception so carved for non-mentioning the DIN in the body of the order, thus not in conformity with para 2 and 3 of the said Circular. 38. We therefore find that there is consistent view taken by the Hon'ble Delhi High Court, Hon'ble Bombay High Court and Hon'ble Calcutta High Court that given the binding nature of the CBDT Circular on the income tax authorities, the consequences of the contravention thereof ought to be given full effect to and any communication so issued in contravention of the CBDT Circular ought to be treated as invalid and deemed never to have been issued. 39. At the same time, we will be failing in our duty in not referring to the decisions rendered by the Hon'ble Allahabad High Court, the Hon'ble Kerela High Court and Hon'ble Jharkhand High Court which have come to our notice and brought to the notice of both the parties during the course of hearing. 40. The Hon'ble Allahabad High Court in case of Chandra Bhan vs Union of India (Writ petition no. 829 of 2023 dated 18/07/2023) reported in 2023:AHC:142867 has held as under: "Heard learned coun....
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....o the assessee and all questions of law and facts were kept open. While disposing off the writ petition, the Hon'ble High Court has also held that the argument of the appellant that the order so passed is without jurisdiction deserve to be rejected since no prejudice is shown to have been caused to the petitioner as the petitioner has acknowledged receipt of such notice and has also submitted his objections, which have been duly adverted to and non-issuance of notice on DIN would thus not be a ground to entertain the writ petition, notwithstanding the availability of alternative remedy. We therefore find that the writ petition so filed was dismissed by the Hon'ble High Court primarily in view of availability of alternate remedy and secondly, following the doctrine of no prejudice being caused to the assessee. At the same time, it is noted that there is no reference to the contents of the CBDT Circular apparently not brought to the notice of the Hon'ble High Court and consequently, no reference to the intent and context of issuance of such circular and the fact that the said circular has been issued by the CBDT in exercise of its powers u/s 119 of the Act which at the very threshold....
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....tion shall be issued by any Income Tax Authority inter alia relating to assessment orders, statutory or otherwise, inquiries, approvals to an assessee or any other person on or after 1st October 2019 unless a computer generated DIN has been allotted. The said Circular is extracted hereunder: "CIRCULAR NO.19/2019 (F. NO.225/95/2019-ITA.II], DATED 14-8-2019 With the launch of various e-governance Initiatives, Income Tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax-administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as "communication" were found to have been issued manually, without maintaining a proper audit trail of such communication. 2. In order to prevent such instances and to maintain proper ....
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.... dated .... 4. Any communication which is not in conformity with Para 2 and Para-3 above, shall be treated as invalid and shall be deemed to have never been issued. 5. The communication issued manually in the three situations specified in para 3- (i), (ii) or (iii) above shall have to be regularised within 15 working days of its issuance, by i. uploading the manual communication on the System. ii. compulsorily generating the DIN on the System; iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro forma available on the System. 6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance. 7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the Income-tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31st October 2019." 4.2 The satisfaction note is a document prepared by the Assessing Aut....
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....sessee at the same point in time doesn't bear the DIN number. 44. Further, the Hon'ble Jharkhand High Court in case of Prakash Lal Khandelwal vs. The CIT, Ranchi (in W.P. (T) No. 1901 of 2022 dated 19/21-02-2023) has held as under: "7. Having heard learned counsel for the parties and after going through the documents annexed with the respective affidavits and the averments made therein it appears that the petitioner in the present writ petition has challenged the assessment order, dated 31.03.2022, passed in the case of the petitioner for AY 2014-15. The said assessment order was passed pursuant to the order dated 02.03.2020 passed by the ITAT which had directed the assessing officer to examine the entire issue afresh. The order of the learned ITAT was received by the office of the Principal Commissioner of Income Tax on or around 24.06.2020. According to the petitioner, as per Section 153 (3) of the Income Tax Act, 1961, the limitation period for passing and communicating the said assessment has expired on 31.03.2022. The main thrust of the argument of the petitioner is that the said assessment order, dated 31.03.2022, passed in the case of the petitioner was ....
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....after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "twenty one months", the words "twelve months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2021, the provisions of this subsection shall have effect, as if for the words "twenty one months", the words "nine months" had been substituted. (2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted. (3) Notwithstanding anything contained in sub sections (1) and (2), an order of fresh assessment in pursuance of an order under section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of nine m....
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.... the end of the financial year in which the order sought to be revised was passed, such an order cannot be said to be beyond the period of limitation prescribed under Section 263(2) of the Act. Receipt of the order passed under Section 263 by the assessee has no relevance for the purpose of counting the period of limitation provided under Section 263 of the Income Tax Act. 5. In the present case, the order was made/passed by the learned Commissioner on 26-3-2012 and according to the department it was dispatched on 28-3-2012. The relevant last date for the purpose of passing the order under Section 263 considering the fact that the assessment was for the Financial Year 2008-09 would be 31-3-2012 and the order might have been received as per the case of the assessee respondent herein on 29-11-2012. However as observed hereinabove, the date on which the order under Section 263 has been received by the assessee is not relevant for the purpose of calculating/considering the period of limitation provided under Section 263(2) of the Act. Therefore the High Court as such has misconstrued and has misinterpreted the provision of sub-section (2) of Section 263 of the Act. If the inte....
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....Section 153 (1) and Section 153 (2) on one hand and Section 153 (3) on the other hand are substantially different. While Section 153 (1) and Section 153 (2) starts with a negative and strict expression being "No order of assessment .... shall be made", Section 153 (3) starts with a non obstante clause being "Notwithstanding anything contained in sub-sections (1) and (2)". The non-obstante clause gives Section 153 (3) an over-riding effect over the provision of Section 153 (1) and Section 153 (2). It further appears that, both under Section 153 (1) and Section 153 (2) the language is "no order of assessment ....... shall be made" and the language in Section 153 (3) is "....order of fresh assessment .... may be made .....". The legislature, in the same Section 153, has used the word "shall" for assessment orders in cases falling under Section 153 (1) and Section 153 (2) and has used the word "may" for assessment orders in cases falling under Section 153 (3). Accordingly, the legislature itself has given stricter time line for Section 153 (1) and Section 153 (2) and has given a liberal time line for Section 153 (3). Thus, it may not be correct to apply the time line provided ....
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....e of the parties. 45. In the aforesaid case briefly the facts of matter were that the assessment was originally completed under section 143(3). Thereafter the matter was carried in appeal before the Ld. CIT(A) and thereafter before the Tribunal wherein the Tribunal vide its order dt. 02/03/2020 remanded the matter back to the AO for fresh consideration. Thereafter the assessee pursued the matter with the AO however no final order was passed stating that after the introduction of the Faceless Assessment Scheme, the entire proceedings shall be carried out in terms of the said scheme. Aggrieved with the said action, the assessee preferred a Writ Petition before the Hon'ble High Court which was however subsequently withdrawn and the reasons for the withdrawal which were allowed by the Hon'ble High Court vide order dt. 19/04/2022 was that a fresh assessment order has been passed and uploaded on the Web Portal and in terms of Section 153(3), the time period to commence and conclude the proceeding after remand would be governed from the end of the financial year in which the order was received which would be 31/03/2022. During the pendency of the Writ Petition, the order of the assessm....
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....the assessment order pursuant to remand and does not provide the time limit for communicating the assessment order. It was also contended that the Circular Number 19/2019 regulates merely issuance of any communication by the Income Tax Authority and not passing of the assessment order which has been clearly passed within the limitation period. 47. The submissions so made by both the parties were considered by the Hon'ble High Court and referring to the provisions of Section 153, it was held that Section 153(3) regulates only making the order and there is no restriction or limitation period prescribed under section 153(3) for issuance of order, uploading of order on web portal or communication of order. It was held in the said case, the assessment order was made / generated on 31/03/2022 and intimation letter was issued on 01/04/2022 therefore the contention advanced by the assessee that the assessment order dt. 31/03/2022 which was uploaded on the web portal on 01/04/2022 and communicated to the assessee on 03/04/2022 is barred by limitation was found misconceived and not accepted. It was further held by the Hon'ble High Court that the assessment order was uploaded on web portal....
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....ere are certain factual and legal distinguishing features in case of matters before Hon'ble Allahabad High Court, Hon'ble Kerela High Court and Hon'ble Jharkhand High Court and therefore, these decisions stand distinguishable and cannot come to the aid of the Revenue or be held against the assessee unlike the decisions rendered by the Hon'ble Delhi High Court, Hon'ble Bombay High Court and Hon'ble Calcutta High Court which have a clear bearing on the matter under consideration and supports the case of the assessee. Having said that, we have a situation where contrary views have been expressed by the non-jurisdictional High Courts and there is no jurisdictional Punjab and Haryana High Court decision where necessary guidance can be drawn from. In such a scenario, we are guided by the decision of the Hon'ble Supreme Court in case of Commissioner of Income tax vs M/s Vegetables Products Ltd reported in 88 ITR 192 where it was held that where the provision is capable of more than one reasonable interpretation and different High Courts have taken different view matter, the view which is favourable to the assessee should be adopted. In view of the same, we are inclined to follow the views....