Without a DIN, a Section 263 order is void and is presumed to have never been issued
Fact and issue of the case
The assessee, an individual is a contractor earning business income from contract receipts apart from rental income and interest income. The assessee filed the return of income for AY 2011-12 on 30.09.2011 declaring an income of Rs.2,58,15,614. The case was selected for scrutiny under CASS and the assessment was completed u/s. 143(3) by making disallowance of agricultural income of Rs.5,00,000 and disallowance of expenses with respect to machinery maintenance of Rs.4,50,000. The case was reopened based on the information received from ITO(Inv) Unit 3(1) with regard to the search conducted and the undisclosed income offered by the assessee during the course of search. Based on the statement recorded from the employees of the assessee, Shri Shivaramu, the AO made an addition of Rs.2,70,00,000 in the hands of the assessee towards deposits made into the account of Shri Shivaramu and his brother by the assessee and completed the assessment u/s. 147 r.w.s. 144 of the Act. 3. Subsequently the PCIT issued a show cause notice for the reason that in the statement recorded Shri Shivaramu had stated about the cash withdrawals to the tune of Rs.17 crores in a span of 15 days by the assessee and the AO while completing the assessment did not make any enquiries in this regard. The assessee submitted before the PCIT giving reasons for the cash withdrawals and that the AO has applied his mind while completing the assessment after taking into account the details furnished by the assessee before the AO. However the PCIT did not accept the submissions of the assessee and proceeded to set aside the order of the AO passed u/s.147 r.w.s. 144 for doing fresh assessment on the point of payments of Rs. 17 crores. Aggrieved the assessee has preferred this appeal before the Tribunal. 4. The assessee raised 6 grounds pertaining to the revision order passed by the PCIT setting aside the order of the AO to make a fresh assessment on the point of payments amounting to Rs.17 crores. The assessee also made application for admission of additional grounds wherein the issue is contended on legal grounds in this appeal. The legal grounds relate to the validity of the order u/s. 263 for the reason that the order issued is a manual order and does not contain Document Identification Number [DIN] which is not in accordance with the instruction of Central Board of Direct Taxes (CBDT) issued vide circular no.19/2019 dated 14.08.2019. The relevant additional grounds are as extracted below
The impugned order passed by the learned Principal Commissioner of Income Tax is without a valid Document Indentification No. (DIN) and consequently, the revision order is invalid and non-est on the facts and circumstances of the case.
The impugned order passed by the learned Principal Commissioner of Income Tax is contrary to the binding CBDT Circular No.19/2019 dated 14.08.2019 and consequently, the revision order is invalid and non-est on the facts and circumstances of the case.
The appellant craves leave to add, alter, modify, delete or substitute any or all of the grounds at the time of hearing the appeal.
Observation by the tribunal
The tribunal has considered the rival submissions advanced by the learned Advocates. Even assuming that the intention of CBDT was to restrict the time for selection of the cases for scrutiny within a period of three months, it cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four corners of Circulars No. 9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon the department under section 119 of the I.T. Act.
Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. 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. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act. [emphasis supplied by us by underline]
Considering the facts on record, perusal of the impugned order, submissions made by the Ld. Counsel and the department, CBDT circular and the judicial precedents including that of Hon’ble Supreme Court and the jurisdictional High Court of Calcutta, we are inclined to adjudicate on the additional ground in favour of the assessee by holding that the order passed by the Ld. CIT(E) is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to the CBDT circular no. 19 of 2019. Accordingly, additional ground taken by the assessee is allowed. Having so held on the legal issue raised by the assessee in the additional ground, the grounds relating to the merits of the case requires no adjudication. Accordingly, the appeal of the assessee is allowed in terms of above observations and findings.”
We further notice that a similar view is being taken by the Delhi Bench of the ITAT in the case M/s.Brandix Mauritius Holdings Ltd., vs DCIT (ITA No.1542/Del/2020 dated 09.2022)
In assessee’s case there is no dispute about the fact that the impugned order u/s. 263 of the Act has been issued manually. It is also noticed that the DIN for the order is generated through two separate intimations one bearing the same date as the date of the order u/s.263 and the other is dated 25.03.2022. The argument of the ld DR that the intimation dated 24.03.2022 is part of the order and that there is no violation cannot be accepted as generating the DIN by separate intimation is allowed to be done to regularise the manual order (Para 5 of the circular) provided the manual order is issued in accordance with the procedure as contained in Para 3. On perusal of the order u/s.263, it is noted that the order neither contains the DIN in the body of the order, nor contains the fact in the specific format as stated in Para 3 that the communication is issued manually without a DIN after obtaining the necessary approvals. Therefore, we are of considered view that the impugned order is not in conformity with Para 2 and Para 3 of the CBDT circular.
In view of these discussions and respectfully following the decision of the Kolkata and Delhi Benches of the Hon’ble Tribunal we hold that the orders passed u/s.263 for the assessment years 2014-15 to 2016-17 are invalid and shall be deemed to have never been issued as per Para 4 of the CBDT circular as the order is not conformity with Para 2 and Para 3. It is ordered accordingly.”
In assessee’s case, it is noticed as per the appeal set filed, that the revision order dated 15.3.2021 does not contain the DIN. The PCIT on the same day had issued an intimation whereby the DIN of the order u/s. 263 was communicated to the assessee. The argument of the ld DR that the intimation dated 15.03.2021 is part of the order and that there is no violation cannot be accepted as generating the DIN by separate intimation is allowed to be done to regularise the manual order (Para 5 of the circular) provided the manual order is issued in accordance with the procedure as contained in Para 3. It is also submitted by ld DR that in the records with the revenue, the DIN is manually written in the order u/s.263 and it is only a clerical error that a wrong DIN is written instead of what is given in the intimation dated 15.03.2021. As rebuttal the ld AR submitted a true copy of the order u/s.263 duly certified by the Notary where it is noticed that the order u/s.263 does not have any DIN mentioned therein manually. Therefore from the perusal of facts and records it is clear that the order u/s.263 neither contains the DIN in the body of the order, nor contains the fact in the specific format as stated in Para 3 that the communication is issued manually without a DIN after obtaining the necessary approvals. Therefore we are of considered view that the impugned order is not in conformity with Para 2 and Para 3 of the CBDT circular. In view of these discussions and respectfully following the decision of the coordinate bench of the Tribunal in the case of Dilip Kothari (supra), we hold that the order passed u/s.263 is invalid and shall be deemed to have never been issued as per Para 4 of the CBDT circular as the order is not conformity with Para 2 and Para 3. It is ordered accordingly.
Read the full order from hereSection-263-1
The tribunal has ruled in favour of the assessee and dismiss the appeal.