As the DIN was omitted, the income tax assessment order was deemed invalid
Fact and issue of the case
This appeal by the assessee is preferred against the order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Income-tax Act, 1961 [hereinafter referred to as ‘The Act’].
The grievances of the assessee read as under:
GENERAL
That, on the facts and in the circumstances of the case and in law, the order of the learned AO dated October 15, 2019 passed under section 147/ 1440(13)7143(3) of the Income-tax Act, 1961 (“the Act”) in respect of AY 2011-12 is arbitrary; contrary’ to law, facts and circumstances; time barred and hence, liable to be quashed.
RE-ASSESSMENT PROCEEDINGS BAD IN LAW
That, on the facts and in the circumstances of the case and in law, the learned AO was not justified in furnishing the reasons for initiation of re-assessment proceedings to the Appellant beyond a reasonable period despite multiple requests made by the Appellant seeking reasons.
BUY-BACK DOES NOT RESULT INTO TAXABLE CAPITAL GAINS UNDER THE ACT
That on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP erred in ignoring that there should not have been any tax liability under the Act as the transaction of buy-back does not result in any taxable income under the Act since:
a. Section 46A of the Act merely characterizes the gain on account of buy-back as ‘capital gains’ but neither there is a charge of tax created by section 46A of the Act nor section 2(24) of the Act covers this gain within its scope;
b. Without prejudice to the above, given the fact that Appellant is the parent company of Brandix Apparel India Private Limited (“BAIPL”), the buy-back undertaken by BAIPL would be covered by the exemption under clause (iv) of section 47 of the Act. c. BUY-BACK DOES NOT RESULT INTO TAXABLE CAPITAL GAINS UNDER THE RELEVANT TAX TREATY
That, on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP erred in holding the Appellant liable for tax on capital gains in India arising on account of transfer of shares to BAIPL pursuant to buy-back undertaken by BAIPL by disregarding the provisions of the India-Mauritius tax treaty.
That, on the facts and in the circumstances of the case and in law, the learned AO/ Hon’ble DRP grossly erred in holding that Circular No. 789 dated April 13, 2000 is applicable only to Foreign Institutional Investors investing in India through entities in Mauritius and not to any other residents of Mauritius.
Without prejudice to the above, that on the facts and in the circumstance of the case and in the law, the learned AO/ Hon’ble DRP was not justified in attempting to charge the same income in the hands of the Appellant when such income was already charged in the hands of the Appellant’s subsidiary i.e., BAIPL.
Observation of the court
A perusal of the aforementioned Circular clearly shows that the CBDT has considered the exceptional circumstances as mentioned in Para 3 of the Circular and therefore, in our considered opinion, only those circumstances which have been mentioned therein would be considered for non-mentioning of DIN.
In Para 3 itself, the Board has made it very clear that in cases where communication is issued manually, it may be done only after obtaining necessary approval of the relevant authorities and communication so issued must indicate the exceptional circumstances provided in the Circular itself. It has been made very clear by the Board that any communication which is not in conformity with Para 2. and 3 of the Circular shall be treated as invalid and shall be deemed to have never been issued.
The impugned order is hit by this mandate of the Board and, therefore, we are inclined to adjudicate Ground No. 8 [supra] in favour of the assessee by holding that the order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Act is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to Circular No. 19/2009 dated 14.08.2019.
Ground No. 8 is, accordingly, allowed and without going into merits, the assessment order is treated as null and void.
In the result, the appeal of the assessee in ITA No. 1542/DEL/2020 is allowed.
The order is pronounced in the open court on 19.09.2022.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Brandix-Mauritius-Holdings-Ltd-Vs-DCIT-ITAT-Delhi-2-1
