Assessment Order Issued Without DIN, Invalid; S. 292B Of ITA Not Applicable: Delhi High Court

The court remarked that in view of the CBDT Circular no. 19/2019, dated 14.08.2019, all assessments, appeals, orders, which find mention in paragraph 2 of the 2019 Circular, issued without a DIN, can have no standing in law.

The bench of Justices Rajiv Shakdher and Tara Vitasta Ganju dismissed the contention of the department that the failure to generate DIN will not invalidate the assessment proceedings in view of Section 292B of the Income Tax Act, 1961. The court ruled that Paragraph 4 of the 2019 Circular clearly provides that any communication, including the communication of assessment order, which is not in conformity with the said Circular, shall be treated as invalid and shall be deemed to have never been issued, i.e., it shall be non-est in law.

The bench added that it is well established that the circulars issued by the CBDT in exercise of its powers under Section 119 of the Act are binding on the revenue department.

Section 292B of the Income Tax Act provides that no return of income, assessment, notice, etc., shall be invalid or be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, if the same is in substance and in effect in conformity with or according to the intent and purpose of the Act.

The revenue department filed an appeal before the Delhi High Court challenging the order of the ITAT where the Tribunal had allowed the appeal filed by the assessee, Brandix Mauritius Holdings Ltd, and had quashed the assessment order passed by the Assessing Officer (AO) on the ground that it did not bear a DIN. The Tribunal had taken recourse to the CBDT Circular no. 19/2019, dated 14.08.2019.

The revenue department contended before the court that the failure to generate and allocate DIN was a mere mistake or at best, a defect and/or an omission, which ought not to invalidate the assessment proceedings.

To this, the assessee averred that the department’s failure to generate DIN was an error which is jurisdictional in nature and therefore, it cannot be corrected by taking recourse to Section 292B of the Act.

Referring to the 2019 Circular, the High Court reckoned that the object and purpose of allocating DIN to the communications and/or any correspondence emanating from the revenue is to maintain a proper audit trail. “Therefore, the CBDT, in exercise of its powers, has mandated 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 etcetera, to the assessee or any other person, on or after 01.10.2019 unless it is allotted a computer-generated DIN,” the court observed.

Further, there is a specific requirement under paragraph 2 of the 2019 Circular that all such communication issued on or after the 1.10.2019 shall carry a computer-generated DIN duly quoted in the body of such communication, the court remarked.

The bench noted that though paragraph 3 of the 2019 Circular also sets out certain circumstances in which exceptions can be made and the communication may be issued manually, after recording reasons in writing and with the prior written approval of the specified authority. However, even then the specified authority is required to take steps to regularise the failure to quote DIN within 15 working days.

“As a matter of fact, paragraph 7 of 2019 Circular mandates alignment of all pending assessment proceedings, where notices were issued manually, prior to the issuance of the said circular, by having them uploaded in the system by the date given therein, i.e., 31.10.2019,” it further observed.

The bench added that as per paragraph 4 of the circular, any communication which is not in conformity with the provisions of paragraph 2 and 3 is to be treated as invalid, as if it was never issued.

Perusing the facts of the case, the court noted that the final assessment order which was passed by the AO on 15.10.2019, did not bear a DIN. It further reckoned that there was nothing on record to show that the department’s failure to allocate DIN arose out of the “exceptional circumstances” set out in paragraph 3 of the Circular.

Thus, the court concluded that paragraph 4 of the 2019 Circular would squarely apply.

“Paragraph 4 of the 2019 Circular, as extracted hereinabove, decidedly provides that any communication which is not in conformity with paragraph 2 and 3 shall be treated as invalid and shall be deemed to have never been issued. The phraseology of paragraph 4 of the 2019 Circular fairly puts such communication, which includes communication of assessment order, in the category of communication which are non-est in law,” said the court.

In view of the phraseology used in paragraph 4 of the Circular, the court dismissed the contention of the department that recourse can be taken to Section 292B of the Act.

Perusing the 2019 Circular, it observed: “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.”

The court thus dismissed the appeal and upheld the decision of the Tribunal.

“We find no error in the view adopted by the Tribunal. The Tribunal has simply applied the provisions of the 2019 Circular and thus, reached a conclusion in favour of the respondent/assessee,” the court ruled.

Case Title: The Commissioner of Income Tax (International Taxation) vs Brandix Mauritius Holdings Ltd

Citation: 2023 LiveLaw (Del) 329

Counsel for the Appellant: Mr Puneet Rai, Sr. Standing Counsel with Mr Ashvini Kumar & Ms Madhavi Shukla, Jr. Standing Counsel.

Counsel for the Respondent: Mr Ajay Vohra, Sr. Adv. with Mr Guruprasad, Adv.

Click Here To Read/Download Order