2024 (1) TMI 1470 - AT - Income Tax

Absence of DIN while granting statutory approval u/s 153D - non-est approval - Validity of assessment u/s 153A - mandatory nature of generation and mentioning of DIN - DR submitted that such lapse is only a procedure irregularity if any - HELD THAT - We find that the issue is no longer res integra and has been examined in length in the case of Finesse International Design Pvt. Ltd. 2023 (12) TMI 706 - ITAT DELHI Other several judgments which underscores the mandatory nature of generation and mentioning of DIN in the body of communication of such order has been referred therein. In consonance with view expressed in Finesse International we find merit in the case made out by the assessee in the additional ground. The additional ground is thus allowed and the assessment order framed u/s 153A is set aside and cancelled in view of the legal infirmity of absence of DIN on the body of statutory approval granted u/s 153D of the Act by the competent authority i.e. Addl. Commissioner of Income Tax. Appeal of the assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

• Whether the Assessing Officer (AO) had valid jurisdiction to assume proceedings under section 153A of the Income Tax Act, 1961, in the facts of the case.
• Whether the addition of Rs. 25,00,000 under section 69C read with section 115BBE of the Act was justified on merits.
• Whether the statutory approval granted under section 153D of the Income Tax Act, 1961, was valid and lawful in the absence of a Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019.
• Whether the failure to mention the DIN on the approval memo under section 153D renders the approval and consequently the assessment order passed under section 153A a nullity.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Assumption of Jurisdiction under Section 153A

The assessee challenged the jurisdiction of the AO to initiate proceedings under section 153A. However, the Tribunal did not extensively analyze this issue in the present judgment, as the primary focus shifted to the legality of the approval under section 153D. The Tribunal noted the appeal was filed against the assessment order passed under section 153A read with 143(3), but the final decision did not rest on jurisdictional grounds under section 153A.

Issue 2: Merits of Addition under Section 69C read with Section 115BBE

The assessee also challenged the addition of Rs. 25,00,000 under section 69C read with section 115BBE on merits. The Tribunal, however, refrained from adjudicating this issue in view of its decision on the validity of the approval under section 153D, which vitiated the entire assessment order. Since the assessment order was set aside, the Tribunal did not find it necessary to delve into the merits of the addition.

Issue 3: Validity of Approval under Section 153D in Absence of DIN

Relevant Legal Framework and Precedents: Section 153D of the Income Tax Act mandates that the Assessing Officer's draft assessment order under section 153A must be approved by an Additional Commissioner of Income Tax. The CBDT Circular No. 19/2019 requires that all communications, including statutory approvals, must bear a Document Identification Number (DIN) to ensure traceability and authenticity.

Several judicial pronouncements have interpreted the mandatory nature of the DIN requirement. The Tribunal relied heavily on the decision in Finesse International Design Pvt. Ltd. vs. DCIT, where the absence of DIN on the statutory approval under section 153D was held to render the approval non-est in law. The Tribunal also referred to multiple High Court and Tribunal decisions emphasizing strict compliance with the CBDT Circular.

Court's Interpretation and Reasoning: The Tribunal observed that the approval memo dated 12.05.2021 issued by the Additional Commissioner of Income Tax under section 153D did not contain any reference to a DIN. Similarly, the requisition letter by the AO and the draft assessment order also lacked DIN. The Tribunal held that such omission is not a mere procedural irregularity but a fundamental legal infirmity that invalidates the approval.

The Tribunal underscored that the statutory approval without a DIN is a nullity, and any assessment order passed on the basis of such approval is void ab initio. The Tribunal rejected the Revenue's contention that the absence of DIN was a technical lapse causing no prejudice, emphasizing the mandatory and non-negotiable nature of the CBDT Circular's requirements.

Key Evidence and Findings: The primary evidence was the approval memo and related communications which lacked the DIN. The Tribunal also relied on the CBDT Circular No. 19/2019 and the judicial precedents cited by the assessee's counsel.

Application of Law to Facts: Applying the strict mandate of the CBDT Circular and the binding precedents, the Tribunal concluded that the statutory approval under section 153D without DIN is invalid. Consequently, the assessment order framed under section 153A, which depends on such approval, is rendered null and void.

Treatment of Competing Arguments: The Revenue argued that the omission was a procedural irregularity without prejudice and should not vitiate the assessment. The Tribunal rejected this benign view, holding that the legal requirement of DIN is mandatory and its absence cannot be cured or overlooked. The Tribunal aligned with the line of judicial authorities that have taken a strict approach to this procedural mandate.

Issue 4: Consequences of Invalid Approval on Assessment Order

The Tribunal held that since the approval under section 153D was invalid, the assessment order passed under section 153A based on such approval is a nullity. This legal infirmity led to the setting aside and cancellation of the assessment order. The Tribunal did not proceed to examine other grounds raised by the assessee, as the primary issue disposed of the appeal.

3. SIGNIFICANT HOLDINGS

The Tribunal made the following crucial legal determinations:

• "In consonance with view expressed in Finesse International, we find merit in the case made out by the assessee in the additional ground. The additional ground is thus allowed and the assessment order framed under section 153A is set aside and cancelled in view of the legal infirmity of absence of DIN on the body of statutory approval granted under section 153D of the Act by the competent authority."
• The Tribunal emphasized the mandatory nature of the DIN requirement as per CBDT Circular No. 19/2019 and judicial precedents, holding that absence of DIN renders the statutory approval and consequent assessment order a nullity.
• The Tribunal rejected the Revenue's contention that the absence of DIN was a mere procedural irregularity, affirming that such non-compliance cannot be condoned.
• As a direct consequence of the invalid approval, the assessment order passed under section 153A was quashed without adjudicating on the merits of the additions made.