Income Tax Department Ready to Move Supreme Court to Challenge the Ruling of Delhi High Court on Validity of Orders Issued Without Document Identification Number (DIN)
The Income Tax Department is ready to challenge a recent Delhi High Court ruling that declared Income Tax assessment orders lacking a Document Identification Number (DIN) to be legally invalid. This move comes after the Delhi HC upheld the provisions of the Central Board of Direct Taxes (CBDT) Circular No. 19/2019 Dated. 14 August 2019, which mandated the use of DIN for all issued documents.
Background:
On 14 August 2019, the CBDT issued the Circular No. 19/2019 emphasizing the mandatory use of DIN by Income Tax Authorities (ITA). According to this directive, any communication lacking a DIN is considered invalid and deemed to have never been issued. The Delhi HC, in April, affirmed the validity of this circular, asserting that failure to adhere to DIN requirements renders assessment orders legally unsustainable.
Challenges Faced by the IT Department:
Government sources highlight that the absence of DIN in Income Tax orders is often a technical glitch rather than a deliberate omission. While the Income Tax Department argues that the failure to generate DIN should be considered a correctable defect under Section 292B of the Income Tax Act, the Delhi HC rejected this argument, deeming it “untenable” in light of the specific language used in the CBDT Circular 19/2019.
Implications of the Delhi HC Ruling:
The Delhi HC ruling underscores two critical legal positions. Firstly, it emphasizes the binding nature of CBDT circulars, categorizing them as mandatory. This means that the Income Tax department must adhere strictly to the prescribed methodology outlined by the CBDT, without deviation under the pretext of errors or omissions. Secondly, the HC establishes that non-compliance with the CBDT circular by the Income Tax department constitutes a jurisdictional error, and such lapses cannot be rectified by invoking Section 292B.
IT Department’s Response:
In response to the Delhi HC ruling, the Income Tax Department is actively considering filing an appeal in the Supreme Court. While acknowledging that the absence of DIN may result from technical difficulties, the Department seeks to challenge the ruling that deems past orders without DIN as legally invalid. The appeal process is currently in the finalization stage, with expert opinions being sought.
Conclusion:
The legal battle surrounding the validity of Income Tax assessment orders without DIN continues to unfold. The Delhi HC’s affirmation of the mandatory nature of CBDT circulars sets a precedent for strict adherence to procedural requirements, emphasizing the significance of DIN in maintaining the legal standing of tax documents. The Income Tax Department’s potential appeal to the Supreme Court adds another layer to this complex issue, highlighting the ongoing challenges and legal intricacies in the realm of taxation.
Explanatory Note:
1. Verdict of Delhi High Court on Validity of Orders Without DIN (Case- Brandix Mauritius Holdings Ltd Vs CIT-International taxation):
In the April 2023 verdict on the referenced case, the Delhi High Court affirmed the Income Tax Appellate Tribunal’s (ITAT) decision to set aside an assessment order by the Income Tax Department due to the absence of a Document Identification Number (DIN). The court emphasized the significance of compliance with the CBDT Circular no. 19/2019, issued on 14.08.2019, stating that assessments, appeals, and orders falling under paragraph 2 of the 2019 Circular, issued without a DIN, hold no legal standing.
Justices Rajiv Shakdher and Tara Vitasta Ganju of the bench rejected the revenue’s argument that Section 292B of the Income Tax Act, 1961, could override the DIN requirement, stating that the 2019 Circular’s Paragraph 4 deems any communication, including assessment orders, not conforming to the Circular as invalid and non-existent in law.
The court further underscored the binding nature of CBDT circulars, issued under Section 119 of the Act, on the Income Tax department. It established that circulars, such as the 2019 Circular, are legally binding, reinforcing the invalidity of communications failing to adhere to its provisions. This ruling clarifies the strict adherence to procedural requirements outlined in CBDT circulars, specifically emphasizing the necessity of a DIN in assessment-related communications.
2. Provisions Under Section. 292B of Income Tax Act: Return of income, etc., not to be invalid on certain grounds:
“No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.”
To Access the Related CBDT Circular No. 19/2019 CLICK HERE
To Know About Prosecution Provisions under Income Tax Act CLICK HERE
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