Apr 30, 2023

Generation of DIN: Mandatory Only for Communication of an Order?

Section 282 of the IT Act along with Rule 127 of the Income Tax Rules 1962 (‘IT Rules’) sets out the rules of service to be followed by the Income Tax Authorities (‘ITA’) whilst issuing notices, orders, summons to the assessee. Further, Finance Act, 2009 introduced Section 282B in the IT Act, whereby it was mandated that every communication issued to the assessee must contain a computer-generated DIN. However, this provision was omitted by the Finance Act, 2011. Thereafter, the Central Board of Direct Taxes (‘CBDT’), upon observing certain instances of communications being issued without a proper audit trail, issued Circular  dated August 14, 2019(‘Circular’),[1]  whereby the condition for allotting a computer-generated DIN on every communication was revived and made mandatory.

Recently, the Hon’ble High Court of Delhi in the case of CIT v. Brandix Mauritius Holdings Ltd.[2], dealt with the issue of legality of a communication issued without a DIN and held that any communication issued in non-compliance of the Circular would be non-est and deemed to have never been issued by the ITA.[3]

Interestingly, the Hon’ble High Court of Jharkhand in a recent case,[4] while dealing with a scenario in which although the order of assessment was ‘made’ within the prescribed limitation, however, the DIN was generated subsequently, upheld the validity of such order. The High Court held that the Circular stipulates the communication of the order and not making of the order and hence, a delay of one day in generation of the DIN would not be fatal to such assessment. It was opined that the provisions of Section 153(3) of the IT Act, being a directory provision dealing with ‘making of an order’ and not its communication, the delayed generation of DIN would not have a bearing on the validity of such an assessment order.

It is, however, important to note that unlike the Jharkhand High Court, the Delhi High Court was dealing with an Order, whose limitation was governed under Section 153(2), which is a mandatory provision for making an order within 12 months. Therefore, whether the ratio of judgment of Jharkhand High Court can be applied to every order passed under the IT Act is still a question which would require determination at the level of the Apex Court.

[1] Circular no. 19, dated August 14, 2019 issued by Central Board of Direct Taxes.

[2] CIT v. Brandix Mauritius Holdings Ltd., [Order dated 20.03.2023 in ITA 163/2023 (Delhi High Court)].

[3] See more: Tata Medical Centre Trust v. CIT, [2022] 140 taxmann.com 431 (Kolkata Tribunal); Dilip Kothari v. PCIT, [2023] 146    taxmann.com 442 (Bangalore Tribunal).

[4] Prakash Lal Khandelwal v. CIT, [Order dated 21.02.2023 in W.P.(T) No. 1901/2022 (Jharkhand High Court)].




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