Income Tax Order Not Invalid If DIN Is Communicated Later Through Separate Intimation: Karnataka High Court

The Karnataka High Court has held that an income tax order initially communicated without a Document Identification Number (DIN) does not become invalid merely because the DIN is communicated later through a separate authenticated intimation letter.

The court held that the procedure substantially complied with CBDT Circular No. 19/2019 as it maintained the audit trail and authenticity of departmental communications.

A Division Bench of Justice S.G. Pandit and Justice K.V. Aravind allowed two appeals filed by the Revenue against orders of the Income Tax Appellate Tribunal (ITAT), Bengaluru.

“Where the DIN is subsequently communicated through an intimation and such intimation bears its own DIN while also referring to the DIN of the enclosed order, the order cannot be held to be invalid merely on the ground that the DIN was not originally reflected in the communication.”, the court ruled.

The appeals arose after the tribunal set aside a Dispute Resolution Panel (DRP) order and a revision order on the ground that they had been communicated without a DIN, contrary to CBDT Circular No. 19/2019. The Revenue challenged those rulings before the High Court.

Before the court, the Revenue explained that where orders are prepared manually outside the Income Tax Business Application (ITBA) system, they are uploaded to generate a DIN. Because of the system's built-in process, the uploaded order may initially be communicated without a DIN. Once the DIN is generated, a separate authenticated intimation letter communicating the DIN is issued along with the order bearing the manually entered DIN.

The assessees argued that the Circular required every order to contain a DIN at the time it was communicated and that a later intimation could not cure the defect. They also argued that where an order was communicated without a DIN, prior approval of the Chief Commissioner or Director General of Income Tax was mandatory and had not been obtained.

Examining the purpose of the circular, the court observed that the DIN mechanism was introduced to maintain a proper audit trail of departmental communications and improve transparency in tax administration.

“The overarching purpose discernible from the Circular is the maintenance of an audit trail of departmental communications. In the facts of the present cases, we are satisfied that the procedure adopted achieves that objective and adequately maintains the audit trail contemplated under Circular No.19/2019.”, the court ruled.

The court accepted the Revenue's explanation of the ITBA process and held that the subsequent communication of the DIN amounted to substantial compliance with the Circular. It ruled that an order would attract invalidity under the Circular only where no DIN was generated or communicated at all.

The court also clarified that prior approval of the Chief Commissioner or Director General of Income Tax is required only where a communication is manually issued without a DIN. Since the orders in these cases were electronically communicated through the ITBA system and were thereafter re-communicated through authenticated intimation letters carrying the DIN, that requirement did not apply.

It further held that an incorrect manual mention of the DIN in the order would not invalidate the order if the accompanying intimation letter correctly identified the order, contained the correct DIN and enabled verification of its authenticity.

The court accordingly allowed the revenue's appeals, set aside the tribunal's orders, and remitted both matters to the tribunal for consideration of the issues raised in the appeals.

For Revenue: K. Arvind Kamath, ASG, with other standing counsel

For Assessees: Senior Advocate T. Suryanarayana; and Advocate Hemanth Venkatray Pai,