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Smart Summary

Concise Analytical Summary of the Opinion

Factual and Procedural Background

This matter arises from an appeal filed by M/s Brandix Mauritius Holdings Ltd (the assessee) against a final assessment order dated 15.10.2019 framed under sections 147/144C(13)/143(3) of the Income-tax Act, 1961 for Assessment Year 2011-12. The assessee challenged the reassessment and raised multiple grounds contesting (inter alia) the initiation of reassessment, the taxation of capital gains arising from a buy-back transaction, the applicability of the India–Mauritius tax treaty and certain procedural and interest-related issues. By letter dated 19.08.2022 the assessee also sought to raise additional grounds, notably a ground (Ground No. 8) asserting invalidity of the final assessment order for failure to quote the mandatory Document Identification Number (DIN) as required by CBDT Circular No. 19/2019 dated 14.08.2019. The Tribunal admitted the additional grounds and proceeded primarily to adjudicate Ground No. 8, which the Tribunal found to be determinative of the matter.

Legal Issues Presented

  1. Whether the final assessment order dated 15.10.2019 — issued without quoting the mandatory Document Identification Number (DIN) as required by CBDT Circular No. 19/2019 dated 14.08.2019 — is invalid and to be treated as never issued.
  2. Whether the Tribunal may admit and entertain additional grounds of appeal (raised after filing the appeal) where they raise questions of law based on facts on record (as considered in the Supreme Court decision cited by the Tribunal).
  3. Whether, on the facts of this case, the buy-back transaction gives rise to taxable capital gains in the hands of the appellant under the Income-tax Act or under the India–Mauritius tax treaty (this is a substantive issue presented by the assessee's grounds, though the Tribunal decided the case on the procedural DIN ground without reaching the merits).

Arguments of the Parties

Appellant's Arguments

  • The reassessment order dated 15.10.2019 is arbitrary, contrary to law, time-barred and otherwise liable to be quashed.
  • The assessing officer delayed furnishing reasons for reopening beyond a reasonable period despite repeated requests by the assessee.
  • The buy-back of shares did not result in taxable capital gains under the Income-tax Act: Section 46A merely characterises buy-back gain but does not create a charge; Section 47(iva) exemption (in respect of parent–subsidiary transactions) was argued to be applicable.
  • The buy-back did not give rise to taxable capital gains in India under the India–Mauritius tax treaty; reliance was placed on treaty provisions and also on the applicability of CBDT Circular No. 789 (raised as an argument about scope/application to Mauritius residents beyond FIIs).
  • The AO/DRP allegedly attempted to tax income already charged in the hands of the subsidiary or holding company, resulting in double charging of the same income.
  • Ground No.7: Alleged absence (or non-production) of mandatory sanction (if any) under Section 151 of the Act for initiation of reassessment proceedings.
  • Ground No.8: The AO erred in issuing the final assessment order without quoting DIN as required by CBDT Circular No.19/2019, rendering the order invalid and void ab initio.
  • Ground No.9: The AO erred in not allowing additional credit of TDS deposited under Vivad se Vishwas being otherwise allowable.
  • Ground No.10: The AO/DRP erred in treating the gains as short-term taxable at 40% rather than long-term taxable at 20% and in not allowing the benefit of the first proviso to section 48.

Respondent's (Department's) Arguments

  • The Department's representative (Ld. DR) contended that a DIN had been generated but due to an upgradation/technical issue it was not reflected in the body of the order; accordingly, the omission was an error of form and not fatal to the validity of the assessment order.
  • The DR argued that the error (non-mention of DIN) should not render the assessment order null and void.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
National Thermal Power Corporation, 229 ITR 383 (Supreme Court) Proposition that the Tribunal has discretion to allow new grounds of appeal, and that where the Tribunal is required to consider a question of law arising from facts on record it may permit a new ground necessary to correctly assess tax liability. The Tribunal relied on this ratio to admit the additional grounds of appeal filed by the assessee (the Tribunal found that it need not verify new facts and therefore admitted the additional grounds).

Court's Reasoning and Analysis

The Tribunal proceeded in two connected steps.

  1. Admissibility of Additional Grounds: The Tribunal first considered whether the additional grounds (filed by letter dated 19.08.2022) could be admitted. Relying on the ratio in National Thermal Power Corporation (229 ITR 383), the Tribunal observed that it has discretion to allow new grounds and that where the raised question is one of law arising from facts on record, such a ground may be permitted. The Tribunal therefore admitted the additional grounds because it was not required to verify new facts to consider them.
  2. Examination of Ground No. 8 (DIN issue): The Tribunal then identified Ground No. 8 — the challenge to the assessment order for omission of the Document Identification Number (DIN) required by CBDT Circular No. 19/2019 — as going to the root of the matter and proceeded to adjudicate it.
    • The Tribunal noted the undisputed factual position that the final assessment order and notice of demand dated 15.10.2019 did not quote a DIN in their body.
    • The Tribunal examined CBDT Circular No. 19/2019 (dated 14.08.2019), which mandated that no communication relating to assessment, notices, orders, etc., shall be issued on or after 15th October 2019 unless a computer-generated DIN has been allotted and quoted in the body of the communication.
    • The Circular itself provides limited, specified exceptions in paragraph 3 (technical difficulties, communications required to be issued by an officer outside the office, PAN migration delay, PAN unavailability in certain proceedings, or unavailability of system functionality). If communications are issued manually under those exceptions, prior written approval and reasons must be recorded in the file, and the manual communication must explicitly state the exceptional circumstance and approval details. Paragraph 4 of the Circular states that any communication not in conformity with paragraphs 2 and 3 shall be treated as invalid and deemed to have never been issued.
    • The Tribunal emphasized that the CBDT confined exceptions to those enumerated in the Circular and that only those circumstances permit non-mentioning of DIN. The Tribunal therefore held that communications failing to conform to Para 2 and Para 3 are invalid per the Circular's own mandate.
    • Although the Department's representative asserted that a DIN had been generated but not reflected due to upgradation, the Tribunal found that the Circular requires conformity with its specified exceptions and procedural safeguards (approval, recording reasons, and explicit statement in the communication). The record did not establish compliance with those requirements.
  3. Conclusion on analysis: Applying the Circular's mandatory provisions to the undisputed fact that the order did not quote a DIN and in the absence of an established exceptional circumstance and the required approvals/reasons prescribed in the Circular, the Tribunal concluded that the impugned assessment order was hit by the Circular's mandate and must be treated as invalid and deemed never to have been issued.

Holding and Implications

Holding: The Tribunal held that the final assessment order dated 15.10.2019 framed under sections 147/144C(13)/143(3) is invalid and is to be treated as having never been issued because it failed to quote the mandatory Document Identification Number (DIN) in contravention of CBDT Circular No. 19/2019 dated 14.08.2019.

Implications:

  • Direct effect: The Tribunal allowed the appellant's appeal (ITA No. 1542/DEL/2020) and treated the impugned reassessment order as null and void without deciding the substantive merits of the other grounds of appeal.
  • The decision results in the impugned assessment order being set aside on procedural grounds (DIN omission) and the matter was disposed in favour of the assessee on that basis.
  • The opinion does not purport to lay down a new legal precedent beyond applying the mandatory terms of CBDT Circular No. 19/2019 and the admitted Supreme Court authority on admission of additional grounds; the Tribunal decided the appeal on the procedural DIN ground and expressly did not go into the merits of the substantive tax issues.

Source limitation notice: This summary is based exclusively on the content of the provided judicial opinion. No facts, arguments or outcomes not present in the opinion have been added or inferred.

Show full summary ...

    Brandix Mauritius Holdings Limited, Mauritius v. DCIT International Taxation Circle-1(1)(2), New Delhi

    IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI 'D' BENCH,

    NEW DELHI

    BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND

    SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

    ITA No. 1542/DEL/2020 [A.Y 2011-12) M/s Brandix Mauritius Holdings Ltd Vs. The Dy. C.I.T C/o Plot. No. 18, Brandix Apsez Circle - 1(1)(2) Vishakhapatnam, Pudimadaka Road Inttl. Taxation Achutapuram, Vishakhapatnam New Delhi

    PAN: AAHCB 1470 H

    (Applicant) (Respondent) Assessee By : Shri Kanchun Kaushal, FCA Ms. Shruti Khimta

    Department By : Ms. Anupama Anand, CIT- DR

    Date of Hearing : 14.09.2022 Date of Pronouncement : 19.09.2022

    ORDER

    PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-

    This appeal by the assessee is preferred against the order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'].

    1

    2

    2. The grievances of the assessee read as under:

    "1. GENERAL

    1.1 That, on the facts and in the circumstances of the case and in law, the order of the learned AO dated October 15, 2019 passed under section 147/ 1440(13)7143(3) of the Income-tax Act, 1961 ("the Act") in respect of AY 2011-12 is arbitrary; contrary' to law, facts and circumstances; time barred and hence, liable to be quashed.

    2. RE-ASSESSMENT PROCEEDINGS BAD IN LAW

    2.1 That, on the facts and in the circumstances of the case and in law, the learned AO was not justified in furnishing the reasons for initiation of re-assessment proceedings to the Appellant beyond a reasonable period despite multiple requests made by the Appellant seeking reasons.

    3. BUY-BACK DOES NOT RESULT INTO TAXABLE CAPITAL

    GAINS UNDER THE ACT

    3.1 That on the facts and in the circumstances of the case and in law, the learned AO/ Hon'ble DRP erred in ignoring that there should not have been any tax liability under the Act as the transaction of buy-back does not result in any taxable income under the Act since:

    3

    a. Section 46A of the Act merely characterizes the gain on account of buy-back as 'capital gains' but neither there is a charge of tax created by section 46A of the Act nor section 2(24) of the Act covers this gain within its scope; b. Without prejudice to the above, given the fact that Appellant is the parent company of Brandix Apparel India Private Limited ("BAIPL"), the buy-back undertaken by BAIPL would be covered by the exemption under clause (iv) of section 47 of the Act.

    4. BUY-BACK DOES NOT RESULT INTO TAXABLE CAPITAL

    GAINS UNDER THE RELEVANT TAX TREATY

    4.1. That,on the facts and in the circumstances of the case and in law, the learned AO/ Hon'ble DRP erred in holding the Appellant liable for tax on capital gains in India arising on account of transfer of shares to BAIPL pursuant to buy-back undertaken by BAIPL by disregarding the provisions of the India-Mauritius tax treaty.

    4.2 That,on the facts and in the circumstances of the case and in law, the learned AO/ Hon'ble DRP grossly erred in holding that Circular No. 789 dated April 13, 2000 is applicable only to Foreign Institutional Investors investing in India through entities in Mauritius and not to any other residents of Mauritius.

    4

    4.3 Without prejudice to the above, that on the facts and in the circumstance of the case and in the law, the learned AO/ Hon'ble DRP was not justified in attempting to charge the same income in the hands of the Appellant when such income was already charged in the hands of the Appellant's subsidiary i.e.,

    BAIPL.

    (Tax effect: INR 5,61,04,244)

    5. ERRONEOUS OBSERVATIONS

    5.1 That, on the facts and in the circumstances of the case and in law, the learned AO/ Hon'ble DRP erred in imposing tax on capital gains in India in the hands of the Appellant when the learned AO/ Hon'ble DRP has itself admitted that the capital gains in India was taxable in the hands of the holding company i.e., Brandix International Limited ("BIL").

    5.2 That, on the facts and in the circumstances of the case and in law, the learned AO/ Hon'ble DRP erred in holding that the decision to buy-back shares by BAIPL was taken on January 19,2010 being prior to the date (March 30, 2010) of gift of shares by BIL to the Appellant.

    6. OTHER

    6.1 That, on the facts and in the circumstances of the case and in law, the learned AO erred in levying interest under section 234A of the Act.

    (Tax effect: INR 4,48,83,360)

    5

    6.2 That, on the facts and in the circumstances of the case and in law, the learned AO erred in levying interest under section 234B of the Act.

    (Tax effect: INR 5,77,87,326)

    6.3 That on the facts and in the circumstances of the case and in law, the learned AO has erred in initiating proceedings under section 27i(i)(c) of the Act.

    The grounds of appeal mentioned above are independent and without prejudice to one another.

    Further the Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing before the Hon'ble Tribunal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law.

    3. Vide letter dated 19.08.2022, the assessee has raised the following additional grounds of appeal:

    "7. Ground No. 7: On the facts and circumstances of the case & in law, the Learned Assessing Officer ('Ld. AO') grossly erred in not providing the copy of mandatory sanction, if any, obtained under section 151 of the Income-tax Act, 1961 ('the Act') containing necessary satisfaction and endorsement of the concerned Learned Commissioner of Income-tax, and thus, the

    6

    initiation of reassessment proceedings and reopening of assessment deserves to be held as invalid and bad in law.

    8. Ground No. 8: On the facts and circumstances of the case & in law, the Learned Assessing Officer ('Ld. AO') erred in issuing the final assessment order under section 147/ 1440(13)/ 143(3) of the Income-tax Act, 1961 ('the Act') dated 15 October 2019 without quoting the mandatory document identification number ('DIN') in conformity with Para-2 and Para-3 of Circular No. 19/2019 dated 14 August 2019 and thus, the said final assessment order deserves to be held as invalid, bad in law and void-ab-initio.

    9. Ground No. 9: On the facts and circumstances of the case & in law, the Ld. AO learned erred in not allowing additional credit of tax deducted at source of INR 3,42,09,905 to the appellant, deposited by the Indian deductor under Vivad se Vishwas ('VsV') proceedings which is otherwise allowable as per FAQ No. 30 of Circular no. 9/2020 dated 22 April 2020.

    10. Ground No. 10: Without prejudice to the other grounds, on the facts and circumstances of the case & in law, the Ld. AO and Dispute Resolution Panel erred in holding the capital gains earned during the instant year as short-term capital gains taxable @ 40% instead of long-term capital gains taxable @20% and in further not granting the benefit of first proviso to section 48 of the Act while computing said capital gains under the provisions of the Act.

    7

    The aforesaid grounds of appeal are without prejudice to each other, and the grounds of appeal raised along with the captioned appeal."

    4. We have carefully perused the additional grounds of appeal raised by the assessee mentioned hereinabove. The Hon'ble Supreme Court in the case of National Thermal Power Corporation 229 I TR 383 has laid down the following ratio:

    "7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee."

    5. In light of the above ratio, we find that this Tribunal is not required to verify any new facts. Therefore, the additional grounds raised are admitted.

    8

    6. It would be pertinent to adjudicate Ground No. 8, since it goes to the root of the matter. Ground No 8 reads as under:

    "8. Ground No. 8: On the facts and circumstances of the case & in law, the Learned Assessing Officer ('Ld. AO') erred in issuing the final assessment order under section 147/ 1440(13)/ 143(3) of the Income-tax Act, 1961 ('the Act') dated 15 October 2019 without quoting the mandatory document identification number ('DIN') in conformity with Para-2 and Para-3 of Circular No. 19/2019 dated 14 August 2019 and thus, the said final assessment order deserves to be held as invalid, bad in law and void-ab-initio.:"

    7. A perusal of the record shows that the final assessment order along with notice of demand is dated 15.10.2019 and it is an undisputed fact that it has been passed/issued without quoting Document Identification Number [DIN], which is mandatory as per CBDT Circular No. 19/2019 dated 14.08.2019.

    8. The ld. DR vehemently stated that DIN was generated but due to upgradation, it was not reflected in the order. It is the say of the ld. DR that the error is not so fatal as to make the assessment order null and void. It would be pertinent to refer to CBDT Circular No. 19/2019 which reads as under:

    9

    Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No. 19/2019

    New Delhi, dated the 14thAugust, 20 19 Subject: Generation/Allotment/Quoting of Document Identification Number in Notice/ Order /Summons /letter /correspondence issued by the Income-tax Department - reg. With the launch of various e-governance initiatives, Income- tax Department is moving toward total computerization of its work. This' has led to a significant improvement in delivery of services and has also brought greater transparency in the functioning of the tax administration. Presently, almost all notices and orders are being generated electronically on the Income Tax Business Application (ITBA) platform. However, it has been brought to the notice of the Central Boa rd of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as "communication") were found to have been issued manually, without maintaining a proper aud t trail of such communication.

    2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-tax Act, 1961 (herinafter referred to as

    "the Act"), has decided that no communication shall be issued by

    10

    any income tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1 51 day of October, 20 19 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of' such communication.

    3. In exceptional circumstances such as, -

    (i) when there are technical difficulties in generating /allotting/ quoting the DIN and issuance 0r communication electronically; or

    (ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties; or

    (iii) when due to delay in PAN migration, PAN is lying with non- jurisdictional Assessing Officer; or

    (iv) when PAN of assessee is not avail able and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or (v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the file and with prior written approval of the Chief Commissioner / Director General of income tax. In cases where manual comll1unicati on 'is required to be issued due to delay

    11

    in PAN migration. the proposal seeking approval for issuance of manual communication shall include the reason for delay in PAN migration. The communication issued under aforesaid circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner / Director General of Income-Tax for issue of manual communication in the following format- ... . . .. This communication issues manually without a DIN on account of reason/reasons given in para 3 (i)/3(iI)/3 (iii)/3 (iv)/3 (v) of the CBDT Circular No ... dated .... . (strike off those which are not applicable) and with the approval of the Chief Commissioner / Director General oj Income Tax vide number .... dated .. .. "

    4. Any communication which is not in conformity with Para-2 and Para-3 above, shall be treated as invalid and shall be deemed to have never been issued.

    5. The communication issued manually in the three situations specified in para 3- (i), (ii) or (iii) above shall have to be regularised within 15 working days of its issuance, by -

    i. uploading the manual communication on the System.

    ii. compulsorily generating the DIN on the System;

    12

    iii. communicating the DIN so generated to the assessee/any other person as per electronically generated pro-forma available on the System.

    6. An intimation of issuance of manual communication for the reasons mentioned in para 3(v) shall be sent to the Principal Director General of Income-tax (Systems) within seven days from the date of its issuance.

    7. Further, in all pending assessment proceedings, where notices were issued manually, prior to issuance of this Circular, the income- tax authorities shall identify such cases and shall upload the notices in these cases on the Systems by 31th October, 2019.

    8. Hindi version to follow. (F. No. 225/95/2019-ITA.II) Sd/-

    Sarita Kumari

    Director [ITA.II CBDT]"

    9. A perusal of the aforementioned Circular clearly shows that the CBDT has considered the exceptional circumstances as mentioned in Para 3 of the Circular and therefore, in our considered opinion, only those circumstances which have been mentioned therein would be considered for non-mentioning of DIN.

    13

    10. In Para 3 itself, the Board has made it very clear that in cases where communication is issued manually, it may be done only after obtaining necessary approval of the relevant authorities and communication so issued must indicate the exceptional circumstances provided in the Circular itself. It has been made very clear by the Board that any communication which is not in conformity with Para 2. and 3 of the Circular shall be treated as invalid and shall be deemed to have never been issued.

    11. The impugned order is hit by this mandate of the Board and, therefore, we are inclined to adjudicate Ground No. 8 [supra] in favour of the assessee by holding that the order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Act is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to Circular No. 19/2009 dated 14.08.2019.

    12. Ground No. 8 is, accordingly, allowed and without going into merits, the assessment order is treated as null and void.

    14

    13. In the result, the appeal of the assessee in ITA No. 1542/DEL/2020 is allowed.

    The order is pronounced in the open court on 19.09.2022.

    Sd/- Sd/-

    [SAKTIJIT DEY] [N.K. BILLAIYA]

    JUDICIAL MEMBER ACCOUNTANT MEMBER

    Dated: 19thSeptember, 2022. VL/

    Copy forwarded to:

    1. Appellant

    2. Respondent

    3. CIT

    4. CIT(A)

    5. DR

    Asst. Registrar, ITAT, New Delhi

    15

    Date of dictation Date on which the typed draft is placed before the dictating Member

    Date on which the typed draft is placed before the Other Member

    Date on which the approved draft comes to the Sr.PS/PS

    Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS

    Date on which the final order is uploaded on the website of ITAT

    Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order

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    Comments

    Brandix Mauritius Ho... v. DCIT International T...
    (Sep 19, 2022)