Rectification order passed beyond four years without notice

Rectification order passed beyond four years without notice and DIN is invalid and barred by limitation

Issue

Whether a rectification order passed under section 154 read with section 143(3) beyond four years from the end of the financial year in which the original assessment order was passed is barred by limitation.
Whether a section 154 order passed without serving prior notice under section 154(3) and without a Document Identification Number (DIN) as per CBDT Circular dated 14-8-2019 is legally sustainable.

Facts

The Income Tax Officer passed an original assessment order under section 143(3) on 25-2-2015.
Subsequently, the Assessing Officer passed a rectification order under section 154 read with section 143(3) on 25-3-2022 to rectify the assessment order dated 25-2-2015.
The Income Tax Department failed to establish or disclose that prior notice had been served upon the assessee before passing the rectification order.
The impugned rectification order dated 25-3-2022 did not contain any Document Identification Number (DIN).
The assessee filed a writ petition challenging the validity and limitation of the rectification order dated 25-3-2022.

Decision

On Limitation under Section 154: Since the order sought to be rectified was dated 25-2-2015, the statutory limitation period of four years ended on 31-3-2019. The impugned order passed on 25-3-2022 was clearly barred by limitation.
On Procedural Non-Compliance: The Revenue failed to comply with section 154(3) as no prior notice was served upon the assessee, violating principles of natural justice.
On Mandatory DIN Absence: The impugned order lacked a Document Identification Number (DIN), violating the mandatory requirements of CBDT Circular dated 14-8-2019.
Relief: The impugned rectification order dated 25-3-2022 was set aside in favor of the assessee.

Key Takeaways

Strict Limitation Period: Section 154 orders must be passed within four years from the end of the financial year in which the order sought to be amended was passed.
Mandatory Opportunity of Being Heard: Section 154(3) makes it obligatory to issue prior notice and afford an opportunity of being heard before passing any rectification order that enhances an assessment or reduces a refund.
Mandatory DIN Compliance: Any tax order issued without a DIN in contravention of CBDT Circular dated 14-8-2019 is invalid and non-est in law.

HIGH COURT OF CALCUTTA

Surajit Ghosh

Income-tax Officer

Kausik Chanda, J.

WPA No. 54 of 2026

MARCH 31, 2026

Ms. Sutapa Roy Choudhury, Sr. Adv., Saikat Ghoshal and Ms. Aratrika Roy for the Petitioner. Prithu Dudhoria and Anurag Roy for the Respondent.

ORDER

1. The petitioner challenges an order dated March 25, 2022, issued by the Income Tax Officer, Ward No. 29(1), Kolkata under Section 154 read with Section 143(3) of the Income Tax Act, 1961.

2. Ms. Sutapa Roy Choudhury, learned senior advocate appearing for the petitioner, submits that the order dated March 25, 2022 cannot be sustained, as no notice was issued to the petitioner prior to the passing of the said order, as required under Section 154(3) of the Income Tax Act, 1961. It is further submitted that the order is barred by limitation as prescribed under Section 154(7) of the said Act. Additionally, it is argued that the document does not bear any Document Identification Number, as mandated by the circular dated August 14, 2019 issued by the Central Board of Direct Taxes, Department of Revenue.

3. Mr. Prithu Dudhoria, learned advocate appearing for the Revenue, submits that the writ petition has been filed after a lapse of approximately four years from the date of the impugned order. Accordingly, it is contended that the writ petition ought not to be entertained on the ground of delay.

4. Upon consideration, I find merit in the submissions advanced by Ms. Sutapa Roy Choudhury, learned senior advocate for the petitioner, that the impugned order dated March 25, 2022 is barred by limitation.

5. Section 154(7) is quoted below:

“154. Rectification of mistake.—

(7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years [from the end of the financial year in which the order sought to be amended was passed].”

6. Since the order which sought to be rectified under Section 154 of the Income Tax Act, 1961, is an order dated February 25, 2015 under Section 143(3) of the Income Tax Act, 1961. The last date for passing the order should have been March 31, 2019.

7. It is evident that the impugned order, having been passed on March 25, 2022, is beyond the prescribed period of limitation.

8. Furthermore, the Department has failed to comply with the requirements of Section 154(3) of the Act by not disclosing that any prior notice was served upon the petitioner before passing the impugned order.

9. There is also substance in the contention that the document does not contain any Document Identification Number.

10. Since the order has been passed beyond the prescribed period of limitation, it suffers from a jurisdictional error. The objection regarding delay raised by the Revenue has been satisfactorily explained by the petitioner in paragraph 5 of the writ petition, wherein it is stated that the delay occurred due to the death of the petitioner’s earlier learned advocate.

11. In view of the foregoing, the impugned order dated March 25, 2022 is set aside.

12. Accordingly, WPA 54 of 2026 stands allowed. All consequential recovery proceedings initiated by the Department shall also stand set aside.

13. Urgent photostat certified copy of this order, if applied for, be supplied to the learned advocates for the parties on usual undertakings.