The Bombay High Court has held that an approval for a special audit issued without a Document Identification Number (DIN) is invalid and deemed never to have been issued.
A Division Bench of Justice B P Colabawalla and Justice Firdosh P Pooniwalla allowed a writ petition filed by assessee Sanjay Nathalal Shah and quashed a special audit ordered for Assessment Year 2023–24 .
Relying on a CBDT circular issued in August 2019, which mandates that every communication, including statutory approvals, must carry a computer-generated Document Identification Number, the court held that " Paragraph 4 unequivocally provides the consequence of non-compliance, stating that any communication not in conformity with paragraphs 2 and 3 "shall be treated as invalid and shall be deemed to have never been issued."
The case arose from an order dated 10 February 2025 passed by the Assessing Officer under Section 142(2A) of the Income Tax Act, 1961. The order directed a special audit of the taxpayer's accounts. A consequential audit report dated 6 June 2025 was also challenged.
Section 142(2A) permits the Assessing Officer to order a special audit where the accounts are complex or revenue interests are involved. However, the law requires prior approval of the Principal Commissioner or Commissioner. Without a valid approval, the Assessing Officer has no jurisdiction.
The approval in this case was dated 6 February 2025. It did not carry a DIN. It also did not record any exceptional circumstances permitting manual issuance.
The taxpayer argued that the approval was void ab initio. He submitted that the entire audit proceedings were without authority of law.
The revenue argued that the approval was an internal document. It claimed that a DIN on the final audit order was sufficient compliance.
The court rejected this argument. It relied on CBDT Circular No. 19 of 2019 dated 14 August 2019. The Circular mandates that every communication, including approvals, must carry a computer-generated DIN.
The bench observed, “The approval dated 06.02.2025, which forms the very basis of the impugned Order directing a special audit, does not have a DIN quoted on its face. It also does not contain any reference to exceptional circumstances or the prior approval required for manual issuance as mandated by Paragraph 3 of the Circular. As a result, the approval is clearly in violation of Circular No. 19 of 2019.”
The court noted that the circular clearly states that any such communication shall be treated as invalid and deemed never to have been issued. It held that prior approval under Section 142(2A) is a jurisdictional condition. It is not a procedural formality.
The court further held that a defect in the approval cannot be cured by a valid DIN on the final order. If the foundation fails, the consequential order cannot stand.
The bench held that the approval was non est in law. It quashed the special audit order dated 10 February 2025. It also quashed the audit report dated 6 June 2025.
The court clarified that the revenue may proceed afresh in accordance with law. It noted that the period during which the special audit remained pending stands excluded while computing limitation under Section 153 of the Act. Time, therefore, remains available to complete the assessment.
Case Name: Sanjay Nathalal Shah v. Assistant Commissioner of Income Tax, Central Circle 5(2) & Ors.
Citation: 2026 LLBiz HC(BOM)16
Case Number: WRIT PETITION (L) NO. 19240 OF 2025
For Petitioner: Advocates Dharan Gandhi and Aanchal Vyas
For Respondent: Advocate Swapna Gokhale