BEFORE THE HON'BLE HIGH COURTOECHHAmSGARH ATBILASPUR Tax Case (Income Tax Appeal) No. 2A^/2008 ADDellant ( ,^7.^-t^.^"^ ^J-:^^ »v"9' Deputy Commissioner of Income Tax-1(1), Raipur (C.G.) f.^^'y.^^" .,.^?'.i^ <^~^ \^ .t f;^t°^:v':'" '^.^C^' -t<58a'" Respondent VERSUS M/s. Sunita Finlease Ltd., 2/509, ChirudihWard, G.E. Road, Raipur(C.G.) INCOME TAX APPEAL U/S. 2g0 A OFJNCQMETAX ACT. 1961 ^r .10 HIGH COURT OF CHHATTISGARH AT BILASPUR D.B. HON'BLE SHRI DHIRENDRA MISHRA, & HON'BLE SHRIR.N. CHANDRAKAR, JJ Tax Case (Income Tax Appeal) No.21 of 2008 ApBellant Resppndent Versus Deputy Commissioner of Income Tax-1(1), Raipur (CG) M/s Sunita Finlease Ltd., 2/509, Chirudih Ward, G.E. Road, Raipur (CG) Present: Mr. Rajeev Shrivastava, counsel for the appellant/Revenue. Ms. Smiti Sharma, counsel for the respondent/assessee. ORALJUDGIVIENT (21st October, 2010) Per Dhifen_dra_Mjshra,^.l The Revenue's appeal under Section 280A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Bilaspur Bench, Bilaspur (in short "the Tribunal") has been admitted on the following substantial question of law: "Whether the Income Tax Appellate Tribunal was justified in holding that the administrative instructions No; 9/2004 issued by the Central Board of Direct Taxes is binding on the administrative officer in view of the statutory provision contained in Section 143(2) ofthe Income Tax Act, 1961, which provided for limitation of 12 months for issuance of notice under Section 143(2) oftheAct? 02. Briefly stated, facts of the case as projected in the Memo of Appeal, are that the assessee filed his return of income on 29 October, 2004 declaring total income at Rs.NIL. The return was processed/assessed under Section 143(1) of the Income Tax Act, 1961 (in short "the Act, 1961") and the same was selected forscrutiny and assessment was completed on 15.12.2006 on a total income of Rs.41,26,844/-. A total sum of Rs.27,12.120/- was disallowed on the ground of excessive premium paid to key-man insurance policy out of an amount of Rs.90,40,402/-. 03. The appeal preferred by the assessee was further dismissed by Commissioner of Income Tax (Appeals). However, the Tribunal accepting the submission of the assessee that scrutiny of the case has been done in %. violation of Instructipns No.9/2004 dated 20th September, 2004 issued by the Central Board of Direct Taxes (for brevity "the Board") allowed the appeal. It has been further held that the Board's instructions are binding on all the revenue authorities and therefore, selection for scrutiny of the case has not been done as per Board's instructions referred to, and the Assessing Officer erred in assuming the jurisdiction under Section 143(2) of the Act in contravention of the Board's instructions in completing assessment under Section 144, which is bad in law. 04. Shri Rajeev Shrivastava, learned counsel for the Revenue, would argue that the directions contained in Instructions No.9/2004 dated 20.9.2004 shall not defeat the provisions of law, which provides limitation of one year for scrutiny under Section 143(2) ofthe Act. Any guideline or instruction cannot supersede the provisions of the Act. 05. Placing reliance on the decision of the High Court of Kerala in the matter of Commissioner of Income Tax Vs. Malayala Manorama & Co. Ltd. , it is argued that the Board's circulars though binding on all revenue officers, cannot go against the provisions ofthe Act. Further relying on the decision of the Hon'ble Supreme Court in the matter of Kerala Financial Corporation Vs. Commissioner of Income Tax^, it is submitted that the circular of the Board, relied upon by the Tribunal, was applicable to the returns for the current financial year 2004-05. The referred circular was applicable to selection of the cases for scrutiny of the returns for the financial year 2004-05 and the same was not applicable to scrutiny of the returns filed by the assessee on 29 October, 2004. 06. On the other hand, Ms. Smiti Sharma, learned counsel for the Revenue, submits that it is settled law that the circulars issued by the Board under Section 119 ofthe Act are binding on all officers and employees employed in execution of the Act, even if they deviate from the provisions of the Act. The powers of the Board are wide enough to enable it to grant relaxation from the provisions of several sections enumerated in Clause-VIII. The only bar on the exercise of power is that it is not prejudicial to the assessee. Reliance is placed on the decision of the Hon'ble Supreme Court in UCO Bank Vs. Commissioner of Income Tasc', Union of India & another ' (1983) 33 CTR (KER) 277 : (1983) 143 ITR 29 (KER) : (1983) 12 TAXMAN 253 2 (1994) 119 CTR (SC) 164 :(1994) 210 ITR 129 (SC) : (1994) 75 TAXMAN 573 3 (1999) 237 ITR 889 (SC) Vs. Azadi Bachao Andolan and another and decision of the Andhra Pradesh High Court in Commissioner of Income Tax Vs. Smt Nayana P. Dedhia". 07. We have heard learned counsel for the parties and perused the impugned order. 08. In Malayala Manorama , the Kerala High Court while considering the scopeof CBDT circulars issued under Section 119 of the Act, held that certainly a circular issued by the Board would be binding on all officers and persons employed under Section 119 but no instruction or circular can go against the provisions of the Act. While the Board can relax the rigours of the law or grant relief which is not to be found in the terms of the statute, such circulars making for a just and fair administration of the law, no instruction which will be ultra vires of the provisions of the statute could be issued. 09. In the matter of Kerala Financial Corporation , the Supreme Court while dealing with the circulars issued by the Board under Section 119, observed that Section 119 empowers the Board to issue orders, instructions or directions for the proper administration of Act or for such other purposes specified in sub-section (2) of the Sectipn. Such an order, instruction or direction cannot override the provisions of the Act; that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. Such a contention cannot seriously be even raised. 't. 10. In the case of UCO Bank , the Supreme Court dealing with the tegal status of such circulars, obsen/ed thus: "Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income Tax Act, which are binding on the authorities in the administration of the Act. Under Section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act "(2003) 263 ITR 706 (SC) 5 (2004) 270 ITR 572 is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities." 11. In the matter of Smt. Nayana P. Dedhia , the Andhra Pradesh Court held that these guidelines issued by the Board in exercise of powers in terms of Section 119 of the Act relaxing the rigours of law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board. 12. Direction by issuing instructions to the officers for the process of selection of cases for scrutiny for returns for a particular financial year and allowing time ofthree monthsfor completion of the same can, by no stretch of imagination, be considered that it overrides or detracts from the provisions of the Act. It only directs that theabove exercise should be completed within three months of the date of filing of return by the assessee, which amounts to relaxation to the assessee that the return filed by him can be scrutinized by the .Assessing Officer within three months of filing of the return. 13. So far as contention of the Revenue that Instructions No. 9/2004 dated 20th September, 2004 is not applicable in the present case, is concerned, in view of the specific stipulation in the circular that "for retums filed during the current financial year 2004-05, the selection of cases for scrutiny will have to be completed within three months of the date of filing the returns' and considering that in the present case, the return has, admittedly, been filed by the assessee on 29 October, 2004 i.e. during the current financial year 2004- 05, we find no substance in the above contention. 14. For the aforesaid reasons, we decide the substantial question of law in favour of the assessee and against the Revenue. Accordingly, the appeal is jdismisaed_ _ Sd/- Dhirendra Mishra Jadge Sd/- R.N. Chandrakar Judge t-A