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TMI Blog1983 (7) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... instructions on 10-3-1978 and on the basis of such instructions the exchange rate on the basis of rule 115 was to be adopted at Rs. 7.50 per US dollar. 4. Consequently, on the basis of such aforesaid information, the ITO issued notices under section 147(b) of the Act. 5. Before the ITO in reassessment proceedings, on behalf of the assessee, it was contended that there was no information in the possession of the ITO as required under section 147(h) and as such the ITO has no jurisdiction to start the proceedings under section 147(h). 6. The ITO after considering the contentions of the assessee and material on record was of the view that the instructions issued by the Board subsequently was information within the meaning of section 147(h). The ITO was of the view that on the basis of information in his possession he has reason to believe that income has escaped assessment. Consequently, he held that initiation of proceedings under section 147(b) was valid. Accordingly, he completed reassessment proceedings in question. 7. Being aggrieved with the order of the ITO, the assessee took the matter in appeal. Before the learned Commissioner (Appeals), inter alia, it was contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the revised instructions issued by the CBDT the exchange rate of per US dollar was Rs. 7.50 as against the exchange rate of Rs. 7.29 interpreted by the Board in its earlier instructions issued in 1972. Thus, it is clear that the ITO at the time of starting proceedings under section 147(b)/148 had fresh material in his possession. In the present case, the Board only gave its opinion regarding interpretation of rule 115. The suggested interpretation of the said rule do not enjoy the status of law. Such suggestion was only opinion and the ITO has every right to consider such opinion and after considering such opinion he can always reason to believe that on the basis of fresh information there was escapement of income. Thus, the learned departmental representative further contended that the directions given by the Board from time to time are binding on the income-tax authorities as provided in section 119 of the Act. In support of this contention the reliance was placed on the ratio of the decision in the case of Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 (SC) and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC) wherein it is held that the circular issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him or on his behalf in foreign currency shall be the telegraphic transfer buying rate of such currency as on the specified date." The ITO on the basis of standing instructions issued by the Board determined the exchange rate of US dollar in rupee in accordance with rule 115. According to the instructions issued by the Board the exchange rate at the time of completing the assessments was Rs. 7.29 per US dollar. Subsequently the Board issued instructions in 1978 and on the basis of such instructions it was directed that exchange rate of per US dollar in rupee should be Rs. 7.50. So the revised instructions were fresh material before the ITO at the time of starting proceedings under section 147(b). The finding of the learned Commissioner (Appeals) to the contrary that the ITO was not having any fresh information in his possession at the time of proceedings under section 147(b) is factually incorrect. In the decision of A. Raman & Co.'s case the Supreme Court has defined the expression 'information' in section 147(b), 'as instructions or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment'. 12. We m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding instructions issued by the Board has taken exchange rate of per US dollar at Rs. 7.29. Subsequently the Board issued directions and on the basis of such instructions the exchange rate was to be taken at Rs. 7.50 per US dollar. Such instructions could definitely be an information within the meaning of section 147(b). Section 119 clearly provides that the Board from time to time can issue orders and instructions to the income-tax authorities and such instructions or directions shall be binding on the income-tax authorities. The highest executive authority is the CBDT which is constituted under the Central Board of Revenue Act, 1963. It has powers to make rules and to issue orders and instructions to officers and persons employed in the execution of the Act. There are two exceptions to this rule. Firstly, it cannot interfere with the discretion of AAC/Commissioner in the exercise of their appeal (sic) judicial function and, secondly, it cannot direct the ITO or any other income-tax authorities to make particular assessment in particular manner. In the decision of Navnit Lal C. Javeri's case the Supreme Court clearly held that the circular issued by the Board would be binding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuinely refunded to the companies, they would not be taken into account under section 12(1B)'. Section 2(6A)(e) and 12(1B) did not suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines Ltd.'s case, where referring to another circular issued by Central Board of Revenue under section 5(8), on which reliance was placed on behalf of the assessee, the Supreme Court while deciding the said case observed as under : " Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this Court observed in Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198, 203 : ' It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea, was not to affect such transactions and not to bring them within the mischief of the new provision.' " 17. The directions given in that circular clearly deviated from the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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