TMI Blog2011 (8) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired by the assessee in purchasing loom hours and the test of enduring benefit cannot help the Revenue - Decided in favor of the assessee - I.T.A. No.224 of 2004 - - - Dated:- 2-8-2011 - Mr. Justice Bhaskar Bhattacharya, Mr. Justice Sambuddha Chakrabarti, JJ. For the Appellant: Mr. R.N. Bajoria, Mr. J.P. Khaitan, Mr. S. Das, Mr. C.S. Das. For the Respondent: Mr. R.N. Bandopadhya, Ms. Susmita Das De. Bhaskar Bhattacharya, J.: This appeal under Section 260A of the Income-tax Act, 1961 ( Act ) is at the instance of an assessee and is directed against an order dated March 3, 2004 passed by the Income-tax Appellate Tribunal, C Bench, Kolkata in ITA No.867 (kol) of 2002 for the Assessment Year 1998-99, dismissing the appeal filed by the assessee against an order dated March 4, 2003 passed under Section 263 of the Act. Being dissatisfied, the assessee has come up with the present appeal. The facts giving rise to filing of the present appeal may be summarized thus: a) The appellant is, inter alia, engaged in the business of manufacturing electrical equipments and is assessed to tax under the provision of the Act. The present appeal relates to the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subordination. g) Being dissatisfied, the appellant has come up with the present appeal. A Division Bench of this Court at the time of admission of this appeal formulated the following substantial question of law: a) Whether the Tribunal was justified in law in holding that the said circular dated January 23, 2001 was binding on the Assessing Officer in the assessment proceedings before him? b) Whether the Board had any jurisdiction, power or authority to issue any instructions or order in relation to the quasi judicial functions of the Assessing Officer in the assessment proceedings? c) Whether the instructions of the board as contained in the said circular dated January 23, 2001 are contrary to law in holding that the payments made on account of VRS are not allowable revenue expenditure? d) Whether the Tribunal was justified in holding the order of the Commissioner setting aside the entire assessment and directing a fresh assessment de novo when admittedly on none of the other issues there was any controversy? e) Whether jurisdiction under Section 263 of the Act could be assumed in the facts and circumstances of the case by the Commissioner when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-Tax, reported in 1980 Vol.124 ITR 1; 7. Sassoon J. David Co. P. Ltd. vs. Commissioner of Income-tax, Bombay, reported in 1979 Vol.261 ITR 118. Mr. Banerjee, the learned Advocate appearing on behalf of the Revenue, has, on the other hand, opposed the aforesaid contentions of Mr. Bajoria and has contended that the Circular dated 23rd January, 2001 was very much binding upon the Assessing Officer and as such, the Commissioner of Income-tax (Appeals) rightly initiated a proceeding under Section 263 of the Act for reopening of the assessment in accordance with the direction given in the said Circular. Mr. Banerjee submits that the direction contained in Circular are in conformity with the decisions of the Supreme Court and as such, there is no illegality in the order impugned in this appeal. Mr. Banerjee, therefore, prays for dismissal of this appeal. In order to appreciate the questions involved in this appeal, first we propose to consider the scope of Section 119 of the Act which is quoted below: 119. Instructions to subordinate authorities. (1) The Board may, from time to time, issue such orders, instructions and directions to other Income Tax authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely: (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and (ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed: Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament. (Emphasis supplied by us). On a plain reading of the said provision, we have no doubt in our mind that the circular issued by the Board under the aforesaid provision is meant for guiding the officers of the Revenue for administrative purpose of enforcing the provisions of the Act. But when an authority under the Act is required to perform quasi-judicial functions, such authorities should be guided by the law of the land as enunciated on the questions involved by various judicial authorities whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions and directions to other Income-tax authorities as it may deem fit for the proper administration of this Act and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board. Provided that no such orders, instructions or directions shall be issued (a) so as to require any Income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner: or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions. " Under sub-section (2) of Section 119 without prejudice to the generality of the Board's power set out in sub-section (1) a specific power is given to the Board for the purpose of proper and efficient management of the work of assessment and collection of revenue to issue from time to time general or special orders in respect of any class of incomes or class of cases setting forth directions or instructions, not being prejudicial to assessees, as the guidelines, principles or procedures to be followed in the work relating to assessment. Such instructions may be by way of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enkatrama Reddy, expressed doubt in the above view of Pal, J. and observed as follows: As is evident from Section 151-A, the Board is empowered to issue orders or instructions in order to ensure uniformity in the classification of goods or with respect to levy of duty. The need to issue such instructions arises when there is a doubt or ambiguity in relation to those matters. The possibility of varying views being taken by the customs officials while administering the Act may bring about uncertainty and confusion. In order to avoid this situation, Section 151-A has been enacted on the same lines as Section 37-A of the Central Excise Act. The apparent need to issue such circulars is felt when there is no authoritative pronouncement of the Court on the subject. Once the relevant issue is decided by the Court at the highest level, the very basis and substratum of the circular disappears. The law laid down by this Court will ensure uniformity in the decisions at all levels. By an express constitutional provision, the law declared by the Supreme Court is made binding on all the courts within the territory of India (vide Article 141). Proprio vigore the law is binding on all the trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjudicating authority has to decide the case against the assessee, but as per the decision of this Court, the assessee's contention has to be accepted by the adjudicating authority. If the proposition laid down in Dhiren Chemical Industries has to be followed, the adjudicating authority should pass an order in terms of the circular holding the issue in favour of the Revenue, knowing fully well that on a challenge by the assessee, it is liable to be set aside in appeal. The assessee will then be driven to file an appeal to get rid of an obviously illegal order. Is it all contemplated by Section 151-A? The aforesaid observations of P. Venkatrama Reddy, J. is more convincing than the view taken by Pal, J. declaring the decision in the case of Hindustan Aeronautics Ltd. v. CIT (supra), as per incurium. We respectfully follow the view taken in Hindustan Aeronautics Ltd. (supra) and the one taken by P. Venkatrama Reddy, J. Applying the aforesaid principles to the facts of the present case, we find that the sole reason for invocation of Section 263 of the Act is a circular dated January 23, 2001 issued in terms of Section 119 of the Act. The outcome of the original order of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Group of Mills so registered to utilize the allotment of hours of work per week of other members in the same group who were not fully utilizing the hours of work allowable to them under the working time agreement, provided that such transfer of hours of work was for a period of not less than six months. This transaction of transfer of allotment of hours of work per week was commonly referred to as sale of looms hours by one member to another. The consequence of such transfer was that the hours of work per week transferred by a member were liable to be deducted from the working hours per week allowed to such member under the working time agreement and the member in whose favour such transfer was made was entitled to utilise the number of working hours per week transferred to him in addition to the working hours per week allowed to him under the working time agreement. It was under this clause that the assessee purchased loom hours from four different jute manufacturing concerns which were signatories to the working time agreement, for the aggregate sum of Rs. 2,03,225/- during the year 1st Aug. 1958 to 31st July 1959. In the course of assessment for the Assessment Year 1960-61 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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