TMI Blog1989 (2) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner No.1 filed its return for the assessment year 1983-84 showing losses in its cloth business. The Income-tax Officer, respondent No. 4, after satisfying himself, passed the assessment order, wherein the losses were accepted. In the next assessment year, i.e., 1984-85, the petitioner No. 1, in addition to the losses in the cloth business, also showed the losses in the business of chillies and garlic trading which was carried on by it in the said assessment year. On an enquiry by the Income-tax Officer, the losses were found to be bogus ; hence, the Income-tax Officer issued a notice (annexure "B") under section 143(3) of the Income-tax Act, 1961 (for short "the Act"), in respect of the assessment year 1984-85, to show cause why the losses shown in the business of cloth, chillies and garlic be not disallowed. Another notice (annexure "C") under section 147/148 of the Act was also issued for reassessing the income in relation to the assessment year 1983-84 as income chargeable to tax has escaped assessment. The petitioners, taking advantage of the public circulars in relation to the "Voluntary Disclosure Scheme" issued from time to time, filed their revised returns for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed respondent No. 3, the Central Board of Direct Taxes, for grant of the relief under the scheme. The Central Board of Direct Taxes instructed petitioner No. 1 to contact the Commissioner of Income-tax in that regard, vide annexure T. The Commissioner of Income-tax, vide order dated May 17, 1988, without affording an opportunity of hearing and without giving a reasoned or a speaking order, dismissed the petition stating that after careful consideration of the petition, the Board has decided that the petitioner's case for assessment years 1983-84 and 1984-85 is not covered under the Amnesty Scheme. In this petition, Shri G. M. Chaphekar, learned counsel for the petitioners, contended before this court that the petitioners have filed their revised returns under the "Voluntary Disclosure Scheme" claiming benefit under the Amnesty Scheme, disclosed higher incomes and paid thereon the full tax before March 31, 1986, and before the passing of any order by the Income-tax Officer. Thus, the income-tax authorities were bound to give the benefits of the Amnesty Scheme as the Central Board of Direct Taxes has issued various circulars in this respect. The order (annexure 'K') dated 14 Febru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative side, and is an administrative order. Hence, the question of waiving any penalty, interest or any other liability does not arise. In the present case, it is not in dispute that the facility under the Amnesty Scheme was prevalent and the Central Board of Direct Taxes issued various public circulars from time to time in relation to the "Voluntary Disclosure Scheme", which was in force by virtue of the provisions of the Finance Act, 1985. Some of them are public circulars, No. 423 (annexure "D"), No. 432 (annexure "E"), No. 439 (annexure "F"), No. 440 (annexure "G"), No. 441 (annexure "H"), No. 451 (annexure "J") and order dated February 14, 1986 (annexure "K "). The Central Board of Direct Taxes has also issued a resume of the answers given to the specific questions raised by the members of the Bar Association, Income-tax, on January 2, 1986, which is annexed as annexure "I". It is also not disputed that the subordinate authorities and the Income-tax authorities are bound by the instructions, circulars and orders issued by the Central Board of Direct Taxes, which are issued in exercise of their powers conferred under section 119 of the Act. Public Circular No. 451 (annexure " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC)). The binding nature of the circulars has been considered by the various High Courts in a series of decisions. In a recent decision, the Division Bench of the Kerala High Court in CIT v. Punalur Paper Mills Ltd. [1988] 170 ITR 37, after placing reliance on the decisions of the apex court and various High Courts, has held that the circulars so issued have the force of law and are binding on all officers of the Department. The benevolent circulars are in the nature of administrative relief and will go to the assistance of the assessee. They "supplant" the law and not "supplement" the law. The circulars can deviate from the provisions of the Act. It is not open to the Department to contend, even in cases where the circular goes beyond the terms of the section, that the circular has no legal effect or should not be given effect to. Circulars cannot impose any burden on the taxpayer. But, by the issue of the circular, the rigour of the law can be relaxed by giving administrative relief. Even if the circulars are relied on for the first time before the High Court during the course of hearing, the assessee will be entitled to the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard has decided that your case for the assessment years 1983-84 and 1984-85 is not covered under the Amnesty Scheme." From the above order, it is apparent that it does not contain any reasons. While deciding the petition made before the Commissioner of Income-tax for exercising the discretionary powers under section 273A of the Act, the Commissioner was acting under the statute. Every statutory authority has to act in accordance with the statute and has to pass the discretionary order judicially after affording an opportunity of hearing. The order must be a speaking order and if the order is arbitrary, fanciful or cryptic, a writ of mandamus will be issued to such an authority to rehear and determine the matter afresh, according to law. Even if the petition is not considered under section 273A of the Act and is considered to be on the administrative side, in rejection of the petition resulting in various penal consequences, i.e, imposition of penalty, interest and facing of prosecution, hence, in our opinion, the Commissioner, on the administrative side, after affording an opportunity, ought to have passed a reasoned and speaking order. Administrative action should be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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