Income Tax Appellate Tribunal - Hyderabad
Smt. Nayana P. Dedhia vs Assistant Commissioner Of Income Tax on 20 August, 2002
Equivalent citations: [2003]86ITD398(HYD), (2004)84TTJ(HYD)233
ORDER
M.V.R. Prasad, A.M.
1. This is an appeal filed by the assessee. It is directed against the order of the CIT(A)-V, Hyderabad, dt. 7th Feb., 2002, for the asst. yr. 1996-97.
2. Though several grounds are taken by the assessee in this appeal, one of the main grounds, which goes to the root of the problem reads as under :
"The learned CIT(A) has erred in rejecting the ground that the AO had erred in taking up the assessment for scrutiny in spite of the assessee offering business income above 30 per cent as advertised by the IT Department."
The learned counsel for the assessee mentioned that the Department has issued a press-release to the effect that when the returned income exceeds the income returned in the earlier year by 30 per cent thereof, the assessment should not be selected for scrutiny. The said press-release dt. 12th March, 1996, which may be seen at pp. 2555 and 2556 of the latest edition of Taxman on 'Direct Taxes Circulars--Income-tax', a copy of which is furnished by the learned counsel for the assessee, reads as follows :
"749A. Scrutiny assessment guidelines for asst. yr. 1996-97.
The IT Department has decided not to select returns for the asst. yr. 1996-97 for detailed scrutiny if the total income declared is at least 30 per cent more than the total income declared for the asst, yr. 1995-96.
The following further conditions should be fulfilled :
(a) The total income for both the assessment years should exceed the basic exemption limit;
(b) The total income for the asst. yr. 1995-96 should not exceed Rs. 5 lakhs; and
(c) Tax is fully paid for the asst. yr. 1996-97 before the return is filed.
In these cases the taxpayers will not be required to attend income-tax offices in connection with their assessments.
However, some of these cases will be scrutinized if there is positive information of tax evasion or there is a large claim of refund.
Press release; dt. 12th March, 1996. ..."
It is claimed that the assessee satisfies the above conditions mentioned in the press-release and so, the assessment should not have been taken up; for scrutiny, and the impugned additions should not have been made.
3. The AO took up the return for scrutiny and referred the valuation of a building constructed" by the assessee to the Valuation Cell and brought to tax the difference between the cost of construction estimated by the Valuation Officer and the cost booked in the books of the assessee. It is pleaded that all these additions made by the AO deserve to be deleted because the assessment, in the first place, should not have been taken up for scrutiny at all. It is also mentioned that the assessee brought this aspect of the matter to the notice of the AO, vide his letter dt. 26th June, 1998.
Relevant portion of the said letter, copy of which is at pp. 11 to 13 of the paper book filed before us, reads as under:
"Sub : Nayna P. Dedhia-GIR No. N-785-Asst. yr. 1996-97 Ref : Your letter dt. 8th June, 1998 In reply to your above letter, we are enclosing herewith the following :
1. Copy of statement of loans taken.
2. Copies of acknowledgement and computation of income for racial asst. yrs. 1994-95, 1995-96 and 1997-98
3. Details of outstanding liabilities.
4. Copies of bills towards additions to fixed assets during financial year 1995-96. Also, we are producing herewith books of account, pass-book for the financial year 1995-96 and vouchers for November and December, 1995 for your verification.
The assessee has retained a portion of constructed area 5783 sq. ft. on first floor and 1000 sq. ft. in cellor total amounting to Rs. 40,78,525 which is shown on the credit side of the P&L a/c.
Further to our above submissions we would also like to draw your kind attention that the assessee has filed her return of income for asst. yr, 1996-97 under the "30 per cent Voluntary Disclosure Scheme" advertised by the Department."
Inviting our attention to the letter dt. 19th Dec., 2001, addressed to the CIT(A), a copy of which is furnished at pp. 73 to 96 of the assessee's paper book filed before us, it is claimed that this aspect of the matter was also brought to the notice of the CIT(A). Relevant portion of the said letter of the assessee dt. 19th Dec., 2001, reads as under :
"Return of income for asst. yr. 1996-97.
For the asst. yr. 1996-97 the business income offered by the assessee was 51.6 per cent higher than the business income offered by the assessee in the preceding year.
In view of the fact the assessee qualifies for the 30 per cent voluntary disclosure of income scheme that was offered by the Department. As per this scheme, the selection of assessee's case for scrutiny is unjustified arid the assessment done by the officer is improper. ...,......"
An additional ground of appeal was taken before the CIT(A) questioning the validity of the assessment made in violation of the promise extended to the assessees by the said press-release.
4. The AO did not deal with the above objection of the assessee, questioning his right to take the case for scrutiny, and the CIT(A) rejected the claim of the assessee in this behalf, with the following remarks :
"8. An additional ground has been raised in the course of the appeal proceedings stating that, in spite of disclosure of income at 30 per cent more that what was disclosed in the previous year, the case was taken up for scrutiny, which was against the decision taken by the Department. Therefore, the learned Authorised Representative urged that the AO was not correct in taking up the case for scrutiny at all.
9. I have duly considered the submission of the appellant in this regard. The powers vested in an AO in terms of the provisions of Section 143 of the Act entitles him/her to take up any case for scrutiny, if he or she considers that such scrutiny is necessary, on the facts and in the circumstances of the case. In the present case, the appellant was inconsistent in declaring income from business inasmuch as for the asst. yr. 1993-94, the appellant relied on the books of account maintained by her, while declaring the income for that year, but in the subsequent two assessment years, i.e., for asst. yrs. 1994-95 and 1995-96 she no longer relied on her books and estimated profits at the rate of 8 per cent of the gross receipts as her income. Again, in the current year, i.e., in asst. yr. 1996-97, she declared the profit finally computed on the basis of the books of account, from the project, which continued from asst. yr. 1993-94 onwards. Considering the facts that for the intervening two years, i.e., 1994-95 and 1995-96, the profit was shown in an ad hoc manner on the basis of estimation at the rate of 8 per cent on the gross receipts including advances received for sale of space, it cannot be said that the AO was unjustified in selecting the case for scrutiny in the final year of completion of the project for ascertaining the true profit earned by the appellant from the project nor can it be said that the action of the AO was in violation of any legal provision.
9.1 Therefore, I do not find any merit in the additional ground taken by the learned Authorised Representative for the appellant and hence the same is dismissed."
5. Before us, the learned counsel for the assessee invited our attention to the provisions of Section 119 of the IT Act, the relevant portion of which reads as under :
"119(1) The Board may, from time to time, issue such orders, instructions and directions to other IT 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 IT 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 Dy. CIT or the CIT(A) in the exercise of his appellate functions.
(2) Without prejudice to the generality of the foregoing power:
(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of Sections 139, 143, 144, 147, 148, 154, 155, Sub-section (1A) of Section 201, Sections 210, 211, 234A, 234B, 234C, 271 and 273 or otherwise) 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 to the guidelines, principles or procedures to be followed by other IT authorities in the work relating to assessment or collection of revenue or the intimation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information.
(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise the CIT or the ITO to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.
(c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter VI or Chapter VIA, 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."
It is mentioned that in terms of Section 119(2)(a) of the Act, the Board is empowered to issue instructions, orders, etc. which are beneficial to the assessees in relaxation of sections like Section 143, and the press-release, extracted by us hereinabove, clearly falls into the category of such instructions/orders which the Board is authorised to issue. It is also claimed that these instructions, etc. are binding on the AO in the light of the ratio of the decision of the apex Court in the case of UCO Bank v. CIT (1999) 237 ITR 889 (SC).
Reliance is also placed on the decision of the Hon'ble Bombay High Court in the case of Bombay Cloth Syndicate v. CIT (1995) 214 ITR 210 (Bom) in which it is held that public advertisements or press release issued by the CBDT, of 'orders, instructions and directions' contemplated under Section 119 of the Act, and such orders, instructions and directions either be issued by Departmental circulars or by notice to the persons responsible for the execution of the Act, or by notice to the public. Such public advertisements amount to notice to the public as well as circulars to the officers. In this context, reliance is also placed on the decision of the Hon'ble Calcutta High Court in the case of CIT v. Savoy Enterprises Ltd (1995) 211 ITR 192 (Cal), in which it is held that executive instructions issued by the CBDT are binding on the concerned authorities and also the decisions of the Hon'ble Kerala High Court in the case of CIT v. Aspinwall & Co. Ltd. (1993) 204 ITR 225 (Ker), in which it was held that circulars can even supplement law. It is also pleaded that under the press-release in question', there are only two circumstances under which the benefit of the press-release can be withheld, and they are : (1) if there is positive information of tax envision; and (2) if there is a large claim of refund. It is mentioned that none of the above two circumstances were obtaining in the case of the assessee, and so, the AO was not justified in not extending the benefit of the press-release to the assessee, and he has subjected the case of the assessee to scrutiny in violation of the promise contained in the circular. It is also pleaded that the circumstances mentioned by the CIT(A) justifying the action of the AO in taking up the case for scrutiny, are totally irrelevant and they do not figure in the said press-release. In the other words, the press-release does not go into the question as to how the profit was returned in the earlier years and in the current year. It only talks of the quantum of income returned in the two years and whether the income returned in the subsequent year exceeds that returned in the preceding year by 30 per cent or not. As these conditions are satisfied, it is claimed that the scrutiny of the case of the assessee was totally uncalled for. In this context, the learned counsel for the assessee also relied upon the doctrine of legitimate expectation, which is the subject-matter of an article by learned author, Shri S. Rajaratnam (232 ITR 53 Journal). The article refers to this doctrine as enunciated in Halsbury's Laws of England, Fourth Edition, Volume I(1), and extracted the relevant portion of it as under:
"Legitimate expectations :--A person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice."
In the light of the above case-law and the doctrine of legitimate expectations, it is claimed that the AO was not justified in taking up the case of the assessee for scrutiny in violation of the promise contained in the press-release, and consequently, the additions made in the course of such scrutiny, assessment also deserve to be deleted without any further consideration.
6. The learned Departmental Representative, on the other hand, invited our attention to the last portion of Section 119(2)(a) in which it is stated that the relevant order, instruction, etc. be published and circulated in the prescribed manner for general information'. The prescribed manner of publication, according to him, is given in Rule 111B of the IT Rules, which reads as under:
"Any general or special order of the Board issued under Clause (a) of Sub-section (2) of Section 119, the publication and circulation of which is, in the opinion of the Board, necessary in the public interest, shall be published and circulated in one or more of the following modes, namely :
(i) publication of the order in the official Gazette;
(ii) dispatching copies of the order to chambers of commerce and other trade or professional associations which are, for the time being, borne on the mailing list of the Board;
(iii) displaying copies of the order on the notice board of the office of every Chief CIT or CIT, Dy. CIT and AO."
It is claimed that as the assessee is claiming a benefit, i.e., exemption from scrutiny, it is for him to prove that the said order or press-release has been published or circulated in the prescribed manner. As it is not proved that the said press-release has been published or circulated in the prescribed manner in accordance with Rule 111B, the benefit of the press-release cannot be given to the assessee, notwithstanding the ratio of the decision of the Hon'ble Bombay High Court in the case of Bombay Cloth Syndicate (supra) relied upon by the learned counsel for the assessee.
7. We are of the view that the assessee deserves to succeed, It is not denied that the assessee satisfies the conditions mentioned in the said press-release. The authenticity of the press-release is also not questioned. What is questioned is only whether the press-release is published or circulated in one of the three modes laid down in Rule 111B of the IT Rules, It may be seen that the prescribed mode No. (ii) relates to despatching copies of the orders through Chambers of Commerce and other trade associations; and mode No. (iii) relates to displaying the copies of the orders on the notice boards inter alia of the AOs. It is not the case of the Department that it was not displayed on the notice board of the AO. The only case is that it was not proved that the press-release was so displayed on the notice board. We are of the view that the argument of the learned Departmental Representative in this behalf is too technical to be accepted. It is too much to assume that the CBDT issued a press-release and did not send a copy thereof to its AOs in the field. It is also too much to expect the assessee to prove the display of the instructions received from the CBDT, on the notice board. The only way to prove such a display on the notice board of the AO, is to take a photograph of the notice board at the appropriate time, which is, to say the least, expecting the impossibility. 'In the circumstances, we are of the view that the Revenue authorities are bound to honour the instructions of the CBDT contained in the said press-release. Further, we are of the view that the Department is bound by the principle of promissory estoppel not to take up the case of the assessee for scrutiny. In terms of its own press-release.
8. For the foregoing reasons, we hold that the AO was not justified in taking up the case of the assesses for scrutiny, and making the impugned assessment. Accordingly, impugned orders of the Revenue authorities are set aside on this short ground. Consequently, we need not go into the merits of the other grounds raised by the assessee in the present appeal, questioning the additions made in the impugned assessment,
9. In the result, assessee's appeal is allowed.