Calcutta High Court
Amal Kumar Ghosh vs Assistant Commissioner Of Income Tax on 21 January, 2014
Author: Girish Chandra Gupta
Bench: Girish Chandra Gupta
ORDER SHEET
ITA No. 21 of 2011
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction (Income Tax)
ORIGINAL SIDE
AMAL KUMAR GHOSH
Versus
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-42 & ORS
BEFORE:
The Hon'ble JUSTICE GIRISH CHANDRA GUPTA
The Hon'ble JUSTICE TAPASH MOOKHERJEE
Date : 21st January, 2014.
Mr.R. Bharadwaj, Adv. for Appellant
Ms.A. Gutgutia,Adv. for Respondent
The Court : This appeal is directed against a judgment and order dated 30th July, 2010 passed by the learned Income Tax Appellate Tribunal upholding the contention of the revenue that the Assessing Officer was competent to issue notice under section 143(2) of the I.T. Act for scrutiny even after expiry of the period of three months from the date of filing of the return. The admitted fact is that CBDT issued Circulars 2 no.9 and 10, i.e. for Corporate Assessee and for Non-Corporate Assessee respectively. The relevant provision appearing from Circular No.10 reads as follows:
"The process of selection of cases for scrutiny for returns filed upto 31.3.2004 must be completed by 15th October, 2004. For returns filed during the current financial year 2004-2005, the selection of cases for scrutiny will have to be completed within 3 months of the date of filing of the return".
In this case, the return was filed by the assessee on 29th October, 2004 and the notice under section 143(2) of the I.T. Act was issued on 14th July, 2005. Evidently, the notice was not issued within a period of three months. The contention of the revenue was that such a notice under section 143(2) of the I.T. Act could have been issued within 12 months from the date of filing of the return and, therefore, the notice was well within time. The assessee contended that the time for the purpose of issuance of such a notice has been restricted by three months by Circular No.10 issued by CBDT which is binding on the Income Tax 3 authorities under section 119 of the I.T. Act and, therefore, they could not have deviated therefrom. Learned Income Tax Appellate Tribunal in the case of Sunita Finlease Ltd. Vs. DCIT reported in (2008) 8 DTR 183 held that, "the selection of scrutiny of case has been done in violation of CBDT Instruction No.9/2004 dt. 20th Sept.2004. It further held that CBDT instructions are binding on the Revenue authorities and therefore the selection of the scrutiny of the case has not been done in accordance with Board instructions. The Tribunal also held that the A.O. erred in assuming the jurisdiction u/s. 143(2) in contravention of CBDT instructions and in completing the assessment order u/s. 144 which is bad in law and that the CIT(A) erred in confirming the order of the A.O."
The selfsame Bench of the Income Tax Appellate Tribunal in its judgment and order dated 23rd January, 2009 in the case of Subhasish Roy Vs. ITO followed the judgment in the case of Sunita Finlease Ltd. Vs. DCIT and held as follows:
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"After hearing the rival submissions and on careful perusal of the materials available on record and keeping in view of the decision of the Coordinate Bench in the case of Sunita Finance Ltd. Vs. DCIT reported in 8 DTR 183 (Bilaspur) dated 15th February, 2008 wherein it was held that scrutiny of the case having been done in violation of CBDT Instruction No.9/04 dated 20.9.04, the AO erred in assuming the jurisdiction and completing the assessment. Therefore, respectfully following the same, we set aside the orders of the AO on this issue itself".
But, in the present case, the learned Tribunal took the view as follows:
"The Hon'ble Tribunal in the case of Sunita Finlease (supra) has equated the expression "selection of the cases for scrutiny with"
issue of notice u/s 143(2)". We are unable to accept this view for the reasons elaborated hereinabove. Thus, we hold that the impugned instruction did not take away the jurisdiction of the A.O. to issue notice u/s. 143(2) of the Act as per the proviso of the said section. Jurisdiction to scrutinize the case was rightly invoked by the A.O. We, therefore, set aside the order of the ld. CIT(A) on this issue and hold that assessment was a valid one."
Therefore, the following questions arise for determination. 5
a) Whether the learned Tribunal being a Coordinate Bench was entitled to differ from the views expressed in the case of Sunita Finlease Ltd. Vs. DCIT and also in the case of Subhasish Roy Vs. ITO ?
b) Whether the notice under section 143(2) of the I.T. Act was in legal exercise of jurisdiction ?
In so far as the second question formulated above is concerned, Mrs. Gutgutia, learned Advocate for the revenue submitted that the circular issued by CBDT cannot be construed to mean to have altered period of limitation provided in section 143(2) of the I.T. Act. She added that the circular was issued for the purpose of expediting the process of assessment. The object was to achieve the target laid down in the Central Action Plan. The object, according to her, by no means, was to permit evasion of tax by the unscrupulous assessees. She added that CBDT has provided the time for selection of cases for scrutiny. CBDT did not restrict time for issuance of a notice. She has produced official records to 6 show that the case was selected for scrutiny on 6th July, 2005. She has also given inspection of the aforesaid notes in the file to Mr. Bharadwaj.
Mr. Bharadwaj, learned Advocate appearing for the assessee submitted that even assuming that CBDT has prescribed a time limit for selection of cases for scrutiny, the admitted case of the department is that the case was not even selected for scrutiny within a period of three months. Therefore, the applicability of the circular cannot be wished away. He added that the views taken by the learned Tribunal in the cases of Sunita Finlease Ltd. Vs. DCIT and Subhasish Roy Vs. ITO were binding on the Coordinate Bench of the Tribunal and it was not open to them to have deviated from the views expressed therein. In case they were of a different view, they should have referred the matter to a larger Bench, which they did not. On the top of that, he drew our attention to a Division Bench judgment in the case of Deputy Commissioner of Income Tax Vs. Sunita Finlease Ltd. reported in 330 ITR 491 (Chhattisgarh). He submitted that the revenue had preferred an appeal against an order 7 passed in the case of Sunita Finlease Ltd. Vs. DCIT but the challenge failed and the order passed by the Tribunal was upheld. He also submitted that the views taken by the learned Tribunal are altogether illegal and should be set aside.
We have considered the rival submissions advanced by the learned Advocates. Even assuming that the intention of CBDT was to restrict the time for selection of the cases for scrutiny within a period of three months, it cannot be said that the selection in this case was made within the aforesaid period. Admittedly, the return was filed on 29th October, 2004 and the case was selected for scrutiny on 6th July, 2005. It may be pointed out that Mrs. Gutgutia was, in fact, reiterating the views taken by the learned Tribunal which we also quoted above. By any process of reasoning, it was not open for the learned Tribunal to come to a finding that the department acted within the four corners of Circulars No.9 and 10 issued by CBDT. The circulars were evidently violated. The circulars are binding upon the department under section 119 of the I.T. Act. 8
Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act.
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Considering the view, we have taken it is not necessary for us to answer the questions formulated above for the purpose of disposal of this appeal.
The appeal is thus allowed.
(GIRISH CHANDRA GUPTA, J.) (TAPASH MOOKHERJEE, J.) km AR(CR)