R.D. Gattani, J.
1. Messrs. Golcha Properties (Private) Limited, (In Liquidation), briefly 'the Company' was on 10 5-1968 by this Court, ordered to be wound up in Company Petitions No. 9 and 10 of 1966. The Official Liquidator attached to this Court was appointed Liquidator of 'the Company'. After the passing of that order the Official Liquidator is carrying on the business of 'the Company' for the beneficial winding up of it.
2. This application has been filed by the Commissioner of Income Tax (Recovery), New Delhi for grant of the leave of the Court against 'the Company' for the recovery of Rs. 31,31,620/- in respect of the alleged liability of 'the Company' under the Income Tax Act, 1961, briefly' the Act' for the assessment years 1969-70, 1970-71, 1971-72, 1972-73. According to the application, tax for the assessment year 1969-70 was assessed as Rs. 5,91,935/, for the assessment year 1970-71 as Rs 10,38,374/- and for the assessment year 1971-72 as Rs. 11,94,274/-. Out of this latter amount a sum of Rs. 5,20,722/-had been paid as advance tax and, therefore, only an amount of Rs. 6,73,552/-remains to be paid in respect of assessment year 1971-72. For the assessment year 1972-73 the allegation of the applicant is that 'the Company' upon the basis of the return filed on its behalf is liable to pay a sum of Rs 7,41,375/-. In other words there is no assessment order for the assessment year 1972-73. The applicant has further claimed interest for certain period on the assessment for the years 1969-70 and 1970-71.
3. In the reply filed on behalf of the Official Liquidator various grounds opposing the application have been taken, but at the time of the arguments the learned Counsel for the Official Liquidator limited his arguments on the ground that the application is pre-mature as the stage for the recovery of the amounts mentioned in the application has not yet become ripe. He contended that appeals against the assessment orders for the years 1969-70, 1970-71 and 1971-72 have already been filed and not decided so far and till they are decided the question of recovery of the tax in respect of these years does not arise. In this connection reliance has been placed upon an instruction issued by the Central Board of Direct Taxes (Instruction No. 96 dated 21-8-1969, F. No. 1/6/69-L.T.C C. of C.B.D.T.), The contention raised is that according to Seetion 119 of 'the Act' the instructions issued by the Central Board of Direct Taxes are of binding force and the Income Tax Authorities are under obligation to give effect to such instructions.
4. Mr. Lodha on the other hand has urged that the functions of an Income Tax Authority while dealing under 'the Act' are quasi judicial and, therefore, the instruction such as relied upon by Mr. Mathur cannot have any binding force upon the Income Tax Authority. He has in this connection relied upon a case reported in Raja V.V.V.R.K. Yachendra Kumara Rajah of Venkatagiri v. Income-Tax Officer, A ward, Nellore, and Anr. : [1968]70ITR772(AP) .
5. In order to appreciate the arguments advanced by both the parties it will be profitable to reproduce in veroatim the instruction relied upon by Mr. Mathur:
Minutes of the 8 the meeting of the Informal Consultative Committee held on 13th May,1969--implementation of assurance given--Item 1 (vi).
One of the points that came up for consideration in the 8th meeting of the Informal Consultative Committee was that Income-Tax Assessments were of the arbitrarily pitched at high figures and that the collection of disputed demands as a result thereof was also not stayed inspite of the specific provision in the matter in Section 220(6) of the Income-tax Act, 1961.
2. The then Deputy Prime Minister had observed as under:
Where the income determined on assessment was substantially higher than the returned income say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appears, provided there were no lapses on the part of the assessse.3. The Board desire that the above observations may be brought to the notice of all the Income-tax Officers working under you and the powers of stay of recovery in such cases upto the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/Commissioner of Income-tax.
6. Mr. Mathur appearing for the Official Liquidator has argued that the present case is covered by this instruction and as such the collection of the tax in dispute should be held in abeyance till the decision of the appeals in respect of the assessment years 1989-70, 1970-71 and 1971-72. The filing of the appeals in respect of these three assessment years and the fact that they are pending is not disputed by Mr. Lodha. It is further not the case of the applicant that the facts of the case do not attract this instruction. So the question emerges whether the instruction reproduced above should have been given effect to by the concerning Income Tax Authorities To put in other words whether the recovery of the tax for the said three years can be treated to be in abeyance because of this instruction.
7. The instruction relied upon by Mr. Mathur was issued under Section 119 of 'the Act', the relevant portion of which reads as follows:
119. Instructions to subordinate authorities:
(1) The Baord may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administratian 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 directione 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 direction of the appellate Assistant Commissioner in the exercise of his appellate functions..
The word 'Board' has been defined in Section 2(12) of 'the Act' as follows:
2. Definitions.--In the Act, unless the context otherwise requires:.
(12) 'Board' means the Central Board of Direct Taxes constituted under the Central Board of Revenue Act, 1963;
8. A perusal of Section 119(1) of 'the Act' would show that it has been inserted for the proper administration of 'the Act' and the phrase 'proper administration of the Act' certainly includes the matters in regard to assessment and recovery of the tax as well. The section clearly lays down that the instructions issued are to be observed and followed by the Income Tax Authorities to whom such instructions are issued and all other persons employed in the execution of this Act.
9. As to the binding force of such instructions the question came before their Lordships of the Supreme Court in the case reported in Navnitlal C. Javeri v. K.K. Sen, Appellate Assistant Commissioner of Income-Tax, Bombay : [1965]56ITR198(SC) . It will be useful to quote in verbatim the observations of their Lordships in his respect:
There is another material circumstance which cannot be ignored. It appears that when these amendments were introduced in Parliament, the Hon'ble Minister for Revenue and Civil Expenditure gave an assurance that outstanding loans and advances which are otherwise liable to be taxed as dividends in the assessment year 1955-56 will not be subjected to tax if it is shown that they had been genuinely refunded to the respective companies before the 30th June, 1955, It was realised by the Government that unless such a step was taken, the operation of Section 12(15) would lead to extreme hardship, because it would have covered the aggregate of all outstanding loans of past years and that may have imposed an unreasonably high liability on the respective shareholders to whom the loans might have been advanced. In order that the assurance given by the Minister in Parliament should be carried out, a circular (No. 20 (XXI-6)/55) was issued by the Central Board of Revenue on the 10th May, 1956. 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.
10. This was a case under the Income Tax Act, 1922. As such Section 5 (8) of that Act has been referred to. Suffice it to say that provisions of Section 119(1) of the present Act more or less correspond to the provisions of Section 5(8) of the Old Act of 1922. In the present case also the instruction relied upon by Mr. Mathur is based upon the assurance given in Parliament by the then Deputy Prime Minister. Thus according to the Supreme Court authority (2) the instructions under Section 119 of 'the Act' have binding force. This view was followed in Dr. T.P. Kapadia v. CIT, Mysore : [1973]87ITR511(KAR)
11. The authority (1) relied upon by Mr. Lodha is, in my opinion, of no help to him, because in the first place the letter relied upon in that case could not take the phase of instruction or direction and in the second, place that letter was against proviso (a) to Section 119(1) of 'the Act'. It interfered with the power of Income Tax Authority in the matter of assessment of tax and as such the concerned authority was not bound to to follow it.
12. So far as the quasi judicial and judicial functions of the Income Tax Authorities in regard to assessment of tax and hearing of appeals are concerned, suffice it to say that they have been safe guarded under provisos (a) and (b) of Section 119(1) of 'ther Act'. In other words instructions which go against these provisos have no legal effect The instruction relied upon by Mr. Mathur cannot be said to be against provisos (a), and (b) of Section 119(1) of 'the Act'. It is regarding recovery of tax only and not regarding us assessment. It does not in any way fetter the powers of Income Tax Authority inregard to the assessment of tax; nor does it many way interfere with the discretion of the Appellate Assistant, Commissioner in disposing of the appeals against assessment orders. To put in other words this intruction has, in my opinion, nothing to do with the judicial or quasi-judicial functions of the concerned Income Tax Authorities.
13. In case an assesses has preferred an appeal under Section 246 of 'the Act', the Income Tax Authority as long as such appeal remains undisposed of has discretion to treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired. Of course in such cases he any impose such conditions as he may think fit in the circumstances of the case (vide Section 220(6) of 'the Act') Instruction No. 96 gives more relief to an assessee who has preferred an appeal in comparison to the provisions of Sub-section (6) of Section 220 of 'the Act', if his case comes within four corners of the instruction The recovery in such a case is held in abeyance till the disposal of the appeal. It is to be noted that the relief given according to this instruction is limited to the disposal of the first appeal only and not thereafter. I am, therefore, of the view that the instruction in question has binding force upon the concerned Income Tax Authorities and, till the disposal of the appeals pending before the Appellate Assistant Commissioner in respect of assessment years 1969-70, 1970-71 and 1971-72 the recovery of the tax in respect of the same years must be taken to be in abeyance.
14. As regards the amount for the year 1972-73 the case having not been assessed as yet, by the Income Tax Officer, cannot be said to have become due and payable. As such the question of grant of leave under Section 246 of the Indian Companies Act 1956 in respect of it does not arise.
15. In the light of all what has been said above, the objection raised on behalf of the Official Liquidator prevails and the present application under Section 446 of the Indian Companies Act, 1956 being premature is, rejected. The Official Liquidator will get his costs from the applicant.