| SooperKanoon Citation | sooperkanoon.com/72286 |
| Court | Income Tax Appellate Tribunal ITAT Agra |
| Decided On | Oct-04-2002 |
| Judge | N Karhail, M Gusia |
| Reported in | (2003)85ITD68Agra |
| Appellant | Assistant Commissioner of Income |
| Respondent | JaIn Motors and Tractors |
2. During the course of hearing the learned counsel for the assessee at the outset has taken a preliminary objection about the maintainability of the appeal filed by the Revenue on the ground that as per Instruction No. 1979 dt: 27th March, 2000, issued by Central Board of Direct Tax (CBDT), the appeal is not required to be filed by Revenue before the Tribunal in cases where the tax effect of the appeal does not exceed Rs. 1 lakh. Since the Instruction issued by CBDT are binding on all the Revenue authorities, the appeal filed by the Revenue contrary to the said instructions is not legally maintainable, therefore liable to be dismissed. In support thereof the learned counsel has relied upon the decision of Tribunal Chandigarh Bench in the case of ITO v. Dharmvir (2002) 253 ITR 1 (AT) wherein the Tribunal has held that the Instructions are not issued by the CBDT in a light-hearted manner. These instructions are issued after a great deal of deliberation and discussion where every aspect of the matter, more particularly the question of loss of revenue is examined in depth.
Every officer is enjoined with, the duty to advance the policies laid down by the CBDT and see that these are not defeated. The Instructions are also aimed at reducing arrears in Courts and Tribunals. The CBDT, in the Circular dt. 27th March, 2000, had asked all officers of the IT Department under their control not to file appeals before the Tribunal in cases where the tax effect involved in appeal did not, exceed Rs. 1 lakh. These Instructions were binding on all Departmental authorities and they could not be bypassed and treated as of no consequence on the pretext that these were private only and the authorities were bound to follow, comply with and see that the policies laid down by the Board achieve their objectives. Thus, the Tribunal dismissed the appeals filed by the Revenue on this preliminary ground without going into the merits of the grounds raised before it.
3. The learned counsel has also relied upon the decision of Bombay High Court in the case of CIT v. Cameo Colour Co. (2002) 254 ITR 565 (Bom) wherein it has been held that Circular No. 279/126/98-ITJ dt. 27th March, 2000, reflected the policy decision taken by the CBDT not to raise question of law where the tax effect is less than the amount prescribed, in the instruction' issued by the CBDT with a view to reduce litigation before the High Courts. The circular is binding on Revenue. An appeal contrary to the instructions issued in circular will not be considered by the Courts.
4. On the other hand, the learned Departmental Representative has submitted that the Instruction No. 1979 as referred to above in the decision of Chandigarh Bench and Bombay High Court is an administrative order issued for the guidance of the Departmental officers. The procedure for filing the appeal is given in the IT Act and Rules on the basis of which appeals are being filed , with appellate authorities.
The appeals are filed under statutory provisions of the IT Act and the Act provides for right to file appeal by the aggrieved party. These .
Instructions are meant for internal use of the officers of IT Department and are not a public circular. The learned Departmental Representative has also referred to the decision of the Allahabad High Court in the case of Janta Metal Works v. ITO (1990) 186 ITR 458 (All) wherein it has been held that the instructions are meant for guidance of officers, They cannot and do not create any legal right in the assessee. The learned Departmental Representative has further submitted that the filing of appeal in spite of Board's Instruction is an internal matter of the Department for which the Board is empowered to take any action as it deems fit. The learned Departmental Representative has further pointed out that these instructions are not 'Circulars' and have not been issued to provide any benefit of tax relief to the assessee. These instructions are not in the nature of 'benevolent circulars' for the benefit of the assessee. These instructions are for the guidance of the IT Department.
5. The learned Departmental Representative has further argued that these instructions and guidelines cannot override the specific provisions of the IT Act. A reference in this connection has been made to the decision of Madras High Court in the case of Madura Chit and Investments (P) Ltd. and Anr. v. ITO (1994) 208 ITR 228 (Mad), Reiter Machine Works Ltd. v. CIT(Mad) and Kerala Financial Corp. v. CIT (1994) 210 ITR 129 (SC). Thus, the learned Departmental Representative has contended that the preliminary objection raised by the learned counsel for the assessee about the maintainability of the appeal on the basis of the said circular is not legally sustainable. In support thereof the learned Departmental Representative has relied upon the decision of Tribunal Delhi 'B' Bench in the case of ITO v. Sri Raj Kumar, Prop. Raj Cloth House [ITA No. 4763/D/96 (asst. yr. 1989-90)], wherein the Tribunal has upheld the maintainability of appeal filed by the Revenue.' 6. The learned Departmental Representative in the alternative has also submitted that since the appeal has been filed in 1994, Instruction No.1903 effective from 1st Nov., 1992 would be relevant for consideration and not the instruction relied up by the learned counsel. The learned Departmental Representative has further submitted that this is an appeal filed against the cancellation of penalty imposed under Section 271(1)(c) of the Act. Hence, the monetary limit fixed for not filing the appeal would not be applicable in the instant case.
7. We have heard the parties and have perused the records of the case and the case law relied upon by the respective parties. Section 119 of IT Act relates to the powers of CBDT to issue instructions to subordinate authorities. Under the said section, Board has been empowered to issue directions to other IT authorities for the proper administration of the Act and such authorities and all other persons employed in the execution of the Act will be bound to observe and follow the orders, instructions and directions of the Board. It has, however, been made clear that the orders, instructions or directions of the Board shall not be such as to require any IT authority to make a particular assessment, or to dispose of a particular case in a particular manner. It has further been provided that by such orders or instructions Board should not interfere with the discretion of the Dy.
CIT(A) or the CIT(A) in the exercise of his appellate function. Under Sub-section (2) of Section 119, the Board has been specifically empowered to issue administrative directions and instructions for the purpose of proper and efficient management of the work of assessment and collection of revenue. Such directions or instructions may be by way of general or special orders in respect of any class of incomes or class of cases. Such orders may set forth the guidelines, principles or procedures to be followed by other IT authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties. Such orders may be even in relaxation of any of the provisions of Sections 139, 143, 144, 157, 148, 154, 155, 201(1)(a), 210, 211, 234A, 234B, 234C, 271 and 273. The Board has also been empowered under Section 119(2)(b) to authorise the CIT or the ITO to admit such application or claim for exemption deduction, refund or any other relief under the Act even after the expiry of the time-limit and to deal with it on merits in accordance with law, 8. Under Section 253(2) of the Act, the CIT has been empowered to direct the AO to file appeal before the Tribunal against any order passed by Dy. CITCA)/CIT(A) to the Appellate Tribunal.
9. The basic question arise for consideration is that whether the instruction No. 1979 (supra) are statutory instruction or are merely administrative instruction for the internal use of IT authorities; In the case of CIT v. Anjum M.H. Ghaswala 166 Taxation 586 (SC), the Hon'ble Supreme Court has held thus: "It is true that by this press release the Board had interpreted the provisions of the Act in a particular manner. Be that as if may, we would like to make if clear that every clarificatory note or press release issued by the Board does not have the statutory force like the circulars issued by the Board under Section 119 of the Act. It is only those circulars issued by the Board under the provisions of Section 119 of the Act will have the statutory force and will be binding on every IT authorities. Therefore, the press release relied upon by Shri Ramamurti not being a circular issued under Section 119 of the Act will not be of any assistance to the respondents in support of their contentions." 10. Further, the Allahabad High Court in Janata Metal Works v. ITO (supra) has held that instructions are meant for guidance of officers and do not create any legal rights or contain the statutory power and cannot be enforced through Court.
11. Similar observations have been made by the Delhi High Court in the case of Geep Industrial Syndicate Ltd. v. CBDT (1987) 166 ITR 88 (Del).
Thus, it could be said that it is only those circulars or instructions issued by the Board under the provision of Section 119 of the Act will have statutory force and will be binding on every IT authorities.
Delegated legislation can be issued only when the authority concerned has statutory power to do so. But statutory power is not necessary for issuing directions/instructions. The basic distinguishing feature between a direction and delegated legislation is that while delegated legislation is binding on both the administration and the individual and is enforceable through a Court of law at the instance of either the individual or the administration, whereas an administrative direction generally speaking, is not so binding and enforceable. There may be an administrative remedy available to the individual concerned for enforcing such directions.
12. A statute may delegate to the administration power to promulgate delegated legislation. But the administration yet seek to issue an instrument under its general power rather than under statutory power.
Such an instrument will amount to a direction and not the delegated legislation. But the problem would be as to how to ascertain whether the Government instrument in question has been issued under general administrative power or statutory rule-making power when it does not indicate the source of power under which it is being issued. If it says that it is being issued under statutory power, then it is easy to identify it as a rule/statutory direction. But when it does not indicate its source then the problem of identification of its source becomes complicated. There appears to be no definite test to ascertain the nature of a Government instrument in such a situation.I.N. Saxena v. State of M.P. AIR 1967 SC 1264 the, question arose whether a memorandum issued by Government of Madhya Pradesh fixing the age of retirement of civil servants should be characterized as a rule as having been issued under Art, 309, or only a direction as having been issued under the administrative power of Government the Court ruled that it was merely an executive direction arid not a rule on the following consideration : --it was in the form of a letter issued by the Government to the Collectors; --its form (it began with words "that.... The Government have decided") showed that the Government was conveying an executive decision to the Collectors to be followed by them.
14. In V.T. Khanzaode v. Reserve Bank of India, AIR 1982 SC 917, the staff regulation issued by Reserve Bank of India (a statutory body) fixing the basis of seniority of its employees were held to be merely administrative instructions. The Court recognized that bank could issue such regulations under its general regulation-making power under Section 58 of the Reserve Bank of India Act. Such regulation could, however, be made with the previous sanction of the Central Government, and they were required to be laid before each House of Parliament. The Court held that the regulation in question were made not under Section 58 but under administrative power of bank given to it by Section 7(2) of the Act for the reason as under : "Firstly, the regulations were not made with the previous sanction of the Government.
Secondly, while issuing the regulation, the source of power under which they were made, was not mentioned. The Court conceded that failure to do so by itself is not conclusive of the matter, if otherwise, the authority has the power. However, if the common course of manner, in which the power has been exercised establishes that while exercising power under the section, the practice has been to mention the source that would be a relevant factor in determining whether the regulation have statutory force or not. The Court noted that the various other regulation promulgated by the bank did mention the source of power in the recitals. In this context, the absence of such a recital in the case of regulation in question led to the interference that they were not made under Section 58." 15. The reasonings assigned by the Hon'ble Supreme Court in aforesaid cases for ascertaining the nature of instrument of Government can be applied to the Instruction No. 1979 to ascertain as to whether it is statutory in nature or merely an administrative instruction.
16. Perusal of the said circular would not show that the said instruction have been issued by the CBDT in exercise of its powers conferred under Section 119 of IT Act, 1961. The Board while referring to earlier circulars has mentioned that "in supersession of the above instruction, it has now been decided by the Board that the appeals will be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder:". Thus, the forms which is used does not indicate source of power under which it is issued. It merely indicates that the Board was conveying its executive decision to the Chief CITs, Directors General of IT. Further, it is seen that Board has been issuing instruction/ circulars in exercise of its powers conferred under Section 119 of the Act. Some of them has been mentioned at pp.
4306 to 4320 of Chaturvedi and Pithisaria's Book on Income-tax Law (Fifth Edition). Thus it is clear that the Board while exercising its power under Section 119, the practice has been to. mention the source.
However, it may be mentioned that there is no mention of source of power in the recital of the Instruction No. 1979. In the absence of such a recital in the case of the said Circular No. 1979 the inference would be that the same was not issued under Section 119 of the Act.
Thus, the same can be said to be administrative instruction having no statutory force behind it. Therefore, the same cannot be enforced through the Court of law. Even assuming that these instructions are statutory in nature, the same cannot stand the legal scrutiny as no subordination legislation can abrogate or override the provisions of the Act under which they have been framed. What Section 119 has empowered the Board is to issue orders, instruction, or directions for the "proper administration" of the Act or for such other purposes specified in Sub-section (2) of that section. Such an order, instruction or direction cannot override the provision of the Act. That would be destructive of the known principle of law as that would really amount to giving powers to a delegated authority, even to amend the provision of law enacted by Parliament. [Kerala Financial Corporation v. CIT (supra) refer]. It may be seen that under Section 253 both the assessee and CIT have been allowed to, prefer appeal before the Tribunal if they are aggrieved by the order of first appellate authority. Thus the law has specifically authorised the CIT to direct the AO to appeal to the Tribunal against such orders. This is statutory right conferred by the statute on the CIT. Any instruction or direction of CBDT curtailing the said statutory right would, in our view, amount to overriding the provision of the Act. Further under Section 119(2) the Board has been empowered to issue instruction orders for the purpose of proper and efficient management of the work of the assessment and collection of revenue by way of relaxation of any provision of sections mentioned therein. It is seen that the filing of appeal by CIT does not fall in any of the categories for which the Board has been authorised to issue instruction under Section 119. Thus the instruction in question would be beyond the scope of the provision of the Section 119. Therefore, it can be said that the instruction in question are not legally sustainable, being violation of the provision of Act and also beyond the scope of power conferred on the CBDT.17. It may be pertinent to mention that Tribunal Chandigarh in the case of Dhannvii (supra) and Bombay High Court in the case of Cameo Colour Co. (supra) did not examine the question whether Instruction No. 1979 is a circular under Section 119 or merely an internal guideline for guidance of the officers for filing of appeal. It Is well settled that the observations of the Court have to be understood in the light of the questions/issues and the controversy before the Court. It is not desirable and proper to pick out a word and read it as laying down a principle of law divorced from the context of the subject matter of controversy.
18. In view of what has been discussed above, we hold that Instruction No. 1979 being not issued in exercise of power conferred on CBDT under Section 119 have to be held as not statutory instruction but merely administrative instruction for the guidance of the IT authorities.
Thus, the same cannot be enforced through the Court of law. Therefore, we find no force in the preliminary objection raised by the learned counsel for the assessee about the maintainability of the appeal of the Revenue. We, therefore, reject the said preliminary objection.
19. Now we proceed to examine the matter on merits. The effective ground of appeal reads as under : "That the learned CIT(A) has erred in law and on facts in cancelling the penalty of Rs. 16,800 imposed under Section 271(1)(c) irrespective of the fact that the assessee-firm has failed to substantiate his explanation and evidence given in support of the deposits made in the name of partners satisfactorily and hence particulars have been concealed as per provisions of Expln. 1(B) of Section 271(1)(c)." 21. Briefly stated facts are that two of the partners introduced a sum of Rs. 19,500 and Rs.30,000 respectively as part of their share capital in the firm. It was explained before the AO that the amount had been introduced out of their agriculture income. The assessee could not produce evidence in Form 6-R regarding sale of agriculture produce. The CIT(A) admitted the capital introduced to the extent of Rs. 10,000 and confirmed addition of Rs. 15,000 in respect of one of the partners. The capital introduced by the other partner at Rs. 1.9,500 was confirmed as such. The AO while levying the penalty has mentioned that it was explained before him that Shri Arvind Kumar Jain in respect of whom addition of Rs. 19,500 had been confirmed was a regular tax- payer and has shown income from agriculture in his return of income at Rs. 20,500. As regards addition, of Rs. 15,000 confirmed by CIT(A) in the case of other partner Shri Vimal Kumar Modi, it was mentioned that since the CIT(A) has admitted the capital to the extent of Rs. 18,000 only, penalty for concealment is attracted in respect of the remaining amount of Rs. 15,000. However, the explanation of the assessee was found to be unsatisfactory to the AO. Hence, he held that the firm had not produced the correct particulars of his income and thus concealed the income of Rs. 34,500. Accordingly he imposed the penalty of Rs. 16 700 under Section 271(1)(c) of the Act.
22. On appeal before the CIT(A), it has been submitted on behalf of the assessee that during pendency of appeal against the order under Section 143(3) the jurisdiction of the assessee was transferred from Circle-1 to Ward-1, Jhansi, by operation of order of CIT, Agra effective from 1st June, 1992, The assessee filed his objection under Section 124. But the AO. did not forward it to the CIT, Agra and issued a notice of penalty under Section 271(1)(c) putting no date on the same. In spite of his objection against the order under Section 124 the assessee filed evidence and document showing the source of capital introduced by the partners on the basis of information available at the time of framing the assessment. The assessee has also submitted that no penalty can be levied in the case of the assessee where the capital introduced by the partners who arc responsible for explaining the source of money introduced by them and if any addition is called for the same should be in the hands of the partners as the firm's onus for explaining the source of investment stands explained once it is submitted that the money has come out of the sources of the partners. The mere fact that AO has not accepted the explanation furnished is not sufficient ground for levy of penalty. In this regard a reliance has been made to various decisions referred to at p. 3 of CIT(A)'s order. The learned CIT(A) after having considered the submission of the assessee has deleted the penalty as she found the penalty under Section 271(1)(c) has been imposed on the basis that the capital introduced by the partners in the firm could not be explained properly.
23. We have heard the parties and perused the records of the case. As per Expln. 1 to s, 271(1)(c), penalty for concealment can be imposed only if both the conditions, namely the assessee has failed to substantiate his explanation and has also failed to prove its bona fide have been fulfilled. In case any of the two conditions is not fulfilled, no penalty under Section 271(1)(c) is imposable. In other words, even if the assessee was not able to substantiate its explanation but if such explanation was bona fide, no penalty under Section 271(1)(c) is imposed. It is seen that the assessee has failed to substantiate its explanation in respect of the deposits made in the name of partners satisfactorily. However, bona fide of his explanation made in this regard has not been doubted by the Department. In the circumstances, we find no infirmity in the order passed by the CIT(A).
25. The CO filed by the assessee in support of the impugned order thus has become infructuons and the same is accordingly dismissed.