Tc/1278/1988 Of Shri G D Gopal v. The Commr. Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS. DATED: 03/07/2002 CORAM THE HONOURABLE MR.JUSTICE V.S.SIRPURKARANDTHE HONOURABLE MR.JUSTICE N.V.BALASUBRAMANIAN. T.C. No.1277 of 1988 and T.C.No. 1278 of 1988. Shri G.D. Gopal,Coimbatore. ...Applicantin both T.Cs. .vs. The Commissioner of Income-tax,Coimbatore....Respondentin both T.Cs. Tax Cases filed under Section 256(1) of Income Tax Act 1961against the order of the Income Tax Appellate Tribunal, Madras in I.T.A. Nos.1237 and 1238/Mds/1985. !For Applicant inboth T.Cs. ..... Mr.P.P.S.Janardhana Raja. ^For Respondent inboth T.Cs. ..... Mr.T.C.A.RamanujamSenior Standing Counsel(Income Tax). :JUDGMENT ( Judgment of the Court was delivered byV.S.SIRPURKAR,J). The common question referred to us in these two T.Cs is asfollows:- "Whether on the facts and in the circumstances of the case,the Appellate Tribunal was right in law in holding that the excercise ofpowers by the Commissioner of Income Tax under Section 263 of the Income TaxAct,1961 for the assessment years 1980-81 and 1981-82 was within the period oflimitation? 2.The following factual circumstances would highlight the controversy. It will be seen that Section 263 of the Income Tax provided alimitation of 2 years from the date of the passing of the order for revisingthat order under that Section. The amendment which was made by Section 47 ofthe Taxation Laws (Amendment) Act 1984 provides now that the said limitationwould stand extended and the limitation of the two years would start not fromthe date of the passing of the orders but from the last date of the relevantfinancial year. The amendment is to be found in the following words:The amended Section 263(2) runs as under:- "No order shall be made under Sub Section 1 after the expiryof two years from the end of financial year (emphasis supplied) in which theorder sought to be revised was passed.The emphasized words would clearlysuggest that even if the order which is sought to be revised under the Sectionis passed earlier, the limitation of 2 years however would start from the endof the relevant financial year and in that sense the limitation would standextended to that effect". 3.The assessee in these cases had made a voluntary disclosure of Rs.1,00,000/- as representing the income for 1974-75 and earlier years,being the value of some items of steel and paints. While making theassessments for the relevant two years the Income Tax Officer had not includedin assessee's total income any portion of the income arisen on sale of somegoods. Therefore, the Commissioner of Income Tax after going through therecords considering that the action of the Income Tax Officer in not includingthe sale proceeds of the items of steel and paints was erroneous, sought touse his powers under Section 2 63 by revising the order. 4. When the revision was taken up, it was pleaded before the Commissioner that the action was barred by limitation as the period of twoyears allowed under the Income Tax Act had already expired. It was pointedout that since the assessments of two years were made on 21.12.1982, theaction under Section 263 of the Act could be taken only upto 21.12.1984,whereas the action in this case was taken in March 1985 . The Commissionernegatived these contentions on limitation and held that by virtue of theTaxation Laws Amendment Act 1984, the period of limitation stood extended uptothe expiry of two years from the end of financial year in which the assessmentorder was passed, which order was sought to be revised. He has found onmerits against the assessee in his order. But we are not concerned with themerits in these cases as the learned counsel for the assessee has restrictedhis argument only to the limitation aspect. The matter was taken up beforethe Tribunal and the Tribunal by its order impugned came to the conclusionthat the exercise and the action under Section 263 of the Act ordered by theCommissioner were in order and could not be said to be beyond the limitation.It is only on the basis of this that ultimately the question came to bereferred to us. 5.Mr.P.P.S.Janardhana Raja, the learned counsel for the assessee has heavily relied upon a circular No. 402 dated 1.11.1984 issued bythe CBDT, which is to the following effect:- "Income Tax Circulars Subject:- Taxation Laws (Amendment) Act,1984-Amendmentof S.263 of the I.T.Act, 1961-Clarificationregarding. As a consequence of the amendment of Section 263 of the IncomeTax Act,1961, by Section 47 of the Taxation Laws (Amendment) Act, 1984, thelimitation for passing an order under Section 263 will, in view of generalprinciples of interpretation of statutes, stand extended in cases where theperiod of limitation originally laid down in that section had not expiredbefore 1st October,1984. However, with a view to avoiding controversy andlitigation in the matter, it is desirable that orders under Section 263 of theIncome Tax Act are passed, as far as possible, within two years of the date ofthe order sought to be revised in cases where the order sought to be revisedwas passed before 1st October, 1984. (Sd.) Kalyan ChandUnder SecretaryCentral Board of Direct Taxes. (F.No.279/146/84-ITJ). (151 I.T.R.(STATUTES) Page 46)". The learned counsel very fairly says that since the amendment made to Section263 is of procedural nature, ordinarily it would be retrospective in nature.The learned counsel however further carries his argument suggesting thatbecause of the circular, which we have quoted above, the concerned authoritywas bound to exercise his powers within two years from the passing of theorder. The learned counsel points out that in the circular the periodconsidered is upto 1.10.1984 in the sense that in respect of those cases wherethe period of limitation had not expired before 1.10.1984, it would bedesirable for the Officers to initiate the action under Section 263 of the Actwithin two years of the date. The learned counsel, therefore, points out thatin present case the concerned orders were passed in December 1982. He,therefore, contends that as per this circular, the action under Section 263 ofdeciding to revise the orders should have been taken before two years of thepassing of the orders and not in consonance with the amendment made, i.e., theaction should not have been taken beyond the period of 21st December 1984,which has happened in this case. 6.The learned counsel contends that even when the amendmenthad come already and even if it is presumed that the amendment is of aretrospective nature yet, because of the circular, it would be incumbent uponthe Department to initiate action within two years as per the old unamendedlaw and not as per the amended law. The learned counsel therefore heavilyrelies on the circular. He says further that the circular has beenconsistently followed by the Department in the sense that under such caseswhere the limitation had not expired before 1st October 1984, the Departmenthas been initiating the actions only within two years of the passing of the orders and not in terms of the amendment of Section 263 of the Act. For thisthe learned counsel relies heavily on the judgment of this court in T.C.Nos.680 to 682 of 1998 (Shri N. Mahalingam, Pollachi .vs. The Commissioner ofIncome Tax, Coimbatore) dated 25.9.2001 - (R.JAYASIMHA BABU AND MRS.A.SUBBULAKSHMY,JJ). It is pointed out that in that judgment there is astatement recorded by the Senior Standing Counsel of the Department. Theparagraph is in the following words:- orders and not in terms of the amendment of Section 263 of the Act. For thisthe learned counsel relies heavily on the judgment of this court in T.C.Nos.680 to 682 of 1998 (Shri N. Mahalingam, Pollachi .vs. The Commissioner ofIncome Tax, Coimbatore) dated 25.9.2001 - (R.JAYASIMHA BABU AND MRS.A.SUBBULAKSHMY,JJ). It is pointed out that in that judgment there is astatement recorded by the Senior Standing Counsel of the Department. Theparagraph is in the following words:- "The learned Senior Standing Counsel for the Department hasinformed us that the Department has consistently followed the circular. Noreason has been stated as to why that circular was dis-regarded in the instantcase. The assessee herein is as much entitled to the benefit of the circularas any other assessee similarly placed. That circular being one which isbeneficial to the assessee, is also binding on the Department and the standtaken by the Department inconsistent with the circular cannot be sustained".7. Mr.P.P.S.Janardhanaraja has also very heavily relied onthe judgment of the Supreme Court in "U.CO., BANK .VS. COMMISSIONER OF INCOMETAX" (S.C) (237 INCOME TAX REPORTS 889) suggesting therein that theDepartmental circulars, more particularly issued under Section 119 are bindingagainst the Department. 8. As against this, the learned Senior Standing Counsel points out that factually the situation is not correct. He points out that itwas not a Departmental practice to ignore the amendment and to take up theaction of revision within two years of the orders if the limitation had notexpired by 1.10.1984. The learned Senior Standing Counsel has filed anaffidavit of one M.L.Kuppusamy, The Commissioner of Income Tax I,Coimbatore.In that affidavit firstly it is suggested that the action initiated in thiscase more particularly in March 1985 is well within the time in terms ofamended Section 263(2) of the Act. It is then asserted that it would not becorrect to state that the circular is generally followed by the DepartmentalOfficer. The reason given is that in spite of the best efforts of theDepartment the cases could arise where the action may not have been possibleto be completed within the period of 2 years from the date of assessment ordersought to be revised and it is then asserted that in such cases the Departmenttakes recourse to the amended provision of law. It is then submitted that thecircular is followed wherever it is so possible to pass the orders by nottaking the advantage of the extended period of limitation. But where it isnot possible, the recourse has to be taken to the amended provision of law andthe extended period of limitation thereunder. 9. The learned Senior Standing Counsel therefore asserts that the order of the Tribunal wherein the action taken under Section 263 has beenheld to be within time is a correct order and that the reference should beanswered against the assessee. The learned Senior Standing Counsel has reliedon certain cases and more particularly the decision reported in "COMMISSIONEROF INCOME TAX .VS. MRS.MANJULA SOOD" (22 7 I.T.R.873), " COMMISSIONER OFINCOME TAX .VS. ANJUM M.H. GHASWALA AND OTHERS" (252 I.T.R. 1) and "SHIVAKANT JHA .VS. UNION OF INDIA" (Delhi) (Vol.122 Taxman-Tax Reports 952). Wewould deal with these cases in the later part of our judgment. 10.First we will have to take into consideration the contention raised by the learned counsel that we are bound by the judgmentpassed in Mahalingam's case cited supra and that we must adopt the samecourse. Considering the law of precedents we are unable to accept this 10.First we will have to take into consideration the contention raised by the learned counsel that we are bound by the judgmentpassed in Mahalingam's case cited supra and that we must adopt the samecourse. Considering the law of precedents we are unable to accept this contention. It is trite position in law that the judgment is binding only forthe question of law decided by it. There can be no doubt that any judgment ofa co-ordinate Bench would be binding on us, but there would be a rider thatsuch judgment must have decided a certain position of law or must have taken acertain view of law. In our opinion the afore mentioned judgment cannot besaid to have taken any particular view of law nor can it be said that thejudgment decides anything. In the judgment the learned Judges have reliedupon a statement made that the circular is normally followed in the sense thatthe Department initiates the action of revision within one year of passing theorder. Relying on that statement the learned Judges have taken a particularcourse, suggesting that if that was the practice of the Department, then therewould be no question of denying the benefits to the assessee. The judgmenttherefore proceeds on the factual circumstances that statement at the Bar wasavailable to the learned Judges that the circular is normally followed in thesense that in spite of the circular, the Department adheres to the time limitunder the unamended provision of Section 263 of the Act. Unfortunately, suchfactual circumstance is not available to us in view of a clear cut affidavitmade on behalf of the Department that it is not in all the cases that thecircular is followed in the sense that the action for revision is orderedwithin two years of the passing of the orders to be revised. Therefore, thereis a definite difference on the facts. Again it might have been the practicethen to follow the circular but there is nothing on record that it is thepractice even now or when the revision was initiated in this case. On theother hand, the practice seems to be otherwise. Therefore,even if aparticular course was taken earlier it does not become binding on us. It isagain not clear as to what is meant by "following the circular" . If thecircular is to be followed then also it cannot divest the revisional authorityof his power and further if such power is used, such exercise cannot becomeillegal. 11.Therefore,we would view the matter from the other angle,i.e., the language of the circular. A plain reading of the circularclearly shows that the Department was aware of the fact that because of theamendment to Section 263(2) the limitation stood extended to the last date ofthe financial year and that such amendment being in the nature of proceduralamendment was applicable to the pending cases also. After asserting thatposition the circular however cautions or advises the Officers of theDepartment to initiate the actions as far as possible within two years of theorders where the limitation has not expired on 1.10.1984. The date isextremely significant because the circular itself has come on 1.11.1984. Thecircular merely states that in such cases where the limitation had not expiredthe Officers instead of waiting for the extended period, i.e., upto March oras the case may be the last date of the financial year, would avoid the legalcontroversy and the litigation by initiating the actions within two years ofthe date of the order. Again the circular mentions very specifically that asfar as possible the orders would be passed in terms of the old amended law,i.e., within two years from the date of the passing of the orders forrevision. The language of the circular therefore is clear to suggest thatthis recourse has to be taken where it is possible. It may be that in thiscase it was not possible for the Commissioner to pass the orders within thetime as per the amended Section, i.e., within two years of the passing of theorder. In our opinion the circular is extremely clear. Therefore, even if we accept the statement that the circular was generally followed, there could bethe cases where it was not possible for the Officers to follow the circular.When we again go back to the judgment in Mahalingam's case cited supra, thestatement made was that the Department has consistently followed the circular.In our view, even if the circular is followed, it was as far as possiblebecause those are the words reflected in the circular itself. There wouldstill be the cases where the circular could not have been followed "as far aspossible". This appears to be one such case. Therefore, we are of theopinion that the Tribunal was right in holding that the orders were passedwithin time. This takes to another task of considering the other argumentbased on the case law. 12.The learned counsel for the assessee then says that thiswould mean a differential treatment to the two assessees while one assesseewould get the advantage of the circular, the another would be deprived of suchadvantage. We do not agree with the argument for the simple reason that weare not having the advantage of the facts as to what were the circumstancesprevailing for the then learned senior counsel to make a statement that wasmade by the learned counsel in Mahalingam's case, cited supra. The learnedSenior Standing Counsel before us asserts that there is a factual circumstanceavailable before us to the effect that the concerned Officer has sworn anaffidavit that wherever it is impossible for them to adhere to the earliertime limit under the unamended law, they take recourse to the extendedlimitation under the amended provision of Section 263(2) of the Act. In viewof that we do not think that this would be the case of any discriminationAfter all the facts may differ and can differ and in this case they do appearto be different. In this view, we do not want to take any stock of thejudgments, which have been referred by the learned counsel for the Departemntas we find that on the basis of the language of the circular itself, theTribunal has passed a correct order in law. 13.In that view, we answer the references against the assesseeand in favour of the Revenue. No costs. (V.S.S.,J) (N.V.B.,J)Index:yes. 3.7.2002.Website: yes. nyr Copy to: 1. The Assistant Registrar,Income Tax Appellate TribunalII Floor, Beasant Nagar,Chennai. 2. The Secretary, Central Boardof Revenue, New Delhi. 3. The Income Tax Officer,Company Circle V, Coimbatore. 4. The Commissioner of Income TaxCoimbatore. V.S.SIRPURKAR,JandN.V.BALASUBRAMANIAN,J T.C.Nos.1277 & 1278 of 1988�