2000 (4) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the assessment order dated March 31, 1999.
2. Applicability and interpretation of Circular No. 549, para. 5.12, dated October 31, 1989, issued by the CBDT.
3. Jurisdiction and independence of the Assessing Officer.
4. Availability and adequacy of alternative remedies.

Summary:

1. Validity of the Assessment Order:
The petitioner, a public limited company, challenged the assessment order dated March 31, 1999, wherein the Assessing Officer determined the total income at Rs. 2,11,81,620 but assessed it at Rs. 5,13,86,320 based on Circular No. 549, para. 5.12. The petitioner sought a writ of certiorari to quash the assessment order and a writ of mandamus for a refund of Rs. 1,69,80,360 with interest.

2. Applicability and Interpretation of Circular No. 549:
The Assessing Officer relied on Circular No. 549, which states that in scrutiny cases u/s 143(3), the assessed income cannot be lower than the returned income. This circular was issued u/s 119 of the Income-tax Act, 1961, which allows the CBDT to issue instructions for the proper administration of the Act but prohibits directions on specific assessments.

3. Jurisdiction and Independence of the Assessing Officer:
The court emphasized that the Assessing Officer must exercise quasi-judicial functions independently and not be influenced by external instructions. The reliance on Circular No. 549 was deemed to undermine the officer's discretion, rendering the assessment order invalid. The court cited precedents where administrative instructions should not control quasi-judicial decisions (e.g., Commissioner of Police v. Gordhandas Bhanji, AIR 1952 SC 16).

4. Availability and Adequacy of Alternative Remedies:
The petitioner argued that the appeal process was ineffective due to the binding nature of the CBDT circular on appellate authorities. The court agreed, noting that the appeal would not cure the defect of the assessment order being influenced by the circular. The court referenced several cases supporting the principle that writs can be issued when statutory remedies are inadequate or when the authority acts without jurisdiction (e.g., Calcutta Discount Co. Ltd. v. ITO, AIR 1961 SC 372).

Conclusion:
The court quashed the portion of the assessment order influenced by Circular No. 549 and directed the Assessing Officer to reassess the income independently within one month. The court held that the Assessing Officer's reliance on the circular was improper, and the statutory remedy of appeal was inadequate in this case.