1981 (3) TMI 65 - HC - Income Tax

Summary

Issues:
1. Interpretation of sub-section (4)(c) of s. 264 of the Income Tax Act, 1961.
2. Whether the petitioner was denied an opportunity of hearing and if it affected the jurisdiction of the Commissioner.
3. Conflict between judicial pronouncements and circular instructions issued by the CBDT regarding the interpretation of s. 264 of the Act.

Detailed Analysis:
1. The judgment addresses the interpretation of sub-section (4)(c) of s. 264 of the Income Tax Act, 1961. The petitioner, Hindustan Aeronautics Limited, filed a revision application before the Commissioner of Income-tax against the order of the AAC. The Commissioner dismissed the revision petition citing sub-s. (4)(c) of s. 264 and a ruling of the Kerala High Court. The petitioner contended that the Kerala High Court's decision did not correctly interpret the law and argued that the Commissioner should have entertained the revision application. The judge noted that the Kerala High Court's decision did not consider all aspects of the Act and disagreed with its interpretation, indicating a conflict in judicial opinions.

2. The petitioner also claimed that they were denied an opportunity of hearing on a specific date, which could have allowed them to present circular instructions of the CBDT to the Commissioner. The circular clarified that the Commissioner's jurisdiction to entertain a revision petition is not barred if the department files an appeal before the Tribunal. The judge emphasized that the Commissioner should have considered the circular instructions and entertained the revision application, regardless of the Kerala High Court's ruling. The failure to do so was seen as a lack of exercising jurisdiction, leading to the setting aside of the impugned order.

3. The judgment highlighted the conflict between judicial pronouncements and the circular instructions issued by the CBDT regarding the interpretation of s. 264 of the Act. The judge noted that while High Courts are not bound by government agency views, the Commissioner, as a subordinate authority, should have followed the circular instructions. The judge concluded that the Commissioner's failure to consider the circular instructions and exercise jurisdiction appropriately led to setting aside the order and remitting the matter back to the Commissioner for proper consideration and disposal in accordance with the law.