2004 (2) TMI 274 - AT - Income Tax

Appellate Tribunal - Binding effect on instructions issued by the Board - Whether, the Tribunal committed a mistake u/s 254(2) of the Income-tax Act in dismissing the appeal of the Revenue in the light of Circulars of the Board? - HELD THAT - The only restriction imposed on the powers of the Board is that those should not be prejudicial to assessee. Here also the Board may if of the opinion that it is necessary in the public interest to do so, publish and circulate such instructions. Therefore, it is not in all cases that instructions/circulars issued by the Board under section 119(2) are published by the Board. Thus, only the difference between sub-section (1) and sub-section (2) of section 119 is that while sub-section (1) deals with the general instructions and directions, sub-section (2) is more specific with reference to particular class of income or class of cases. But we are not inclined to agree with the view canvassed by the learned DR that Instructions issued under subsection (1) of section 119 are more in the nature of administrative instructions, and, therefore, are not binding on the authorities because section itself mandates that such instructions shall be followed by the filed authorities. Therefore, these are binding in nature. Nowhere section 119 provides any exception to Income-tax authorities not to follow such instructions except in a case where such instructions interfere with the discretion of Commissioner (Appeals) or with the jurisdiction and power of particular Income-tax authority in a particular case. Admittedly, instructions issued by the CBDT prescribing monetary limit for filing the appeals before the Tribunal, High Court or Supreme Court arc not in nature which could interfere with the discretion of CIT(A) or interfere with the power and jurisdiction of Income-tax authorities to complete the assessment order to dispose of a particular matter in a particular case in a particular manner. Therefore, these instructions are binding on Income-tax authorities. In the case of Union of India v. Azadi Bachao Andolan 2003 (10) TMI 5 - SUPREME COURT the Hon'ble Supreme Court has held that a notification issued by the Central Government u/s 90 for implementation of the terms of Double Taxation Avoidance Agreement, the provisions of sub-section (2) of section 90 comes into operation and an assessee who is covered by the provisions of the Double Taxation Avoidance Agreement is entitled to seek benefits thereunder, even if the provisions of the Double Taxation Avoidance Agreement are inconsistent with those of the Act. The Apex Court has referred to their several earlier judgments and has held that instructions issued by the Board u/s 119 of the Income-tax Act, 1961 are binding on the income-tax authorities. Thus, it does not leave any doubt in our mind that both instructions issued u/s 119(1) and circulars issued by the Board u/s 119(2) have equal force and are binding on all the Income-tax Authorities. We are of the considered opinion that instructions of the Board including those prescribing monetary limit for filing the appeal before the various forums are binding on the Income-tax authorities. The law does not draw any distinction between instructions/circulars issued under sections 119(1) and 119(2) of the Income-tax Act. Both are binding on the Departmental Officers. We hold accordingly. Therefore, this question is decided accordingly. Whether the instructions of the Board are binding or not and whether the appeals could be dismissed by relying on Board's Instruction No. 1979, dated 27th March, 2000 due to smallness of tax effect or not and also whether the judgment of the Hon'ble jurisdictional Punjab Haryana High Court in the case of Rani Paliwal 2003 (10) TMI 18 - PUNJAB AND HARYANA HIGH COURT was only an observation in the nature of passing remarks or was binding in nature are highly debatable, contentious and which could be established only through long-drawn process of reasoning, arguments and debate. Therefore, the issue would fall outside the purview of powers of the Tribunal vested u/s 254(2) of the Income tax. Exercise of powers by the Tribunal u/s 254(2) in allowing such applications would amount to review of the orders which is not permitted under the law. Therefore, these applications deserve to be rejected on this count. Thus, we are of the considered opinion that the Tribunal did not commit any error in dismissing the appeals by relying on Instruction No. 1979, dated 27th March, 2000 of the Central Board of Direct Taxes and such issues fall outside the scope of rectification mentioned u/s 254(2) of the Income-tax Act, 1961. These Miscellaneous Applications filed by the Revenue will now go to the Regular Bench for final disposal for a limited purpose whether the tax effect in these cases exceeds the prescribed monetary limit fixed by the Board.

Summary

Issues Involved:
1. Whether instructions issued by the CBDT are binding on the Income-tax Authorities.
2. Whether the observations made by the Punjab & Haryana High Court in the case of Rani Paliwal form part of ratio decidendi and are binding.
3. Whether the mistakes pointed out by the Revenue in the Miscellaneous Applications could be rectified by the Tribunal u/s 254(2) of the Income-tax Act.

Summary:

1. Binding Nature of CBDT Instructions:
The Tribunal examined whether instructions issued by the CBDT are binding on the Income-tax Authorities. It was concluded that instructions issued under both sub-sections (1) and (2) of section 119 of the Income-tax Act are binding on the Income-tax authorities. The Tribunal referred to several judgments, including those of the Supreme Court, which established that CBDT instructions have statutory force and must be followed by the field officers. The Tribunal emphasized that these instructions aim to ensure uniformity and prevent arbitrariness in the administration of tax laws.

2. Observations in Rani Paliwal Case:
The Tribunal analyzed whether the observations made by the Punjab & Haryana High Court in the case of Rani Paliwal form part of the ratio decidendi and are binding. It was noted that the High Court dismissed the appeal on the ground that no substantial question of law was involved and the plea regarding tax effect was not taken before the Tribunal. The Tribunal concluded that the observations made by the High Court regarding the binding nature of CBDT instructions were passing remarks and not part of the ratio decidendi. Therefore, these observations are not binding on the Tribunal.

3. Rectification u/s 254(2):
The Tribunal considered whether the mistakes pointed out by the Revenue in the Miscellaneous Applications could be rectified u/s 254(2) of the Income-tax Act. It was held that the Tribunal has limited powers under section 254(2) to rectify mistakes that are obvious, patent, and glaring from the records. Issues that involve prolonged discussions, arguments, or debatable points of law fall outside the purview of section 254(2). The Tribunal concluded that the view taken by the ITAT Amritsar Bench, which relied on CBDT Instruction No. 1979, was a possible view supported by several judgments. Therefore, the issues raised by the Revenue in the Miscellaneous Applications could not be rectified under section 254(2) as they involved debatable and contentious points of law.

Conclusion:
The Tribunal held that the instructions issued by the CBDT are binding on the Income-tax authorities, the observations made by the Punjab & Haryana High Court in the case of Rani Paliwal were passing remarks and not binding, and the issues raised by the Revenue in the Miscellaneous Applications could not be rectified under section 254(2) of the Income-tax Act. The Miscellaneous Applications filed by the Revenue were directed to the Regular Bench for final disposal to determine whether the tax effect in these cases exceeds the prescribed monetary limit fixed by the Board.