1999 (2) TMI 7 - SC - Income Tax

Applicability of Circular No. 455 - held that Circular No. 455 dated May 16 1986 issued by the Central Board Direct Taxes is applicable to all pending proceedings which have not attained finality under section 269-I of the Act - Full Bench contention that the circular was not applicable to the case on hand as the acquisition proceedings were over by the order of the competent authority passed on March 31 1981 in not acceptable

Summary

Issues:
- Applicability of a circular issued by the Central Board of Direct Taxes under the Income-tax Act to ongoing acquisition proceedings.
- Interpretation of the circular in relation to proceedings pending at the appellate stage.
- Determination of whether the circular supplants statutory provisions or complements them.

Analysis:
The case involved the appellants who purchased lands with buildings, leading to an acquisition order by the Inspector of Income-tax. The appellants appealed to the Tribunal, which canceled the proceedings. Subsequently, the Revenue appealed to the High Court under section 269H. During the appeal, Chapter XX-C was introduced in the Income-tax Act, making Chapter XX-A inapplicable post-September 30, 1986. A circular issued by the Central Board of Direct Taxes stated that acquisition proceedings for properties below Rs. 5 lakhs would not be initiated after April 1, 1986. The High Court referred the matter to a Full Bench to decide if the circular could supplant statutory provisions. The Full Bench held the circular inapplicable as the acquisition proceedings had concluded earlier. The appellants appealed this decision.

The Supreme Court delved into the legislative background, highlighting the purpose of Chapter XX-A to prevent tax evasion through undervaluation of property. With the introduction of Chapter XX-C in 1986, properties exceeding Rs. 5 lakhs required a transfer agreement three months before the intended transfer date. The Court emphasized that the circular aimed to expedite proceedings for properties under Rs. 5 lakhs. It cited previous judgments emphasizing that "proceedings" included appellate stages, rejecting the Full Bench's narrow interpretation. The Court referenced decisions from Delhi, Punjab and Haryana, Patna, and Madras High Courts supporting the circular's applicability to ongoing proceedings.

Ultimately, the Supreme Court allowed the appeal, holding that Circular No. 455 issued by the Central Board of Direct Taxes applied to all pending proceedings not finalized under the Act. The Court disagreed with the Full Bench's restrictive view, aligning with other High Court judgments. The decision clarified that the circular's beneficial intent extended to ongoing acquisition proceedings, ensuring a streamlined resolution process.