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2000 (5) TMI 3 - SC - Income TaxRevision under s. 264 of the Income Tax Act 1961 - deductions - Government company engaged in the manufacture of aeroplanes and its parts - Binding nature of circulars issued by the Central Board of Direct Taxes (CBDT) on the CIT - HELD THAT - We may notice that s. 263 of the Act where a revision is permissible in cases of orders which are prejudicial to the interest of the Revenue in the Expln. (c) thereof it has been provided where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal the powers of the CIT under this subsection shall extend to such matters as had not been considered and decided in such appeal. Where the legislature intended that the scope of revision should extend to a part of the order which had not been considered and decided in an appeal and thereby does not merge is explicitly provided. When the legislature does not make such a distinction in the scheme of s. 264 of the Act the view taken by the High Court appears to us to be correct. However the learned counsel for the appellant relied on the decisions in Navnitlal C. Javeri vs. K.K. Sen 1964 (10) TMI 16 - SUPREME COURT Ellerman Lines Ltd. vs. CIT 1971 (10) TMI 7 - SUPREME COURT and K.P. Varghese vs. ITO 1981 (9) TMI 1 - SUPREME COURT to contend that the circular issued by the Board under s. 119 of the Act is binding on the CIT in terms of which he was bound to examine the revision of the appellant on merits and the order of the learned Single Judge merely gives effect to such a course. Dr. Gauri Shankar learned senior advocate for the Revenue however pointed out by referring to several decisions of this Court to the effect that the circulars or instructions given by the Board are no doubt binding in law on the authorities under the Act but when the Supreme Court or the High Court has declared the law on the question arising for consideration it will not be open to a Court to direct that a Circular should be given effect to and not the view expressed in a decision of the Supreme Court or the High Court. We find great force in this submission made by the learned senior advocate for the Revenue and find absolutely no merit in this appeal and the same stands dismissed but in the circumstances of the case there shall be no orders as to costs.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment was whether the Commissioner of Income Tax (CIT) could entertain a revision petition under Section 264 of the Income Tax Act, 1961, when the order in question had been subject to an appeal to the Income Tax Appellate Tribunal (ITAT), even if the subject matter of the appellate and revisional proceedings were distinct. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework primarily revolves around Section 264 of the Income Tax Act, 1961, which provides the CIT with the power to revise any order passed by an authority subordinate to him. However, Section 264(4) explicitly states that the CIT shall not revise any order in a case where the order has been made the subject of an appeal to the Tribunal. The judgment also references Section 263, which allows for revision in cases prejudicial to the interest of the Revenue, and explicitly provides for situations where the revision can extend to matters not considered in an appeal. Court's interpretation and reasoning: The Court interpreted Section 264(4) as a clear legislative intent to prohibit the CIT from revising any order that has been appealed to the Tribunal. The Court emphasized that the order made by the Appellate Assistant Commissioner (AAC) merges entirely into the order of the Tribunal, and cannot be divided into parts for separate revision and appeal processes. The Court noted that where the legislature intended to allow for partial revision, as in Section 263, it did so explicitly. Key evidence and findings: The Court relied on the precedent set in CWT & Anr. vs. Mrs. Kasturbai Walchand & Ors., which established that the CIT has no power to revise orders under Section 264 if they have been appealed to the Tribunal, regardless of whether the relief claimed in the revision differs from that in the appeal. Application of law to facts: The Court applied the legal principles to the facts of the case, determining that since the order in question had been the subject of an appeal to the Tribunal, the CIT was justified in dismissing the revision petition filed by the appellant. The Court rejected the argument that the revision could be entertained based on the distinct subject matter of the appellate and revisional proceedings. Treatment of competing arguments: The appellant argued that a circular issued by the Central Board of Direct Taxes (CBDT) under Section 119 of the Act, which was binding on the CIT, required the revision to be examined on merits. However, the Court held that circulars or instructions from the CBDT are binding on authorities under the Act only to the extent that they do not conflict with judicial decisions. Since the Supreme Court and High Court had already declared the law on this matter, the circular could not override these decisions. Conclusions: The Court concluded that the CIT was correct in dismissing the revision petition, as it was barred by Section 264(4) of the Act. The Court found no merit in the appeal and dismissed it, affirming the decision of the Division Bench of the High Court. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Court stated, "What becomes merged in the order of the Tribunal is the order made by the AAC in its entirety and not in part." Core principles established: The judgment reinforced the principle that the CIT cannot revise an order under Section 264 if it has been appealed to the Tribunal, as the entire order merges into the Tribunal's order. It also established that CBDT circulars cannot override judicial decisions. Final determinations on each issue: The Court determined that the CIT was justified in dismissing the revision petition under Section 264, as the order had been appealed to the Tribunal. The Court dismissed the appeal, upholding the decision of the Division Bench.
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