2012 (6) TMI 820 - HC - Income Tax

Summary

Issues involved:
Challenging order of assessment and notice issued under Section 266(3) of the Income Tax Act, 1961.

Order of Assessment:
- The Andhra Pradesh Beverages Corporation Limited challenged the order of assessment dated 28-12-2011 for the assessment year 2009-10, raising a demand of Rs. 865,60,88,900.
- The petitioner filed its return of income admitting 'nil' income and Rs. 3,89,560/- as book profit under Sec.115 JB of the Act.
- The order of assessment was challenged on the grounds that the petitioner is acting as an agent of the State and the income of the State Government is not liable to be taxed under Art. 289(1) of the Constitution.
- The challenge also included the initiation of proceedings under Sec. 143(2) based on identification by CASS and a circular of the CBDT, alleging abdication of statutory functions and discretion by the respondent.

Validity of Circular and Precedents:
- The circular of the Board directing assessing officers to take up cases identified by CASS was challenged, citing precedents like Pahwa Chemicals Pvt Ltd and others.
- Precedents highlighted the limitations on the power of the Board to issue instructions contrary to the provisions of the Act or interfering with the quasi-judicial discretion of the assessing officer.
- The CASS methodology was defended as a fair and transparent method for identifying cases for scrutiny under Sec. 143 of the Act.

Decision:
- The Court found no violation of the Act or abdication of statutory discretion by the respondent in taking up the petitioner's case for scrutiny based on CASS.
- The petitions were dismissed with liberty to pursue the appellate remedy, as the Court declined to consider the merits of the impugned order of assessment.
- The dismissal of the petitions was also based on the lack of independent grounds challenging the invocation of power under Section 266(3) of the Act.

Conclusion:
The Court upheld the validity of the assessment order and the notice issued under Section 266(3) of the Income Tax Act, 1961, based on the application of the CASS methodology for scrutiny, dismissing the petitions with liberty to pursue appellate remedies.