Direct reference to Supreme court u/s 257 in case of divergence of opinion amongst High court. - Income Tax - 1408/CBDT

INSTRUCTION NO. 1408/CBDT Dated: July 21, 1981 Attention is invited to the Boards instruction No.1020 (F.No.277/15/75- ITJ) dated 5th November, 1976 whereby the Commissioners were directed that while scrutinising the orders of the appellate Tribunal for filing reference application u/s.256(1) they should instruct the Departmental Representatives to request the Tribunal to make a direct reference to the supreme court u/s.257 if there are conflicting decisions of two or more High Courts on any particular question of law. Further even in a reference sought by the assessee the Departmental Representatives were asked to make such request to the Tribunal in appropriate cases. 2. The PAC has taken note of the fact that there is divergence of opinion among various High Courts on the question whether on reopening an assessment u/s.147(a) the ITO has the power to bring to charge also other items falling u/s.147(b) irrespective of the fact that the period of limitation laid down in sec.147(b) has expired. The CsIT would be aware of the decisions of the Madras and Bombay High courts in Veerappa Chettiar Vs. CIT (91 ITR 116) and New Kaiset-i-Hind Spg Wvg. Company Ltd. Vs. CIT (107 ITR 760) respectively. The ratio of the decision is that in a reassessment proceeding initiated by the ITO in respect of an item of income falling u/s.34(1)(a) o the 1922 Act the ITO cannot bring to charge an item of income falling under clause b in such reassessment proceedings initiated beyond the period of four years under clause(a). According to the court a notice of reassessment cannot be issued after the period of 4 years in respect of items of income falling under clause(b) and the ITO cannot assume jurisdiction indirectly by issuing a notice purporting to be under clause(a). As against this view, Andhra Pradesh High court in the case of Pulavarthi Visvanadham and recently in the case of subakaran Gangabhishan dissented from Madras and Bombay view and held that once the assessment was reopened validly no distinction could be made between items falling under clause(a) and those falling under clause(b). There is decision of Punjab High Court in the case of Jagan Nath Maheshwary (32 ITR 418) which is also in agreement with the Andhra view. 3. The PAC has therefore suggested that in view of the divergence of opinion among different High courts in all matters involving such issue the Department should seek direct reference to the Supreme court u/s.257 of the I.T.Act. 4. The CsIT will therefore issue necessary instructions to the Departmental Representatives accordingly. The DRs may also make such requests to the Tribunal in appropriate cases where a reference on such question of law is sought by the assessee.