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TMI Blog2012 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... d has sought adjournment; for challenging the jurisdiction of the AO the appellant should have approached the higher judiciary for redressal of its grievance there is no force in the version of the appellant that it had waited till the disposal of its petition by the Addl. CIT and CIT and the assessment order in its case was passed on 24-12-2008, is misconceived both in law and on facts and therefore could not validly be adopted the basis to sustain the assumption of jurisdiction. 2. That the learned Commissioner of Income tax (Appeals) has erred both in law and on facts in upholding the disallowance of interest incurred and claimed by the appellant company on lease amount of Rs. 4 lacs without appreciating the facts of the case of the appellant company. 3. That the learned Commissioner of Income tax (Appeals) has erred both in law and on facts in disallowing a sum of Rs. 42,530/- representing the expenditure incurred by the field staff on the marriage occasion of dealers etc. which was in law eligible business expenditure and had to be allowed as such. 4. That the learned Commissioner of Income tax (Appeals) has erred both in law and on facts in sustaining the disallowance of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: 2. The following categories of cases shall be compulsorily scrutinized:- ...... ..... . (v)(b) All cases in which an appeal is pending before the CIT(Appeals) against an addition/ disallowance of Rs. 5 lakhs or above, or the Department has filed an appeal before the ITAT against the order of the CIT(Appeals) deleting such an addition/ disallowance and an identical issue is arising in the current year. However, as in (i) above, the quantum ceiling may not be taken into account if a substantial question of law is involved." 2.2. The assessee, during the course of assessment proceedings vide letter dated 7-12-2007 challenged the assumption of jurisdiction on the ground that no addition/ disallowance exceeding Rs. 5 lacs was made in earlier year, which was pending in appeal before the CIT(A). Further, there was no identical issue arising in the current year as arising in earlier year. However, Add. CIT vide order dated 25-11-2008 and the CIT vide order dated 15-12- 2008 rejected the contention of the assessee and held that notice issued was in accordance with law on the ground that in assessment year 2004-05, addition aggregating to Rs. 5,60,207/- were made in order of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and gone through the relevant material available on record. The undisputed facts are that proceedings for assessment for the year under consideration were commenced by issue of a notice dated 17-10-2007. The authorities below have held that such a notice was valid notice, since the same was in accordance with clause (v)(b) of para 2 of the Instruction issued by the CBDT for selection of cases for corporate assessee for F.Y. 2007-08. The relevant portion of the Instruction has already been reproduced by us hereinabove. The order of assessment for A.Y. 2004-05 which has been made the basis for assumption of jurisdiction, shows that the same was passed u/s 143(3) vide order dated 18-12-2006. According to order, no disallowance was made in excess of Rs. 5 lacs though aggregate of all the disallowances was Rs. 5,60,207/-.The issue, therefore, arises whether the AO was correct in holding that since disallowance in aggregate exceeded Rs. 5 lacs, therefore, notice was valid. In our opinion, such a conclusion is contrary to the express instructions of the CBDT. In our opinion, there has to be an addition or disallowance of Rs. 5 lacs or more against which an appeal is pending and such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urns for the assessment year 1996-97 for detailed scrutiny if the total income declared is at least 30 per cent. more than the total income declared for the assessment year 1995-96. The following further conditions should be fulfilled: (a) the total income for both the assessment years should exceed the basic exemption limit ; (b) the total income for the assessment year 1995- 96 should not exceed Rs. 5 lakhs ; and (c) tax is fully paid for the assessment year 1996- 97 before the return is filed. In these cases the taxpayers will not be required to attend Income-tax Offices in connection with their assessments. However, some of these cases will be scrutinized if there is positive information of tax evasion or there is a large claim of refund." The conditions laid down in the circular are also fulfilled by the respondent and there is no dispute on that also. Now, the only question, which needs an answer is, as to what is the status of these circulars. The circular had admittedly been issued by the Central Board of Direct Taxes under section 119(1) of the Act. What is the scope of such circulars should not detain us because of the authoritative pronouncement of the hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities." The Supreme Court, in this judgment, which is clear from the paragraph quoted above, held in no uncertain terms that: (a) the authorities responsible for administration of the Act shall observe and follow any such orders, instructions and directions of the Board ; (b) such instructions can be by way of relaxation of any of the provisions of the section specified therein or otherwise; (c) the Board has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act; (d) the circulars can be adverse to the Income-tax Department, but still, are binding on the authorities of the Income-tax Department, but cannot be binding on the assessee, if they are adverse to the assessee ; (e) the authority, which wields the power for its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that appellant had challenged the initiation of proceedings even prior to letter dated 18-1-2008 and even in letter dated 18-1-2008 it was requested to dispose off the objections raised earlier. Thus, it cannot be held that the appellant had acquiesced to the jurisdiction. 7.4. We may also refer to the judgment of Hon'ble Delhi High Court in the case of Dr. Nalini Mahjan Vs. CIT 257 ITR 123 and that of Hon'ble Supreme Court in the case of L. Hirday Narain 78 ITR 26 (SC), wherein it has been held that certain things which are required to be done in prescribed manner to be done in the same manner. 7.5. Thus, once the CBDT has issued instructions for assumption of jurisdiction for selection of cases of corporate assesses for scrutiny and assessment thereof, the same have to be followed in letter and spirit by the AO. The burden lies on the authority assuming jurisdiction to show and establish that such instructions have duly been complied and satisfied in letter and spirit. However, in the instant case, for the reasons stated above, instructions issued by the CBDT are not shown to have been satisfied for assumption of jurisdiction. Thus, we are in agreement with the contention rais ..... X X X X Extracts X X X X X X X X Extracts X X X X
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