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TMI Blog2008 (11) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals arise out of the common order and as such they were heard together. 2. In the assessment year 1996-97, Shri Lalu Prasad (hereinafter referred to as "the assessee"), was the Chief Minister of the State of Bihar. He filed his return of income on October 14, 1996. The gross total income shown by him in the return is as follows : INCOME FROM OTHER SOURCES Acc. Intt. on N.S.C 0.00 Intt. on F.D. matured 2,16,060.00 Intt. S/b A/c 2,439.00 Pay and allowance as Chief Minister 72,802.40 2,91,301.40 Short-term capital gain 0.00 0.00 Long-term capital gain 0.00 0.00 Gross total income 2,91,301.40 3. He also furnished details of pay and allowance received as the Chief Minister and incidental expenses in the following manner : DETAILS OF PAY/ALLOWNACES AS CHIEF MINISTER Pay 23,539.85 Allowance 35,209.70 Sumptuary allowance 23,539.85 82,289.40 TDS reimbursed for financial year 1995-96 8,497.00 90,786.40 Less: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inister of Bihar received Rs. 9,909,40 as gross salary from the Government of Bihar. It is this amount which the assessee declared as income from other sources. In my opinion, the Assessing Officer has correctly treated the pay and allowance received by the assessee as salary and allowed standard deduction, the disallowance incidental expenses of Rs. 17,984 as made by the Assessing Officer is thus upheld." 6. As regards adding back of the interest on the National Savings Certificate, the Commissioner of Income-tax (Appeals) observed as follows : "If the method of accounting employed is mercantile, he has to show interest/income on accrued basis and if the method of accounting employed is cash he has to declare interest/income on cash basis. In any case, the impugned addition is not a matter of adjustment and cannot be linked to the rebate under section 88 claimed by the assessee on accrued interest of NSC which may be in the mind of the Assessing Officer, In view of the aforesaid, adjustment of Rs. 6,000 as made by the Assessing Officer is deleted." 7. The Revenue aggrieved by the order of the Commissioner of Income-tax (Appeals) deleting adding back of the interest on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of law : "1. Whether, on the facts and in the circumstances of the case, the addition made on account of accrued interest on NSC was a matter of adjustment within the provision of section 143(1)(a) ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding taxation of interest on NSC on accrual basis whereas the appellant follows cash system of accounting for taxation of interest income ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in affirming the change of head of income from other source declared by the appellant to income from salaries by the Assessing Officer in processing under section 143(1)(a) ? 4. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal regarding change of head of income from other sources to salary is legal, valid and permissible under section 143(1)(a) ? 5. Whether the Tribunal was justified in allowing the appeal of the Department in I. T. A. No. 438/Pat/97, the filing of which violate the instruction No. 1979, dated March 27, 2000, issued by the Central Board of Direct Taxes ?" 11. Mr. Ajay Rastogi, appearing on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or directions issued under sub-section (1) it shall not be lawful for an assessee, being a party in any appeal or reference, to contend that the income-tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case. (4) the Appellate Tribunal or court hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstance under which such appeal or application for reference was filed or not filed in respect of any case. (5) Every order, instruction and direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) and the provisions of sub-sections (2), (3) and (4) shall apply accordingly." 14. From a plain reading of section 268A(1) of the Act, it is evident that the Central Board of Direct Taxes has been conferred power to issue order/instructions for the purpose of regulating filing of appeal or application for reference. Section 268A(5) further provides that order/instruction or direction issued by the Central Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o proceed on the basis of the return (and the accounts or documents accompanying the same) as it is; he can only make correction of arithmetical errors or adjustments which are 'prima facie' admissible. 'Prima facie', literally means 'on the face of it'. Hence, while allowing adjustments which are prima facie admissible and disallowing adjustments which are prima facie inadmissible, he has to confine himself to the materials before him in the return, etc." 20. Mr. Rastogi, emphasises that the income can count under the head "Salary" when the relationship of employer and employee exists between an assessee and the employer. He points out that the Chief Minister is not employed by anybody. 21. Mr. Harshwardhan Prasad, however, contends that on the basis of information available in the return filed by the assessee, the Assessing Officer prima facie came to the conclusion that the head shown by the assessee, is incorrect and hence nothing prevented him from changing the head of income from other sources to that of salary. 22. Rival submission necessitates examination of the scheme of section 14 of the Act. For the purpose of charge of income-tax, the total income has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk. (1A) The total number of Ministers, including the Chief Minister, in the Council of Ministers in a State shall not exceed fifteen per cent., of the total number of members of the Legislative Assembly of that State. Provided that the number of Ministers, including the Chief Minister, in a State shall not be less than twelve: Provided further that where the total number of Ministers, including the Chief Minister, in the Consil of Ministers in any State at the commencement of the Constitution (Ninety-first Amendment) Act, 2003, exceeds the said fifteen per cent., or the number specified in the first proviso, as the case may be, then, the total number of Ministers in that State shall be brought in conformity with the provisions of this clause within six months from such date as the President may by public notification appoint. (1B) A member of the Legislative Assembly of a State or either House of the Legislature of a State having Legislative Council belonging to any political party who is disqualified for being a member of that House under paragraph 2 of the Tenth Schedule shall also be disqualified to be appointed as a Minister under clause (1) for duration of the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question as to whether salary of a judge is taxable and another question was as to whether it is to be taxable under the head "Salary" or "Income from other sources". One of the questions in the aforesaid case was as follows: "Whether the salary of a judge of the Supreme Court payable under clause (1) of article 125 or the salary of a judge of the High Court of a State payable under clause (1) of article 221 is not taxable under the head 'Salaries'; and, if it is so, is it taxable under any other head of income referred to in section 14 of the Income-tax Act, 1961." 28. Answering the aforesaid question, the Supreme Court had observed that the Supreme Court judges and High Court judges, although, have no employer but this itself will not mean that they do not receive salary. In the said case, it has been held as follows (page 875): "It is true that High Court and the Supreme Court judges have no employer, but that, ipso facto, does not mean that they do not receive salaries. They are constitutional functionaries. Articles 125 and 221 of the Constitution deal with the 'salaries' of Supreme Court and High Court judges respectively and expressly state that what the judges rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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