Case Note & Summary
The case involves a reference under Section 256(1) of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal to the Bombay High Court. The question of law referred was whether mistakes in assessments completed under Section 143(1) of the Act can be rectified by resorting to Section 154. The applicant was the Commissioner of Income-tax, Bombay City-IX, and the respondent was M/s. Pithwa Engg. Works. The Court heard the learned counsel for the applicant-revenue and perused the reference proceedings. The Court noted that in the case of Commissioner of Income Tax v. Camco Colour Co. (2002) 254 ITR 565, it was ruled that instructions issued by the Central Board of Direct Taxes, New Delhi, dated 27th March, 2000, which revised the monetary limit for filing references to the High Court from Rs.50,000 to Rs.2,00,000, are binding on the Department. The Court observed that these instructions reflect a policy decision to reduce litigation before High Courts and the Supreme Court. Since the tax effect in the present case was less than Rs.2,00,000, the Court dismissed the reference as not maintainable, without going into the merits of the legal question. The decision was based solely on the binding nature of the CBDT circular.
Headnote
A) Income Tax - Rectification of Mistakes - Section 154 of Income Tax Act, 1961 - The question was whether mistakes in assessments completed under Section 143(1) can be rectified under Section 154. The Court did not decide the merits as the reference was dismissed on the ground of low tax effect. (Paras 1-4)
B) Income Tax - CBDT Circulars - Binding Nature - Instructions dated 27th March, 2000 fixing monetary limit of Rs.2,00,000 for filing references to High Court are binding on the Revenue. The Court dismissed the reference as the tax effect was less than the prescribed limit. (Paras 3-4)
Issue of Consideration
Whether the Tribunal was right in law in holding that mistakes in assessments completed under Section 143(1) of the Income Tax Act, 1961 cannot be rectified by resorting to Section 154 of the Act.
Final Decision
The reference is dismissed as not maintainable due to low tax effect, in view of the CBDT circular dated 27th March, 2000, which is binding on the Revenue.
Law Points
- Binding nature of CBDT circulars
- Monetary limit for filing tax references
- Rectification under Section 154 of Income Tax Act
- 1961
Case Details
2005 LawText (BOM) (07) 135
Income Tax Reference No. 397 of 1988
Mr. Ashok Katangale for Applicant, None for Respondent
Commissioner of Income-tax, Bombay City-IX, Bombay
M/s. Pithwa Engg. Works, C/o. M.J. Doshi & Co., 504, Commerce House, 140, N.M. Road, Bombay-23
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Nature of Litigation
Reference under Section 256(1) of the Income Tax Act, 1961, on a question of law regarding rectification of assessments under Section 154.
Remedy Sought
The Revenue sought an opinion from the High Court on whether the Tribunal was correct in holding that mistakes in assessments under Section 143(1) cannot be rectified under Section 154.
Filing Reason
The Revenue filed the reference to challenge the Tribunal's decision on the rectification issue.
Previous Decisions
The Income Tax Appellate Tribunal had referred the question of law to the High Court.
Issues
Whether the Tribunal was right in law in holding that mistakes in assessments completed under Section 143(1) of the Income Tax Act, 1961 cannot be rectified by resorting to Section 154 of the Act.
Submissions/Arguments
The learned counsel for the applicant-revenue was heard. The Court noted the binding nature of CBDT instructions dated 27th March, 2000, which set a monetary limit of Rs.2,00,000 for filing references.
Ratio Decidendi
The CBDT instructions dated 27th March, 2000, fixing a monetary limit of Rs.2,00,000 for filing references to the High Court, are binding on the Revenue. Since the tax effect in the present case is less than the prescribed limit, the reference is not maintainable and is dismissed.
Judgment Excerpts
This Court in the case of Commissioner of Income Tax V/s. Camco Colour Co. (2002) 254 ITR 565 ruled that the instructions issued by the Central Board of Direct Taxes, New Delhi, dated 27th March, 2000; wherein monetary limit for the department for filing reference to the High Court earlier fixed for Rs.50,000/- came to be revised and fresh instructions are issued to file references only in cases where tax effect exceeds Rs.2,00,000/-, are binding on the Department.
The above instructions dated 27th March, 2000 reflect the policy decision taken by the Board not to raise questions of law where the tax effect is less than the amount prescribed in the above circular with a view to reduce litigations before High Courts and Supreme Court.
Procedural History
The Income Tax Appellate Tribunal referred a question of law under Section 256(1) of the Income Tax Act, 1961, to the Bombay High Court. The High Court heard the reference and dismissed it on the ground of low tax effect based on a CBDT circular.
Acts & Sections
- Income Tax Act, 1961: 143(1), 154, 256(1)
