N. Mahalingam vs Commissioner of Wealth Tax

R. Jayasimha Babu, J.—The assessment years are 1979-80, 1980-81 and 1981-82. The assessee''s grievance, which resulted in the reference is regarding the revision of the assessment order, which had been passed on January 25, 1983. The revisional order had been passed on March 25, 1985. The assessee contends that the revisional order is one, which should not have been made having regard to the circular, which the Central Board of Direct Taxes had issued on the 1st day of November, 1984. That circular reads thus (see [1985] 151 ITR 46) :

"Circular No. 402, dated November 1, 1984.

Subject: Taxation Laws (Amendment) Act, 1984--Amendment of Section 263 of the Income Tax Act, 1961--Clarification regarding.

As a consequence of the amendment of Section 263 of the Income Tax Act, 1961, by Section 47 of the Taxation Laws (Amendment) Act, 1984, the limitation for passing an order u/s 263 will, in view of general principles of interpretation of statutes, stand extended in cases where the period of limitation originally laid down in that Section had not expired before 1st October, 1984. However, with a view to avoiding controversy and litigation in the matter, it is desirable that orders u/s 263 of the Income Tax Act are passed, as far as possible, within two years of the date of the order sought to be revised in cases where the order sought to be revised was passed before 1st October, 1984."

The learned senior standing counsel for the Department has informed us that the Department has consistently followed the circular. No reason has been stated as to why that circular was disregarded in the instant case. The assessee herein is as much entitled to the benefit of the circular as any other assessee similarly placed. That circular being one which is beneficial to the assessee, is also binding on the Department and the stand taken by the Department inconsistent with the circular cannot be sustained.

The question referred to us regarding the illegality of the revision made by the Commissioner in exercise of his power u/s 263 of the Income Tax Act, revising the assessment, which had been made on January 25, 1983, prior to the date of amendment of Section 263 by the Taxation Laws (Amendment) Act, 1984, is, therefore, answered against the Revenue and in favour of the assessee.