GATTANI, J. - (1.) MESSERS. Golcha Properties (Private) Limited, (In Liquidation) briefly 'the Company' was on 10 6-1968 by this Court ordered to be wound up in Company Petitions No. 9 and 10 of 1966. The Official Liquidator attached to this Court was appointed Liquidator of the Company. After the passing of that order the Official Liquidator is carrying on the business of the Company for the beneficial winding up of it.
(2.) THIS application has been filed by the Commissioner of Income Tax (Recovery), New Delhi for grant of the leave of the Court (to appeal) against the Company for the recovery of Rs. 31,31,620/- in respect of the alleged liability of the Company under the Income Tax Act, 1961, briefly 'the Act' for the assessment years 1969-70, 1970-71, 1971-72 and 1972-73. According to the application, tax for the assessment year 1969-70 was assessed as Rs. 5,91,925/-, for the assessment year 1970 71 as Rs. 10,38,374/- and for the assessment year 1971-72 as Rs. 11,94,274/- out of this latter amount a sum of Rs. 5,20,722/- has been paid as advance tax and, therefore, only an amount of Rs. 6,73,552/- remains to be paid in respect of assessment year 1971 72. For the assessment year 1972 73 the allegation of the applicant is that the Company upon the basis of the return filed on its behalf is liable to pay a sum of Rs. 7,41,375/ -. In other words there is no assessment order for the assessment year J 972-73. The applicant has further claimed interest for certain period on the assessments for the years 1969-70 and 1970-71. In the reply filed on behalf of the Official Liquidator various grounds opposing the application have been taken, but at the time of the arguments the learned counsel for the Official Liquidator limited his arguments on the ground that the application is premature at the stage for the recovery of the amounts mentioned in the application has not yet become ripe. He contended that appeals against the assessment orders for the years 1969-70, 1970-71 and 1971-72 have already been filed and not decided so far and till they are decided the question of recovery of the tax in respect of those years does not arise. In this connection reliance has been placed upon on instruction issued by the Central Board of Direct Taxes (Instruction No. 96 dated 21-8-1969, F. No. 1/6/69 I. T. G. C. of G. B. D. T. ). The contention raised is that according to sec. 119 of the Act the instructions issued by the Central Board of Direct Taxes are of binding force and the Income Tax Authorities are under obligation to give effect to such instructions. Mr. Lodha on the other hand has urged that the functions of an Income Tax Authority while dealing under the Act are quasi-judicial and, therefore, the instruction such as relied upon by Mr. Mathur cannot have any binding force upon the Income Tax Authority. He has in this connection relied upon a case reported in Raja V. V. V. R. K. Yashendra Kumara Rajah of Venkatagiri vs. Income Tax Officer, A-Ward, Nellore (l ). In order to appreciate the arguments advanced by both the parties it will be profitable to reproduce in verbatim the instruction relied upon by Mr. Mathur: "minutes of the 8th meeting of the Informal Consultative Committee held on 13th May, 1969 Implementation of assurance give Item 1 (vi ). One of the points that came up for in the 8th meeting of the Informal Consultative Committee was that Income-tax Assessments were arbitrarily pitched at high figures and that the collection of disputed demands as result thereof was also not stayed in spite of the specific provision in the matter in sec. 220 (6) of the Income-tax Act, 1961. 2. The then Deputy Minister had observed as under: "where the income determined on assessment was substantially higher than the returned income say, twice the latter amount or more, the collection of the tax in dispute should be held in abeyance till the decision on the appeals, provided there were no lapses on the part of assessee. " 3. The Board desire that the above observations may be brought to the notice of all the Income-tax Officers working under you and the powers of stay of recovery in such cases upto the stage of first appeal may be exercised by the Inspecting Assistant Commissioner/commissioner of Income-tax. " Mr. Mathur appearing for the Official Liquidator has argued that the present case is covered by this instruction and as such the collection of the tax in dispute should be held in abeyance till the decision of the appeals in respect of the assessment years 1969-70, 1970-71 and 1971-72. The filing of the appeals in respect of these three assessment years and the fact that they are pending is not disputed by Mr. Lodha. It is further not the case of the applicant that the facts of the case do not attract this instruction So the question emerges whether the instruction reproduced above should have been given effect to by the concerning Income Tax Authorities. To put in other words whether the recovery of the tax for the said three years can be treated to be in abeyance because of this instruction.
(3.) THE instruction relied upon by Mr. Mathur was issued under sec. 119 of the Act the relevant portion of which reads as follows: "119. Instructions to subordinate authorities. (1) THE Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board: Provided that no such orders, instructions of directions shall be issued - (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions. . . . . . . . . . . . . " THE word Board' has been defined in sec. 2 (12) of 'the Act' as follows: " (2) Definitions.- In this Act, unless the context otherwise requires - . . . . . . . . . . . . . . . . . . . . . . . . . . (12) "board" means the Central Board of Director Taxes constituted under the Central Board of Revenue Act, 1963; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . " A perusal of sec. 119 (1) of 'the Act' would show that it has been inserted for the proper administration of the Act and the phrase 'proper administration of the Act' certainly includes the matters in regard to assessment and recovery of the tax as well. This section clearly lays down that the instructions issued are to be observed and followed by the Income Tax Authorities to whom such instructions are issued and all otner persons employed in the execution of this Act. As to the binding force of such instructions the question came before their Lordships of the Supreme Court in the case reported in Navnitlal C. Javeri vs. K. K. Sen, Appellate Assistant Commissioner of Income Tax, Bombay (2 ). It will be useful to quote in verbatim the observations of their Lordships in this respect: "there is another material circumstance which cannot be ignored. It appears that when these amendments were introduced in Parliament, the Hon'ble Minister for Revenue and Civil Expenditure gave an assurance that outstanding loans and advances which are otherwise liable to be taxed as dividends in the assessment your 1955-56 will not be subjected to tax if it is shown that they had been genuinely refunded to the respective companies before the 30th June, 1955. It was realised by the Government that unless such a step was taken, the operation of see. 12 (13) would lead to extreme hardship, because it would have covered the aggregate of all outstanding loans of past years and that may have imposed an unreasonably high liability on the respective shareholders to whom the loans might have been advanced. In order that the assurance given by the Minister in parliament should be carried out, a circular (No. 20 (XXI-6)/55) was issued by the Central Board of Revenue on the 10th May, 1956. It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under sec. 5 (8) of the Act. " This was a case under the Income Tax Act, 1222. As such sec. 5 (8) of that Act has been referred to. Suffice is to say that provisions of sec. 119 (1) of the present Act more or less correspond to the provisions of sec. 5 (8) of the old Act of 1922. In the present case also the instruction relied upon by Mr. Mathur is based upon the assurance given in Parliament by the then Deputy Prime Minister. Thus according to the Supreme Court authority (2) the instructions under sec. 119 of the Act have binding force. This view was followed in Dr. T. P. Kapadia vs. Commissioner of Income-Tax, Mysore (3 ). ;