By Subash Agarwal, Advocate
1. CBDT Circular / order u/s. 119 dated 26.09.2013
In exercise of power u/s. 119(2)(a) r.w. sec. 139 and Rule 12, CBDT relaxed the requirement of furnishing the Audit Report u/s. 44AB as prescribed under Rule 12(2) for the A.Y.: 2013 – 2014. As per the said order u/s. 119, following requirements were stated –
(a) The assessee who were finding it difficult to upload the prescribed Reports of Audit in the system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed due date.
(b) The said Report of Audit should however be furnished electronically on or before 31.10.2013.
The professionals reasonably instructed / aware of the rules of statutory interpretation, interpreted the CBDT circular / order as under –
(i) There was extension of time for furnishing of the audit report electronically till 31.10.2013.
(ii) The requirement of furnishing of TAR manually to the A.O. was optional since the word “may” was used in clause (a) of the circular.
2. Illegal Press Release issued on the same date
The Press Release dated 26.09.2013 has imposed the following two conditions for availing the benefit of the circular which were not present in the circular issued –
(i) Mandatory requirement to file audit report manually with the A.O. by 30.09.2013.
(ii) Mandatory requirement to file ROI electronically by 30.09.2013.
The purported relaxation was only for the purpose of online submission of TAR.
The relaxation was actually no relaxation at all for the CAs.
There was a lot of wastage of time of the CAs for no fault on their part but due to a variety of reasons for which only the revenue department was responsible viz., late issue of notification for online filing of TAR, faulty system for the same, change in the utility for online submission of TAR virtually every week etc.
3. Power of CBDT to issue benevolent circulars –
The power to issue circulars, instructions and directions has been conferred upon the CBDT by section 119 of the Income Tax Act.
Such power has been given as per section 119 for the specific purpose of proper administration of the Act, efficient management of the work of assessment and collection of revenue and to relax the requirement of law in order to avoid genuine hardship. But CBDT is not empowered to make the provisions more onerous and ask assessees to do more than what is required by the statute.
Courts have time and again held that circulars issued by the CBDT relaxing the rigour of the provisions of the Act were binding on the authorities. Kindly refer the following judgements in this regard –
(a) Ellerman Lines Ltd. vs. CIT 82 ITR 913 (SC)
(b) Bharat Vijay Mills Ltd. vs. ITO 154 ITR 786 (Guj.)
(c) CIT vs. Punalur Paper Mills Ltd. 170 ITR 37 (Ker.)
(d) Navnit Lal C Javeri vs. K.K. Sen 56 ITR 198 (SC)
Needless to say, the circular / order issued on 26.09.2013 was in consonance with the above-mentioned principles laid down by the courts.
4. Illegal Press Release dated 26.09.2013
As stated above, the Press Release issued on the same date but subsequent in point of time is illegal inasmuch as it imposes more onerous and stringent conditions and also it goes beyond the mandate of the Act read with relevant rules.
Proviso to Rule 12(2) specifically states that where the assessee is required to furnish a report of audit u/s. 44AB, he shall furnish the same electronically but the Press Release imposes a further condition to file the audit report manually, which is clearly against the said Rule.
The message from the various High Courts and the Apex Court is loud and clear-circulars/instructions which are not in accordance with the statute are to be disregarded.
Observations of various High Courts including the Apex Court on this point are given below -
a) Delhi Flour Mills Company Limited vs Commissioner Of Income-Tax  95 ITR 151 (Del.)
“Decisions of the Central Board are not binding upon courts. They are meant only for the guidance of the departmental authorities. If these departmental decisions are not in accordance with the provisions of the statute, they have to be disregarded.”
b) Indo-gulf Fertilizers And Chemicals Corporation Limited vs Union Of India  195 ITR 485 ( All.)
“it may be observed that so far as the direction given by the Board is concerned, it may no doubt be binding upon the departmental authorities, but such directions do not bind the courts, and it is needless to cite cases on the point. So far as courts are concerned, they would only examine whether the orders passed by the departmental authorities are in accordance with the provisions of the Act or not. If the directions of the Board are beyond the scope of the provisions of the Income-tax Act, they will not hold good and the authorities can very well be asked to act according to law.”
c) ITO vs D. Manohar Lal Kothari  236 ITR 357( Mad.)
“In State Bank of Travancore v. CIT 158 ITR102, the Supreme Court has ruled that the circulars issued by the Central Board of Direct Taxes are executive in character and they cannot alter the provisions of the Act. In CIT v. Hero Cycles Pvt. Ltd. 228 ITR 463, also the apex court would observe that the circulars issued by the Central Board of Direct Taxes can bind the Income-tax Officer but will not bind the appellate authority or the Tribunal or the court or even the assessee. This court also has considered this aspect in CIT v. O. M. S. S. Sankaralinga Nadar and Co.  147 ITR 332, holding that the courts are not bound by the circulars issued by the Central Board of Direct Taxes on the subject. In Kerala Financial Corporation v. CIT  210 ITR 129, also once again the apex court has observed that the circular of the Central Board of Direct Taxes under section 119 of the Act cannot override or detract from the provisions of the Act. The view of the apex court is reflected by this court also in Saroja Mills Ltd. v. CIT  220 ITR 626, observing that the Central Board of Direct Taxes by its circulars cannot pre-empt a judicial interpretation of the provisions of the Act and the Tribunal, much less the High Court, is not bound by the circulars.”
Further, Hon’ble Calcutta High Court in the case of Tarak Nath Paul vs. CWT 142 ITR 468 has taken the view that a Press Note issued by the Ministry of Finance could not be taken into account by the revenue authorities for deciding the question of imposition of penalty.
In view of the above, it is almost certain that in regard to the present scenario, the courts will take a view that the Press Release issued subsequent to the earlier beneficial circular is invalid, illegal and devoid of binding force of law.