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Case Law Details

Case Name : CIT Vs S.V. Gopala Rao (Supreme Court of India)
Appeal Number : Civil Appeal No(S). 4901/2010
Date of Judgement/Order : 13/07/2017
Related Assessment Year :
Advocate Akhilesh Kumar Sah

In CIT vs. S.V. Gopala Rao [Civil Appeal No(S). 4901/2010, decided on 13.07.17], the Central Board of Direct Taxes (CBDT) issued a Circular under Section 119 of the Income Tax Act, 1961 (herein referred to as ‘the Act’). In fact, it amended the provisions contained in Rule 68B of the IInd Schedule to the Act, which otherwise have statutory force. Honorable Supreme Court held that such legislative provisions cannot be amended by CBDT in exercise of its power under Section 119 of the Act. The High Court has, therefore, rightly held the circular ultra virus and quashed the same.

Earlier, in S.V. Gopala Rao vs. CIT[(2004) 192 CTR AP 530, 2004 270 ITR 433 AP], the controversy was very short and mostly the material facts were not at dispute. The petitioners challenged a sale on the ground that the sale was effected beyond time. The dates which were material were not in dispute. The order became final somewhere in 1991-92 and according to Rule 68B of the Act, the order had to be deemed to have come into force from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum had been attached had become conclusive. As such, the time would start running from March 31, 1993, since Rule 68B of the Act itself was incorporated by the Finance Act, 1992, with effect from June 1, 1992. Therefore, June 1, 1992, was taken as a date for reference. The assessment, in the case, had been completed before June 1, 1992. In between, the Department tried to auction the property but cancelled the auction because the price procured in such auction was not acceptable to the Department. Therefore, the Department claimed one year’s further time in accordance with the proviso to Sub-rule (1) of Rule 68B of the Act. The matter was also pending in the High Court and almost for a period of five years the High Court continued the stay. Therefore, senior counsel appearing for the respondents submitted that the time during which the stay of the High Court remained operative had to be excluded. He also contended that one year’s further time had to be granted because in one of the auctions, the property was not sold. He further contended that there has been amendment to Rule 68B of the Act, vide Notification No. 9995 dated March 1, 1996 (see [1996] 218 ITR (St.) 121), by which the period of three years mentioned in Rule 68B of the Act had been extended to four years. Therefore, the auction, which was conducted on February 19, 2003, was within time, as the order had become conclusive by the deeming provision in Rule 68B(3) of the Act by March 31, 1993. Learned counsel for the petitioners did not dispute this factual position but he contended that the so called amendment to Rule 68B by Notification No. 9995 [see (1996) 218 ITR (St.) 121], could not be given effect to as it was ultra vires. He submitted that Rule 68B itself was inserted by the Finance Act, 1992, by an Act of Parliament. An Act of Parliament could not be amended by any authority whatsoever much less by the Board under its powers under Section 119 of the Act.

Senior counsel appearing for the respondents, on the other hand, submitted that under Rule 94 of the Act, CBDT has power to issue circulars for removing difficulties.

The learned Judges of the Andhra Pradesh High Court held that we fail to understand what difficulty was removed by CBDT by amending a provision which had been enacted by Parliament. Even otherwise, we have not seen any power under Section 119 of the Act, which gives any power to the Board to issue such notifications. Therefore, in our view, Rule 68B(1) of the Act as on today lays down the period of three years alone and the notification referred to by the respondents has no effect at all. Therefore, clearly the sale was carried out beyond time and as such is set aside.

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