Section 119:- An insight 

Power Under Section 119 : Instruction to subordinate authorities

Section 119, is a wide power in the hands of board (CBDT) which an tax administering body. Where Board can issue orders, instructions and directions to other Income Tax Authorities for proper administration of Act and other person who are connected with statute’s  enforcement shall observe them and follow. It seems very clear that these instructions must be complied by the Tax administering Authorities but Appellate Authorities of Income Tax (Who are delivering Justice and not Administering tax Law) are not bound by them rather they are required to pursue principal of natural justice. Assessee can also argue a matter contrary to the provisions of these orders, instructions and directions. We can find them relevant in each and every section generally and Section 139, 143, 144, 147, 148, 154, 155, 210, 211, 234A, 234B and 234C specifically in these sections limitation of time is a material issue.

Further section 119 also talk about Chapter IV , VI A deductions, exemptions and reliefs under Act. A reference to these provisions has been made to provide relaxation to the aggrieved facing genuine hardship which administering authorities cannot provide otherwise.

Some of these instructions and directions have been issued as a explanation to the complexities involved while administering provisions of the act. Example of such circular are – Circular No. 648 dated 30th March 1993 dealing with income of insurance agents and Circular No. 577 dated 4th September 1990 which says Income of any trust declared any person by will where such trust is the only trust so declared by him will continue to be charged to tax in the manner prescribed in the first proviso to section 164 (1), Circular No. 665 dated 5th October 1993 dealing with treatment of securities and Circular No. 723 dated 19.09.1995  clarifying that Section 195 and 194C not apply to Section 172 cases.

Some of these instructions and directions provide added authority in the hands of administrative wing, which is otherwise lacking and which is very much needed for proper administration to mitigate the hardship on the part of the person governed. Example are Circular No. 521 dated 17th August 1988 empowering to admit belated refund claims and Order No. 404/2/70/72 dated 30th August 1973 empowering to admit and dispose of on merits application beyond time limit filed by the assessee under section 220 (3)

However in Kerala Financial Corporation Vs. CIT (1994) 210 ITR 129 (SC) it has been held that a circular of CBDT can not override or distract from Act.

Importance of these instructions, directions and orders should be appreciated because most of the times adoption of them is favourable to the assessee and if these are not followed assessee can bring them into the notice of Tax administrators. On the other hand if these are not favourable to the assessee due to the fact that these are against the principal of natural justice then certainly these need not be followed and a situation contrary to them can be pleaded provided it is just and equitable in the eye of justice administering authorities. At times when an advice has been given by the board. It will not be in the nature of direction or instructions and it would be as an aid for the authorities concerned to come to a decision on the merits of the case in the light of his individual judgement. Income Tax Administering Authorities should refrain from quoting or referring to the advice given by the board in any order passed by them. [Instruction No. 796 dated 12th November 1974]

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