Law:

Section:

Section 119 of the Income-tax Act, 1961 - Central Board of Direct Taxes - Instructions to subordinate authorities - Assessment year 2005-06 - Whether administration Instruction No. 9 of 2004, dated 20-9-2004 issued by CBDT which provides for scrutiny for return filed in financial year 2004-05 is binding on income-tax authorities - Held, yes FACTS The assessee filed his return of income on 29-10-2004 declaring total income at Rs. nil. The return was processed/assessed under section 143(1) and the same was selected for scrutiny and assessment was completed on 15-12-2006 on a total income of Rs. 41,26,844. A total sum of Rs. 27,12,120 was disallowed on the ground of excessive premium paid to keyman insurance policy out of an amount of Rs. 90,40,402. The appeal preferred by the assessee was further dismissed by the Commissioner (Appeals). However, the Tribunal accepting the submission of the assessee that scrutiny of the case had been done in violation of Instruction No. 9/2004 dated 20-9-2004 issued by the Central Board of Direct Taxes allowed the appeal. It had been further held that the Board's instructions are binding on all the Revenue authorities and therefore, selection for scrutiny of the case had not been done as per the Board's instructions referred to, and the Assessing Officer erred in assuming the jurisdiction under section 143(2) in contravention of the Board's instructions in completing the assessment under section 144, which was bad in law. The Revenue, in the instant case argued that the directions contained in Instruction No. 9/2004, dated 20-9-2004 would not defeat the provisions of law, which provides limitation of one year for scrutiny under section 143(2). Any guideline or instruction cannot supersede the provisions of the Act. HELD In the matter of Smt. Nayana P. Dedhia [2004] 270 ITR 572 / 141 Taxman 603 , the Andhra Pradesh Court held that these guidelines issued by the Board in exercise of powers in terms of section 119 relaxing the rigours of law are binding on all the officers responsible for implementation of the Act and, therefore, bound to follow and observe any such orders, instructions and directions of the Board. [Para 13]…

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