Binding tax circulars required reconsideration of acquisition proceedings where pending relief applications had to be examined first.

Service of notice before publication in the Official Gazette did not vitiate the jurisdiction to initiate and complete acquisition proceedings under Chapter XX-A, because the point had already been decided against that challenge. However, circular instructions issued under statutory power were binding on tax authorities, and pending voluntary disclosure applications had to be considered before any final acquisition order could stand. The acquisition orders were therefore set aside and the matters remitted for fresh consideration in light of the binding circular and the pending applications.

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Issues: (i) Whether service of notice under section 269D(2) before publication of the notice in the Official Gazette vitiated the jurisdiction to initiate and complete acquisition proceedings under Chapter XX-A of the Income-tax Act, 1961; (ii) Whether the acquisition proceedings had to be regulated in accordance with the circular instructions issued by the Central Board of Direct Taxes during the pendency of the appeals.

Issue (i): Whether service of notice under section 269D(2) before publication of the notice in the Official Gazette vitiated the jurisdiction to initiate and complete acquisition proceedings under Chapter XX-A of the Income-tax Act, 1961.

Analysis: The point had already been decided in an earlier identical matter, and the same reasoning was applied. The Tribunal's acceptance of the additional ground challenging jurisdiction on the basis of premature service of notice could not stand in light of that prior decision.

Conclusion: The challenge to jurisdiction on the ground of service of notice before Gazette publication failed.

Issue (ii): Whether the acquisition proceedings had to be regulated in accordance with the circular instructions issued by the Central Board of Direct Taxes during the pendency of the appeals.

Analysis: The Board's circular, issued under its statutory power and section 119, was binding on all authorities administering the Act. Since the circular directed dropping of acquisition proceedings where the specified conditions under the voluntary disclosure scheme were satisfied, the pending applications under that scheme had to be taken into account before any final acquisition order could be sustained. The proper course was to set aside the existing orders and remit the matter for redetermination after the Commissioner's decision on those applications.

Conclusion: The acquisition proceedings were required to be regulated in accordance with the binding circular, and the matter was remitted for fresh consideration.

Final Conclusion: The appeals succeeded to the extent that the acquisition orders were set aside and the matters were sent back for reconsideration in the light of the binding circular and the pending voluntary disclosure applications.

Ratio Decidendi: Circulars issued by the Board under its statutory authority and section 119 bind the tax authorities and the appellate court, and pending statutory relief proceedings must be considered before sustaining acquisition under Chapter XX-A.

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