2004 (4) TMI 279 - AT - Income Tax

Tribunal Cancels CIT Order: CBDT Circular Upheld

The Tribunal held that the CIT's order under section 263 was not justified as the Assessing Officer's order was in compliance with CBDT Circular No. 762, ... Minimum Alternate Tax Issues Involved:1. Limitation for communication of the order under section 263.2. Applicability of section 115JA to the assessee.3. Binding nature of CBDT Circulars.4. Jurisdiction of the CIT under section 263.5. Impact of the appellate order on the assessment order.Issue-Wise Detailed Analysis:1. Limitation for Communication of the Order under Section 263:The assessee contended that the order dated 7-3-2002 under section 263 was served on 16-10-2002, beyond the limitation period, thus making it barred by limitation. Reliance was placed on the decision of the Hon'ble Kerala High Court in CIT v. Sree Narayana Chandrika Trust [1995] 212 ITR 456.2. Applicability of Section 115JA to the Assessee:The assessee argued that it is not a company for the purposes of section 115JA and thus should not be subject to Minimum Alternate Tax (MAT). It was emphasized that the accounts were maintained as per the Electricity (Supply) Act, 1948, and not as per the Companies Act, 1956. Reliance was placed on the Mumbai Bench Tribunal's decision in Maharashtra State Electricity Board v. Jt. CIT [2002] 82 ITD 422, which held that such entities are not subject to MAT. The Finance Minister's speech and the Board's Circular No. 762 dated 18-2-1998 were also cited, which exempted companies engaged in the generation and distribution of power from MAT.3. Binding Nature of CBDT Circulars:The assessee contended that the Assessing Officer's order was in compliance with CBDT Circular No. 762, which is binding on all Income-tax authorities under section 119 of the Act. The Supreme Court judgments in K.P. Verghese v. ITO [1981] 131 ITR 597 and others were cited to support the binding nature of such circulars. The Revenue argued that the circular should not be followed as it was contrary to the statutory provisions.4. Jurisdiction of the CIT under Section 263:The assessee argued that the CIT's invocation of section 263 was unjustified as the order of the Assessing Officer was neither erroneous nor prejudicial to the interests of the Revenue. The Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 836 was cited, which held that both conditions must be satisfied for section 263 to be invoked. The CIT(A)'s order for the assessment year 1998-99, which was in favor of the assessee, was also part of the record and should have precluded the CIT from exercising jurisdiction under section 263.5. Impact of the Appellate Order on the Assessment Order:As the CIT's order under section 263 was cancelled, the subsequent assessment order dated 25-2-2003, which levied MAT, was also rendered void. Consequently, the appeal against the assessment order was allowed.Conclusion:The Tribunal held that the CIT's order under section 263 was not justified as the Assessing Officer's order was in line with the CBDT Circular No. 762, which exempted companies engaged in the generation and distribution of power from MAT. The Tribunal emphasized the binding nature of the CBDT circulars and the Supreme Court's stance on consistency and discipline in following such circulars. Consequently, the Tribunal cancelled the CIT's order under section 263 and the subsequent assessment order, allowing both appeals of the assessee.