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Validity of: Selection of case for scrutiny assessment-Selection contrary to CBDT's instructions
January, 30th 2008

CIT vs Best Plastics (P) Ltd.
Citation 295 ITR 256 
Validity of: Selection of case for scrutiny assessment - Selection contrary to CBDT's instructions

The assessee's case was selected for scrutiny assessement contrary to the instructions of the CBDT in Circular No. 1917 dated 3 June 1994. The Tribunal was right in setting aside the assessement since the said circular was binding on the AO.
High Court of Delhi

CIT vs Best Plastics (P) Ltd.

I. T. A. No. 951 of 2005

T.S. Thakur and J.M. Malik, JJ

5 April 2006

J.R. Goel for the Appellant
Manu K. Giri with K. Sampath for the Respondent


The Commissioner of Income-tax and the Income-tax Appellate Tribunal have both relied upon a decision of the Supreme Court in Commissioner of Customs v. Indian Oil Corporation Ltd. [2004] 267 ITR 272 to have that the circulars issued by the Central Board of Direct Taxes (CBDT) binding on the officers of the Income-tax Department. To the same effect is the decision of the Supreme Court in UCO Bank v. CIT [1999] 237 ITR 889.

The respondent-assessee's return was in the instant case taken up for scrutiny in violation of the Central Board of Direct Taxes circular according to which if the returned income is 30 per cent, more than the income of the earlier assessment year, the case of the assessee should not be scrutinised under Instruction No. 1922 dated March 9, 1995, extended the operation of the circulars to the assessment year 1995-96 also as is evident from the following paragraphs appearing in the same :

"Under Board's Instruction No. 1917 dated June 3, 1994, certain categories of cases were kept outside the scope of sample scrutiny during the financial year 1994-95. On such category consisted of those assessees who declared a total income for the assessment year 1994-95 that was more by 30 per cent, of the total income returned for the assessment year 1993-94 subject to the conditions that :

(a) the income for both the assessment years exceeded the basic exemption limit ;

(b) the total income for the assessment year 1993-94 was Rs. 5 lakhs or less ; and

(c) the tax was fully paid for the assessment year 1994-95 before the return was filed.

2. Suggestions have been received to extend this scheme for the assessment year 1995-96 also. After considering them, it has been decided that the above norm of exclusion from sample scrutiny could be extended for the assessment year 1995-96 also in such cases where the following criteria are satisfied :

(i) the income returned for the assessment year 1995-96 is at least 30 per cent. more than the total income returned for the assessment year 1994-95."

The assessment order passed by the Assessing Officer has in the light of the above been set aside by the Commissioner which order has been upheld by the Tribunal in appeal. No substantial question of law arises for our consideration in the light of the settled legal position emanating from the aforementioned judgments of the Supreme Court. This appeal accordingly fails and is hereby dismissed.

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