AMBIKA CONSTRUCTION Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN this writ petition under Article 226 of the Constitution, the petitioner, Ambika Construction, a partnership firm, has prayed for quashing the order of the INcome-tax Officer, dated November 18, 1996 (annexure-3 series), under Section 143(1)/184 of the INcome-tax Act and to declare that the effect of the Central Board of Direct Taxes Circular No. 737 (see [1996] 218 ITR (St.) 97), dated February 23, 1996, cannot be applied retrospectively so as to take away the petitioner's right duly accrued under the provisions of the Central Board of Direct Taxes Circular No. 684 (see [1994] 208 ITR (St.) 8), dated June 10, 1994, contained in annexure-2.

(2.) IT is contended that the assessment order itself would indicate that the case was selected for scrutiny under Section 44AD of the Act. The petitioner, therefore, explained and submitted a return as per Circular No. 684 (see [1994] 208 ITR (St.) 8), (annexure-2). But at the time of final order dated November 18, 1996, contained in annexure-3 the respondent-Income-tax Officer made assessment applying certain procedures of Circular No. 737 (see [1996] 218 ITR (St.) 97), (annexure-4), although it was issued on February 23, 1996. IT was further contended that applicability of any circular has to be made effective with reference to the year of assessment and not at the time of final assessment. Therefore, in fact, for the particular year of assessment, Circular No. 684 (see [1994] 208 ITR (St.) 8), of the Central Board of Direct Taxes was in force and later modified vide Circular No. 737 (see [1996] 218 ITR (St.) 97), dated February 23, 1996. Therefore, the assessee was entitled to have the assessment made and completed in accordance with the previous circular. In support of such a proposition reliance was made to a case of CIT v. B.M. Edward, India Sea Foods [1979] 119 ITR 334 (Ker) [FB]. Reliance was also made to a decision of the apex court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597, to show that a statutory provision must be so construed that absurdity and mischief may be avoided. Therefore, if literal interpretation of a provision produces an absurd and unjust result which was never intended by the Legislature, the court may modify such a language to avoid the mischief.

(3.) THEREFORE, for the reasons stated above, I answer the question against the petitioner. But certainly with liberty to file an appeal before the competent authority with regard to any other grievance.