Assessment completed only on date of service of assessment order? CBDT corrects six year old blunder
WHEN the provisions relating to settlement of cases by the Income-tax Settlement Commission (ITSC) were amended in 2007, CBDT in Circular No. 3 of 2008 dated 12.03.2008 (inter alia) clarified that "the assessment shall be deemed to have been completed only on the date of service of assessment order to the applicant".
This, naturally created its own confusion. This Circular was immediately referred to in the case of Rescuwear Corporation - - by the Special Bench of the Income Tax Settlement Commission in a case decided on 13.06.2008.
In the Chirag Construction - case, the Bombay High Court held that the Circular is binding on the Revenue even if it deviates from the provisions of the Act. It was also noted that interpretations given by the CBDT in favour of the assessee are binding on the Department and the Department is estopped from raising any argument contrary to the interpretation placed by the CBDT. The High Court also noted a Supreme Court decision that Circulars can be issued by the Board to explain or tone down the rigours of law and to ensure fair enforcement of its provisions. These circulars have the force of law and are binding on the Income Tax Authorities, though they cannot be enforced adversely against the assessee.
It took the CBDT six years and a few court cases to realise its faux pas .
The latest Circular of the Board states, "It has been inadvertently stated in para 61.2 of Circular No.3 of 2008 that the assessment shall be deemed to have been completed only on the date of service of assessment order to the applicant. This statement is not in consonance with the provisions contained in Explanation to clause (b) of section 245A of the Income-tax Act which, inter alia, provides that a proceeding for assessment of any assessment year shall be deemed to have concluded on the date on which the assessment is made."
So the offending sentence is now retrospectively changed with effect from 1.6.2007 to read as, "the assessment shall be deemed to have been completed on the date on which the assessment order is passed."
Can they amend a Circular retrospectively? Will they also amend the appellate orders based on this Circular?
CBDT Circular No.16/2014, Dated: November 17, 2014