Important Point
Circular No. 455 dated 16.5.1986 issued by the C.B.D.T. is applicable to all pending proceedings which have not attained under Section 269-I of the Act as defined in the explanation to the said Section.

Judgment

Srinivasan, J.-The appellants purchased certain lands with buildings thereon in 1977 for a sum of Rs. 2,45,000/-. The Ins­pector of Income Tax valued them at Rs. 3,24,000/- and later in 1979 the Departmental Valuation Officer valued them at Rs. 7,24,000/-. The Inspecting As­sistant Commissioner, Acquisition Range, Ernakulam ordered acquisition of the property on 31.3.1981. The appellants filed an appeal to the Tribunal by order dated 31.10.1981. The appeal was allowed and the proceedings were cancelled. As against the said order, the Revenue filed an appeal under Section 269H in the High Court of Kerala.

2. During the pendency of the appeal, Chapter XX-C was introduced in the Income Tax Act (hereinafter referred to as ‘Act’) by Finance Act of 1986 w.e.f. October 1, 1986. Under Section 269 RR, Chapter XX-A was made inapplicable in relation to transfer of an immovable property after September 30, 1986. The Central Board of Direct Taxes (hereinaf­ter referred to as ‘C.B.D.T.’) issued Circular No. 455 dated 16.9.1986. The relevant part of the Circular reads as follows:-

“With a view to achieve early finalisation of proceedings under the existing Chapter XX-A of the Income-Tax Act, 1961, the Board has decided that with effect from April 1, 1986, acquisition proceedings under Section 269C will not be initiated in respect of an immovable property for which the apparent consideration is Rs. 5 lakhs or less and that where acquisition proceedings have been initiated by issue of notice under Section 269D, the proceedings will be dropped if the apparent consideration of the immovable property is below Rs. 5 lakhs.”

3. When the appeal was taken up by the High Court, the appellants herein contended that the acquisition proceedings had to be dropped as the consideration was only Rs. 2,45,000/-. The matter was referred to a Full Bench of the High Court for decision on the question whether Administrative Circular issued by the C.B.D.T. under the Act to sup­plement the statute can supplant the same by deviating or detracting or going beyond or contrary to the statutory provisions.

4. The Full Bench opined that the Circular was not applicable to the case on hand as the acquisition proceedings were over by the order of the Competent Authority passed on 31.3.1981. The Full Bench observed that the pendency of the proceedings before the Competent Authority was necessary for the applicability of the Circular and as no such proceedings were pending in this case, the Circular had no applica­tion. Consequently, the Full Bench declined to answer the question referred and directed the matter to be posted before the Division Bench for hearing.

5. Against the said order of the Full Bench the appellants have pre­ferred this appeal on Special Leave. When leave was granted, the hearing of the pending appeal before the High Court was stayed. The only question to be considered is whether the Circular issued by the Board is applicable to proceedings pending in the Appellate stages or not. In other words, the question is, whether the Circular will not apply to proceedings in which the Competent Authority had passed an order earlier even though the same is subject matter of appellate pro­ceedings.

6. Chapter XX-A of the Act was introduced by Taxation Laws (Amendment) Bill, 1971 to implement the recommendations of the Wanchoo Committee with a view to prevent or arrest evasion of tax through under statement of value of immovable property in sale transactions. The provisions of the Chapter enabled the Central Government to acquire any immovable property having a fair market value above Rs. 25 lakhs in cases where the consideration declared in the instrument of transfer was less than the fair market value of the property on the date of acquisition of the instrument. That power was available in cases where there were reasons to believe that the consideration agreed to between the parties had not been truly stated in the document with a view to facilitate tax evasion b