MATHEW M. THOMAS AND ORS. versus COMMISSIONER OF INCOME TAX

Citation: [1999] 1 S.C.R. 651 · Decided: 16-02-1999 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Appeal(s) allowed
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Judgment (excerpt)

MATHEW M. THOMAS AND ORS. 
A 
v. 
COMMISSIONER OF INCOME TAX 
FEBRUARY 16, 1999 
[D.P. WADHWA AND M. SRINIVASAN, JJ.] 
B 
;,.. 
Income Tax Act, 1961: Sections 269-D, 269-G, 269-H, 269-I-Explana-
tion, 269-RR (Chapter XX-A) and 269-UD (Chapter XX-C) 
Income tax-Property under sale-<.:ompulsory acquisition of--CBDT C 
issued Circular No. 455 dated 16.9.1986, which provided for dropping of 
acquisition proceedings w.e.f 1.4.1986 in cases where apparent consideration 
of immovable property was below Rs. 5 lakh~Applicability of Circular No. 
455-Held, Applicable to all pending proceedings at the appellate stage which 
have not attained finality under S.269-I and also to the proceedings pending 
before the Competent Autho1ity. 
D 
Section 269- D--f'roceedings-Meaning of-Held, include the proceed-
ings at the appellate stage. 
Section 119-Circulars issued by CBDT-Binding nature of-Held, All 
authorities employed in the execution of the IT Act are duty bound to observe E 
and fallow the orders, instrnctions and directions of CBDT. 
Words and Phrases : 
"Proceedings''-Meaning of-111 the context of S.269-D of the Income 
Tax Act, 1961. 
The appellant purchased a certain immovable property for a sum 
below Rs. 5 lakhs. The Inspecting Assistant Commissioner ordered ac-
quisition of the property. The appellants filed an appeal before the Income 
F 
Tax Appellate Tribunal, which was allowed. 
G 
During the pendency of the Revenue's appeal before the High Court 
under Section 269-H 'or the Income Tax Act, 1961, Chapter XX-C was 
introduced in the Act. The Central Board of Direct Taxes (CBDT) issued 
a Circular No. 455 dated 16-9-1986 under Section 269-RR of the Act which 
'.,·, 
provided for dropping of acquisition proceedings where the apparent H 
651 
652 
SUPREME COURT REPORTS 
[1999] 1 S.C.R. 
A consideration of the immovable property was below Rs. 5 lakhs w.e.f. 
1.4.1986. 
The appellants contended before the High Court that the acquisition 
proceedings had to be· dropped as the consideration was. below Rs. 5 lakhs. 
B A Full Bench of the High Court held that the pendency of the proceedings · 
before the Competent Authority was necessary for the applicability of the 
said Circular and as no such proceedings were pending in the instant case, 
the Circular had no application. Hence this appeal. 
c 
Allowing the appeal, this Court 
HELD : 1.1. Chapter XX-A of the Income Tax Act, 1961 was intro-
duced by Taxation Laws (Amendments) Bill, 1971 to implement the recom-
mendations of the Wanchoo Committee with a view to prevent or arrest 
evasion of tax through understatement of value of immovable property in 
D sale transactions. The Government found that the provisions of the said 
Chapter were not as effective as intended. Chapter XX-C was introduced 
and Chapter XX-A was deleted. The provisions of Chapter XX-C are thus 
in the nature of pre-emptive purchase by the Central Government to the 
proposed sale and they were applicable to the properties, the value of 
which exceeded Rs. 5 lakhs. (655-B, E] 
E 
1.2. In view of the change in the legislation, the CBDT thought fit to 
issue Circular No. 455, obviously with an object of achieving the earlier. 
finalisation of the proceedings under Chapter XX-A. The language of the 
Circular does not in any manner indicate that it will apply only to proceed-
F ings pending before the Competent Authority. The mere fact that reference 
is made to the initiation of the proceedings by notice under Section 269-D 
does not limit the operation of the Circular to proceedings immediately 
following such notice and culminating with the order of the Competent 
Authority. If proceedings are pending before the Tribunal in appeal and 
before the High Court on further appeal, they are the acquisition proceed-
G ings of the same nature as they are only in continuation of the proceedings 
initiated by. the Competent Authority. It is well settled that the word 
"Proceedings" shall include the proceedings at the appellate stage. [ 656-B-D] 
Garikapati Veeraya v. N. Subiah Choudhry, AIR (1957) SC 540, relied 
H on. 
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MATIIEWM. TIIOMASv. C.l.T. [SRINIVASAN,J.] 
653 
CIT v. Rattan Chand Sood, (1987) 66 ITR 497 (Del); CIT v. Export A 
India Corporation (P) Ltd., (1996) 219 ITR461 (P&H); CITv. GobindRam, 
(1996) 221 ITR 892 (P&H); CIT v. Gursher Singh, (1997) 225 ITR 725 
(P&H); Competent Authority (Acqwsition) v. Smt. Lalita Tody, (1997) 225 
ITR 665 (Pat) and CIT v. Sivan Soap Factory, (19
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