Lakshmi Stone Crushing Industries vs The Income Tax Officer

N. Kumar, J.—The assessee has preferred this appeal against the order passed by the Tribunal which has refused to interfere with the order passed by the lower authorities completing the assessment on the assessee as an Association of Persons.

The assessee is engaged in the business of stone crushing and hire of tractors and tippers. The assessee filed its return of income on 18.7.2005 in respect of the assessment year 2003-04 declaring an income of Rs. 7,296/-in the status of firm under the head income from business. Since the return of income was filed beyond the time provided under Sections 139(1) and 139(4) of the Income Tax Act, 1961 (hereinafter for short referred to as ''the Act''), a notice under Section 148 of the Act was issued on 18.8.2005 to regularize the proceedings. On receipt of the said notice, the assessee filed a return. Subsequently, it was found that the assessee has not filed the certified copy of the partnership deed along with the return of income filed. The assessing authority proposed to invoke the provisions of Section 184 (5) to treat the status of the assessee as AOP as against its claim as firm. The assessee by his letter dated 4.12.2006 objected to the proposal and also filed a copy of the partnership deed duly certified by all the partners. Thereafter, the assessment was concluded on 15.12.2006 under Section 143(3) read with Section 147 of the Act. The assessing authority declined to accept the explanation of the assessee and held the assessee in the status of AOP and concluded the assessment. While doing so, the assessee''s claim towards payment of interest on capital debited into the profit and loss account to the tune of Rs. 2,61,127/- and salary to the partners as claimed by the assessee to the extent of Rs. 65,661/- were disallowed. In addition, there were other disallowances like disallowance of 25% of HSD oil, machinery and vehicle maintenance, telephone expenses and bonus payment to the tune of Rs. 18,376/-. Consequently, an income of Rs. 4,12,230/- was determined on which tax was levied besides interest under Sections 234A , 234B and 234C of the Act.

Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). The Appellate Authority without proper consideration of the arguments and the documents produced dismissed the appeal and upheld the order of the assessing authority.

Aggrieved by the said order, the assessee preferred a second appeal to the Tribunal. The Tribunal also dismissed the appeal, affirming the findings recorded by both the authorities. It is against the said order, the present appeal is filed.

This appeal was admitted to consider the following substantial questions of law on 15.12.2009:--

"1. Whether in the circumstances, the Tribunal was justified in passing the ex-parte order without affording an opportunity to the appellant while denying the status of the Appellant as a firm?

Whether the Appellant having filed the copy of the partnership deed duly signed by all the partners well before the conclusion of the assessment and the assessment having been passed under Section 143(3) read with Section 147 of the Act, the Tribunal was justified in upholding the denial of status as firm in the case of the Appellant?

Whether in law, the Tribunal was right in affirming the status of the appellant as AOP as done by the assessing officer in the assessment for the relevant assessment year?"

Sri S. Parthasarathi, the learned counsel appearing for the assessee assailing the impugned order contended that, on failure to comply with the requirements of Section 144 of the Act, when proceedings were initiated under Section 147 of the Act, a notice under Section 148 of the Act came to be issued. In pursuance of the said notice, the assessee filed a return. In the course of assessment proceedings, the assessee also produced a duly certified partnership deed. In spite of the compliance with the aforesaid requirements, the authorities were not justified in passing an order under Section 184(5) treating the assessee as AOP and then refusing to give deductions by way of payment of interest, salary and other legitimate expenses to which the assessee is entitled to under Section 28 of the Act. Elaborating the argument he contends that, once a return is filed in pursuance of notice under Section 148 of the Act, the legal effect is, the provisions of the Act shall so far as may be, apply accordingly as if such return or a return required to be furnished under Section 139 of the Act and, therefore, the default contemplated under Section 144(1)(a) is wiped out. Secondly, on the ground of failure to comply with the requirement of Section 144 of the Act, the assessee may not be continued the benefit of deduction under Section 28 in so far as a partnership firm is concerned and, therefore, he submits a case for interference is made out.

Per contra, Sri K.V. Aravind, learned counsel appearing for the revenue supporting the impugned order contended that, though on filing of a return in pursuance of a notice under Section 148 , the said return is treated as a return furnished under Section 139 . It is not for all purposes. The word used is ''so far as may be''. Therefore, when admittedly Section 144 of the Act is not complied with, the consequences which are enumerated in Sections 184 (5) and 185 automatically applies and, therefore, denial of deductions under Section 28 of the Act is valid and cannot be found fault with. Therefore, he submits that a case for interference is not made out.

Section 139 of the Act provides that, every person, being a company or a firm or being a person other than a company or a firm, shall, on or before the due date, furnish a return of his income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, if his total income is assessable under the Act during the previous year exceeded the maximum amount which is not chargeable to income-tax. Explanation (2) to Section 139 explains the meaning of the word "due date" prescribed in different dates as the last date for filing the returns in respect of a company, a firm and a person. Section 139(1) , 139(4) and 139(5) provides for filing of returns on different dates. Section 144(1) of the Act provides for best judgment assessment. If any person fails to make the return required under sub-section (1) or (4) or (5) of Section 139 or fails to comply with the terms of a notice issued under sub-section (1) of Section 142 or having made a return fails to comply with all the terms of a notice issued under sub-section (2) of Section 143 , then the assessing authority after taking into account all relevant material which is gathered by him after giving a notice to the assessee an opportunity of being heard make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment.

Section 147 of the Act provides for initiation of proceedings in respect of income escaping assessment. However, Section 148 makes it clear that, before making the assessment, reassessment or recomputation under Section 147 , the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. Once such a return is filed provisions of the Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139 .

Chapter XVI of the Act provides for special provisions applicable to firms. Section 184 deals with assessment of a firm. It provides that, a firm shall be assessed as a firm for the purposes of this Act, if (i) the partnership is evidenced by an instrument; and (ii) the individual shares of the partners are specified in that instrument. In proof of the assessee being a firm, subsection (2) provides that, a certified copy of the instrument of partnership shall accompany the return of income of the firm. Sub-section (5) of Section 184 prior to amendment, i.e., prior to 1.4.2004 provides that, if such a firm has failed to comply with the requirement of Section 144 , then the firm shall not be assessed as a firm but it shall be assessed in the same manner as an Association of Persons. Similarly, Section 185 prior to its amendment with effect from 1.4.2004 provided that, if the assessee firm does not comply with the provisions of Section 184 , then the firm shall be assessed for that assessment year in the same manner as an Association of Persons. By Finance Act, 2003 which came into effect from 1.4.2004, sub-section (5) is substituted. The substituted provision now provides that, if the assessee firm fails to comply with the requirement mentioned in Section 184 , the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession" and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28 .

Therefore, once there is non-compliance of Section 144 , though the assessee firm is assessed as a firm, it shall not be entitled to the deduction which are allowable in respect of a firm as provided under sub-section (5) of Section 28 of the Act. Similarly, the substituted provision Section 185 provides that, if the firm does not comply with the provisions of Section 184 , namely non-furnishing of partnership deed along with the return, then the firm would again be not entitled to the benefit of deduction allowable in respect of a firm as provided in clause (v) of Section 28 of the Act.

Now, the question for consideration is, when admittedly the assessee has not complied with the requirement of Section 144 and when he files a return in pursuance to the notice issued under Section 148 and when such return is to be treated as a return filed under Section 139 , still is the assessee not entitled to the benefits of deduction allowable to a firm as provided under clause (v) of Section 28 of the Act. All the three authorities have held relying on the judgment of the Kerala High Court that, though the return filed in pursuance of a notice under Section 148 is treated as a return filed under Section 139 , it would not have the effect of wiping out the failure contemplated under Section 144 of the Act. Though the assessee would be assessed under the Act as a firm, but the benefits flowing to a firm as per clause (v) of Section 28 is not available to the assessee in view of sub-section (5) of Section 184 of the Act.

In this regard it is necessary to interpret subsection (5) of Section 184 of the Act. It reads as under : -

"184(5) Notwithstanding anything contained in any other provision of this Act, where, in respect of any assessment year, there is on the part of a firm any such failure as is mentioned in section 144 , the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession" and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28 ."

A reading of the said provision makes it clear that, if there is a failure on the part of the firm, as is mentioned in Section 144 , then the firm shall be so assessed that no deduction as contemplated in the said provision read with clause (v) of Section 28 is allowable to the said firm. That is the plain meaning of the said Section. Similarly, Section 185 provides that, if a firm does not comply with the provisions of Section 184 , same consequences would follow. Sub-section (5) of Section 184 deals with non-compliance of Section 144 and Section 185 deals with non-compliance of Section 184 . In fact, the Kerala High Court in case of Radha Picture Palace Vs. Dy. Commissioner of Income Tax and Another, has categorically held as under:--

"The object of Section 184(5) is such that only assessees, who comply with the statutory provisions which include filing of regular returns in time and co-operating with the Department by complying with the terms of notices issued under ss. 142 , 143(2) are entitled to the benefit of deductions. All what s. 148 conveys is that reassessment under s. 147 based on the return filed pursuant to notice issued under the said section should be completed in the same way a regular assessment is completed based on a return filed under s. 139 (1) . However, it cannot be said that an assessee, who filed a return based on notice issued under s. 148 is not involved in any of the failures referred to in s. 144(1) which the assessee admittedly has commuted inasmuch as the assessee has not filed a regular return under s. 139 . The very purpose of introducing a fiction in s. 148 is that but for the fiction available therein, a return filed against notice issued under s. 148 cannot be treated as a regular return under s. 139 . However, filing of return against notice issued under s. 148 itself is not the same as filing a return under s. 139 of the Act. So much so, failures referred to in s. 144(1) are absolute failures which cannot be remedied by filing returns based on notice under s. 148 of the Act."

In fact, this Court in the case of COMMISSIONER OF INCOME TAX v. SRI HUKMICHAND AND COMPANY, ITA No. 4/2004 dealing with a case where the assessee was precluded from filing a return within the due date under Section 139 of the Act because the assessee''s books were seized by the APMC authorities held that the failure to comply with the requirement of Section 144(1) of the Act was not intentional, beyond their control and, therefore, they cannot be denied the benefit of deduction under Section 28 of the Act.

The interpretation placed by the Kerala High Court in view of the words used in the Section cannot be found fault with. But, the Central Board of Direct Taxes explaining the substance of the provisions of the Act which are brought on the statute book by virtue of the Finance Act, 2003 has issued Circular No. 7/2003. At para 66 they were dealing with Rationalization of provisions relating to assessment of firms. It reads as under:

"66.1 Under the existing provision contained in sub-section (5) of Section 184 , where, in respect of any assessment year, there is on the part of a firm any such failure as is mentioned in Section 144 , the firm shall be assessed in the same manner as an association of persons, and all the provisions of the Income-tax Act shall apply accordingly.

66.2 Further, the existing provisions of Section 185 provide that in case a firm does not comply with the provisions of section 184 for any assessment year, the firm shall be assessed for that assessment year in the same manner as an association of persons, and all the provisions of this Act shall apply accordingly.

66.3 With a view to rationalize the provisions relating to assessment of firms, the Act has substituted Sub-section (5) of Section 184 and Section 185 so as to provide that in case a firm does not comply with the other provisions of Section 184 or a best judgment assessment is made in the case of the firm as referred to in Section 144 , no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the business income of the firm. Such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of Section 28 of the Income-Tax Act.

66.4 These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-05 and subsequent years."

Paragraph 66.3 makes it clear that, the substituted Sub-section (5) of Section 184 and Section 185 intends to provide that in case a firm does not comply with the other provisions of Section 184 or a best judgment assessment is made in the case of the firm as referred to in Section 144 , no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the business income of the firm. In sub-section (5) of Section 184 , there is no mention about best judgment assessment. What is provided therein is failure as mentioned in Section 144 . On failure to comply with the requirements of Section 144 , the assessing authority is vested with the power to pass a best judgment assessment. The said best judgment assessment would be passed by the assessing authority due to non-cooperation of the assessee and, therefore, as a consequence the assessee is deprived of the deductions enumerated in the said provision. Now, that the explanation given by the CBDT to sub-section (5) of Section 184 , they have introduced a requirement of a best judgment assessment as a condition precedent for denying the benefit of deduction. Mere noncompliance of Section 144 would not deprive the assessee the benefit of deduction under Section 28 . No doubt the said explanatory note includes words which are not found in the Section. Therefore, the learned counsel for the revenue contended in the first place that, Circular No. 7/2003 is not issued in terms of Section 119 of the Act, as such it is not enforceable. Secondly, he contended that the explanation offered by the CBDT runs counter to the express provisions contained in the statute in which statutory provisions should prevail. Therefore, he submits that the authorities were justified in denying the benefit of deduction relying on the statutory provision.

The Apex Court had an occasion to consider the effect of Circulars under Section 119 of the Act in the case of Union of India and Another Vs. Azadi Bachao Andolan and Another, , where it is held as under:--

"Effect of circular under Section 119 :

Much of the argument centred around the effect of the circular issued by the Central Board of Direct Taxes under Section 119 of the Act and its binding nature.

Section 119 , strategically placed in Chapter XIII which deals with Income-Tax Authorities'' is an enabling power of the CBDT, which is recognised as an authority under the Income-tax Act under section 116(a) . The CBDT under this section is empowered to issue such orders, instructions and directions to other income-tax authorities "as it may deem fit for proper administration of this Act". Such authorities and all other persons employed in the execution of this Act are bound to observe and follow such orders, instructions and directions of the CBDT. The proviso to sub-section (1) of section 119 recognises two exceptions to this power. First, that the CBDT cannot require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner. Second, is with regard to interference with the discretion of the Commissioner (Appeals) in exercise of his appellate functions. Subsection(2) of Section 119 provides for the exercise of power in certain special cases and enables the CBDT, if it considers it necessary or expedient so to do for the purpose of proper and efficient management of the work of assessment and collection of revenue, to issue general or special orders in respect of any class of incomes of class of cases, setting forth directions or instructions as to the guidelines, principles or procedures to be followed by other income-tax authorities in the discharge of their work relating to assessment or initiating proceedings for imposition of penalties. The powers of the CBDT are wide enough to enable it to grant relaxation from the provisions of several sections enumerated in clause (a). Such orders may be published in the Official Gazette in the prescribed manner, if the CBDT is of the opinion that it is so necessary. The only bar on the exercise of power is that it is not prejudicial to the assessee. We are not concerned with the provisions in clauses (b) and (c) in the present appeals.

In K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, , it was pointed out by this Court that not only are the circulars and instructions, issued by the CBDT in exercise of the power under section 119 , binding on the authorities administering the tax department, but they are also clearly in the nature of contemporanea expositio furnishing legitimate aid to the construction of the Act.

The Rule of contemporanea expositio is that "administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction commonly referred to as practical construction, although non- controlling, is nevertheless entitled to considerable weight, it is highly persuasive." (Crawford on statutory construction, 1940, edition, as in supra note 13).

The validity of this principle was recognised in Baleshwar Bagarti v. Bhagirathi Dass [1908 ILR 35 Cal 701, 713], where the Calcutta High Court stated the rule in the following words :

"It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it."

The statement of this rule has also been quoted with approval by this Court in Desh Bandhu Gupta and Co. and Others Vs. Delhi Stock Exchange Association Ltd., .

In K.P. Varghese this Court held that the circulars of the CBDT issued in exercise of its power under section 119 are legally binding on the revenue and that this binding character attaches to the circulars (page 612) "even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction."

Navnitlal C. Javeri Vs. K.K. Sen, Appellate Assistant Commissioner of Income Tax, ''D'' Range, Bombay, and Ellerman Lines Ltd. Vs. Commissioner of Income Tax, West Bengal, Calcutta, clearly establish the principle that circulars issued by the CBDT under section 119 of the Act are binding on all officers and employees employed in the execution of the Act, even if they deviate from the provisions of the Act.

In UCO Bank, Calcutta Vs. Commissioner of Income Tax, West Bengal, , 896], dealing with the legal status of such circulars, this Court observed:

"Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act. Under section 119(2) however, the circulars as contemplated therein cannot be adverse to the assessee. Thus the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119 . The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities."

In Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, it was pointed out that the circulars issued by CBDT under Section 119 of the Act have statutory force and would be binding on every income-tax authority although such may not be the case with regard to press releases issue by the CBDT for information of the public.

In Collector of Central Excise, Vadodra Vs. Dhiren Chemical Industries, , this Court, interpreting the phrase ''appropriate'', observed: (page 130 of 2 SCC):

"We need to make it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue."

The Apex Court in the case of State of Kerala and Others Vs. Kurian Abraham Pvt. Ltd. and Another, interpreting Section 119 (1) of the Act held as under:--

"19. One more aspect needs to be mentioned. Provisions of Section 3(1A) are similar to the provisions of Section 119(1) of the Income-tax Act, 1961 ("1961 Act") inasmuch as both the sections have used the expression "for the proper administration of this Act". According to the Law of Income-tax by Kanga and Palkivala, the Board is entrusted with the power to give effect to the provisions of the Act and to provide "fair and just administration" in the matter of imposition and collection of tax. This is where it becomes the incumbent duty of the Board to grant administrative relief in appropriate cases. In such exercise, incidentally the Board has to consider the effect of the items enumerated in the Entry. Therefore, it is not open to the State Government to contend that the Board in this case had entered into an area which is earmarked for the legislature/executive. In our view, the said circular grants administrative relief to the business. It was entitled to do so. Therefore, it cannot be said that the Board had acted beyond its authority in issuing the said circular. One more reason needs to be stated. Whenever such binding circulars are issued by the Board granting administrative relief(s) business arranges its affairs relying on such circulars. Therefore, as long as the circular remains in force, it is not open to the subordinate officers to contend that the circular is erroneous and not binding on them."

From the aforesaid judgments referred to by the Apex Court it is clear that, the CBDT under this section is empowered to issue such orders, instructions and directions to other income-tax authorities "as it may deem fit for proper administration of this Act". Such authorities and all other persons employed in the execution of this Act are bound to observe and follow such orders, instructions and directions of the CBDT. The powers of the CBDT are wide enough to enable it to grant relaxation from the provisions of several sections enumerated in clause (a). The only bar on the exercise of power is that it is not prejudicial to the assessee. The circulars issued by the CBDT issued under section 119 of the Act are legally binding on the officers and employees employed in the Section and even if they deviate from such construction. Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board has the power, to tone down the rigour of the law and ensure a fair enforcement of its provisions. The authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119 . The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities. It is trite a law as long as an authority has power which is traceable to a source, the mere fact that the source of power is not enacted in an instruction does not render the instruction invalid.

Section 119 of the Act confers power on the Board to issue instructions to subordinate authorities. The instructions may be in the nature of orders, instructions and directions to other income tax authorities, the purpose of the same is proper administration of the Act. Once such instructions, orders or directions are issued, all authorities and persons employed in the Section of the Act shall observe and follow them. In the instant case Circular No. 7/2003 is issued by way of an explanatory note on provisions relating to direct taxes with reference to Finance Act, 2003. The introduction provides that the Finance Act, 2003 is passed by the Parliament, received the assent of the President on 14.5.2003 and it has been enacted as Act No. 32/2003. The object of the circular is to explain the substance of the provisions of the Act relating to direct taxes. This explanation is meant for all the subordinate authorities for the purpose of proper administration of the Act and the same is binding on all of them and they shall follow and observe such orders. It is by way of explanation while rationalizing the provisions relating to assessment of firms it is made clear that, only in the event of a best judgment assessment is made for failure to comply with Section 144 of the Act, the benefit which is available to a firm under Section 28 of the Act can be denied. If a best judgment assessment under Section 144 of the Act is not made, no disallowance under Section 184(5) of the Act, can be made. No doubt this explanatory note is not in conformity with Section 184(5) of the Act. But, when the CBDT issued the said explanatory note, it is giving relaxation and benefit to the assessee which the statute has not provided. Such a power is vested in the CBDT by virtue of Section 119 . Once such a benefit is conferred by way of a circular, the authorities are bound by the same. They cannot sit in judgment over the said explanation and deny the benefit to the assessee. Even though this Court can interpret the said provision and note that there is inconsistency between the provision and the explanation offered, but when the CBDT issued such instruction granting that benefit to the assessee that has to be respected. In that view of the matter, the approach of the three authorities in denying the benefit to the assessee was not justified. It is contrary to the said explanation found in the circular which the CBDT wanted to extend to the assessee in order to overcome the hardship by virtue of the said statutory provision. Therefore, the impugned orders cannot be sustained.

It was also contended that, when the partnership deed was not enclosed to the return filed, there is noncompliance of Section 184(2) of the Act and, therefore, the consequences mentioned in Section 184 has to follow. But, it is on record before the assessment, a partnership deed duly certified and signed by all the partners were produced before the assessing authority. Therefore, there is substantial compliance with sub-section (2) of Section 184 of the Act. As could be seen from the language employed in Section 185 , if there is non-compliance with the provisions of Section 184 , the firm shall be so assessed and no deduction would be granted. In other words it is at the time of assessment, if the authority is not given the partnership deed, the firm would be given the benefit. But, at the time of assessment, if the partnership deed was produced, certainly the authorities have to look into the partnership deed and if it is a firm which satisfies the other requirements, then the firm would be entitled to other benefits. Under such circumstances, Section 185 is not attracted. Seen from any angle, the impugned orders passed by the authorities cannot be sustained. Accordingly, we pass the following order:--

"(i) Appeal is allowed.

(ii) The impugned orders passed by the authorities are hereby set aside.

(iii) The substantial questions of law are answered in favour of the assessee and against the revenue."

Parties to bear their own costs.