Does the celebrated Circular No. 14 of 1955 still hold the field?
I recently got hold of the original copy of the Circular No. 14 of 1955.
Apart from interesting observations in Para2, this Circular recognised it as the "duty" of officers to assist tax payers in every reasonable way, including inviting their attention to any relief available to them which the taxpayers have "omitted to claim for some reason". Circulars, as is settled, are binding upon the Revenue.
But does this Circular issued under the 1922 Act survive under the 2025 Act? The answer lies in the law itself, and the logic flows in a waterfall:
A. 1922 to 1961:
When the 1961 Act was enacted, S. 297(2)(k) dealing with Repeals and Savings stated that "directions", "instructions", "orders", "notifications" etc. issued under the 1922 Act, insofar as not inconsistent with 1961 Act, shall be "deemed to have been issued" under the 1961 Act.
While the term "Circular" was not specifically mentioned, Hon'ble SC in Azadi Bachao Andolan held that "Circulars" emanating from CBDT also contains orders, instructions or directions only.
Thus, the Circular is first deemed to have been "issued under the 1961 Act".
B. 1961 to 2025:
S. 536(2)(j) of the 2025 Act contains almost identical provisions dealing with "Repeals and Savings". CBDT has also clarified in its FAQs that "As per the provisions of section 536(2)(j) of the Income Tax Act, 2025, circulars, notifications, instructions, approvals, etc, issued under the old Act will remain valid as long as they do not conflict with the new Act."
Thus, the Circular statutorily teleports itself, firstly from the 1922 Act to the 1961 Act and thereafter, to the 2025 Act.
Now, the critical question is: Whether it is in conflict with the New Act?
Decisions such as Goetze under the 1961 Act barred a fresh claim before AO otherwise than by way of a revised return. But that decision, unreasoned as it is, runs in the teeth of the AO's statutory duty to "make an assessment of the total income or loss", not just "make additions to the returned income". In any case, while Goetze bars a fresh claim by the Assessee, it does not absolve the AO of his independent duty, under this binding Circular, to grant relief as per the law.
Further, though Goetze permits a fresh claim before appellate authorities, is it really prudent to force a taxpayer into litigation merely to lodge the very same claim before appellate authorities, especially when the AO has no dispute on merits of the claim?
So what exactly is in conflict with the provisions and spirit of the Act?
This Circular? or Goetze?