can issue instructions to assessing officers meant for ‘appropriate use of resources’. The idea is to ensure that field officials do not chase all cases of indirect transfer of Indian assets where the retrospective tax provision could be applied.
“This (instructing the AOs to desist from such a move) is possible despite the power of scrutiny of assessing officers are granted in Section 143(3) to make an assessment of income after seeking a return, hearing evidence in support of claims of relief or exemption, and then determining the total income on which tax is to be paid,” according to a finance ministry official.
In April 2000, the CBDT told field officers in Circular 789 that the residence certificate issued by Mauritius to FIIs was sufficient evidence for residence status as well as for beneficial ownership for treaty benefits. The Delhi HC struck it down saying a mere circular of the CBDT cannot usurp the quasi-judicial power of officers to lift the corporate veil and see the actual resident status and that asking them to accept the certificate as sufficient proof was beyond the CBDT’s power. However, the Supreme Court subsequently said CBDT was within its powers to issue directions to eliminate avoidable wastage of time, talent and energy of assessing officers in revenue collection.
“The executive may take a policy decision not to pursue all cases and lay down classes of cases that may be pursued. It would be a tightrope walk as such classification would be liable to extremely strict scrutiny of constitutionality and should have a reasonable nexus with the object sought to be achieved, which itself should be legally permissible,” said Manoj SR, a New Delhi-based expert in constitutional law.