The Central Board of Direct Taxes has clarified that proper procedures were followed in hiring Finance Minister P. Chidambaram's wife as an counsel, but admitted not informing his office about it was a "lapse".

The board was reacting to reports regarding the engagement of Nalini Chidambaram as a special counsel for the income tax department in a case involving large amount of tax revenue.

The board said that in January last year the department's senior standing counsel Pushya Sitaraman had briefed P. Chidambaram, who was then a practising advocate, about a case involving large revenues.

But the case was not taken up for hearing until May 2004 when Chidambaram was named finance minister. So in July, Sitaraman persuaded Chidambaram's wife to take up the case in view of her experience, the board said in a statement.

A proposal to this effect was received from the department's Chennai office and approved by the board as per the prescribed procedure, the board said, adding that files on engagement of counsels were not submitted to the finance minister.

"In this case also, the file was not put up to the finance minister. Nor was the finance minister informed of the matter. In retrospect, not informing the finance minister was a lapse on the part of the board," the statement said.

"This is the sole occasion on which Nalini Chidambaram was engaged as a special counsel by the income tax department. The Board took this decision as per the normal procedure," the board said, regretting any embarrassment to Chidambaram.