www.taxguru.in 1 in the income tax appellate tribunal “smc” bench : kolkata [before hon’ble sri n.v.vasudevan, jm] i.t.a no. 1632/k

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IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH : KOLKATA
[Before Hon’ble Sri N.V.Vasudevan, JM]
I.T.A No. 1632/Kol/2016
Assessment Year : 2011-12
Radharaman Jew Trust Fund -vs.- I.T.O., Ward-43(3)
Kolkata Kolkata
[PAN : AAAAR 0974 P]
(Appellant) (Respondent)
For the Appellant : Shri G.R.Saha, Advocate For the Respondent : Shri
Nicholas Murmu, JCIT
Date of Hearing : 05.04.2017.
Date of Pronouncement : 12.04.20 17.
ORDER
Per N.V.Vasudevan, JM
This is an appeal by the Assessee against the order dated 31.05.2016
of C.I.T.(A)-13, Kolkata relating to A.Y.2011-12.
2.
The Assessee is a trust having come into existence under deed of
settlement dated 15.08.1945.The assessee filed its return of
income on 29.12.2011 for A.Y.2011-12 in the status of an AOP. The
Assessee did not make claims for exemption of its income u/s.1 1
of the Income Tax Act, 1961 (Act). It has all along been assessed
as an AOP. The AO processed the return of income filed by the
assessee u/s 143(1) of the Income Tax Act, 1961 (Act) on 02.03.20
13. The assessee had filed its return of income in Form ITR 5 and
the status adopted was Status No.6 given in the form namely “any
other AOP/BOP artificial juridical person”.
1.
The AO issued an intimation u/s 143(1) of the Act in which he
adopted the status of the assessee from an AOP to a person taxable
in terms of section 139(4A) of the Act
ITA No.1632/Kol/2016
Radharaman Jew Trust Fund
A.Yr.2011-12
holding that the applicable form of return was Form No.7 instead of
Form No.5 in which the assessee had furnished the return of income. In
the return of income filed the assessee had declared total income of
Rs.8,28,210/- on which the tax liability was Rs.1,05,537/-. The
advance tax and TDS paid by the assessee was a sum of Rs.1,71,834/-.
The assessee was thus entitled to a refund of tax paid in excess.
4. The AO however adopting the status of the assessee as falling
within the form of return to be fled in ITR-7 determined the tax
liability of the assessee at a sum of Rs.2,81,826/- and raised a
demand of Rs.1,09,992/- after giving credit to advance tax paid and
TDS of Rs.1,71,834/-. There is no difference in the total income as
declared by the assessee and the total income as determined in the
intimation u/s 143(1) of the Act. The increased tax liability is
because of the AO’s action in concluding that the case of the assessee
falls within the status of an AOP to which the provision of section
139(4A) of the Act apply. The provision of section 139(4A) of the Act
applies to an income derived by a trust which exists only for
charitable or religious purposes whose total income without giving
effect to the provision of section 11 and 12 exceeds the maximum
amount which is not chargeable to income tax. In the case of such
trust Rule 12(1)(g) of the Income Tax Rules, 1962 (Rules) requires
filing return of income in Form No.ITR-7. The assessees who are
covered by the aforesaid provision are chargeable to tax at a higher
rate of tax. The persons who are covered under Sec.139(4A) of the Act
are chargeable to tax at a higher rate of tax on their total income.
By the action of the AO in holding that the Assessee is also a person
who is covered by the provisions of Sec.139(4A), the rate of tax at
which total income is assessable and consequent tax liability of the
Assessee was determined at a much higher sum than what was claimed by
the Assessee in the return of income. The AO processed the return of
income filed by the assessee u/s 143(1) of the Income Tax Act, 1961
(Act) on 02.03.2013, making the aforesaid adjustment to the tax
payable by the Assessee consequent to his action in treating the
Assessee as a person covered by Sec. 139(4A) of the Act.
ITA No.1632/Kol/2016
Radharaman Jew Trust Fund
A.Yr.2011-12
4. The assessee was aggrieved by the intimation dated 02.03.2013
issued by the AO and he filed an appeal before CIT(A) contending that
while processing the return u/s 143(1) of the Act the AO cannot
unilaterally change the status of the assessee from an AOP to which
form No.ITR-5 is applicable to a person falling within the ambit of
section 139(4A) to whom ITR-7 form in which return of income has to be
filed. This contention was rejected by CIT(A). The following were the
relevant observations of CIT(A) :-
“ In this case perusal of submission of the appellants shows that the
appellant had filled its return in form NO.5. form which is to be used
only by a firm, AOP.BOI, artificial judicial persons, co-operative
society and legal authority to file their income tax return. As
submitted the appellant case is claimed to be religious trust which
has been created for the benefit of deity and also in favour of
various beneficiary by creating various heads of funds in favour of
poor and indigent widow and the other related family members, to the
retired farmer servants of the trust and claimed exemption.
The nature of activity, objective of the society and documents
submitted required to file return in Form No. ITR 7, as per
instruction issued by C8DT, which is applicable to the persons
mentioned below:-
1.
Return under section 139( 4A) is required to be filed by every
person in respect of income derived from property held under trust
or other legal obligation wholly for charitable or religious
purposes or in part only for such purposes.
2.
Return under section 139(48) is required to be filled by a
political party if the total income without giving effect to the
provisions of section 139( 4A) exceeds the maximum amount which is
not chargeable to income tax.
3.
Return under section 139( 4C) is required to be filed by every
scientific research association, news agency, association or
institution referred to any section 10(238) fund or institution or
university or other educational instituting or any hospital or
other medical institution.
4.
The return under section 139(4D) is required to be filed by every
university, college or other institution which is required - to
furnish return of income or Joss under any other provision of this
section.
Keeping in view of the aforesaid instruction for filing of ITR-7 in
case of exemption claimed, the AO has rightly assessed the case which
is covered in ITR 7
ITA No.1632/Kol/2016
Radharaman Jew Trust Fund
A.Yr.2011-12
other than ITR 5 filed by the appellant. It is since qua non for AOP
that it must be one in which two or more person join in a common
purpose or common action. In CIT V/s Ibrahimji Hakimji (1949) 8 ITR
501 (Sind), it was held the trustees form AOP but this could not make
them owners. The definition of the word person given in the Act under
section 2(3 1) in enumerative. The last category of the person defined
in the Said section is 'every juridical person, not falling within any
of the preceding sub-clauses'. Therefore, it is person falls within
any of the preceding sub-clauses, then it cannot be termed as
Artificial juridical Person. A Hindu may dedicate for religious or
charitable objects all property which he can validity dispose of by
gift or by will for the purpose of endowment. Even in the case of
dedication to an idol, which cannot itself physically hold lands in
trustees. The mere execution of a deed, though it may purport on the
face of it is dedicate property to an idol, it is not enough to
constitute a valid endowment. Therefore, this is a prima facie mistake
committed by the appellant by filing ITR-5 whereas it was supposed to
file ITR-7 which has been correctly done by the AO and this is in the
scope of section 143(1)(a).”
5. Aggrieved by the order of CIT(A) the assessee has preferred the
present appeal before the Tribunal raising the following grounds of
appeal :-
“FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE
COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW IN HOLDING THAT THE
ASSESSING OFFICER CAN CHANGE THE STATUS OF THE APPELLANT WHILE
PROCESSINF THE RETURN OF INCOME UNDER S. 143(1)(a) OF THE INCOME TAX
ACT;
2.
FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE
CIT{A) ERRED IN LAW IN HOLDING THAT THE APPELLANT CLAIMED
EXEMPTION FROM LIABILITY TO INCOME TAX U/S 11 OR AT ALL WHEN ALL
THAT THE APPELLANT ASKED FOR WAS THAT BEING AN ARTIFICIAL
JURIDICAL PERSON SRI SRI IS WAR RADHARAMAN JEW, THE BENEFICIARY
DEITY, SHOULD BE TAXED AS AN ASSOCIATION OF PERSONS;
3.
FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE
CIT (A) ERRED IN LAW BY CLUBBING THE APPELLANT WITH THREE OTHER
TRUSTS SETTLED BY THE SETTLOR THROUGH THE SAME INSTRUMENT OF
SETTLEMENT WHEN ALL THE LATER THREE TRUSTS ARE ABSOLUTELY
INDEPENDENT, SEPARATE HAVING UNRELATED OBJECTS;
4. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, BEING A
PRE-1970 TRUST, THE RATE OF TAX APPLICABLE TO ITS INCOME
ITA No.1632/Kol/2016
Radharaman Jew Trust Fund
A.Yr.2011-12
IS NOT LIABLE TO BE AT THE MAXIMUM MARGINAL RATE AND THE RESTRICTION
OF S. 164(3) THIRD PROVISO AS REGARDS THE SHARES IN THE INCOME OF
SEVERAL BENEFICIARIES BEING INDETERMINATE; BECAUSE THE SETTLEMENT IS
IN FAVOUR OF ONE PERSON ONLY BEING THE DEITY SRI SRI IS WAR RADHARAMAN
JEW AND THE DEITY BEING CAPABLE OF HOLDING THE DEDICATED PROPERTIES
ABSOLUTELY, IS NOT APPLICABLE. THE CIT(A) ERRED IN HOLDING OTHERWISE
AND SO HIS ORDER NEEDS TO BE CANCELLED.
4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE
CIT{A) NEEDS TO BE CANCELLED BEING BASED ON IRRELEVANT GROUNDS OR
INCORRECT FACTS AND THE APPELLANT SHOULD BE TAXED AT NORMAL RATES AS
IN THE FIRST SCHEDULE, PART I TO THE FINANCE ACT OF THE ASST. YEAR
UNDER APPEAL.
6. I have heard the rival submissions. The question for my
consideration is whether the action of AO while issuing an intimation
u/s 143(1) of the Act by changing the status of the assessee which
consequently enhanced the tax liability of the assessee was
permissible. Section 143(1) of the Act provides that where a return
was made u/.s 139 of the Act is made such a return shall be processed
in the following manner :-
“ (a)the total income or loss shall be computed after making the
following adjustments, namely:-
i.
any arithmetical error in the return; or
i.
an incorrect claim, if such incorrect claim is apparent from any
information in the return;
(b)the tax and interest, if any, shall be computed on the basis of the
total income computed under clause (a);
(c)the sum payable by; or the amount of refund due to, the assessee
shall be determined after adjustment of the tax and interest, if any,
computed under clause (d) by any tax deducted at source, any tax
collected at source, any advance tax paid, any relief allowable under
an agreement under section 90 or section 90A, or any relief allowable
under section 91, any rebate allowable under Part A of Chapter VII,
any tax paid on self-assessment and any amount paid otherwise by way
of tax or interest;
(d)an intimation shall be prepared or generated and sent to the
assessee specifying the sum determined to be payable by, or the amount
of refund due to, the assessee under clause (c); and
ITA No.1632/Kol/2016
Radharaman Jew Trust Fund
A.Yr.2011-12
(e)the amount of refund due to the assessee in pursuance of the
determination under clause (c) shall be granted to the assessee:”
Explanation (a) to section 143(1) provides as follows :- “ Explanation-For
the purposes of this sub-section,-
(a) “ an incorrect claim apparent from any information in the return”
shall mean a claim, on the basis of an entry, in the return, -
i.
of an item, which is inconsistent with another entry of the same
or some other item in such return;
i.
In respect of which the information required to be furnished under
this Act to substantiate such entry has not been so furnished; or
(iii) In respect of a deduction, where such deduction exceeds
specified statutory limit which may have been expressed as monetary
amount or percentage or ratio or fraction;”
7. It is clear from the aforesaid statutory provision that the change
of status as done by the AO does not fall within any of the clauses
from (a) to (e) of section 143(1) of the Act. It cannot also be said
that change of status of an assessee would fall within the meaning of
the expression “an incorrect claim apparent from any information in
the return” as laid down in Explanation (a) to section 143(1) of the
Act. There was no inconsistency entries in the return of income. There
was no entry on which information was required to be furnished under
this act which was omitted to be furnished. There was no deduction
claimed beyond the statutory limit by the assessee. I therefore hold
that the intimation issued by the AO u/s 143(1) of the Act changing
the status of the assessee was not in accordance with the provisions
of law. The AO is therefore directed to modify the intimation u/s
143(1) of the Act accepting the return of income of the assessee as it
is and issue refund as claimed by the assessee. I hold and direct
accordingly and allow the appeal of the assessee.
ITA No.1632/Kol/2016
Radharaman Jew Trust Fund
A.Yr.2011-12
8. In the result the appeal of the assessee is allowed.
Order pronounced in the Court on 12.04.2017.
Sd/-
[ N.V.Vasudevan ] Judicial Member
Dated : 12.04.2017. [RG PS]
Copy of the order forwarded to:
1.
Radharaman Jew Trust Fund, 28, Muktaram Babu Street,
Kolkata-700007.
2.
I.T.O., Ward-43(3), Kolkata.
3. CIT(A)-13, Kolkata. 4. C.I.T.-15, Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
True copy
By Order
Asstt.Registrar, ITAT, Kolkata Benches

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