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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
All the appeals of the assessees are directed against the
respective orders of the Commissioner of Income Tax (Appeals)-13,
Chennai. Since common issue arises for consideration in all these
4 I.T.A. Nos.2177 to 2190/Mds/16
appeals, we heard these appeals together and disposing of the
same by this common order.
Shri J. Prabhakar, the Ld. representative for the assessees,
submitted that the assessees filed returns of income for all the
assessment years electronically and the same were processed
under Section 143(1) of the Income-tax Act, 1961 (in short 'the Act').
In the course of processing the returns, the Assessing Officer
changed the status of the assessees as AOP and levied tax under
Section 164(1) of the Act at maximum marginal rate. According to
the Ld. representative, Section 143(1) of the Act is only to make
prima facie adjustment and not to make any adjustment with regard
to debatable issue. According to the Ld. representative, the status
of the assessees and levy of tax at maximum marginal rate under
Section 164(1) of the Act are debatable issue, therefore, it cannot
be a subject matter of proceeding under Section 143(1) of the Act.
In other words, according to the Ld. representative, if the Assessing
Officer intends to change the status of the assessees and levy tax
at maximum marginal rate under Section 164(1) of the Act, he has
to take necessary step to scrutinize the matter after giving
opportunity to the assessee by issuing a notice. In the guise of
5 I.T.A. Nos.2177 to 2190/Mds/16
making prima facie adjustment, the status of the assessee and rate
of tax cannot be changed at all.
Placing reliance on the judgment of Bombay High Court in
W.P.No.2424 of 2016 in Shapoorji Pallonji and Co. Pvt. Ltd. v.
DCIT, a copy of which is filed by the assessees, the Ld.
representative for the assessees submitted that in the case before
Bombay High Court, when the return was processed under Section
143(1) of the Act, the assessee requested the Assessing Officer for
refund. The Assessing Officer informed the assessee that inspite of
his efforts to process the return of income, the ITD application was
not allowing to process the return for technical reasons. In those
circumstances, the Bombay High Court directed the Chief
Commissioner of Income Tax to make an attempt to resolve the
issue on war-footing to ensure that the computer system runs in
accordance with enactment. In this case also, according to the Ld.
representative, when the assessees have filed their returns in the
status of individual, the same cannot be changed to AOP while
processing the return under Section 143(1) of the Act. Therefore,
according to the Ld. representative, the CIT(Appeals) is not justified
in dismissing the appeal of the assessee.
6 I.T.A. Nos.2177 to 2190/Mds/16
On the contrary, Shri A.V. Sreekanth, the Ld. Departmental
Representative, submitted that the assessee-Trusts are
beneficiaries of Suguna Children Family Trust. The source of
income for the trust was through the parent trust, the income from
house property and interest income from fixed deposit with Suguna
Industries. The CIT(Appeals) by placing reliance on the judgment of
Apex Court in CWT v. Trustees of H.E.H. Nizam’s family
(Remainder Wealth) Trust (108 ITR 555), found that the Revenue
had the option to assess the beneficial interest either in the hands of
the trustee in a representative capacity or assessee directly in the
hands of the beneficiary. In both the cases, what was taxed was
the interest of the beneficiary for the trust properties and not the
corpus of the trust properties. Therefore, according to the Ld. D.R.,
the CIT(Appeals) found that there is uncertainty in the trust and
vesting of income in the hands of the future beneficiaries, hence,
the shares of allocation are treated as indefinite and uncertain,
therefore, the income of the Trusts is liable for taxation at maximum
marginal rate under Section 164(1) of the Act.
We have considered the rival submissions on either side and
perused the relevant material available on record. The assessees
7 I.T.A. Nos.2177 to 2190/Mds/16
admittedly filed their returns of income electronically and the same
were processed under Section 143(1) of the Act. The question arises for consideration is when the Assessing Officer processed the returns under Section 143(1) of the Act, whether he can change
the status of the assessees and levy tax at maximum marginal rate? We have carefully gone through the provisions of Section 143(1) of the Act. Section 143(1) of the Act enables the Assessing Officer to
make prima facie adjustment on the basis of the material available on record. Changing of status is something outside the purview of the prima facie adjustment under Section 143(1) of the Act. Therefore, this Tribunal is of the considered opinion that changing of
status of the assessees cannot be made while processing return under Section 143(1) of the Act. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Accordingly, the same
are set aside. However, it is made clear that it is open to the Assessing Officer to take up the matter for scrutiny as provided under the provisions of the Income-tax Act.
With the above observation, the appeals of the assessees stand allowed.
Order pronounced on 27th December, 2016 at Chennai.
8 I.T.A. Nos.2177 to 2190/Mds/16
Sd/- Sd/- (�ड.एस. सु�दर �संह) (एन.आर.एस. गणेशन) (D.S. Sunder Singh) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member
चे�नई/Chennai, �दनांक/Dated, the 27th December, 2016.
Kri.
आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-13, Chennai 4. Principal CIT-8, Chennai-34 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.