2017 (4) TMI 609 - AT - Income Tax

Intimation u/s 143(1) by changing the status of the assessee which consequently enhanced the tax liability of the assessee - AO adopted the status of the assessee from an AOP to a person taxable in terms of section 139(4A) - Held 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. 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. - Decided in favour of assessee.

Summary

Issues Involved:
1. Change of status of the assessee by the Assessing Officer (AO) from an Association of Persons (AOP) to a person taxable under section 139(4A) of the Income Tax Act.
2. Permissibility of the AO's action in enhancing the tax liability of the assessee.
3. Applicability of section 143(1) of the Income Tax Act in processing returns and making adjustments.

Analysis:

1. The assessee, a trust formed under a deed of settlement, filed its return as an AOP without claiming exemption under section 11 of the Income Tax Act. The AO changed the status to a person taxable under section 139(4A), leading to higher tax liability. The AO claimed the assessee fell under a trust for charitable or religious purposes, necessitating the use of Form ITR-7 instead of ITR-5. The CIT(A) upheld this decision, citing the nature of the trust's activities and the requirement to file under section 139(4A). The Tribunal noted that the AO's action was not in line with the law, as the change in status did not fall under the provisions of section 143(1) of the Act. The Tribunal directed the AO to accept the return as filed and issue the refund claimed by the assessee.

2. Section 143(1) of the Income Tax Act outlines the processing of returns, adjustments, and determination of tax payable or refund due to the assessee. The AO's unilateral change in the assessee's status was found to be impermissible under this section. The Tribunal emphasized that the change did not align with any of the specified adjustments or criteria for modifying the tax liability. The AO was directed to rectify the intimation issued under section 143(1) and process the return as originally filed by the assessee.

3. The Tribunal's decision focused on the strict interpretation of the provisions of section 143(1) of the Act. It highlighted that the AO's action did not meet the criteria set out in the explanation to the section regarding incorrect claims apparent from the return. The Tribunal concluded that the change in the assessee's status was not justified under the law. By directing the AO to accept the original return and issue the refund, the Tribunal upheld the assessee's appeal and emphasized adherence to statutory provisions in processing income tax returns.

This detailed analysis of the judgment highlights the issues surrounding the change in the assessee's status, the permissibility of the AO's actions, and the application of section 143(1) of the Income Tax Act in processing returns and making adjustments.