2023 (5) TMI 534 - AT - Income Tax

Assessment of trust as Association of Persons (AOP) - family trust - rate of tax - maximum marginal rate or slab rates - in absence of details of section 12A registration, income of the assessee was made taxable under the category of AOP/BOI and tax was charged without giving basic exemption and slab benefits - HELD THAT - As observed Assessee trust is the only trust formed Smt. Lajwanti Manchanda,Assessee trust is a family trust in the form of AOP/BOI for the benefit of Smt. Lajwanti Manchanda s son and grand children. Assessee family trust has only income from other sources and there is no business income to the trust. - Shares of beneficiaries of trust are determined and chart for A.Y 2016-17 to 2019- 20 filed by the assessee clearly shows that conditions as prescribed in various provisions of the Act to claim basic exemption and slab benefit are being fulfilled by the assessee family trust. As per legal positions in favour of assessee it is hereby directed to the A.O for redetermination of assessee family trust tax liability giving basic exemption and slab benefit. It is directed to the assessee also to appear and co-operate before the A.O in terms of filing requisite information and explanations required to verify the claim raised by him. Appeal filed by the assessee is allowed for statistical purposes.

Issues involved:
1. Appeal against the order of National Faceless Appeal Centre for AY 2014-15 & 2015-16.
2. Application of tax rate on the appellant.
3. Denial of benefits to the assessee.
4. Clubbing of appeals for adjudication.
5. Rejection of application u/s 154 by the A.O.
6. Appeal before the CIT(A).
7. Observations and directions by the ITAT.

Issue 1: Appeal against the order of National Faceless Appeal Centre for AY 2014-15 & 2015-16:
The two appeals by the assessee were directed against the order of National Faceless Appeal Centre for AY 2014-15 & 2015-16. The assessee raised common grounds of appeal for both AYs. The ITAT considered ITA No. 1482/Mum/2021 for AY 2014-15 as the lead case. The grounds of appeal included errors in confirming the order passed by the Assessing Officer, violation of principles of natural justice, and applying tax rate on the appellant at the maximum marginal rate instead of slab rates applicable to Association of Persons (AOP).

Issue 2: Application of tax rate on the appellant:
The ITAT observed that the appellant, a family trust, had income from other sources and no business income. The trust was formed for the benefit of Smt. Lajwanti Manchanda's son and grandchildren. The ITAT directed the Assessing Officer to redetermine the trust's tax liability by giving basic exemption and slab benefits. The ITAT also instructed the appellant to cooperate with the AO by providing necessary information and explanations to verify the claims.

Issue 3: Denial of benefits to the assessee:
The assessee received an intimation under section 143(1)(a) where, due to the absence of details of section 12A registration, the income was made taxable under the category of AOP/BOI without basic exemption and slab benefits. The assessee filed an application under section 154, which was rejected by the AO. The CIT(A) agreed with the assessee's contentions on merits but rejected the appeal on technical grounds. The ITAT, after considering various submissions and facts, allowed the appeal for statistical purposes.

Issue 4: Clubbing of appeals for adjudication:
As the issues involved in both ITA No. 1482/Mum/2021 (AY 2014-15) and ITA No. 1483/Mum/2021 (AY 2015-16) were identical, the ITAT clubbed both appeals together for adjudication. The results of adjudication were deemed applicable mutatis mutandis to both appeals.

Issue 5: Rejection of application u/s 154 by the A.O and Appeal before the CIT(A):
The assessee, aggrieved by the rejection of the application under section 154 by the AO, appealed before the CIT(A). Despite the CIT(A) agreeing with the assessee on merits, the appeal was rejected on technical grounds. The ITAT, after reviewing the orders passed by the AO and CIT(A), along with the submissions and relevant documents, allowed the appeal for statistical purposes.

Issue 6: Observations and directions by the ITAT:
After considering the facts of the case and various submissions by the assessee, the ITAT observed that the conditions prescribed in the Act to claim basic exemption and slab benefits were fulfilled by the family trust. Consequently, the ITAT directed the AO to redetermine the trust's tax liability by considering basic exemption and slab benefits. The ITAT also instructed the assessee to cooperate with the AO in providing necessary information for verification.

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