2022 (7) TMI 1317 - AT - Income Tax

Intimation u/s 143(1) - status of the Assessee - assessee furnished return of income mentioning status as any other AOP/BOI - assessee filed return of income in the status of AOP/BOI and has shown income against which no tax was payable at the time of filing of return of income - AO raised the demand against the returned income - Assessee argued AOP/BOI/ artificial judicial person were exempt from payment of taxes up ₹ 2 lakhs - Assessing Officer, CPC suo moto changed the status of assessee - HELD THAT - CIT(A) in his order dismissed the appeal of the assessee by holding that the status of the assessee has not been changed by CPC. However, we note that, no enquiry was made by Ld. CIT(A) as to how this additional tax came to be levied on the assessee when the figure of returned income has not been disturbed by the AO, CPC, and the additional tax could not be levied if the rates applicable to AOI/BOI were to be applied to the assessee. Apparently, the assessee has been taxed at tax rates applicable to some other status , as against the rate applicable to AOP/BOI, which was the status in which the return of income was filed by the assessee. Therefore, in the interests of justice, we are restoring the file to the jurisdictional assessing officer, to ascertain as to how this additional tax came to be levied on the assessee, especially when the status as the AOI/BOI has not been changed by CPC in the 143 (1) intimation issued to the assessee. Needless to say, it is well-settled law that change of status is not permissible under section 143 (1) of the Act. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Change of status under section 143(1) and consequent demand cancellation.
2. Confirmation of excess income tax payable at normal rate without cogent reasons.
3. Failure to provide notice and opportunity for explanation.
4. Disregard for principles of natural justice and judicial guidelines.
5. Determination of excess income tax beyond statutory time limit.

Analysis:

Issue 1: Change of status under section 143(1) and consequent demand cancellation
The assessee contended that the Assessing Officer (AO) cannot change the status under section 143(1) and demanded cancellation of the consequent tax liability. The CIT(A) dismissed the appeal, stating that there was no change in the status and that the tax computation was correct. However, the Tribunal noted discrepancies in the tax calculation and observed that the additional tax was levied under a different status than what was declared by the assessee. Referring to the Radharaman Jew Trust Fund case, the Tribunal emphasized that changing the status under section 143(1) is impermissible. Consequently, the appeal was allowed, and the case was remanded to the assessing officer for further examination.

Issue 2: Confirmation of excess income tax payable at normal rate without cogent reasons
The CIT(A) confirmed the excess income tax payable without providing specific reasons or applying appropriate tax rates. The Tribunal found this confirmation lacking in legal basis and directed a reevaluation by the assessing officer to determine the correct tax liability based on the applicable rates for the assessee's declared status.

Issue 3: Failure to provide notice and opportunity for explanation
The CIT(A) was criticized for confirming the excess tax liability without giving the assessee a chance to present explanations or challenge the computations. The Tribunal highlighted the importance of adhering to principles of natural justice and providing adequate opportunities for the assessee to be heard, emphasizing the need for a fair and transparent assessment process.

Issue 4: Disregard for principles of natural justice and judicial guidelines
The CIT(A) was faulted for disregarding judicial guidelines and not considering past records or departmental positions from earlier years. The Tribunal stressed the importance of consistency and adherence to established legal principles in tax assessments, urging a more thorough and reasoned approach in determining tax liabilities.

Issue 5: Determination of excess income tax beyond statutory time limit
The Tribunal noted that the determination of excess income tax was framed beyond the statutory time limit, raising concerns about the validity of the assessment. Emphasizing the importance of timely and lawful assessments, the Tribunal directed a review of the tax determination process to ensure compliance with statutory requirements.

In conclusion, the Tribunal allowed the appeal for statistical purposes, highlighting the need for a comprehensive reassessment of the tax liability in accordance with legal provisions and principles of natural justice.