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TMI Blog2012 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... Shankar and M. Lava for the Respondent. JUDGMENT Ravi Malimath, J. - In all these appeals the assessees are beneficiaries of the trust. Returns are being filed by the Trustee as well as the beneficiaries. During the course of search it was found that the assessees were not declaring their beneficial interest received from the Trust, along with the other income for the year in which the return of income was filed. Accordingly, the assessing authority added the beneficial interest received by the assessees and recomputed the tax liability while initiating penalty proceedings. Aggrieved by the same, the assessees preferred appeals before the Commissioner of Income Tax, who annulled the orders of the assessing authority and allowed the appeals. Aggrieved by the same, the revenue preferred appeals before the Tribunal. The Tribunal dismissed the appeals. Hence, the present appeals by the Revenue. 2. The Tribunal while dismissing the appeals of the Revenue followed its own Judgment in the case of a connected assessee namely, that of Smt. Indramma (ITA 2785/2005) and Smt.Revathi Raju. The questions of law and the facts in all the appeals are identical. Hence the facts in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 166 of the Act cannot pass an order of assessment in the hands of the Assessee's beneficiary as was done by the Assessing Officer and reversed by the Appellate Commissioner ? (2) Whether the Tribunal was correct in holding that an order of assessment has been passed in the hands of the assessee, when only a return had been submitted and an intimation had been passed under Section 143(1) of the Act which would not amount to regular assessment ?" Counsels have accordingly addressed arguments on these two questions of law. 5. Sri Indra Kumar, the learned senior counsel appearing on behalf of the appellant's counsel contends that the Tribunal committed an error in passing the impugned order. The Tribunal committed an error in holding that in terms of the Circular No.157 issued by the CBDT, a choice was to be made by the Department to tax either the trustee or the beneficiary. He contends that the power has been exercised by the assessing authority under Section 166 of the Act. It clearly provides that nothing in the foregoing Section in this Chapter can prevent the direct assessment of the assessee. The returns said to have been filed under Section 161 comes under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eps under Section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even though an intimation under Section 143(1) had been issued. That an intimation under Section 143 (1) cannot be treated to be an order of assessment and therefore, there being no assessment the question of change of opinion does not arise. He therefore contends that a mere filing of a return cannot amount to assessment. He therefore submits that the order of the Tribunal is erroneous and liable to be set aside. 7. Sri A.Shankar, the learned counsel appearing for the assessees contends that the Tribunal has rightly considered the position in law and hence no interference is called for. He submits that the return of income was filed by the trustee on behalf of the assessee for the assessment year 1992-93 disclosing the interest of the beneficiary. Accordingly an assessment has been made. The beneficiary has also filed Returns as an individual for the said period. Along with the returns she has also appended a note that she is a beneficiary from M/s.ASK Brothers Family Trust and that the share of the beneficiary income for the assessment year 1992-93 has not been included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 161 in respect of the assessee beneficiary was assessed. For the very assessment year the assessee beneficiary filed her return under Section 139 which was also assessed. However, the assessee has appended a note to the returns filed by her as follows:- "Note On Exclusion 1. The assessee is a beneficiary in M/s. A.S.K. Bros. Family Trust, No. 44, Race Course Road, Bangalore - 560 001 bestowed with 54/411 share of beneficial interest. The share of beneficial income for the Assessment Year 1992-93 has been excluded from the above computation of Total Income as the said income is assessable in the hands of the Trustee in respect of each of the beneficiary in terms of Sec 161(1) of I.T. Act, 1961. 2. The assessee is a beneficiary in M/s. A.S. Chinnaswamy Raju Bros. Family Trust No. 44, Race Course Road, Bangalore -1 bestowed with 50/420 share of beneficial interest. The assessee had been credited with Rs. 13,635/-as her share of beneficial income. The said income is excluded from the above Computation of Total Income as the Income of the said Trust had suffered tax at maximum marginal rate." The assessing officer came to the conclusion that there is no chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot subsequently invoke Section 166 of the Act and choose to re-assess either the Trust or the beneficiary. It is undisputed that the assessing officer has an authority under Section 166 to exercise his discretion to assess either the Trustee or the beneficiary, provided however, the same discretion has not been exercised earlier. In the present case, the assessment of the Trustee as well as the beneficiary having been concluded, the discretion is not available to the assessing officer at this point of time. The discretion as envisaged under Section 166 could have been exercised prior to any assessment by the assessing officer. Having assessed both the returns, the assessing officer is not authorized in law to re-exercise his discretion under Section 166. (b) It is to be further noticed that the trustee has filed the returns disclosing the beneficial interest of the beneficiary and the same has been assessed to tax and tax has been paid thereon. Hence, the beneficial income has been taxed. Under these circumstances, the assessing officer has committed an error in bringing to tax the very same amount that has since suffered tax in the returns of the Trustee. It needs no elaborati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice of the Board of such double assessment. 2. According to the scheme of the Income-tax Act, 1961, even as it was under the Income-tax Act of 1922, the general principle is to charge all income only once. The Board desire to reiterate the earlier instructions in this regard. In order that there is no loss of revenue, the Income-tax Officer should keep this point in view at the time of raising the initial assessment either of the trust or the beneficiaries and adopt a course beneficial to the revenue. Having exercised his option once, it will not be open for the Income-tax Officer to assess the same income for that assessment year in the hands of the other person (i.e., the beneficiary or the trustee).' The Circular therefore very clearly states that even though the assessing officer has a discretion under Section 166, the same can be invoked only at the time of raising an initial assessment either by the Trust or the beneficiary and whichever may be beneficial to the Revenue. Having once exercised the option it will not be open to the ITO to assess the same income for the same period in the hands of other persons namely the beneficiary or the Trustee. As stated earlier, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 926 - 2785/2005 1996-97 31.03.1997 46,865 1,374 - DETAILS OF RETURNS FILED BY THE BENEFICIARY U/S. 139(1) ITA. No Asst. Year Date of filing Income Declared Tax Determined Date of intimation u/s 143 (1) 2789/2005 1992-93 31.03.1994 311,279 76,857 04.02.1995 2787/2005 1993-94 31.03.1994 171,292 53,670 04.02.1995 2786/2005 1994-95 24.02.1995 422,215 113,569 29.03.1995 5/2006 1995-96 07.03.1996 327,170 86,900 27.03.1996 2785/2005 1996-97 31.03.1998 40,030 214 21.03.1997 DETAILS OF NOTICES ISSUED TO THE BENEFICIARY ITA. No Asst. Year Date of Issue of 148 Notice Date of Issue of 143(2) Notice Date of Issue of 142(1) Notice Date of order u/s 147 2789/2005 1992-93 21.01.2000 8.11.2000 15.10.2001 18.03.2002 2787/2005 1993-94 21.01.2000 8.11.2000 15.10.2001 18.03.2002 278 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the opinion as framed by the assessing officer in the case of Smt. Revathi Raju, equally applies to all other assessees since all the other assessees are equally placed with the same facts and the same returns. Hence, on this ground also the assessing authority has exceeded his jurisdiction. (b) The provisions of Section 143 has been amended on a number of occasions. The returns of the assessess pertain to the assessment years 1992-1993 to 1996-1997. For the said relevant period, Section 143(1) read as follows:- "Assessment- 143[(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The notice therefore is invalid in law and the proceedings as a consequence of the same has no force in law. Hence, on this ground also the re-opening of the assessment requires to be set aside. (d) The appellate authority while considering the plea put forth and examining the entire material on record held at paras (i) (ii) as follows:- "(i) In one of the cases, that is Smt.Revathy Raju for AY 1992-93 the issue has been accepted in favour of the assessee in a scrutiny assessment u/s 143(3) where there was a complete disclosure of all the details pertaining to the beneficiary interest. It is therefore not a case that the returns have been processed u/s 143(1)(a) where the Assessing Officer did not have any occasion to go into the details. It is also a fact that the Assessing Officer has proceeded mechanically and exactly identically in respect of each of the beneficiaries and hence if in one of the beneficiary's case the issue has been handled u/s 143(3) the Assessing Officer cannot now sit over the judgement and change his opinion. I fully agree with this argument of the AR. [Emphasis supplied] (ii) There is no case of claim of any excessive loss deduction allowance or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le making an assessment, the AO is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to s. 143(1)(a), no addition which is impermissible by the information given in the return could be made by the AO. The reason is that under s.143(1)(a) no opportunity is granted to the assessee and the AO proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under s. 143(1)(a) indicates that the AO has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to s.143 by the Finance (No. 2) Act of 1991 w.e.f. 1st Oct., 1991, and subsequently w.e.f. 1st June, 1994, by the Finance Act, 1994, and ultimately omitted w.e.f. 1st June, 1999,by the Explanation as introduced by the Finance (No.2)Act of 1991 an intimation sent to the assessee under s. 143(1)(a) was deemed to be an order for the purposes of s.246 between 1st June, 1994, to 31st May, 1999, and under s.264 between 1st Oct., 1991, and 31st May, 1999. It is to be noted that the expressions "intimation" and "assessment order" have been used at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther held that, when there is no assessment under Section 143(1)(a) of the Act, the question of change of opinion as contended does not arise. However, in the instant case, as mentioned hereinabove, the assessments have taken place under Section 143(3) of the Act and in so far as Smt.Revathi Raju is concerned, the same is concluded. The facts of all the beneficiaries cases are one and the same. The returns filed is one and the same. Separate orders have been passed under Section 143(3) in some of the sister assessees cases, based on the opinion having been taken by the assessing officer. In so far as Smt.Revathi Raju is concerned, the assessment has stood concluded. Therefore, it is to be held that the initiation of proceedings against the assessees amounts to a change of opinion. In the aforesaid judgment, there were no proceedings under Section 143(3). In the present case, the proceedings under section 143(3) were concluded. Therefore in the facts and circumstances of this case, it is to be held that since the assessments have taken place, the subsequent proceedings are opposed to law. Therefore, the Judgment relied upon has to be understood with reference to the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation. Therefore on these grounds also the notice issued is beyond the period of limitation which vitiates the proceedings. Hence we hold that in the facts circumstances of this case the Tribunal was justified in holding that an order of assessment has been passed in the hands of the assessee. For the aforesaid reasons, the second substantial question of law is answered in favour of the assessee and against the Revenue. 16. The facts in all these appeals are one and the same. In all the cases the returns have been filed by the trustee under Section 161 of the Act and the returns have been filed by the beneficiary under Section 139 of the Act along with the appended note. The subsequent notices under Sections 143(2), 147 and 148 have been simultaneously issued on the same dates to all the assessees. A common order in the case of Smt. Indramma and Smt. Revathi Raju has been passed by the assessing officer. Identical, mechanical orders have been passed in the case of all the assessees. In view of the common orders being passed for all the assessees herein, the substantial questions of law being one and the same and having been answered as aforesaid, the same would equally app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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