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TMI Blog2013 (12) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... at extent only, indicating the tax liability of respective beneficiaries by consolidated order - The Assessing Officer has not followed either of the procedures but still contending to hold that the entire income received on the fixed deposit is taxable in the hands of the assessee- trust, violating the directions of the learned CIT(A) and also violating the provisions of the Act - The orders of AO levying penalty is not only bad in law but also on facts - Penalty cannot be levied - Decided in favour of assessee. - ITA. No. 576/Hyd/2013, ITA.No.577/Hyd/2013, ITA.No.578/Hyd/2013, ITA.No.579/Hyd/2013, ITA.No.580/Hyd/2013 - - - Dated:- 23-12-2013 - Shri D. Manmohan And Shri B. Ramakotaiah,JJ. For the Petitioner : Shri Ravindra Chenji For the Respondent : Shri P. Somasekhar Reddy ORDER Per B. Ramakotaiah, A. M. These five appeals are of assessment years 2000-2001 to 2004-2005 against the Orders of CIT(A)-XVIII, Mumbai camp at Hyderabad dated 14.12.2013 on the issue of penalty under section 271(1)(c). The Assessing Officer levied penalty of the following amounts which the learned CIT(A) confirmed : Amount A.Y. Rs.45,58,800 2000-2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I.T. Act. However, without following the directions of the CIT(A), the Assessing Officer made the additions again which was also subject matter of appeal before the present CIT(A) who vide his order dated 14.02.2013 again directed the Assessing Officer to strictly follow the directions as given by the CIT(A), Vijayawada and to give effect to order as per the provisions of law. However, as far as penalties levied on the same incomes are concerned, the learned CIT(A) confirmed the penalties holding that assessee should have filed returns and relied on the various principles as expressed in para 6.4 of his order to confirm the penalties. Hence, the assessee is aggrieved and filed present appeals. 4. The learned Counsel for the assessee referring to the Orders of the CIT(A) dated 25.12.2008 and consequential orders passed by the Assessing Officer which were also subject matter of appeal submitted that assessee trust can only be taxed to the extent of tax liability imposable on the beneficiaries and accordingly assessment of the gross interest received in the trust in the hands of the trust is not correct. Referring to the orders of the CIT(A) and the provisions of section 161 and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion can be made in two ways. The AO may make as many assessments in the name of the trustee as there are beneficiaries and levy the tax appropriate to such income at the rate of tax applicable to total income of each beneficiary. The assessing authority, in the alternative, can make a single assessment on the trustee, but has to indicate in the order the share income of each beneficiary and tax attributable to it. Sec. 161(1A) is an exception to the above rule. Under s. 161(1A) this rule of apportionment and determination of proportionate tax attributable to the beneficiary will not apply to any income earned by the trustee as profits and gains of a business. The whole of such income shall be taxed at the maximum marginal rate. A similar proviso occurs in s. 161(1) restricting the benefits where business income is involved. Under s. 164(1) if the individual shares of the persons on whose behalf and for whose benefit the income is receivable are indeterminate or unknown, such income, gain, will be taxed at the maximum marginal rate. In certain other circumstances, set out in the proviso to s. 164(1), the relevant income will be assessable not at the maximum rate but at the rate app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idend and also income from capital gains, the entire income so received has to be treated as one and tax has to be levied at the maximum marginal rate. This according to us, is against the very scheme of the Act as also beyond the scope of s. 161(1A) of the Act. If we accept the stand taken by the Department, it will result in arbitrariness and discrimination attracting Art. 14 of the Constitution also. The effect would be that a trust which is not having income by way of profits and gains of business but income under other heads will be entitled to the benefit of s. 161(1), while a trust which is having income by way of profits and gains of business and also the income falling under other heads of income is being treated differently with a higher burden to the trust, which will amount to clear discrimination. That apart under the scheme of the Act, under s. 14 of the Act, all income, for the purpose of charge of income-tax and computation of total income, is classified under different heads, salaries, income from house property, profits and gains of business, etc., and income from other sources. For each head of income separate computation provisions are also made. So far as the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the trustees are not the owners of the property of the trust. The real owner of the trust properties are the beneficiaries of the trust. The interest received on the FDR was also distributed to the beneficiaries in the respective years as per the terms of the deed of trust. The assessee-trust is thus a representative assessee within the meaning of sec.160(iv) and therefore interest earned on FDR of Rs.14.05 crores has to be assessed u/s. 161 in the hands of the assessee-trust only being a representative assessee. With these findings, the CIT(A) has directed the A.O. to assess the interest income u/s. 161 of the I.T. Act. In the result the appeal of the assessee was allowed. 5.4. From the perusal of these findings of the CIT(A), there is no ambiguity that the appeal was allowed in favour of the appellant with clear directions to the A.O. that the interest earned on FDRs has to be assessed u/s. 161 of the I.T. Act in the hands of the assessee-trust. Now, while giving effect to the Order of the CIT(A), the A.O. is bound to follow the directions and not to deviate by making further enquiries or raising new issues. In the present case, the A.O. has deviated in the computation of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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