CPC intimation us 143(1) applying MMR on AOP trust invalid as jurisdiction limited for disallowing only prima facie inadmissible deductions, allowances – ITAT
ABCAUS Case Law Citation:
ABCAUS 1122 (2017) (02) ITAT
Assessment Year : 2013-14
Date/Month of Pronouncement: February, 2017
Important Case Laws Cited/relied upon:
J.K.S. Employees Welfare Fund vs. ITO (1992) reported in 1999 ITR 765 (Raj.)
Brief Facts of the Case:
The assessee filed its return of income in the status of “AOP (Trust)”. The trust was duly registered under section 12A of the Income Tax Act, 1961 (“the Act”). Pusuant to the return filed by the assessee, an intimation under section 143(1) of the Act was issued by the Central Processing Centre Bangalore (CPC). As per the said intimation, tax was levied on the assessee at a maximum marginal rate (MMR) on the returned income as against NIL tax computed by the assessee in income tax return.
The assessee preferred an appeal with CIT(A) who rejected it on the ground that processing under section 143(1) does not entail exercise towards tax rate as applicable on exempted category or non-exempted category. The CPC cannot be blamed for tax demand if the appropriate boxes are not ticked in while filing the return electronically.
Aggrieved with the order of CIT(A), the assessee agitated the issue before the Tribunal.
Contentions of the Assessee:
It was submitted that the AO (CPC) had committed error in applying MMR on total income and has thus erred in raising tax demand thereon. It was further contended that tax on total income of the AOP (Trust) was required to be computed as per rates applicable to an individual assessee and not at maximum marginal rate.
It was further submitted that change in the rate of tax depends upon the status & nature of assessee and interpretation of the provisions of the Act and hence the same would fall outside the purview of an intimation processed under section 143(1) of the Act.
The assessee relied upon the CBDT Circular No.320 dated 11/01/1982 in support of its case and placed reliance upon the judgement of the Hon’ble Rajasthan High Court in the case of J.K.S. Employees Welfare Fund.
Observations made by the ITAT:
The Tribunal observed that it is trite that no tax can be levied or collected without the authority of law in terms of Article 265 of the Constitution of India.
The Tribunal noted the also noted the judgment of Hon’ble Rajasthan High Court in the case of J.K.S. Employees Welfare Fund where the return of income did not mention any reason for applying any rate other than those prescribed in Section 167B and, therefore, the tax was charged as prescribed under Section 167B.
The Hon’ble High Court held that no doubt, the assessee had not mentioned the reasons but has, at the same time, not admitted that the provisions of Section 167B were applicable. For applying the provisions of Section 167B, it was incumbent on the Income-tax Officer to have provided an opportunity to the assessee and then he should have framed the assessment under Section 143(3). The Hon’ble High Court clarified that the provisions of Section 143(1)(a) cannot be invoked and the jurisdiction being limited for disallowing only prima facie inadmissible deductions, allowances, etc., the Income-tax Officer was not justified in sending intimation creating the demand by applying a provision the application of which itself was a disputed one.
Also the Tribunal found that the CBDT Circular No. 320 favoured of assessee.
The order of the CIT(A) was set aside and restored it back to its file for redetermination of the grievance of assessee after taking into account the CBDT Circular and the ratio of the Hon’ble Rajasthan High Court