SHANTI DEVI KHEMKA MEMORIAL TRUST, BHILWARA V. CIT(APPEALS), DELHI

ITA 193/JODH/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7751 (ITAT-JODHPUR)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 22-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Revised return
• Section: 12; 154; 2; 11; 12A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 193/Jodh/2023 Assessment Year: 2017-18 Shanti Devi Khemka Memorial Trust 2-J-9-10, RC Vyas Colony, Bhilwara. [PAN: AALTS 6712L] (Appellant) Vs. ITO, Bhilwara. (Respondent) Appellant by Sh. Rajendra Jain, Adv. & Smt. Raksha Birla, C.A. Respondent by Shri A.S. Nehra, Sr. DR Date of Hearing 18.03.2024 Date of Pronouncement 22.04.2024 ORDER Per:DR. S. Seethalakshmi, JM: This appeal filed by assessee is arising out of the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi dated 22.03.2023 [here in after “CIT(A)/NFAC” ] for assessment year 2017-18, which in turn arise from the order dated 21.06.2021 passed under section 154 of the Income Tax Act, by the ITO, Ward-1, Bhilwara. I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 2 2. In this appeal, the assessee has raised following grounds: - “1. That confirming the rejection of application filed u/sec. 154 of Income Tax Act, 1961 by CIT(A), National Faceless appeal Centre (NFAC) is bad in law. 2. That the ld. CIT(A) has co-terminus powers with that of the AO in view of CIT v/s Kanpur Coal Syndicate (1964) 53 ITR 225 (SC). 3. Any other manner with prior permission of the chair.” 3. Brief fact of the case is that, in this case assessee filed return of income for the assessment year 2017-18 on 08.07.2017 and processing u/s 143(1) was completed on 23.04.2018 at total income of Rs. 3,98,410/- and as per system demand of Rs. 98,297/- was created. The ld. AR of the assessee filed a rectification application on 05.01.2021 and requested that:- “The assessee has received intimation order u/s 143(1) in which the CPC raised a demand of Rs. 98,297/-. But as per their submission the assessee is eligible for the basic exemption of Rs. 2,50,000/- as it is not the charitable or religious trust/institution. So, the provisions of audit u/s 12A(1)(B) of the I.T. Act also not applicable. Under Section 12A(1)(B) of the Act audit is applicable only for charitable or religious trust/institution not to any other trust. The trust has not taken any other exemption u/s 12A of the Act, hence eligible for basic exemption of Rs. 2,50,000/-.” The facts of the case are examined and contention of the ld. AR of the assessee considered but found not acceptable. On verification it is seen that there is no prima facie error in the order which the assessee has sought to be rectified. As I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 3 seen from the e-filed return of income and the rectification request file, taxpayer has not computed tax at correct rate on the income disclosed in the return. Tax has been correctly computed by the system on the income. The assessee filed Return of Income vide ITR-5 and status mentioned as AOP/BOI. In Para D of Partner's or Member's or Trust Information the assessee mentioned that total income of there in no members which total income exceeds the maximum amount which is not chargeable to tax whereas Sh. Manish Kumar Khemka is a member of the above institution having PAN AEQPK3109J and total income of Sh. Manish Kumar Khemika is Rs. 8,71,590/- (i.e. exceeds the maximum amount which is not chargeable to tax). The facts of the case were carefully gone through and it is perused that there is no mistakes apparent from the record. In view of the above, the rectification application filed by the assessee for A.Y. 2017-18 is hereby rejected. Total income remains the same as per order u/s. 143(1) of the Act dated 23.04.2018 at Rs.3,98,410/-. 4. Aggrieved from the order of the assessing officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee the relevant finding of the ld. CIT(A) is reiterated here in below:- “5. Observation and decision: In the only ground of appeal the appellant contested the order of the AO u/s 154 in which the request for levy of tax at the normal slab rates on the total income of the appellant was rejected. In the intimation u/s 143(1) CPC has charged the tax at the maximum marginal rate of 30% on the total income of Rs.3,98,410/-. The ground is I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 4 considered w.r.t. the facts of the case, submissions of the appellant, applicable provisions of law and the AO's order and adjudicated in the following paragraphs. 5.1. The AO has passed a speaking order highlighting the issue in dispute vis-a-vis the information furnished by the appellant in the return, which was filed in ITR-5 as AOP/BOI. He quoted from the provisions of sub-section 2 of section 167B and concluded that the CPC was justified in applying the flat tax rate of 30% on the total income returned. Accordingly, he rejected the application of the appellant u/s 154. 5.1.1. The appellant on the other hand, was initially under the impression the tax demand was created due to the reason that that the basic exemption of Rs.2,50,000/- was not allowed to it. However, in course of the current proceedings it is argued in the written submission that it is a case of "DISCRETIONARY TRUST CREATED BY WILL "where the share of beneficiaries not determinate and the provisions of section 164(1)(1) of Act would apply. It is further contended that the AO was wrong in invoking the provisions of section 167B(2) of Act and applying Maximum Marginal Rate on income of such trust due to filing of return form 5 & status "AOP", which is nothing but a Technical Error. The status of assessehas always been "ARTIFICIAL JURIDICAL PERSON" in terms of section 164(1) of Act & tax should have been levied by treating it as "INDIVIDUAL & not at Maximum Marginal Rate. Thus the A.O.was not justified in rejecting the rectification application. 5.1.2. The arguments of the appellant are not found to be acceptable due to the following reasons: 1. According to the information provided in the return the appellant AOP had four members having shares of 5%,5%, 70% & 20% respectively. Therefore, all of them had fixed and determinate shares. 2. Section 164 of the Act deals with 'Charge of tax where share of beneficiaries unknown'. Sub-section 1 begins with the words- "(1) Subject to the provisions of sub- sections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160...... . On the other hand, section 160 defines 'representative assessee' andclauses (iii) and (iv) deals with incomes of 'Court of Wards, the Administrator- General, the Official Trustee or any receiver or manager' and 'a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913)' respectively. In the return of income under the heading Partner's or Member's or Trust Information- the appellant had left Column No.F, which is required to be filled in in case of persons referred to in section 160(1) (iii) or (iv), were left completely blank. Therefore, the arguments that filing of return in Form 5 in the status of "AOP" was a Technical I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 5 Errorand also that the status of assessehas always been "ARTIFICIAL JURIDICAL PERSON" in terms of section 164(1) of Act & tax should have been levied by treating it as "INDIVIDUAL" & not at Maximum Marginal Rate, can at best be termed as afterthoughts, which occurred to the appellant after the tax was charged at the maximum marginal rate. The case of CIT v/s Kamalini Khatan (supra) relied on by the appellant does not apply, as it is clearly distinguishable on facts. 3. Section 154 of the Act has limited scope of rectifying mistakes which are apparent from record. Law is well settled on the point that the provisions of the section do not apply to something which needs to be established by a long drawn process of reasoning or on points on which there may be two opinions. The issue has been dealt with by the Hon'ble apex court in the case of T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50. In this case, the Supreme Court which was considering the scope of section 154 of the Income-tax Act, 1961, made the following observations (headnote): "A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistakeapparent from the record." In the instant case, the AO was dealing with a petition for rectification u/s 154 and all the issues pointed out by the appellant were beyond the purview of the said section. 4. Assuming but not admitting that in the instant case, the appellant did not file the return as "DISCRETIONARY TRUST CREATED BY WILL "where the share of beneficiaries are not determinate and the provisions of section 164(1)(i) of Act would apply, it remains an undeniable fact that these claims were not made either in the return of income or by filing a revised return. Hon'ble Supreme Court held in Goetze India Ltd. v. CIT [2006] 157 Taxman 1 (SC) that an assessee could not make a claim for deduction other than by filing a revised return. Even though this is not a case where any claim of deduction is involved, however, the principle enunciated in the said case in so far as that theassessee cannot make a new claim other than by filing a revised return would mutatis mutandis apply to the present case as well. 5.2. Therefore, having regard to the facts and circumstances of the case, in the light of the above discussions and respectfully following the principle enunciated in the decision of Hon'ble Supreme Court in Goetze India Ltd(supra), it is concluded that the AO was justified in rejecting the appellant's application u/s 154 vide the impugned order 21.06.2021 .Accordingly, the ground No.1 is dismissed. 6. In the result the appeal is Dismissed.” I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 6 5. As the assessee did not find any favour from the appeal filed before ld. CIT(A). The present appeal filed against the said order of the ld. CIT(A) before this Tribunal on the grounds as reiterated in para 2 above. The ld. AR of the assessee also filed a detailed paper book in support of the contentions raised. The index of the document submitted by the ld. AR of the assessee are as under:- S.No. Particulars Page No. 01. Copy of order u/s 143(1) for A.Y. 2015-16 and 2016-17 in which the CPC had accepted the declared income. 1-10 02. Copy of order u/s 143(1) r.w.s. 154 for A.Y. 2018-19 in which the CPC had rectified the same mistake and accepted the declared income. 11-15 6. In this case the issue raised by the assessee that the trust has not issued any exemption u/s 12A of the Act. Though the assessee’s income can be charged to tax at maximum marginal rate or as per the normal provisions of the Income Tax Act. 7. Per contra, the ld. DR relied on the orders of the ld. CIT(A) at page in para 5.1. 8. We have heard both the parties and perused the materials available on record. On going through the trust deed it is apparent that there is no share of beneficiary whether no one or unknown as the assessee trust is so charging the I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 7 assessee as per provisions of Section 164(1) is incorrect and the relevant provisions of section 164(2) of the Act which is specific charging of section for a trust. Thus, when the specific provisions of charging tax, the general provisions cannot be made applicable in this case. The ld. AR of the assessee also submitted that similar issue has been dealt with by the Revenue for assessment years 2015-16, 2016-17 & 2018-19 as per provisions of Section 164(2) of the Act. Similar issue has been decided by the Coordinate Bench in the case of Shri Digambar Jain Mandir Trust vs. AO in ITA No. 121 to 124/Jodh/2021 dated 15.04.2024 wherein it has held as under:- “ 11. We have heard the rival contentions and perused the material placed on record. From the facts argued by the ld. AR of the assessee the bench noted that the beneficiary in this case of the trust are the general public. So there is no share of beneficiaries whether known or unknown as the assessee is trust so charging the assessee as per the provisions of section 164(1) as held by the ld. CIT(A) is incorrect and the relevant facts has not been appreciated and since there is specific provision in section 164(2) the tax should be charged based on that specific section applicable to the trust assessee. The ld. AR of the assessee also submitted that considering the facts of the case even the provision of section 167B will not applicable and the ld CIT(A) has not appreciated the facts of the case of the assessee. When there is specific provision for charging the tax the general provision cannot be made applicable. Thus, we hold that when the provision of section 164(2) specially deals to charge the tax of those trust where the whole or any part of the relevant income is not exempt under section 11 and 12, the relevant provision of the Act is reiterated herein below : Provision of section 164(2) of the Act (2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2, or which is of the nature referred to in sub- section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons : Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 8 (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. So the Maximum Marginal Rate (MMR) is applicable if the clause (c) or clause (d) of sub-section (1) of section 13. Thus, 13(1)(c) deals where the money spent for the related party and 13(1)(d) deals religious trust or institution. The ld. AR of the assessee submitted that the assessee subsequently already registered u/s. 12A with effect from 22.03.2022 and thus it does not come under the provision of section 13(1)(c) and (d) of the Act and therefore, based on that set of facts the assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individual and AOP. The term individual / person include as per section 2(31) and the same is reads as; (31) "person" includes— (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub- clauses. Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains; We further note that the tax rates applicable is specified in Sec. 2(37A) which states that “rate or rates in force” or “rates in force”, in relation to an assessment year or financial year, mean the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, or as specified under specific sections, which includes Sec.164 and 167B also. The first schedule to the Finance Act reads; “(I) In the case of every individual other than the individual referred to in items (II) and (III) of this Paragraph or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies. Even the revenue department website also advise that the tax rate of the trust is as applicable to the Individual and the screen shot of the same is reproduced herein below as to strengthen the discussion so record: I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 9 Considering that aspect of the matter we are of the considered view that the decision of the ld. CIT(A) to charge the assessee u/s. 164(1) is not correct it should be charged based on the specific provision of the Act u/s. 164(2) of the Act and the tax rate as applicable to that 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee. Based on these observations the ground no. 2 raised by the assessee is allowed. 12. As regards the ground no. 1 raised by the assessee the bench noted that the ld. CIT(A) has not granted the benefit of deduction of expenditure only on the reason that the assessee is not registered u/s. 12 A of the Act. The ld. AR of the assessee placed on record the registration certificate issued to the trust on 22.03.2022 and therefore, considering that aspect of the matter we direct the ld. AO to grant the benefit of the deduction of the expenditure claimed by the as per object of the trust. Based on these observation ground no. 1 raised by the assessee is allowed. In terms of these observations, the appeal of the assessee in ITA no. 121/Jodh/2021 is allowed. 13. The fact of the case in ITA No. 122 to 124-Jodh-2023 and 237/Jodh/2023 is similar to the case in ITA No. 121-Jodh-2021 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 121/Jodh/2021 is similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 121/Jodh/2021 for the Assessment Year 2013-14 shall apply mutatis mutandis in the I.T.A. No. 193/Jodh/2023 Shanti Devi Khemka Memorial Trust 10 case of Shri Digambar Jain Mandir Trust in ITA Nos. 122 to 124-Jodh-2021 and 237/Jodh/2023 for the Assessment Year 2015-16 to 2017-18. In the result, five appeals of the assessee are allowed.” On being content, we direct the ld. Assessing Officer to charge the assessee as per provisions of Section 164(2) of the Act. In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Rathod Kamlesh Jayantbhai) (DR. S. Seethalakshmi) Accountant Member Judicial Member Dated 22/04/2024 Santosh Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order