Appeal details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 4805 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-12-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2003-2004
Appeal Filed On
23-04-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.576/HYD/2013 ASSESSMENT YEAR 2000-2001 ITA.NO.577/HYD/2013 ASSESSMENT YEAR 2001-2002 ITA.NO.578/HYD/2013 ASSESSMENT YEAR 2002-2003 ITA.NO.579/HYD/2013 ASSESSMENT YEAR 2003-2004 ITA.NO.580/HYD/2013 ASSESSMENT YEAR 2004-2005 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD PAN AAATH0477J VS. ITO, WARD 9(4) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAVINDRA CHENJI FOR REVENUE : SHRI P.SOMASEKHAR REDDY DATE OF HEARING : 23.12.2013 DATE OF PRONOUNCEMENT : 23.12.2013 ORDER PER B.RAMAKOTAIAH, A.M. THESE FIVE APPEALS ARE OF ASSESSMENT YEARS 2000-2 001 TO 2004-2005 AGAINST THE ORDERS OF CIT(A)-XVIII, MUMBA I 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 : 2 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD 2. BRIEFLY STATED FACTS LEADING TO THE LEVY OF PEN ALTY ARE THAT TRUSTEES HEH OF THE NIZAM JEWELLERY TRUST (HEREINAF TER REFERRED TO AS TRUST) ARE HOLDING CORPUS OF TRUST FUND FOR AND O N BEHALF OF BENEFICIARIES. THERE IS NO DISPUTE WITH REFERENCE T O THE FACT THAT THE SPECIFIED TRUST IS FOR THE BENEFIT OF BENEFICIARIES WHOSE SHARES ARE DETERMINATE. THE TRUST WAS CREATED ON 29.03.1951 BY HEH NAWAB SIR OSMAN ALI KHAN BAHADUR, THE NIZAM-VII OF HYDERA BAD. CONSEQUENT TO THE SALE OF THE TRUST PROPERTY AND AC QUISITION BY THE GOVERNMENT OF INDIA, AMOUNT WAS RECEIVED BY THE TRU ST OUT OF WHICH, AN AMOUNT OF RS.14.05 CRORES WAS DEPOSITED WITH STA TE BANK OF HYDERABAD, GUNFOUNDRY BRANCH, HYDERABAD AS FIXED DE POSIT UNDER LIEN WITH INCOME TAX DEPARTMENT. THE DEPOSIT GENER ATED INCOME ON QUARTERLY BASIS. THE ASSESSING OFFICER HAVING NOTIC ED THAT THE ASSESSEE-TRUST HAS RECEIVED INTEREST IN RESPECTIVE ASSESSMENT YEARS AND DID NOT FILE RETURNS FOR RESPECTIVE ASSESSMENT YEARS, ISSUED NOTICES UNDER SECTION 148 ASKING THE ASSESSEE TO FI LE RESPECTIVE RETURNS. THE ASSESSEE FILED RETURNS DECLARING NIL I NCOME WITH THE SUBMISSION THAT THE PROVISIONS OF SECTION 161 OF TH E I.T. ACT, 1961 WILL APPLY AND ASSESSMENTS CAN BE MADE IN THE HANDS OF RESPECTIVE BENEFICIARIES OR IN THE TRUST AS A REPRESENTATIVE A SSESSEE IN THE LIKE MANNER AND TO THE SAME EXTENT AS THAT OF THE BENEFI CIARIES. IT RELIED ON VARIOUS DECISIONS OF HONBLE SUPREME COURT AND J URISDICTIONAL AMOUNT A.Y. RS.45,58,800 2000-2001 RS.28,05,384 2001-2002 RS.21,26,117 2002-2003 RS.18,28,533 2003-2004 RS.28,60,525 2004-2005 3 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD HIGH COURT TO SUPPORT THAT INTEREST INCOME RECEIVED ON FD UNDER LIEN WAS OFFERED IN THE RETURNS FILED REPRESENTING VARIO US FUNDS AND IF AT ALL ANY INTEREST INCOME IS TO BE TAXED, THE SAME CA N BE TAXED WITH REFERENCE TO INDIVIDUAL BENEFICIARIES. ACCORDINGLY, THERE IS NO LIABILITY TO TAX ON THE INTEREST RECEIVED BY THE TRUST. THE A SSESSING OFFICER DID NOT AGREE WITH THE SAME AND HELD THAT THE AMOUNT BE LONGS TO THE TRUST AND NOT TO THE BENEFICIARIES AND ACCORDINGLY, THE INTEREST RECEIVED THEREON HAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE- TRUST IN RESPECTIVE ASSESSMENT YEARS. 3. THE MATTER WAS CARRIED TO THE CIT(A) IN FIRST A PPEAL AND VIDE ORDERS DATED 25.12.2008, THE CIT(A), VIJAYAWAD A HAS DIRECTED THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENTS U NDER SECTION 161 OF THE I.T. ACT. HOWEVER, WITHOUT FOLLOWING THE DIR ECTIONS OF THE CIT(A), THE ASSESSING OFFICER MADE THE ADDITIONS AG AIN WHICH WAS ALSO SUBJECT MATTER OF APPEAL BEFORE THE PRESENT CI T(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 LA W. HOWEVER, AS FAR AS PENALTIES LEVIED ON THE SAME INCOMES ARE CONCERNED, THE LEARNED CIT(A) CONFIRMED THE PENALTIES HOLDING THAT ASSESSE E SHOULD HAVE FILED RETURNS AND RELIED ON THE VARIOUS PRINCIPLES AS EXPRESSED IN PARA 6.4 OF HIS ORDER TO CONFIRM THE PENALTIES. HEN CE, 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 CONSEQUEN TIAL ORDERS PASSED BY THE ASSESSING OFFICER WHICH WERE ALSO SUB JECT MATTER OF APPEAL SUBMITTED THAT ASSESSEE TRUST CAN ONLY BE TA XED TO THE EXTENT OF TAX LIABILITY IMPOSABLE ON THE BENEFICIARIES AND ACCORDINGLY ASSESSMENT OF THE GROSS INTEREST RECEIVED IN THE TR UST IN THE HANDS OF 4 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD THE TRUST IS NOT CORRECT. REFERRING TO THE ORDERS O F THE CIT(A) AND THE PROVISIONS OF SECTION 161 AND 271(1)(C) OF THE I.T. ACT, IT WAS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE AMOUNTS/DEMANDS AS PAYABLE BY THE BENEFICIARIES ARE TO BE CONSIDERED AS INCOME OF THE TRUST IN REPRESENTATIVE CAPACITY, THERE WILL BE NO TAX LIABILITY AND ACCORDINGLY, LEVY OF P ENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE TRUST IS NOT CORRECT. T HE LEARNED COUNSEL FURTHER REFERRING TO THE PROVISIONS OF SECTION 271( 1)(C) OF THE ACT SUBMITTED THAT THE TRUST HAS NO LIABILITY TO TAX AT ALL AS HELD BY THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. T.A.V. TRUST (2003) 264 ITR 52 (KER.) (H.C.). THE POSITION UNDER SECTION 161(1) OF THE I.T. ACT IS THAT A TRUSTEES OF TRUST CANNOT BE ASSESSED ON THE AGGREGATE INCOME RECEIVED BY IT AS A SINGLE UNIT. I T WAS FURTHER EXPLAINED THAT THE DEPARTMENT HAS TWO OPTIONS I.E., TO MAKE ASSESSMENTS INDIVIDUAL BENEFICIARY AND LEVY THE TAX APPROPRIATE TO SUCH INCOME TAX APPLICABLE TO TOTAL INCOME OF EACH BENEFICIARY OR IN THE ALTERNATE, ASSESSING OFFICER CAN MAKE A SINGLE ASSESSMENT ON THE TRUST BUT HAS TO INDICATE THE SHARE OF INCOME OF EA CH BENEFICIARY AND THE TAX ATTRIBUTABLE TO IT. IT WAS SUBMITTED THAT I NSPITE OF CLEAR DIRECTIONS OF THE LEARNED CIT(A) DATED 25.12.2008, THE LEARNED ASSESSING OFFICER DID NOT FOLLOW THEM AND THEREFORE , THE MATTER WAS CARRIED TO THE CIT(A) AND UNFORTUNATELY, THE SAME C IT(A) WHO UPHELD THE ASSESSEES CONTENTION IN THE QUANTUM ORDER, CON FIRMED THE PENALTIES ON EXTRANEOUS REASONS. IT WAS SUBMITTED T HAT THE TRUST IS NOT LIABLE TO ANY PENALTY AND ACCORDINGLY, THE SAME MAY PLEASE BE DELETED. 5. THE LEARNED D.R. REITERATED THE FACTS/ARGUMENTS AS STATED BY THE ASSESSING OFFICER AND CIT(A) IN THE O RDERS. 5 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD 6. WE HAVE EXAMINED THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THERE IS NO DISPUTE WITH REFERENCE TO THE F ACT THAT ASSESSEE IS HAVING BENEFICIARIES WHOSE SHARES ARE DETERMINATE A ND TRUST IS NOT ASSESSABLE AT MAXIMUM MARGINAL RATE ON INCOMES OF T RUST ARISING OUT OF PROPERTY FOR THE BENEFIT OF THE BENEFICIARIE S. THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. T.A.V. TRUST (SUP RA) HAS CONSIDERED THE SIMILAR ISSUE OF ASSESSMENTS ON REPRESENTATIVE ASSESSEE AND HELD AS UNDER : 13. THE POSITION UNDER S. 161(1) OF THE ACT IS THAT A T RUSTEE UNDER A TRUST CANNOT BE ASSESSED ON THE AGGREGATE INCOME RE CEIVED BY IT AS A SINGLE UNIT. THE ASSESSMENT IN THE NAME OF THE TRUS TEE IN TERMS OF THE SUB-SECTION CAN BE MADE IN TWO WAYS. THE AO MAY MAK E 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 AUT HORITY, IN THE ALTERNATIVE, CAN MAKE A SINGLE ASSESSMENT ON THE TR USTEE, BUT HAS TO INDICATE IN THE ORDER THE SHARE INCOME OF EACH BENE FICIARY AND TAX ATTRIBUTABLE TO IT. SEC. 161(1A) IS AN EXCEPTION TO THE ABOVE RULE. UNDER S. 161(1A) THIS RULE OF APPORTIONMENT AND DETERMINA TION OF PROPORTIONATE TAX ATTRIBUTABLE TO THE BENEFICIARY W ILL NOT APPLY TO ANY INCOME EARNED BY THE TRUSTEE AS PROFITS AND GAINS O F 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 BENEFI T THE INCOME IS RECEIVABLE ARE INDETERMINATE OR UNKNOWN, SUCH INCOM E, GAIN, WILL BE TAXED AT THE MAXIMUM MARGINAL RATE. IN CERTAIN OTHE R CIRCUMSTANCES, SET OUT IN THE PROVISO TO S. 164(1), THE RELEVANT I NCOME WILL BE ASSESSABLE NOT AT THE MAXIMUM RATE BUT AT THE RATE APPLICABLE TO IT AS IF IT WERE THE TOTAL INCOME OF AN AOP. THESE ARE TH E ONLY THREE EXCEPTIONS TO THE RULE IN S. 161(1) OF THE ACT. SEC . 161 TREATS THE ASSESSEE AS HAVING REPRESENTATIVE CHARACTER. THE AS SESSMENT ON THE TRUSTEE IS TO BE IN LIKE MANNER AND TO THE SAME EXT ENT AS IF IT WERE MADE ON THE BENEFICIARY HIMSELF DIRECTLY. THE PRACT ICAL EFFECT OF THIS PROVISION IS TO RENDER THE ASSESSMENT OF THE TRUSTE E AND THE BENEFICIARY IDENTICAL IN EVERY RESPECT. IT WAS ALSO HELD THAT IN A CASE WHERE THE TRUSTEE RECEIVED INCOME BY WAY OF DIVIDEN D, INTEREST OR CAPITAL GAINS, IT CANNOT BUT BE TREATED AS DIVIDEND , INTEREST OR CAPITAL GAINS, RESPECTIVELY, IN THE REPRESENTATIVE ASSESSME NT WHICH IS TO BE MADE ON THE TRUSTEE. THE AUTHORITY FOR ADVANCE RULI NGS IN ADVANCE RULING P. NO. 10 OF 1996, XYZ, IN RE (1996) 136 CTR (AAR) 358 : (1997) 224 ITR 473 (AAR) CONSIDERED THE SCOPE OF S. 161(1A) OF THE ACT AND OBSERVED AT P. 541 THUS, 'IT IS TRUE THAT S . 161(1A) PROVIDES FOR A TAX AT THE MAXIMUM RATE ON THE INCOME FROM BU SINESS IN THE 6 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD HANDS OF A TRUST.' TO THE SAME EFFECT IS THE OBSERV ATION MADE AT P. 510 UNDER EXCEPTION (A). 14. THUS BY VIRTUE OF THE PROVISIONS OF S. 161(1) OF TH E ACT INCOME FROM PROPERTY RECEIVED BY THE TRUST CANNOT BUT BE T REATED AS INCOME FROM PROPERTY IN THE REPRESENTATIVE ASSESSMENT WHIC H HAS TO BE MADE ON THE TRUSTEE. THIS IS SO, NOTWITHSTANDING THE FAC T THAT THE TRUST IN WHICH THE APPELLANT IS A BENEFICIARY IS HAVING INCO ME FROM PROFITS AND GAINS OF BUSINESS. IN THE CASE OF A TRUST WHICH IS HAVING INCOME FROM BUSINESS AS WELL AS INCOME FROM HOUSE PROPERTY, BY VIRTUE OF THE PROVISIONS OF S. 161(1A) OF THE ACT, THE INCOME FRO M THE BUSINESS EARNED BY THE TRUST SHALL BE TAXED AT THE MAXIMUM M ARGINAL RATE TREATING IT AS A SINGLE UNIT AND THE INCOME FROM HO USE PROPERTY HAS TO BE ASSESSED IN THE HANDS OF THE TRUSTEE IN THE MANN ER PROVIDED IN S. 161(1) OF THE ACT. THIS INTENTION OF THE LEGISLATUR E IS EVIDENT FROM THE STATEMENT OF OBJECTS AND REASONS FOR THE INSERTION OF S. 161(1A) OF THE ACT VIDE THE MEMORANDUM EXPLAINING THE PROVISIO NS OF THE FINANCE BILL, AS ALSO FROM THE CIRCULAR ISSUED BY T HE CBDT MENTIONED ABOVE. 15. THE STAND OF THE DEPARTMENT IS THAT BY VIRTUE OF TH E PROVISIONS CONTAINED IN S. 161(1A) OF THE ACT, IN A CASE WHERE A TRUST IS HAVING INCOME BY WAY OF PROFITS AND GAINS OF BUSINESS, INC OME FROM PROPERTY, INCOME FROM INTEREST, INCOME FROM DIVIDEN D AND ALSO INCOME FROM CAPITAL GAINS, THE ENTIRE INCOME SO RECEIVED H AS TO BE TREATED AS ONE AND TAX HAS TO BE LEVIED AT THE MAXIMUM MARGINA L 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 TH E STAND TAKEN BY THE DEPARTMENT, IT WILL RESULT IN ARBITRARINESS AND DIS CRIMINATION ATTRACTING ART. 14 OF THE CONSTITUTION ALSO. THE EF FECT 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 ENTIT LED 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 U NDER OTHER HEADS OF INCOME IS BEING TREATED DIFFERENTLY WITH A HIGHE R BURDEN TO THE TRUST, WHICH WILL AMOUNT TO CLEAR DISCRIMINATION. T HAT APART UNDER THE SCHEME OF THE ACT, UNDER S. 14 OF THE ACT, ALL INCO ME, FOR THE PURPOSE OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL IN COME, 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 INCOME FROM HOUSE PROPERTY IS CONCERNED, SS. 22 TO 27 ARE PROVIDED. SECTION 26 OF THE ACT DEALS WITH THE PROP ERTY OWNED BY THE CO-OWNERS. 16. NOW REVERTING TO S. 161(1A) OF THE ACT IT MUST BE N OTED THE SUB-S. (1A) ONLY SAYS, 'NOTWITHSTANDING ANYTHING CONTAINED IN SUB-S. (1)' : IN OTHER WORDS, IT DOES NOT SAY 'NOTWITHSTANDING ANYTH ING CONTAINED IN THIS ACT'. THUS, THOUGH THE PROVISIONS OF SUB-S. (1 A) OVERRIDE THE PROVISIONS OF SUB-S. (1) OF S. 161, IT DOES NOT HAV E THE EFFECT OF 7 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD OVERRIDING THE PROVISIONS OF S. 26 OF THE ACT AND C ONSEQUENTLY COMPUTATION OF THE INCOME FROM HOUSE PROPERTY HAS T O BE MADE UNDER SS. 22 TO 25 OF THE ACT SINCE THE TRIBUNAL HAD ENTE RED A CATEGORICAL FINDING THAT THE SHARES OF THE BENEFICIARIES ARE DE FINITE. AS ALREADY NOTED, AS PER SUB-S. (1A), WHERE ANY INCOME IN RESP ECT OF WHICH A REPRESENTATIVE-ASSESSEE IS LIABLE CONSISTS OF, OR I NCLUDES, INCOME BY WAY OF PROFITS OR GAINS OF BUSINESS, TAX SHALL BE C HARGED ON THE WHOLE OF THE INCOME IN RESPECT OF WHICH SUCH PERSON IS SO LIABLE AT THE MAXIMUM RATE. THE INCOME SO LIABLE REFERRED TO IN T HE SAID SUB- SECTION IS ONLY THE BUSINESS INCOME OF THE TRUST AN D NOT ANY OTHER INCOME. IT IS ONLY THE INCOME BY WAY OF PROFITS AND GAINS OF BUSINESS THAT CAN BE CHARGED AT THE MAXIMUM MARGINAL RATE. A NY OTHER INTERPRETATION, ACCORDING TO US, IS AGAINST THE VER Y SCHEME OF THE ACT AND FURTHER SUCH AN INTERPRETATION WILL MAKE THE PR OVISIONS OF SUB-S. (1A) OF S. 161 UNCONSTITUTIONAL. IT IS A WELL SETTL ED POSITION THAT IF TWO CONSTRUCTIONS OF A STATUTE ARE POSSIBLE, ONE OF WHI CH WOULD MAKE IT INTRA VIRES AND THE OTHER ULTRA VIRES, THE COURT MU ST LEAN TO THAT CONSTRUCTION WHICH WOULD MAKE THE OPERATION OF THE SECTION INTRA VIRES (JOHRI MAL VS. DIRECTOR OF CONSOLIDATION OF HOLDING S AIR 1967 SC 1568). 7. THE LEARNED CIT(A) IN FACT HAS DIRECTED THE ASS ESSING OFFICER TO FOLLOW THE PROVISIONS OF SECTION 161. I T IS SURPRISING TO NOTE THAT ASSESSING OFFICER DID NOT FOLLOW THE DIRECTIO NS. IN THE APPEAL ON CONSEQUENTIAL ORDER DATED 19.10.2009, THE SAME CIT( A) ON THE SAME DATE (I.E., 14.02.2013) HAD PASSED ORDER IN THAT A PPEAL AND THE RELEVANT OBSERVATIONS OF THE CIT(A) AT PARAS 5.3 AN D 5.4 ARE AS UNDER: 5.3. FROM THE PERUSAL OF THE FINDING OF LEARNED CI T(A), IT IS CLEAR THAT THE CIT(A) HAS RELIED ON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF THE APPELLANT TRUST REPORTED I N 227 ITR 52, WHERE IT IS HELD THAT THE TRUSTEES ARE NOT THE OWNE RS OF THE PROPERTY OF THE TRUST. THE REAL OWNER OF THE TRUST PROPERTIES ARE THE BENEFICIARIES OF THE TRUST. THE INTEREST RECEIV ED ON THE FDR WAS ALSO DISTRIBUTED TO THE BENEFICIARIES IN THE RE SPECTIVE 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 CR ORES HAS TO BE ASSESSED U/S. 161 IN THE HANDS OF THE ASSESSEE-T RUST ONLY 8 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD BEING A REPRESENTATIVE ASSESSEE. WITH THESE FINDING S, 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 ASSES SEE WAS ALLOWED. 5.4. FROM THE PERUSAL OF THESE FINDINGS OF THE CIT( A), THERE IS NO AMBIGUITY THAT THE APPEAL WAS ALLOWED IN FAVO UR OF THE APPELLANT WITH CLEAR DIRECTIONS TO THE A.O. THAT TH E 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 TH E DIRECTIONS AND NOT TO DEVIATE BY MAKING FURTHER ENQUIRIES OR R AISING NEW ISSUES. IN THE PRESENT CASE, THE A.O. HAS DEVIATED IN THE COMPUTATION OF INCOME AS GIVEN IN ANNEUXRE-1 TO THE COMPUTATION AS SUBMITTED BEFORE THE LEARNED CIT(A), ON WHICH THE REMAND REPORT WAS CALLED FOR FROM THE A.O. SINC E IN THE APPEAL EFFECT ORDER, THE A.O. IS NOT FREE TO MAKE A NY NEW ENQUIRIES AND TO ADOPT NEW FIGURES, THE ACTION OF T HE A.O. SEEMS TO BE INCORRECT. THUS, THE A.O. IS DIRECTED TO STRI CTLY FOLLOW THE DIRECTIONS AS GIVEN BY LEARNED CIT(A) AND GIVE EFFE CT TO ITS ORDER AS PER THE PROVISIONS OF LAW. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 8. WE ARE SURPRISED TO NOTE THAT AFTER DIRECTING T HE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT OF THE TRUST APPLYING THE PROVISIONS OF SECTION 161, THE CIT(A) CONFIRMED THE PENALTY ON THE REASON THAT THE TRUST HAS NOT FILED RETURNS AND THE REFORE, ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 148 AND ACCORDINGLY, THE TRUST IS LIABLE FOR PENALTY. AS CAN BE SEEN FROM TH E ABOVE FACTS STATED, THE TRUST IS A REPRESENTATIVE ASSESSEE AND TO THAT EXTENT OF INCOME TAX LEVIABLE ON THE INCOMES OF THE BENEFICIARIES, A SSESSMENT CAN BE MADE EITHER IN THE HANDS OF THE RESPECTIVE BENEFICI ARIES OR IN THE 9 ITA.NO.576/HYD/2013 HEH THE NIZAMS JEWELLERY TRUST, HYDERABAD HANDS OF THE ASSESSEE TO THAT EXTENT ONLY, INDICATI NG THE TAX LIABILITY OF RESPECTIVE BENEFICIARIES BY CONSOLIDATED ORDER. AS SEEN FROM THE ORDERS OF THE ASSESSING OFFICER HE HAS NOT FOLLOWED EITHER OF THE PROCEDURES BUT STILL CONTENDING TO HOLD THAT THE EN TIRE INCOME RECEIVED ON THE FIXED DEPOSIT IS TAXABLE IN THE HAN DS 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. IN VIEW OF THIS, WE ARE OF THE OPINION THAT PENALTY LEVIED ON THE SO-CALLED ESCAPEMENT OF INCOME IS NOT CORRECT AND THEREFORE, THE SAME STANDS DELETED. ACC ORDINGLY, THE APPEALS OF THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2013. SD/- SD/- (D.MANMOHAN) (B.RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 23 RD DECEMBER, 2013 VBP/- COPY TO 1. HEH THE NIZAM JEWELLERY TRUST, 22-3-660, PURANI HAVELI, HYDERABAD C/O. SHRI RAVINDRA CHENJI, ADVOCATE, C-308, AHUJA ESTATE, 4-1-970, ABIDS, HYDERABAD. 2. ITO, WARD 9(4), I.T. TOWERS, HYDERABAD. 3. CIT(A)-XVIII, MUMBAI HAVING CONCURRENT JURISDICT ION OF CIT(A)-VI, 6A, I.T. TOWERS, A.C. GUARDS, HYDERA BAD. 4. CIT-VI, HYDERABAD 5. D.R. A BENCH
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