Case Law Details
Areca Trust Vs CIT (Appeals) (ITAT Bangalore)
The appellant, Areca Trust, filed an appeal against the order passed by the CIT (Appeals) under section 250 of the Income Tax Act. The grounds raised in the appeal challenged the legality and validity of the Appellate order issued by the CIT (Appeals) and questioned various aspects of the assessment order.
The appellant, a Trust, had filed its return of income for Assessment Year 2018-19, declaring a total income of Nil. The return was processed under section 143(1) of the Act, and an amount of Rs.23,29,62,417/- was considered as income chargeable to tax at a special rate. The assessment was selected for scrutiny, and an assessment under section 143(3) was completed on 12.02.2021 based on the intimation issued under section 143(1) of the Act.
The appellant raised several grounds challenging the assessment and CIT (Appeals) order. They contended that the assessing officer (AO) erred in reiterating the addition made in the intimation issued under section 143(1) during the assessment under section 143(3). The appellant also argued that the CIT (Appeals) didn’t properly address the grounds raised before them and failed to consider the merits of the appeal.
The ITAT analyzed the impugned Assessment Order and the arguments raised by the appellant. It noted that the assessment completed under section 143(3) solely relied on the adjustment made in the intimation under section 143(1). The ITAT observed that no independent discussion was present in the assessment order regarding the income assessed. It cited section 246A of the Act, which specifically provides for an appeal against intimation under section 143(1). Therefore, the ITAT concluded that the cause of action for the appellant arose from the intimation issued under section 143(1) and that the appeal should have been filed against it.
The ITAT addressed the concept of merger and clarified that mere completion of assessment under section 143(3) doesn’t automatically merge the intimation under section 143(1) with the assessment order. The ITAT pointed out that the appellant had also filed a rectification application against the intimation under section 143(1), which was pending disposal. The CIT (Appeals) directed the AO to dispose of the rectification application.
The ITAT rejected the grounds of the appellant and dismissed the appeal. It emphasized that the appeal should have been filed against the intimation under section 143(1) and that the assessment order merely adopted the figures from that intimation. The ITAT suggested a liberal approach for condoning any potential delay in filing an appeal against the intimation under section 143(1), considering the pending rectification application.
Conclusion: The ITAT Bangalore’s decision in the Areca Trust case highlights the importance of understanding the appropriate stage for filing appeals under the Income Tax Act. The ITAT’s analysis clarifies that while assessments under section 143(3) might rely on intimation under section 143(1), the two are distinct and can give rise to separate causes of action.
TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of assessee is directed against the CIT(A)’ s Order dated 07.04.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2. The grounds raised read as follows:
1. On the facts and in circumstances of the case and in law, the Appellate order issued under section 25o of the Income-tax Act, 1961 (`the Act’) passed by the Commissioner of Income-tax (Appeals), NFAC. (learned CIT(A)’) dated 07 April 2023, to the extent prejudicial to the Appellant, is bad in law, void ab initio and contrary to the facts and circumstances of the case and is liable to be quashed.
2. On the facts and in the circumstances of the case: (a) the learned AO, while passing an order under section 143(3) of the Act, has erred in reiterating the addition made in intimation issued under section 143(1) of the Act in an absolute disregard of the submissions made to him during the course of assessment under section 143(3) of the Act; and (b) the learned CIT(A) has erred in not adjudicating upon the ground of appeal no. 3 raised before him in this regard.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have appreciated that intimation under section 143(1) of the Act does not survive after an order under section 143(3) of the Act is passed, hence he ought to have considered the appeal on merits as the grievance actually arouse from the order passed under section 143(3) of the Act.
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have appreciated that there was no inconsistency between various schedules of the Income-tax Return, hence disallowance reiterated in the order under section 143(3) of the Act was unsustainable.
5. On the facts and in the circumstances of the case, the learned CIT(A) has erred in directing the learned AO to charge interest under section 234B and 234C of the Act.
That the Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein below or produce further documents before or at the time of hearing of this Appeal.
3. Brief facts of the case are as follows:
Assessee is a Trust. For the Assessment Year 2018-19, the return of income was filed on 28.08.2018 declaring total income at Nil. The return of income was processed by the AO/CPC under section 143(1) of the Act on 28.02.2020. In the said intimation, an amount of Rs.23,29,62,417/- was considered as income chargeable to tax @ 10% at special rate other than under section 11 5BB of the Act. The assessment was selected for scrutiny and notice under section 143(2) of the Act was issued on 23.09.2019. The assessment under section 143(3) of the Act was completed on 12.02.202 1 by assessing the total income at Rs,23,29,62,420/- as per the intimation issued under section 143(1) of the Act.
4. Aggrieved by the order passed under section 143(3) of the Act, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, it was contended that the assessee earns dividend income of Rs.23,29,62,417/- on mutual funds registered with SEBI and hence the exemption claimed under section 10(35) r.w.s. 10(23) of the Act is to be granted. Further, the learned AR contended that the income was assessed at 10% as per the intimation under section 143(1) of the Act whereas in the assessment completed under section 143(3) of the Act, it was treated as business profit and taxed at 30% as against 10% at special rate under section 1 15BBDA of the Act. The CIT(A) held that the assessee has filed an appeal as against the assessment completed under section 143(3) of the Act wherein no separate addition was made but only incorporated the adjustment made under section 143(1) of the Act. Therefore, it was concluded by the CIT(A) that appeal as against the order passed under section 143(3) of the Act is not maintainable and he did not adjudicate on merits. However, the CIT(A) directed the AO to dispose off the assessee’s rectification application dated 16.06.2020 as against the order passed under section 143(1) of the Act. As regards the rate of tax, the CIT(A) directed the AO to tax the income of Rs.23,29,62,420/- at 10% as per section 1 15BBDA of the Act as it is done in the intimation under section 143(1) of the Act. Accordingly, the appeal of the assessee was partly allowed.
5. Aggrieved, assessee has filed the present appeal before the Tribunal. The assessee has filed Paper Book enclosing therein the case laws relied on, written submissions, income computation statement, the intimation issued under section 143(1) of the Act, notice issued under section 143(2), the submissions made before the CIT(A), etc. The learned AR reiterated the submissions made before the Income Tax authorities.
6. Learned DR strongly relied on the order of the CIT(A).
7. We have heard the rival submissions and perused the material on record. On perusal of the impugned Assessment Order passed under section 143(3) (order dated 12.02.2021), it is clear that AO has assessed the total income at 23,29,62,420/- solely relying on the adjustment made by the AO/CPC in the intimation made under section 143(1) of the Act. In the impugned Assessment Order passed under section 143(3) of the Act, there is no independent discussion as regards the income assessed at Rs.23,29,62,420/-. The relevant portion of the assessment completed under section 143(3) of the Act dated 12.02.2021 reads as follows:
“4. In response to the notice, the assessee responded via e-proceedings and submitted the details called for. Details filed are examined and the income is assessed at Rs. 23,29,62,420/ as per 143 (1) (a) of the Act.”
8. Section 246A specifically provides for an appeal as against intimation issued under section 143(1) of the Act. In the instant case, total income has been assessed at Rs.23,29,62,420/- as per the intimation passed under section 143(1) of the Act. Therefore, the cause of action for the assessee arises from the intimation issued under section 143(1) of the Act and appeal ought to have been filed as against the same. The assessment completed under section 143(3) of the Act merely adopts the assessed figures in the intimation order passed under section 143(3) of the Act. Therefore, no cause of action arises from the order passed under section 143(3) of the Act.
9. Section 143(4) of the Act only mentions that on completion of regular assessment under section 143(3) or 144 of the Act, the tax paid by assessee under section 143(1) of the Act shall be deemed to have been paid toward such regular assessment. That by itself does not mean there is merger of intimation under section 143(1) with that of regular assessment under section 143(3) / 144 (unless issue has been discussed and adjudicated in regular assessment under section 143(3) / 144 of the Act). Assessee, against the intimation under section 143(1) of the Act, has filed a rectification application under section 154 of the Act (vide application dated 16.06.2020) and the same is pending disposal. The CIT(A) in the impugned order has directed the AO to dispose off the said rectification application dated 16.06.2020. Moreover, if assessee is advised to file an appeal as against the intimation under section 143(1) of the Act, a liberal approach may be taken for condonation of delay since assessee’s application for rectification of the intimation under section 143(1) of the Act has been filed within time and same is pending disposal. With the above said observation, the grounds of the assessee are rejected.
10. In the result, appeal filed by the assessee is dismissed.
Pronounced in the open court on the date mentioned on the caption page.
