CIT Vs. ASHA FAMILY TRUST

JUDGEMENT

(1.) THE Income Tax Appellate Tribunal, New Delhi at the instance of the Income -tax department has referred the following question of law under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act,) for opinion to this Court: 'Whether on the facts and in the circumstances of the case, Tribunal is right in holding that the assessing officer has no jurisdiction to change the status while making the assessment under section 143(1) and in that background whether a change in the status is appealable to the first appellate authority'.

(2.) THE assessment year 1984 -85 is involved in the present reference. The brief facts of the case are as follows : - The assessee -respondent had filed the income -tax returns and claimed the status as 'specified trust'. The Income Tax Officer completed the assessment for all these years under section 143(1) of the Act. However, he while making the assessment under section 143(1) of the Act adopted the status as that of AOP and charged tax at maximum marginal rate. The said assessment orders were challenged by way of filing appeals before the Deputy CIT(A) and it was contended that the Income Tax Officer had erred in taking status of AOP. and charging maximum rate of tax. It was claimed that as per the 'returns in the status of specified family trust there was no tax liability in view of section 161 of the Act as the Trust was not a business trust. But the Income Tax Officer by treating the assessee in the status of AOP has created tax liability. After overruling the objection that the appeal is not maintainable, the Deputy CIT(A) allowed the appeals and held that under section 143(1) of the Act the Income Tax Officer could make certain adjustments for the determination of the income, but could not change the status and charge at maximum rate of tax. The order of the Deputy CIT(A) has been confirmed by the Tribunal. The Tribunal agreed with the view point of the First Appellate Authority that the status of the assessee could not be changed while framing assessment under section 143(1) of the Act.

(3.) IT was submitted that an order passed under section 143(1) of the Act is not appealable under section 256(1) of the Act. Appeal being creature of statute, the order under section 143(1) having not been made appealable under the provisions of the Act, the view of the Tribunal that the appeal was maintainable is wrong. He further submitted that an order passed under section 143(1) of the Act has been made appealable for the first time by making necessary amendments with effect from 1 -10 -1998 by amending sub -clause (a) of section 246(1) of the Act. In contra, the learned counsel for the assessee submitted that the order passed by the Income Tax Officer though in exercise of power under section 143(1) of the Act was, in fact, an order under section 143(3) of the Act and was, therefore, appealable under section 246(1)(a) of the Act. Elaborating the argument, he submitted that only certain specified adjustments could have been made by the Income Tax Officer while passing an order under section 143(1) of the Act. In a case where the Income Tax Officer exceeds its power and makes the adjustments not permissible under section 143(1), the assessment order shall be referable to section 143(3) of the Act. Mere mention of a wrong provision in an order will be of little consequence if the power to pass such an order could be traced out in the Act.