HERBERT SMITH, SINGAPORE FIRM v. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)
[Citation -2007-LL-0615-1]

Citation 2007-LL-0615-1
Appellant Name HERBERT SMITH, SINGAPORE FIRM
Respondent Name DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)
Court ITAT
Relevant Act Income-tax
Date of Order 15/06/2007
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags mistake apparent from record • written down value • unregistered firm • self-assessment • audit report • advance tax • rate of tax
Bot Summary: The brief facts of the case are that the assessee filed return of income in the status code '04' on 1-10-2002, declaring total income of Rs. 26,16,700. The Assessing Officer processed the return under section 143(1) and levied tax at the rate of 35 per cent, applicable to '04' status against the tax rate of 30 per cent applied by the assessee. The assessee filed an application under section 154 of the Act requesting inter alia to compute tax at the rate of 30 per cent. The learned Counsel for the assessee submitted that the assessee had filed the return in the status of an unregistered firm, which was stated in audit report. In the return under verification, it had shown the status as '04', which is that of a URF. The assessee had paid advance tax by three challans. The cases cited by the learned counsel do not advance the case of the assessee as the Assessing Officer has not enhanced its income. In such a situation, the Assessing Officer could not have varied the rate of tax without having recourse to the assessee.


Per K.G. Bansal, Accountant Member: This appeal emanates from order of CIT(Appeals)-XXIX, New Delhi, passed on 14-1-2004. assessee has taken six substantive grounds in appeal, which are reproduced below for sake of ready reference:- '1. Based on facts and circumstances of case, Herbert Smith Singapore Firm (hereinafter referred to as 'the Appellant') respectfully submits that learned Commissioner of Income-tax (Appeals)-XXIX, New Delhi [hereinafter referred to as 'learned CIT(A)'] has erred in dismissing appeal filed by appellant against order, dated 20-10-2003, passed by learned Deputy Director of Income-tax, International Taxation, Circle 1(2). 2. Based on facts and circumstances of case, appellant respectfully submits that learned CIT(A) has erred, in law and in fact, in holding that learned Deputy Director of Income-tax, International Taxation, Circle 1(2) was justified in rejecting appellant's application under section 154 of Income-tax Act, 1961 ('Act'). 3. Based on facts and circumstances of case, appellant respectfully submits that learned CIT(A) has erred, in law and in fact, in not accepting appellant's contention that appellant should be assessed as 'Association of Person'. 4. Based on facts and circumstances of case, appellant respectfully submits that learned CIT(A) has erred, in law and in fact, in not accepting appellant's contention that tax rate applied to appellant's income ought to have been 30 per cent and not 35 per cent. 5. Based on facts and circumstances of case, appellant respectfully submits that learned Deputy Director of Income-tax, International Taxation, Circle 1(2), erred in law and in fact, in levying interest under sections 234B and 234C of Act. 6. Each of above grounds is independent and without prejudice to one another.' 2. brief facts of case are that assessee filed return of income in status code '04' on 1-10-2002, declaring total income of Rs. 26,16,700. tax payable, after taking into account tax deducted at source, advance-tax and self-assessment payments, was worked out at nil . Assessing Officer processed return under section 143(1) and levied tax at rate of 35 per cent, applicable to '04' status against tax rate of 30 per cent applied by assessee. assessee filed application under section 154 of Act requesting inter alia to compute tax at rate of 30 per cent. This application was rejected by Assessing Officer by stating that name of assessee suggested that it was firm, which also corresponds to '04' status shown in return. Aggrieved by order, assessee filed appeal before CIT(A)- XXIX, New Delhi. He came to conclusion that Assessing Officer had not changed status as shown by assessee in return. Assessing Officer merely calculated tax by applying rate of 35 per cent, applicable in case of firm. Thus, there was no error apparent from record in order of intimation. Aggrieved by this order, assessee is in appeal before us. 3. learned Counsel for assessee submitted that assessee had filed return in status of unregistered firm (URF), which was stated in audit report. On perusal of report, it is seen that status mentioned in column 4 of report was 'Firm'. It was mentioned in return that Herbert Smith Singapore firm was not evidenced by written partnership deed and shares of partners were indeterminate. It was submitted that '04' status pertains to URF. provisions of section 184 were not applicable and, therefore, assessee should have been taxed as Association of Persons (AOP). It was also submitted that scope of intimation order under section 143(1) is very limited and Assessing Officer has only to determine tax payable on basis of return of income. scope does not extend to altering status of assessee. 3.1 In order to support her case, learned counsel relied on decision of Hon'ble Rajasthan High Court in case of CIT v. Smt. Premlata Jalani [2003] 264 ITR 744. question in that case was whether, Assessing Officer could change interest payable by assessee under section 234C on basis of different interpretation of law? This controversy arose as capital gains tax was also considered for payment of advance tax. In that case, capital gains arose after expiry of date of payment of advance tax. Hon'ble Court held that Assessing Officer could not change interest as liability arose after expiry of date of payment of advance tax for reason that his powers were confined to rectify arithmetical mistakes only. 3.2 Further, she relied on order of ITAT, Ahmedabad Bench 'A', in case of Packers (India) v. ITO [2006] 99 ITD 383, in which it was held that while processing return under section 143(1), Assessing Officer cannot change income on any ground including that of deduction of depreciation. She also relied on order of ITAT, Ahmedabad Bench 'A', in case of Choice Acquaculture (P.) Ltd. v. ITO [2006] 100 ITD 143, in which it was held that Assessing Officer cannot change income under section 143(1) by adopting correct figure of Written Down Value (WDV) brought forward from earlier year. 4. In reply, learned DR pointed out that assessee is firm of solicitors in Singapore and it has carried out its professional activities in India also. In return under verification, it had shown status as '04', which is that of URF. assessee had paid advance tax by three challans. first challan did not contain status, second showed status as 'Firm' and third as '07', being that of AOP. assessee's letter dated 25-10-2002 described itself firm, being branch office of Herbert Smith, partnership firm based in London. audit report described assessee as 'Firm' and Annexure-1 of report furnished names of three partners. It was his case that Assessing Officer merely fed data, contained in return, in computer to produce computer generated intimation. Thus, there was no application of mind by Assessing Officer with view to change status of assessee and tax was computed on basis of return of income filed by assessee. He relied on cases cited by learned counsel and pointed out that all those cases vindicated stand of revenue. 5. In rejoinder, learned counsel stated that structure at Singapore and not London was relevant. '04' status is for URF and not firm. assessee is AOP as accepted in past. If there was any ambiguity in return on issue of its status, view favourable to assessee should have been adopted. 6. We have considered facts of case and rival submissions. We are of view that processing under section 143(1) can be done on basis of return only. Assessing Officer is not empowered to make any alteration in income or status without making inquiry from assessee, which cannot be done in such processing. Past record regarding status can also be not taken into account, as argued by learned counsel. As pointed out by ld. D.R., there were evidences in return, including under verification, which lead to inference that assessee was 'Firm', which did not comply with provisions contained in section 184, thus, it could be assessed as firm under section 185. However, fact also stays that assessee computed its tax under section 167B and paid it accordingly. This was its manifest assertion that it was either 'AOP' or 'BOI' (Body of Individuals). return as whole was ambivalent about status of assessee as at other places it was described as 'Firm'. This ambivalence could only be resolved by questioning assessee failing which favourable view to assessee ought to have been adopted in applying rate of tax. cases cited by learned counsel do not advance case of assessee as Assessing Officer has not enhanced its income. He has merely adopted one view, which is discernible from entries made in return and audit report accompanying it. However, another view was also possible view, which was manifest from return, from calculation of tax made by assessee. In such situation, Assessing Officer could not have varied rate of tax without having recourse to assessee. This discussion also shows that cases cited by learned counsel do not advance case of revenue, as asserted by learned D.R. Thus, we are of view that Assessing Officer and learned CIT(Appeals) erred in holding that there was no mistake apparent from record in adopting tax rate at 35 per cent for reason that Assessing Officer could not have changed rate of tax on peculiar facts of this case. 6.1 ground regarding charging of interest under sections 234B and 234C was not argued by learned counsel. In absence thereof, it is taken as consequential in nature. consequential in nature. 7. In result, appeal is allowed. *** HERBERT SMITH, SINGAPORE FIRM v. DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)
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