Rakesh Garg, J. - (1.) THE present appeal has been filed by the Revenue against the order dated May 18, 2007 (annexure A -4), passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, in I.T.A. No. 2(ASR)/2000 for the assessment year 1995 -96 raising the following substantial questions of law: (i) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in allowing the appeal of the assessee and setting aside the order of the learned Commissioner of Income Tax (Appeals) and quashing the intimation sent by the Assessing Officer under Section 143(1)(a) of the Income Tax Act, 1961? (ii) Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal is right in law in taking a view that the changing of status of firm from the trust to an association of persons (AOP) falls outside the purview of Section 143(1)(a) of the Income Tax Act 1961?
(2.) THE brief facts out of which the present appeal has arisen are as under: The assessee filed Income Tax return in this case on March 27, 1997, showing its income as nil. While processing the return under Section 143(1)(a) of the Income Tax Act (for short "the Act"), the Assessing Officer found that the claim of the assessee for exemption under Section 11 of the Act was not allowable in the absence of registration certificate. A notice dated March 12, 1998 (annexure A -1), was issued to the assessee requiring him to explain why the status of the said trust may not be treated as an AOP in the absence of the registration certificate. On the required date neither any reply was received nor anybody attended the proceedings before the Assessing Officer on behalf of the assessee. Hence, the Assessing Officer proceeded with the computation of total income under Section 143(1)(a) of the Act and treated the status of the trust as AOP and all the income for the assessment year was treated as an AOP and was taxed accordingly. The Assessing Officer changed the status of the assessee from trust (08) claimed in the return to an AOP (07) while processing the return under Section 143(1)(a). Aggrieved with this action of the Assessing Officer, the assessee went in appeal before the Commissioner of Income Tax (Appeals), who vide his order dated August 3, 1999, in Appeal No. 221 -IT/OT(A)/BTI/97 -98 dismissed the appeal of the assessee observing as under: I have given due consideration to the rival submissions and I hold that there is no force in the arguments advanced by learned Counsel of the appellant. The appellant has claimed the status while filing the return as charitable trust, i.e., (08) but the same was not substantiated by enclosing the registration certificate from the competent authority as required under the statute. The Assessing Officer has, therefore, intimated the deficiency to the assessee for filing registration certificate under Section 12A to which the appellant failed to comply. The appellant failed to furnish the certificate of registration issued by the competent authority under Section 12A of the Income Tax Act 1961, even at the appellate stage. On the - contrary it is established that the trust of the appellant is not registered by the competent authority, i.e., the Commissioner of Income Tax under Section 12A of the Income Tax Act, 1961. I, therefore, hold that the Assessing Officer was right in his action in treating the trust as an AOP instead of religious trust in the absence of any proof having the trust been registered by the Commissioner of Income Tax under Section 12A of the Income Tax Act, 1961. It is more so because the appellant failed to remove the deficiency even when it was intimated by the Assessing Officer. This is the first year of the assessment of the trust and, therefore, the Assessing Officer had all the power including changing the status to rectify the mistake of prima facie nature including the status after duly intimating the appellant about his intention to do so. In the absence of registration of trust before the competent authority, the status of the trust can only be an AOP. The assessment so framed by the Assessing Officer in the status of an AOP is legal and in order by virtue of the provisions of Section 292B of the Income Tax Act, 1961. Keeping in view all the facts and legal position into consideration, I hold that the action of the Assessing Officer in changing the status and disallowing the exemption claimed under Section 11 is correct and justified and the same stands upheld.
(3.) AGAINST the above order of the Commissioner of Income Tax (Appeals), Bathinda, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Amritsar, who vide its order dated May 18, 2007, (annexure P -4) in I.T.A. No. 2(ASR)/2000 allowed the appeal and set aside the order of the Commissioner of Income Tax (Appeals) and quashed the intimation sent by the Assessing Officer under Section 143(1)(a) on the ground that the same was illegal and bad in law. While passing the impugned order dated May 18, 2007, the Tribunal held that changing the status of the firm/ trust to an AOP falls outside the ambit and purview of Section 143(1)(a). Even though the trust was not registered with the Commissioner of Income Tax, the assessment could not be made in the status of an AOP under Section 143(1)(a). Moreover, the Assessing Officer could have done so by issuance of notice under Section 143(2) of the Act.;