Assessment in individual status bad when notice issued to HUF Assessment set aside when notice u/s 148 was issued in the name of HUF-ITAT
ABCAUS Case Law Citation:
ABCAUS 1155 (2017) (03) ITAT
Assessment Year : 2008-09
Date/Month of Pronouncement: March-2017
Important Case Laws Cited/relied upon:
Suraj Mal, HUF vs. ITO (2007) 109 ITD 327.
Brief Facts of the Case:
The assessee had filed a return of income in a status of HUF. The Assessing Officer (‘AO’) came to know that the assessee had purchased 2.89 acres of land alongwith four other persons. However, the investment in property was not disclosed in the return of income filed by the assessee in the HUF status. Hence notice u/s 148 of the Income Tax Act, 1961 (‘’the Act’’) was issued to the assessee. The assessee requested the AO to treat the return originally filed as one filed in pursuance to such notice. Thereafter notice u/s 143(2) of the Act was also issued to the assessee. The AO examined the seller of the property who stated that she had sold two pieces of land to five persons including the assessee.
In a sworn statement the assessee admitted that the purchase was made in his individual status though PAN of HUF was given for registration of the document. The assessee had filed return in his individual status for the relevant assessment year and had disclosed purchase of the above mentioned property and the cost of acquisition was mentioned as 1/5th share of the consideration paid. The AO completed the assessment in the individual status of the assessee based on the statements given by the assessee and the seller. The AO made additions for the 1/5 share of the assessee attributable towards cash payments made to the seller which was not disclosed in the return of the assessee.
The assessee’s appeal before Commissioner of Income Tax (Appeals) did not meet with any success. And he dismissed the appeal by confirming the additions made by the Assessing Officer.
Contentions of the Appellant assessee:
It was contended that the assessment was bad in law since it was initiated on a return filed by the assessee in HUF status. It was submitted that the Assessing Officer if he had found that the property was purchased in the individual status of the assessee, ought have issued notice u/s.148 of the Act to the assessee in his individual status. This was never done and the notice was issued in the status of HUF.
It was submitted that the assessment having being done u/s 143(3) r.w.s. 147 of the Act, notice issue of notice u/s 148 of the Act was mandatory. Even the notice u/s 143(2) of the Act was issued to the assessee only in HUF status. Thus, the assessment in the HUF status of the assessee was bad in law.
Contention of the Respondent Revenue:
It was submitted that the tax payer himself had started the confusion. Error was committed by the assessee and this was rectified by the Assessing Officer by making the assessment in the correct status. It was submitted that the lacuna if any could be cured u/s 292BB of the Act.
Observations made by the Tribunal:
It was observed that the properties purchased by the assessee were not disclosed in the return filed by the assessee in HUF status. It was only when assessee was examined by the Assessing Officer he recognized that properties were acquired by the assessee in his individual status and not in the HUF status.
The ITAT noted that return though originally filed in the status of HUF, the assessment was finally completed in the status of individual. Both the notice u/s 148 and u/s 143(2) of the Act issued were much prior to recording of sworn statement from the assessee. Thus, it could safely be concluded that there was no issue of notice on the assessee in his status as individual either u/s 148 nor 143(2) of the Act.
The ITAT opined that once the Assessing Officer reached a opinion that assessment was to be done only in the status of ‘individual’ and not in the status of ‘HUF’, he was bound to issue a notice to the assessee in his individual status. An ‘individual’ and an ‘HUF’ are different persons under the Income Tax Act, and notice to one cannot be deemed as notice to the other. Section 2(31) clearly brings out this differentiation. There was a clear failure to issue notice to the assessee in his individual status.
The Tribunal observed that section 292BB of the Act can cure only were a notice is claimed by a assessee not to have been served on him or served on him out of time or served in an improper manner. It cannot cure a situation where there was no issue of notices u/s 148 or u/s 143(2) of the Act.
Regarding the contention of the Revenue that such a ground was not raised by the assessee before the AO, the Tribunal opined that it being a pure question of law with all relevant facts on record, it can be considered by the Tribunal, though raised first time before it.
The assessment was set aside and the appeal of the assessee was allowed on legal ground alone.