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2007 (11) TMI 663 - AT - Income TaxValidity Of Initiation of Proceedings u/s 147/148 - Escaped assessment - belief that (HUF) has not filed the return of income - assumption of justification u/s 148 - Status of HUF - Notice u/s 148 was sent to the HUF and assessment made in the hands of individual - HELD THAT:- In our view, the IT Act recognizes the status of the HUF different from individual status of Karta of the HUF. Two are treated as different legal entities. Therefore, it is necessary that notice u/s 148 of the Act should be sent in the correct status because jurisdiction to make assessment is assumed by issuing valid notice. Admittedly, in this case, the notice u/s 148 was sent to the HUF and assessment has been made in the hands of individual. In our view after having issued notice u/s 148 of the Act to HUF, the AO has no jurisdiction to make the assessment in the case of individual. In the case of CIT vs. K. Adinarayana Murty [1967 (4) TMI 1 - SUPREME COURT] held that; ‘individual’ and the ‘HUF’ are treated as separate units of assessment and if a notice u/s 34 of the Act is wrongly issued to the assessee in the status of an individual and not in the correct status of an HUF, the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction." Thus, it is clear from the above that the Department cannot be permitted to change the status from the HUF to individual. Thus, assessment framed u/s 148/144 is not legally sustainable. Reasons recorded by the AO - We are of the view that the reopening has been done on the basis of the reason recorded on incorrect facts. That being so, the reasons are, in fact, no reasons at all. This view find support from the decision in the case of CIT vs. Atlas Cycle Industries [1989 (4) TMI 48 - PUNJAB AND HARYANA HIGH COURT]. Further, it is seen from the reason recorded that the purpose of reopening was to make verification of the investment made by the assessee. In the case of Manish Ajmera vs. Asstt. CIT [2005 (3) TMI 388 - ITAT CHANDIGARH-A] it has been held that the assessment made u/s 143(1) without issue of notice u/s 143(2) could not be reopened in the absence of any fresh material to show that income has escaped assessment and reopening for making fishing inquiry was not valid. Therefore, we hold that the initiation of the proceedings u/s 148 of the Act is not legally sustainable and as such assessment framed in pursuance of the said notice is liable to be quashed on this ground alone. Since we have quashed the assessment made in the matter on the legal ground as aforesaid, the other grounds taken by the assessee will not survive. In the result, the appeal filed by the assessee is allowed.
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