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2017 (6) TMI 1355 - AT - Income TaxAssessment of HUF - Addition in the hands of individual member OR HUF - individuals have inherited certain properties through partition of Krishna Reddy, HUF - Income derived from these properties is assessed in individual capacity of the respective persons by the AO - HELD THAT:- It is undisputed fact that in the immediately preceding assessment year i.e. 2003-03, the Hon’ble High Court that this property belongs to HUF of the appellant. Therefore, should be assessed only in the hands of the HUF of the appellant. Hence, the grounds of appeal filed by the assessee are allowed. For the assessment year 2004-05 unexplained investment on account of cost of construction in residential complex - CIT(A) was not justified in rejecting the same merely on the ground that this property does not find a place in the partition deed. It is always possible that property can be acquired out of nucleus of the funds of the HUF in which event, property always belongs to HUF. Therefore, income arising out of the property should be assessed only in the hands of the HUF. - Appeal of assessee allowed. Assessment of annual value of property at Renuka Bangalore, in the status of the individual of the assessee - contention of the assessee that it belongs to joint family and therefore, should be assessed in the status of HUF - HELD THAT:- There is no bar under law to throw individual property into common hotchpot of HUF, even if the contention of the assessee that this property was purchased out of funds received on partition under partition from erstwhile HUF of his father to be disbelieved. In the circumstances, we hold that annual value of property is to be assessed in the hands of the HUF. Thus ground No.2 is allowed. Assessment of annual value at No.1198, Renuka Nilaya, HAL III Stage, Bangalore - As claimed that purchase of site and construction of building thereon have been made out of sale consideration received from assessee’s share of flats in Krishna Apartment which are identified as HUF property - HELD THAT:- We are of the considered opinion that in absence of contrary evidence, explanation tendered in support of source of acquisition of property should be accepted. Therefore, we hold that annual value of property should be assessed only in the individual capacity. Addition on account of assessment of short term capital gain on sale of property at survey No.39/3, Doddanakundi, Bengaluru - HELD THAT:- It is trite law that in absence of any contrary evidence, explanation tendered by the assessee should e accepted. There is nothing on record to disbelieve the explanation tendered by the assessee. We hold that short term capital gains should be assessed only in the hands of HUF. Whether assessment can be made on disrupted HUF which is not hitherto assessed to tax? - HELD THAT:- This issue has come up before the Hon'ble jurisdictional High Court in the case of CIT vs. Lakkanna & Sons [2005 (5) TMI 684 - KARNTATAKA HIGH COURT] wherein it was held that where HUF has not been assessed earlier, enabling provisions of section 171 of the Act cannot be applied to assess after partition in status of HUF - Since HUF of respective parties is already disrupted, there cannot be any assessment. Therefore, assessments framed in the present case are cancelled.
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