TMI Blog2017 (6) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising out of above properties was assessed by the AO in the status of individual following the order of the Tribunal. 3. Being aggrieved an appeal was filed before the CIT(A). By the time the orders are passed by the CIT(A), the Hon ble High Court of Karnataka reversed the order of the Tribunal in ITA No.96/2009 dated 08/12/2014 and the Hon ble High Court held that the properties are to be assessed in the hands of HUF. Therefore, the CIT(A) deleted the addition made on account of the following properties: But in respect of building KMR Building, the CIT(A) held that it belongs to individual as the AR failed to identify this property in the HUF partition deed dated 20/04/1999. 5. Being aggrieved, the assessee is before us in ITA No.1158/Bang/2013 for the assessment year 2003-04 contending that rental income from KMR Building amounting to ₹ 62,500/- cannot be assessed in the hands of the assessee in the status of an individual as the Hon ble High Court held that this property belongs to HUF. 6. After considering the rival submissions and perusing material on record, it is undisputed fact that in the immediately preceding assessment year i.e. 2003-03, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty was purchased on 3/2/1992 out of funds received pursuant to partition deed of his HUF. This contention was rejected by the CIT(A) holding that there was no documentary evidence in support of the partition of HUF. It was urged that the entire property was vacant during the year. Hence, no annual value should be assessed to tax. After hearing rival submissions and perusing material on record, 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. 9. Ground No.3 challenges the assessment of annual value at No.1198, Renuka Nilaya, HAL III Stage, Bangalore. It is 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. This contention was disbelieved by the AO as well as the CIT(A) on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High Court in the case of CIT vs. Lakkanna Sons (ITRC No.57/1994 dated 26/05/2005) 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. The relevant portion of the judgment is as under: 21. Section 4 of the Act is the charging provision. It provides that when any Central Act enacts that income tax shall be charged for any assessment year at any rate, income tax at that rate shall be charged for that year in accordance with the provisions of the Income Tax Act, 1961, in respect of the total income of the previous year of every 'person'. Section 2(31) of the Act defines the meaning of the expression 'person', to mean, apart from others, Hindu Undivided Family (HUF) and is assessed to income tax as a distinct unit of assessment. Section 171 of the Act provides for assessment after a partition of a Hindu Undivided Family. Sub-section (1) of Section 171 of the Act applies only to a HUF, which has hitherto been assessed as undivided, by legal fiction provided in the sub-section for the purposes of the Act continues to be a HUF and continues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of Section 171(1) of the Act is in pari materia with Section 25-A of 1922 Act. To this effect, our attention is drawn to the observations made by the Apex Court in the case of Additional Income Tax Officer, Cuddapah Vs. A Thimmayya and Another - 57 ITR 666, wherein the Court has observed that the Income Tax Officer may assess the income of a Hindu family hitherto assessed as undivided notwithstanding partition, if no claim in that behalf has been made to him, if he is not satisfied about the truth of the claim that the joint family property has been partitioned in definite proportions or if on account of some error or inadvertence if he fails to dispose of the claim. In all these cases, his jurisdiction to assess the income of the family hitherto assessed as undivided remains unaffected, for the reason, procedure for making assessment of tax is statutory. Any error or irregularity in the assessment may be rectified in the manner provided by the Statute alone, and the assessment is not liable to be challenged collaterally? Reliance is also place on the observations made by the Apex Court in Kalwa Devadattam Vs. Union of India - 49 ITR 165. The learned Counsel for the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Ramdas - 6 ITR 414, wherein, the Court has observed, that the word 'assessment' is used in Income Tax Act as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable, and sometimes the procedure laid down in the Act for imposing liability in the tax payer . 23. In the case Additional Income Tax Officer and Another Vs. E. Alfred - 44 ITR 442, the Supreme Court has stated the the word 'assessment' bears different meanings, and in one sense, it comprehends the entire process of computation and levy of tax. It is in this sense that the legal representative becomes an assessee by the fiction, and this fiction has to be fully worked out to its logical conclusion . 24. In A.N. Lakshman Shenoy Vs. Income Tax Officer and Another - 34 ITR 275, the Apex Court has observed that in the context and collection of the words of the Finance Act, 1950, the word assessment is capable of bearing only the comprehensive meaning and would include reassessment . Reassessment will without doubt come within the expression levy, assessment and collection of income tax occurring in Section 13(I) of the Finance Act . 25. The three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said decision in the earlier portion of our order and therefore, repetition of the same may be not necessary. 29. The learned Counsel Sri Parthasarathy, for the assessee, while justifying the findings and conclusion reached by the Income Tax Appellate Tribunal has brought to our notice the opinion expressed by the Karnataka High Court in the case of N.D. Hanumantharayappa Vs. Commissioner of Wealth Tax - 192 ITR 396, in the case of Commissioner of Wealth Tax Vs. G.E. Narayana and Others - 193 ITR 41 and in the case of CIT Vs. D.C. Basappa and Others - 251 ITR 673. Our attention is also invited to the observations made by the Supreme Court in the case of Roshan Di Hatti Vs. Commissioner of Income Tax, New Delhi - 68 ITR 177, wherein the Court has observed that where a claims is made, that joint status of a HUF was dissolved before an order of assessment is made by the Income Tax Officer, the decision of the Supreme Court in Kalwa Devadattam's case - [1963] 49 ITR 165, will have no application because the Supreme Court in that case was not called upon to interpret the expression hitherto assessed as undivided in sub-section (1) and (2) of Section 25-A of Indian Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t necessarily be confined to the purpose for which it was specified in that Section and for no other purpose. The expression hitherto assessed occurring in Section 171(1) of the Act is significant. It makes it clear that only a Hindu Undivided Family which had suffered tax assessment in the past could be deemed to continue to be Hindu Undivided Family till an order of partition under Section 171(1) is recorded . 31. Since the observations made by the Gujarat High Court, Allahabad High Court and the Andhra Pradesh High Court is in consonance with our findings and conclusion reached, which we have noticed in our earlier partition of our order, we respectfully agree with those findings and conclusions. Before we conclude, we intend to observe, may be at the cost of repetition, that in the present case, M/s. Lakkanna and Sons, a HUF - assessee had filed its return of income for the assessment year 1980-1981. Even before the completion of the assessment proceedings, the assessee had intimated the Income Tax Officer the disruption of the HUF. At no point of time, HUF had been assessed to tax under the Act. In view of this factual position, the procedure prescribed under Section 171 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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