PAN of Karta was mentioned instead of PAN of HUF, does not mean income belongs to Karta

By | March 7, 2016

Issue

Whethe the rental income is to be assessed in the hands of appellant-individual just because the PAN number of the appellant-individual has been indicated instead of PAN of HUF in the TDS certificate given by the Tenant ?

Held

HUF is a person for the purposes of assessment under the Act and as such assessing the rental income belonging to the HUF in the individual status is not justifiable, when the returns of the previous years and the subsequent years have been accepted in the status of HUF.

HIGH COURT OF KARNATAKA

M. Sathyanarayana

v.

Income-tax Officer, Ward 10(1), Bangalore

N.K. PATIL AND MRS. S. SUJATHA, JJ.

IT APPEAL NO. 63 OF 2010

JANUARY  21, 2016

JUDGMENT

Mrs. S. Sujatha, J. – This appeal is directed against the judgment passed by the Income Tax Appellate Tribunal, Bangalore Bench – A (‘ITAT’ for short) dated 18.09.2009 in ITA No. 571/Bang/2009 relating to the assessment year 2005-06.

2. Facts in brief are:

– the appellant is an individual and also the karta of his Hindu Undivided Family (HUF) known as Sri M Sathyanarayana (HUF). The appellant filed his return of income for the assessment year 2005-06 declaring the income of Rs. 1,12,540/- on 31.10.2010. The return of income filed by the appellant/assessee was selected for scrutiny and the assessment was concluded under Section 143(3) of the Income Tax Act, 1961 (‘the Act’ for short) on 31.12.2007. The Assessing Officer added an amount of Rs. 1,51,200/- as income from house property and Rs. 2,30,000/- towards long term capital gains. The appellant being aggrieved by the order of the Assessing Officer filed an appeal before the Commissioner of Income Tax (CIT) -A, Bangalore. The First Appellate Authority confirmed the order passed by the Assessing Officer dismissing the appeal. Aggrieved by the same, the appellant preferred an appeal before the ITAT, Bangalore Bench, Bangalore.

3. ITAT dismissed the appeal of the appellant. This order of the ITAT dated 18.09.2009 is impugned in this appeal to consider the following substantial questions of law:

“1. Whether the Tribunal was justified in law in holding that the rental income is to be assessed in the hands of appellant-individual just because the PAN number of the appellant-individual has been indicated instead of PAN of HUF in the TDS certificate given by the Tenant, on the facts and circumstance of the case.
2. Whether the Tribunal is justified in law in holding that the rental income is liable to be assessed in the hands of the appellant on the facts and circumstances of the case.
3. Without prejudice whether the Tribunal was justified in law in permitting double taxation of the same income both in individual and HUF status.”

4. We have heard Sri A Shankar, learned counsel appearing for the assessee/appellant as well as Sri K V Aravind, learned counsel appearing for the revenue.

5. Learned counsel appearing for the assessee would contend that the appellant has declared the income from the property bearing No. 58, Bommasandra, Bangalore as income of HUF. The ITAT failed to appreciate that, once the income is declared as income of HUF, it cannot be assessed in the hands of individual member of HUF. The learned counsel placing reliance on Section 2(31) of the Act submits that HUF is a person for the purposes of assessment under the Act and as such assessing the rental income belonging to the HUF in the individual status is not justifiable, when the returns of the previous years and the subsequent years have been accepted in the status of HUF. It is further contended the whole confusion was crept in on the wrong mentioning of the PAN number of the assessee by the tenant in the rental agreement and thus, this error cannot convert a HUF property into that of the individual property and it is not permissible in law to have such conversion without proper partition or other relevant document. Further, the income tax returns filed and accepted by the departmental authorities for the previous years and subsequent years are placed before us to substantiate his contention that the property in question in fact was HUF property and the mere wrong mention made by the tenant would not change the status under the income tax proceedings.

6. On the other hand, learned counsel appearing for the revenue supports the order and contends that mere filing of the return and the same being accepted by the departmental authorities without proper adjudication would not qualify the assessee to claim the status of HUF. The ITAT after properly considering the material on record has held that the property in question belongs to the assessee as individual and not as the HUF, supported by the possession certificate issued by the KIADB while allotting the property in question to the assessee.

7. After hearing the rival submissions advanced by the parties and perusing the material on record, it is clear that the income from the property bearing No. 58, Bommasandra, Bangalore was declared by the assessee as income of HUF for the previous assessment years and the subsequent assessment years including the current assessment year, the same is accepted by the authorities except the current year. It is only in the current assessment year, the authorities have assessed the income in question in the status of HUF and not as an individual. The assessee/appellant is having two PAN numbers, one as HUF and the other as an individual. If the submission made by the learned counsel for the assessee has to be accepted that the tenant has wrongly mentioned the PAN number (individual) of the assessee in the rental agreement due to some inadvertence, it would not change the status of the assessee/appellant. In such view of the matter, it requires detailed examination of the PAN numbers of the assessee in the context of the PAN number mentioned in the agreement said to have been disclosed by the tenant of the assessee. It is based on the rental agreement, the departmental authorities have proceeded to treat the assessee in the status of an individual regarding the income in question. The undisputed fact that the departmental authorities have accepted the income in question of the assessee, in the status of the HUF for the previous and subsequent years and it is only for one assessment year in question, assessed in the status of HUF [read as ‘individual’—ed.] would warrant interference of this Court. Such a different stand taken only for one assessment year is not appreciable in the facts and circumstances of the case.

8. In the given circumstances, we set aside the order passed by the ITAT as well as the authorities and remit the matter back to the Assessing Officer to examine the issue afresh in accordance with law and to pass fresh assessment order as expeditiously as possible after providing an opportunity of hearing to the parties. All contentions are left open.

9. Accordingly, the appeal filed by the assessee is disposed off answering the substantial questions of law in favour of the assessee and against the revenue.

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