Assessment of Individual cannot be done by issuing notice on HUF

Contention of the Assessee

Ld. Authorised Representative submitted that the assessment was bad in law since it was initiated on a return filed by the assessee in HUF status. As per ld. Authorised Representative Assessing Officer if he 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. Notice was admittedly issued in the status of HUF. Assessment having being done u/s.143(3) r.w.s. 147 of the Act, as per ld. Authorised Representative notice issue of notice u/s.148 of the Act was mandatory. As per the ld. Authorised Representative even the notice u/s.143(2) of the Act was issued to the assessee only in HUF status. Thus, according to him assessment in the HUF status of the assessee was bad in law. Ld. Authorised Representative placed reliance on the third member decision of the Delhi Bench of the Tribunal in the case of Suraf Mal, HUF vs. ITO (2007) 109 lTD 327.

Contention of the Revenue

Departmental Representative submitted that the tax payer himself had started the confusion. Error was committed by the assessee and this was rectified by the ld. Assessing Officer by making the assessment in the correct status. According to him, the lacuna if any could be cured u/s.292BB of the Act.

Held by ITAT

I have considered the rival contentions and perused the orders of the authorities below. First two paragraphs in the impugned assessment order which was passed u/s.143(3) r.w.s.147 of the Act is very relevant and these are reproduced hereunder:-

‘The assessee filed hi s return of income for the A.Y. 2008-09 in HUF status on 21.08.2008 declaring a total income of Rs..1,82,089/- The same was processed u/s 143(1). Information was received from the Income tax Officer, Ward I(1), Kanchipuram vide letter dt 04.02.2011 about the purchase of a land located at Survey No.146/4A, Nemili A Village, Sriperumpudur measuring to 2.89 acres by the assessee alongwith 4 co-owners from one Smt. K. Sathya on 21.05.2007 connected in the case of Shri. Dilli Raja who is assessed in his ward.

On examination of the Return of Income filed by the assessee Shri. Deen Dayal Kothari for the AJ 2008-09 in HUF status, it is seen that the investment in the above property has not been disclosed. So, the undersigned has reason to believe that there is an escapement of income and the assessment was reopened. Notice u/s. 148 was issued on 07.07.2011. The assessee had written a letter stating that the return already filed may be treated as the return filed in response to the notice u/s. 148″.

The properties purchased by the assessee as per ld. Assessing Officer, was not disclosed in the return filed by the assessee in HUF status. It was only when assessee was examined by the ld. Assessing Officer on 04.02.2013, the ld. Assessing Officer recognized that properties were acquired by the assessee in his individual status and not in the HUF status. Relevant para of the assessment order which clearly bring out this is reproduced hereunder:-

‘When Shri. Deen Dayal Kothari appeared on 04.02.2013 a sworn statement was recorded from him. In his statement he stated that the above property was purchased in hi s individual status but PAN no. of HUF status was quoted wrongly during the Regi stration. When the assessee’s return of income filed in his individual status for the concerned asst year declaring a total income of 1,65,784/- was verified, it is found that the assessee has di sclosed the above purchase of property for an amount of 6,03,400/- ( 2,52,000/- and 3,51,416/-) being 1/5^th share. Hence, the assessment is being completed in assessee’s individual status.

What transpires from the above is 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 of the Act which was issued on 07.07.2011 and notice u/s.143(2) of the Act which was issued on 10. 10.2012 were much prior to recording of sworn statement from the assessee which happened on 04.02.2013. Thus, it can safely be concluded that there was no issue of notice on the assessee in his tatus as individual either u/s.148 nor 143(2) of the Act. For i contention that once assessment proceedings has been started in the status of HUF, it ought to have been concluded only in the status of HUF and not as an individual, ld. Authorised Representative has relied on the Third Member decision in the case of Suraf Mal, HUF(supra). In the said case, the original return was filed in the status of individual but final assessment was completed in the status of HUF. What was held by the Bench at para 16 of the order is very relevant, and this is reproduced hereunder:-

’16. In the case of AAC vs. Late B. Appaiah Naidu 1974 CTR (SC) 147: (1972) 84 ITR 259(SC), their Lordships held as under:”Now coming to the second question as noticed earlier, the assessment was made in respect of the income of Appaiah Naidu on his legal representative, his son Sriramamurthy, in the status of an individual and not as the Karta of his HUF. The Department cannot now be permit-ted to change its case and contend that in reality the assessee is the HUF.”

Thus once ld. 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. In the case before us, there was a clear failure to issue notice to the assessee in his individual status. Sec. 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 were there was no issue of notices u/s. 148 or u/s. 143(2) of the Act. As for the contention of the ld. Departmental Representative that such a ground was not raised by the assessee before ld. Assessing Officer, it being a pure question of low with all relevant facts on record, I am of the opinion that Tribunal can consider it, though raised first time before it. I, therefore have no hesitation to set aside the assessment done on assessee on impugned assessment year. Consequently, appeal of the assessee is allowed on legal ground. Question on merits on addition of the addition is therefore not adjudicated.