The Income Tax Appellate Tribunal (ITAT), Bangalore bench has quashed assessment proceedings against an HUF holding that the HUF was disrupted/partitioned as on the date of assessment and the assessment in the status of HUF is invalid.
A search and seizure operations were conducted in the case of one Shri K.J.Purushotham Reddy. During the course of search operations, the residential premises of Shri C.Rajkumar (kartha of assessee), were also covered. It was stated that as a result of search and seizure operations, certain documents belonging to the assessee were found and seized by the Investigation Wing of the Department. During the course of search operations, it was stated by Shri Rajkumar who is the kartha of the present assessee i.e. Rajkumar C, HUF that regular returns of income were being filed in the individual capacity and no returns were filed in the status of ‘Rajkumar C, HUF’, assessee. The assessment was accordingly, completed.
On first appeal, the CIT(A) accepted the contention of the assessee that the income belonged to HUF and not to individual. The CIT(A), however, directed the AO initiate assessment proceedings to tax this income in the hands of Rajkumar C, HUF.
On further appeal by the assessee, the ITAT bench comprising of Shri George George K, JM & Ms.Padmavathy S, AM observed that the assessment is not valid and held that when HUF was not assessed in that status prior to the relevant assessment year, the Assessing Officer has erred in assessing the assessee as an HUF after the disruption of the HUF.
“In the instant case, the HUF was disrupted/partitioned as on the date of assessment (Assessment order in case of HUF was completed on 25.03.2013) and the HUF having not been assessed in the past, the assessment order in the status of HUF is invalid, going by the dictum laid down by the judicial pronouncements cited supra. Therefore, the assessment order dated 25.03.2013 in status of HUF is hereby quashed,” ITAT said.
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