The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that once partition is completed and the HUF is dissolved, such HUF cannot be taxed even for an earlier year when the income was received and the HUF was in existence.
The Assessing Officer framed an addition against the Hindu Undivided Family after its partition. The assessee raised an objection against the said addition on the ground that the HUF was not in existence when the assessment proceedings have been conducted and the Assessment Order has been passed on HUF and therefore, the entire proceedings are rendered null and void.
On second appeal, the Tribunal cited the decision of the Karnataka High Court wherein it was held that no assessment can be made on a HUF if at the time of assessment, it has become divided because at that point of time, there was no undivided family in existence which could be taxed though when the income was received in the year of accounts, the family was joint.
“In the present case also, the Assessment Order is dated 31.012.2010 and as per the Assessment Order, survey under section 133A of the Income Tax Act, 1961 was carried out on 10.09.2009 and notice under section 148 of the IT Act, 1961 was issued and served on the assessee on 22.09.2009. As per para 9 reproduced from the order of CIT(A), it is noted by learned CIT(A) that HUF was disrupted by partition on 22.08.2009. Hence, it is seen from the facts of the present case that on 10.09.2009, when the survey action was conducted under section 133A of the IT Act and also on 22.09.2009 when notice under section 148 of the IT Act, 1961 was issued by the AO and on dated 31.12.2010 when the Assessment Order was passed by AO under section 143 r.w.s. 147 of the IT Act, 1961 for Assessment Year 2005-06, the HUF was not in existence because the same was already partitioned on 22.08.2009,” the Tribunal noted.
“This is the basis of the order of the learned CIT(A) that the Assessment Year involved is 2005-06 and at that point of time, HUF was in existence but as per the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. CIT Vs. PuttarangaNaika (HUF) (supra), this situation is also considered and it is held that if on the date of assessment, the HUF is not in existence, then such HUF cannot be taxed even for an earlier year when the income was received and the HUF was in existence. Respectfully following this judgment of Hon’ble Karnataka High Court, we hold that the present Assessment Order is bad in law and the same is accordingly quashed,” the Tribunal said.
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