2016 (2) TMI 46 - HC - Income Tax

Assessment of rental income - individual v/s HUF status - ITAT held 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 - Held that - 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 assessement year in question, assessed in the status of HUF 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. 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. - Decided in favour of assessee.

Summary

Issues:
1. Assessment of rental income in the hands of individual vs. HUF
2. Double taxation of the same income in individual and HUF status

Analysis:
1. Assessment of Rental Income:
The case involved a dispute regarding the assessment of rental income from a property in Bangalore. The appellant, an individual and kartha of his Hindu Undivided Family (HUF), declared the income as that of the HUF. However, the Assessing Officer added the rental income to the individual's assessment. The main contention was whether the rental income should be assessed in the hands of the individual due to a PAN number error in the TDS certificate. The appellant argued that the property belonged to the HUF, as evidenced by previous and subsequent returns accepted in the HUF status. The appellant emphasized that a mere error in the PAN number should not change the property's status. On the other hand, the revenue contended that the property belonged to the individual based on possession certificates. The High Court noted the inconsistency in assessing the income in the individual status for only one assessment year when previous and subsequent years were assessed in the HUF status. The Court found it necessary to examine the PAN numbers and remitted the matter back to the Assessing Officer for a fresh assessment.

2. Double Taxation Issue:
The appellant also raised concerns about potential double taxation of the same income in both individual and HUF status. The Court did not delve deeply into this issue as the primary focus was on the correct assessment of the rental income. However, the Court's decision to remit the matter for fresh assessment implied a consideration of avoiding double taxation. The Court's order to examine the issue afresh and provide an opportunity for both parties indicated a comprehensive review of all aspects, including the risk of double taxation. Overall, the judgment primarily addressed the correct assessment of rental income but indirectly touched upon the potential issue of double taxation, ensuring a fair and thorough examination of all relevant aspects in the case.