2017 (3) TMI 259 - AT - Income Tax

Reopening of assessment - assessment completed in the status of individual though return originally filed in the status of HUF - Held that - Once AO 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, it is of the opinion that Tribunal can consider it, though raised first time before it. Therefore have no hesitation to set aside the assessment done on assessee on impugned assessment year. - Decided in favour of assessee

Summary

Issues:
1. Legality of assessment done on the assessee.
2. Validity of assessment conducted in the HUF status of the assessee.

Issue 1: Legality of assessment done on the assessee

The assessee filed a return of income for the assessment year in a status of HUF but failed to disclose the investment in a property. The Assessing Officer initiated proceedings under section 148 of the Income Tax Act due to the undisclosed investment. The assessee later admitted that the property was purchased in his individual status, not as part of the HUF. The assessment was completed in the individual status based on this information. The Commissioner of Income Tax (Appeals) upheld the additions made by the Assessing Officer, confirming the assessment in the individual status. The Authorized Representative argued that the assessment in the HUF status was invalid as notices were issued only in the HUF status, not in the individual status. Citing a tribunal decision, the Authorized Representative contended that once the assessment was to be done in the individual status, a notice in the individual status was mandatory.

Issue 2: Validity of assessment conducted in the HUF status of the assessee

The assessment was initiated based on the return filed by the assessee in the HUF status, but it was later revealed that the property was purchased in the individual capacity. The Assessing Officer completed the assessment in the individual status without issuing a notice in the individual status. The Authorized Representative argued that the failure to issue a notice in the individual status rendered the assessment in the HUF status invalid. The Authorized Representative relied on a tribunal decision emphasizing the importance of issuing a notice in the correct status for assessment. The Departmental Representative contended that any confusion was rectified by the Assessing Officer and could be cured under section 292BB of the Act. The Tribunal held that the failure to issue a notice in the individual status rendered the assessment in the HUF status invalid and set aside the assessment for the impugned assessment year.

In conclusion, the Tribunal allowed the appeal of the assessee based on the legal ground of the invalidity of the assessment conducted in the HUF status due to the failure to issue a notice in the individual status. The Tribunal emphasized the importance of issuing notices in the correct status for assessments, as per the provisions of the Income Tax Act.