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2017 (3) TMI 679 - AT - Income TaxReopning of assessment - whether the Ld.CIT(A) can issue a direction to assess to tax the amount in the hands of A. Ramakrishna, HUF? - Held that - The direction of CIT-A is not valid. There are certain time limits prescribed for issuance of a notice u/s. 148, which is governed by the provisions of Section 149. The assessment year involved being 2005-06, the reopening cannot be done, if six years have lapsed from the end of the relevant assessment year. The assessment can be reopened for AY. 2005-06 on or before 31-03-2012. This direction given by the CIT(A) was dated 23-12-2015. By that time the direction was given, the time limits for initiation of proceedings have already lapsed. Not only that, as per Explanation 3 to Section 153 (prior to its amendment w.e.f. 01-06-2016), the CIT(A) could not have issued any such direction without giving an opportunity of being heard to such other person before the said order was passed. In this case, Shri A. Ramakrishna-individual is entirely different from A. Ramakrishna-HUF. Income Tax Act treats them as separate person . Even though HUF is represented by Shri A. Ramakrishna, still as per law, Shri A. Ramakrishna-HUF is such other person within the meaning of the expression provided in Explanation 3. As seen from the record, the CIT(A) has not given any opportunity to such other person before a direction was given. Therefore, the direction given violates not only the provisions of law but also the principles of natural justice. The direction cannot be upheld on these reasons.
Issues Involved:
1. Delay in filing the appeal. 2. Assessment of capital gains in the hands of the individual versus HUF. 3. Validity of the direction issued by the CIT(A) to assess the income in the hands of HUF. Detailed Analysis: 1. Delay in Filing the Appeal: The appeal was filed with a delay of 42 days. The assessee submitted a condonation petition citing enteric fever and medical treatment as reasons for the delay, supported by a medical certificate. After considering the objections from the DR and being satisfied with the reasons provided, the delay in filing the appeal was condoned, and the appeal was admitted. 2. Assessment of Capital Gains in the Hands of the Individual versus HUF: The assessee, a milk vendor, along with his father and three brothers, sold a property held in joint ownership for ?22 Lakhs, with the assessee’s share being ?4,40,000/-. The AO issued a notice in the capacity of an individual, and the assessee filed a NIL return on the last day of the time-barring date. The AO completed the assessment on the same day, bringing to tax ?9,08,902/- as the assessee’s share of the property, adopting the SRO value. The assessee contended that the property belonged to the HUF and that the sale involved tenancy rights, not land or building, making the adoption of SRO value u/s 50C inapplicable. The AO accepted this contention but still adopted the SRO value for the sale consideration. Before the CIT(A), the assessee argued that the capital gain arose in the hands of the HUF, not the individual. The AO, in the remand report, accepted that the transaction pertained to the HUF. The CIT(A) directed the AO to bring the necessary capital gains to tax in the hands of the HUF, deleting the addition made in the individual capacity. 3. Validity of the Direction Issued by the CIT(A) to Assess the Income in the Hands of HUF: The assessee contested the CIT(A)’s direction to assess the income in the hands of the HUF, arguing that no opportunity was given before issuing such a direction. The CIT(A)’s direction was deemed invalid for several reasons: - The time limits for initiating proceedings u/s 148 had lapsed by the time the direction was given. - As per Explanation 3 to Section 153, the CIT(A) could not issue such a direction without giving an opportunity of being heard to the affected party. - The direction violated the principles of natural justice as the HUF was not given an opportunity to be heard. The ITAT referred to the case of Vijay Kumar Sarda Vs. DCIT [146 ITD 553] (Mumbai-Trib) and other judicial precedents, which established that the appellate authority cannot issue directions affecting a third party without giving an opportunity to be heard. The direction given by the CIT(A) was set aside as it was not sustainable both on facts and principles of law. Conclusion: The appeal was partly allowed. The direction given by the CIT(A) to assess the income in the hands of the HUF was set aside. The other grounds raised by the assessee regarding the correctness of the capital gains assessment were not adjudicated as the taxation of capital gains in the hands of the individual had become final by the order of the CIT(A). The order was pronounced in the open court on 10th March 2017.
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