2020 (2) TMI 20 - AT - Income Tax

Assessment of capital gains in the hands of assessee HUF - claim of the assessee is that the capital gains has arisen in the individual capacity of the assessee - HELD THAT - As earlier that the assessee has sold agricultural land located within the Municipal limits to a person named Sri Rajesh Runawal, for a consideration of ₹ 13.05 lakhs. However, since Shri Rajesh Runawal agreed before the ADIT(Inv.)Belgaum that the sale consideration was 34.60 lakhs, the assessee also declared the sale consideration at ₹ 34.60 lakhs, as noticed earlier. We noticed earlier that the assessee had originally declared capital loss of ₹ 27.30 lakhs, due to some computational error. However, in the revised return of income, the assessee-HUF herein has declared capital gains as nil, after claiming deduction u/s 54B of the IT Act. It can be noticed that the assessee-HUF, in two occasions, i.e., in the original return and in revised return of income, has conscious declared the capital in its hands. Accordingly, there is merit in the submission of Ld D.R that the assessee has taken a conscious decision to file return of income in the status of HUF only. Assessee has not brought any new material on record to show that the land actually belonged to individual status. As rightly pointed out by the ld.CIT(A), the onus to prove the above said claim would lie on the assessee and the assessee has failed to discharge its onus by bringing cogent material in support his claim. But to confirm the order passed by the ld.CIT(A) on this issue. Appeal filed by the assessee is dismissed

Summary

Issues involved:
1. Assessment of capital gains in the hands of HUF versus individual capacity.
2. Entitlement of HUF to claim deduction u/s 54B of the IT Act.
3. Determination of assessee's status as HUF or individual.

Analysis:
1. The appeal challenged the order confirming the assessment of capital gains in the hands of HUF, while the claim was that the capital gains arose in the individual capacity of the assessee. The Tribunal had earlier restored the issue of determination of status to the AO, who concluded that the land belonged to HUF, leading to the assessment in HUF's hands.
2. The AO rejected the claim for deduction u/s 54B for the HUF, as it was available only to individual assessees during the relevant assessment year. The AO computed capital gains based on the cost of agricultural land, leading to the assessment in HUF's hands. The assessee contended that the capital gains should be assessable in the individual's status and cited relevant case law regarding deposit requirements under the capital gains scheme.
3. The ld.CIT(A) confirmed the assessment in HUF's hands, emphasizing that the assessee voluntarily filed the return in HUF status and failed to provide new evidence supporting a change in status to individual. The onus to establish the change in status was on the assessee, which was not discharged. The Tribunal upheld the decision, noting that the assessee did not present any new material proving individual ownership of the land, thereby confirming the assessment in HUF's hands.

In conclusion, the appeal challenging the assessment of capital gains in the HUF's hands was dismissed by the Tribunal based on the lack of evidence supporting a change in status and the assessee's conscious decision to file returns in HUF status. The claim for deduction u/s 54B for the HUF was rejected, and the assessment was upheld in HUF's hands.