2022 (6) TMI 796 - AT - Income Tax

Revision u/s 263 - As per CIT original asset in question was not of HUF and therefore directed the AO for clubbing as per provisions of section 64(2)(b) - HELD THAT - As assessee before us stated that the returns of income of HUF were filed for assessment year 1998- 99 and the statement of affairs were filed from assessment year 2002-03 with the Department - assessee mainly harped on the fact that he got married on 07.07.1975 and HUF is formed on that very date. We may agree that the HUF might have formed on the day they got married but what is the nucleus available with the HUF. Assessee categorically denied having any nucleus till assessment year 1998- 99. The properties purchased by individual in their individual name and from the individual source of income cannot be treated as property of HUF. Even the assessee could not prove any nucleus. Once this is the position, as the assessee is unable to prove its case, it is presumed that it has rightly been held that these properties belong to these two individuals i.e., Smt. Bhavani Mahadevan and Shri R. Mahadevan in their individual capacity and not of the HUF. PCIT s finding is supported by evidences that these properties by Smt.Bhavani Mahadevan and Shri R. Mahadevan are all in their individual capacities purchased in the year during 1994 1995. There is no evidence that these properties were purchased by assessee HUF i.e., Mahadevan HUF and in the absence of any evidence, we cannot reverse the findings of PCIT. Secondly, the assessee has claimed the sale consideration out of these properties as long term capital gain in the hands of HUF and claimed deduction u/s.54F of the Act in respect of purchase of house property at Abiramapuram i.e., residential house or flat. We noted that PCIT has rightly held the assessment order as erroneous as well as prejudicial to the interest of Revenue. But, we noted that the PCIT has set aside the assessment order and directed the AO to reframe the assessment as per the provisions of law after considering the submissions and evidences, if any as per law. We find no infirmity in the order of PCIT revising the assessment and setting aside the matter to the file of AO. - Appeal of assessee dismissed.

Summary

Issues:
1. Jurisdiction of revision order u/s.263 of the Income Tax Act.
2. Interpretation of provisions of section 64(2)(b) of the Act.
3. Ownership of assets purchased by HUF members.
4. Application of deductions u/s.54F of the Act.

Jurisdiction of Revision Order u/s.263:
The appeal challenged the revision order passed by the Principal Commissioner of Income Tax, Chennai, under section 263 of the Income Tax Act. The appellant contended that the PCIT's order lacked jurisdiction and erred in law and on facts. The PCIT directed the AO to club the original assets under section 64(2)(b) of the Act, disputing the ownership of the assets. The appellant argued that the assets were purchased from HUF funds and should not be clubbed.

Interpretation of Section 64(2)(b):
The PCIT held that the original assets were purchased by individuals before being thrown into the HUF, leading to the application of section 64(2)(b) for tax liability. The PCIT found the assessment order erroneous and prejudicial to revenue, denying the deduction u/s.54F of the Act. The Tribunal upheld the PCIT's decision, emphasizing that the properties belonged to the individuals and not the HUF, as evidenced by the lack of proof of HUF nucleus during the purchase period.

Ownership of Assets Purchased by HUF Members:
The appellant claimed that the original assets were intended to be part of the HUF properties, supported by documentary evidence. However, the PCIT rejected this claim, stating that the properties were purchased by coparceners in their individual capacities before being transferred to the HUF. The Tribunal concurred with the PCIT's findings, emphasizing the absence of evidence proving the assets belonged to the HUF.

Application of Deductions u/s.54F of the Act:
The PCIT's revision order deemed the assessment erroneous and prejudicial to revenue, leading to the dismissal of the appellant's appeal. The Tribunal upheld the PCIT's decision to set aside the assessment order and directed the AO to reassess the matter in accordance with the law, considering submissions and evidence. The appeal was ultimately dismissed by the Tribunal, affirming the PCIT's revision order.

In conclusion, the Tribunal upheld the PCIT's revision order, emphasizing the lack of evidence supporting the appellant's claim that the assets belonged to the HUF. The decision highlighted the importance of proper documentation and proof of ownership in tax assessments, ultimately leading to the dismissal of the appeal.