Andimuthu Raja, Perambalur V. ACIT, CIRCLE 1(1), Tiruchirapalli

ITA 261/CHNY/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5076 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-07-2024
• Assessment Year: misc
• Appeal Filed On: 29-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Audit objection; Reassessment proceedings; Capital Gains
• Section: 143(3)

Judgement Text

1 आयकर अपीलीय अिधकरण “सी” ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय ी एबी टी. वक , ाियक सद" एवं माननीय ी मनोज कु मार अ'वाल ,लेखा सद" के सम)। BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकरअपील सं./ ITA No.261/Chn y/2024 (िनधा*रणवष* / As sessment Year: 2006-07) & 2. आयकरअपील सं./ ITA No.262/Chn y/2024 (िनधा*रणवष* / As sessment Year: 2010-11) Shri Andimuthu Raja 3/127, Ambedkar Street, Velur Post Perambalur-621 104. बनाम/ Vs . ACIT Circle-1(1) Tiruchirapalli. थायीलेखासं./जीआइआरसं./PAN/GIR No. A D TP R - 2 7 5 5- B (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri Y.Sridhar (FCA)-Ld.AR थ कीओरसे/Respondent by : Ms.R.Anita (Addl.CIT) -Ld. Sr. DR सुनवाईकीतारीख/D at e of He a rin g : 01-08-2024 घोषणाकीतारीख /Date of Pronouncement : 12-08-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee for Assessment Years (AY) 2006- 07 & 2010-11 arise out of the separate orders of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 01-12-2023 & 06-12-2023 in the matter of separate assessments framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 of the Act on 29-01-2012 & 11-01-2013. First, we take up appeal for AY 2006-07 wherein the grounds taken by the assessee read as under:- 1. The appellant is an individual filed his return of income for the Assessment Year 2006-07 admitting a total income of Rs.6,99.266/- which include short term capital gain of Rs.6,81,368/- and the assessment was completed u/s 143(3) of the IT Act, 1961 by accepting the returned income. Subsequently, based on the audit objection the case was reopened u/s 147 and the assessment was completed u/s 143 r.w.s 147 of the Act wherein the short capital gain on sale of shares was treated as business income and the HUF income of Rs.16,02,110/- was clubbed with the individual income, determining total income at Rs.23,01,376/- as HUF status was denied. Aggrieved against the order, the appellant preferred an appeal before the ld. CIT (A) who partly allowed, i.e, profit on sale of shares to be treated as short term capital gain and confirmed the clubbing of HUF income with the individual income. Hence the present appeal filed. 2. On the facts and circumstance of the case, the order passed by the ld. CIT (A) is bad both in law and facts. 3. On the facts and circumstances of the case, the ld. CIT (A) has erred both in law and facts, partly confirming the action of the ld. AO despite the fact that reopening by the ld. AO and consequent reassessment without complying with the statutory conditions prescribed under 147 r.w.s. 148 is bad in law. 4. On the facts and circumstance of the case, the Id. CIT (A) has erred in confirming the action of the Ld. AO ignoring the fact that the Id. AO has erred both on facts and in law in making reassessment under Section 147 of the Act as the reasons recorded for reopening of the assessment does not meet the requirement of section 147 of the Act. 5. The Id.CIT(A) ignoring the fact that the Id. AO has grossly erred in de-recognising the constitution of HUF for the purpose Income Tax Act on the pretext that the appellant has escaped tax by filing two separate returns one in the status of individual and another in HUF by taking advantage of basic exemption. 6. The ld.CIT(A) ought to have appreciated the fact that the appellant had earmarked his share of ancestral land as HUF property from the beginning and also the resultant agricultural income is invested in the form of shares and income derived therefrom is also accounted in HUF only. Thus, to substantiate the existence of appellant's HUF, he has opened separate Bank account, Demat Account for share investments and filed income tax return as a coparcener of HUF. 7. The ld. CIT (A) passed the order without rebutting the case law relied by the appellant. 8. Addition based on conjectures and surmises not valid in law. 9. Hence the addition made by the Id. AO and sustained by the Ld. CIT(A) is being totally contrary to the provisions of law and facts on record and hence the same may kindly be deleted. 2. The Ld. AR advanced arguments on legal grounds as well as on merits. The Ld. Sr. DR has supported the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 From the facts, it emerges that the assessee was assessed u/s 143(3). However, on audit objections, the case was reopened and notice u/s 148 was issued to the assessee on 06-01-2012 which is beyond 4 years. The same was on the ground that the assessee earned Short Term Capital Gains of Rs.6.81 Lacs. The Ld. AO opined that considering the volume of transactions and period of holding, the gains were to be considered as business income. Showing the same under the head capital gains has resulted into lower tax outgo for the assessee. After considering assessee’s submissions, Ld. AO held that that the gains were to be assessed as business income. 3.2 The Ld. AO made another adjustment. It was held that the assessee was denied HUF status for AY 2006-07 for the reasons that the assessee was filing return of income in individual capacity as well as in HUF status. In both the capacities, the assessee derived income from trading of shares, interest income and income from other sources. The HUF consist of assessee, his wife and their daughter. The assessee stated that the properties which were inherited as ancestral property from his father, the income there-from has been accounted as HUF income for more than a decade in respective income tax returns. The father executed a will during 1996 by which the properties were to be divided amongst his wife and 4 sons. As per the will, certain movable properties were to be enjoyed by the assessee individually whereas immovable properties were like agricultural land, residential house and certain other movable properties which were to be divided equally amongst 4 sons. These properties were yet to be partitioned. However, Ld. AO held that these properties were to be devolved in individual capacity only. Therefore, the aforesaid properties were not of HUF but belonging to assessee in individual capacity though it was admitted by Ld. AO that no formal partition took place till date and the properties were held in common. 3.3 Finally, Ld. AO held on opinion that very existence of HUF status was questionable. Adding the income of HUF would be more fruitful. Accordingly, the income of the HUF was clubbed in the hands of the individual assessee. 3.4 The Ld. CIT(A) concurred with assessees’ submissions that the STCG as earned by the assessee were to be assessed under the head capital gains only. However, the action of Ld. AO in clubbing the income of HUF was upheld. Aggrieved, the assessee is in further appeal before us. 4. The assessment for AY 2010-11 was framed u/s 143(3) on similar lines. The Ld. AO clubbed the income of HUF in individual capacity and framed the assessment. The Ld. CIT(A) dismissed the appeal for non- prosecution. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. It is clear that the assessment for AY 2006-07 has been reopened beyond four years at the behest of audit objections only. The regular return of income has already been scrutinized u/s 143(3). There is no allegation of Ld. AO that there was any failure on the part of the assessee to furnish true particulars of income. Further, there is no tangible material before Ld. AO to reopen the case of the assessee. Therefore, there is no valid ground to initiate reassessment proceedings. The issue of STCG has already been adjudicated favorably by Ld. CIT(A) in assessee’s favor and accordingly, there remain no ground for reopening and reassessment could not be held to be justified. We order so. The assessment for AY 2006-07 is liable to be quashed on legal grounds only. 6. On merits also, it is admitted fact by Ld. AO that no partition of ancestral property has happened and the same continue to be the joint property of assessee’s family. The Ld. AR has submitted that HUF is separately assessed to tax under different PAN for more than a decade which has been accepted by the revenue. The AO has clubbed the same on the ground that the same would be more fruitful to the revenue disregarding the fact that HUF has been assessed separately for decades. 7. In the light of all these facts, the assessee succeeds on legal grounds as well as on merits for AY 2006-07. The assessee succeeds on merits for AY 2010-11. We order so. The Ld. AO is directed to accept the income of HUF in the capacity of HUF only in both the years. 8. Both the appeals stand allowed. Order pronounced on 12 th August, 2024 Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) ाियक सद" /JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER चे3ई Chennai; िदनांक Dated :12-08-2024 DS आदेशकीHितिलिपअ'ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु