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Income filed in HUF capacity cannot be taxed again for the individual in the HUF

CLR Editorial Note: This case refers to an assessment of investments held. The assessee is objecting in confirming the assessment of capital gain of the assessee™s HUF in his individual capacity and also assessing the interest income belonging to HUF (Hindu Undivided Family) in the individual capacity of the assessee.

It was noticed that the ancestral property was received by two brothers and the same was divided by two brothers by entering into an agreement between them. The assessee then sold his share and showed the capital gain in the hands of HUF capacity. Whatever, the interest was received on sale consideration etc., the same was offered for taxation in his HUF capacity. The return was then filed with the department which was accepted by the department.

Therefore, the Tribunal held that once the capital gain shown on sale amount of the property and interest income in the hands of HUF, then the same cannot be assessed again in the hands of the individual. This fact was brought to the knowledge of the Assessing Officer and CIT(A), however, the same was not considered for reasons know to them. Since the income shown by the HUF has been accepted by the department, therefore, for the same reason, the Tribunal held that the same cannot be assessed in the individual capacity. Accordingly, the Tribunal deleted the additions in the individual capacity on account of capital gain as well as on account of interest and allowed the appeal of the individual.

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Full Case File

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ITAT MUMBAI BENCH ˜SMC™

Jyotindra Natwarlal Naik

v.

Income-tax Officer, WD-11(2)(4), Mumbai

IT Appeal NO. 4763 (MUM.) OF 2012

[ASSESSMENT YEAR 2008-09]

Date of Pronouncement 02.01.2013

ORDER

1. This is an appeal by the assessee against the order dated 30-5-2012 of leaned CIT(A)-3, Mumbai relating to the assessment year 2008-09.

2. The assessee is objecting in confirming the assessment of capital gain of the assessee™s HUF in his individual capacity and also assessing the interest income belonging to HUF in the individual capacity of the assessee.

3. On receiving some AIR information, the AO noted that the assessee has made investment in FDR, Mutual fund and has entered into an agreement of sale of Matunga property and had received Rs.1.25 crores as advance, which was invested in mutual funds through HSBC Bank account. It was stated before the AO during the assessment proceedings that the assessee has disclosed the sale of property in the hands of the HUF as the same was belong to HUF. The interest on mutual fund etc. has also been shown in the hands of the HUF as the same belongs to HUF. However, the AO did not accept the contention of the assessee as in his view the assessee could not lead any evidence that property belongs to HUF. Accordingly, he treated the capital gain as well as interest in the hands of the individual and completed the assessment accordingly.

4. Before the learned CIT(A), detail submissions were filed. The same contentions were reiterated before the CIT(A). However, learned CIT(A) was also not satisfied with the contention of the learned AR. Accordingly, he confirmed the order of the AO. Now, the assessee is in appeal here before the Tribunal.

5. The contentions raised before the lower authorities are reiterated here before the Tribunal. It was also submitted that the assessee has disclosed the capital gain in HUF while filing the return on the basis of capital gain arises. The interest income has also been disclosed and the same has been accepted by the department. Attention of the Bench was drawn on a copy of the computation as well as other details disclosed in the hands of the HUF. The attention of the Bench was also drawn at page 70A, where copy of the return filed in HUF capacity is placed at page 71, computation of income showing sale price and showing interest in hands of HUF is placed. Copy of balance sheet etc. in the name of HUF is also placed at page 72 onwards. Accordingly, it was submitted that same income cannot be assessed in two hands. Accordingly, it was prayed that the addition made in the hands of the individual on account of capital gain and interest be deleted.

6. On the other hand, learned DR placed reliance on the order of the learned CIT(A).

7. After considering the submission and perusing the material on record, I found that the assessee deserves to succeed in its appeal. It is noticed that the ancestral property was received by two brothers and the same was divided by two brothers by entering into an agreement between the two brothers. The assessee sold his share and shown the capital gain in the hands of HUF capacity. Whatever, the interest was received on sale consideration etc., the same was offered for taxation in his HUF capacity. The return was filed with the department, copy of the same is placed at page 70A along with computation of income as well as balance sheet. The same has been accepted by the department. Therefore, I hold that once the capital gain shown on sale amount of the property and interest income in the hands of HUF, then the same cannot be assessed again in the hands of the individual. This fact was brought to the knowledge of the AO and CIT(A), however, the same was not considered for the reason know to them. Since the income shown by the HUF has been accepted by the department, therefore, for the same reason, I hold that the same cannot be assessed in the individual capacity. Accordingly, I delete the addition in the individual capacity on account of capital gain as well as on account of interest.

8. In the result, appeal of the assessee is allowed.

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