The validity of any assessment order passed continues to be upheld as long as it assesses the assessee in the right status. Taking a note of the same, there might be instances where the very status in which an assessee is assessed might be challenged in order to assail the validity of the order passed.
In the case of SHRI. K. RAMESH REDDY, HUF VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, the issue raised was that the assessee was assessed in the capacity of an HUF even though the HUF had already dissolved prior to the date of assessment order i.e. HUF was non existent. Although the income which happened to be the subject matter of assessment belonged to the HUF, the fact that it was non-existent on the date of assessment should not be overlooked.
For the sake of evaluating the rationality of assessment made in the case of assessee in the status of HUF, the provisions of Section 171(1) of the Income Tax Act were cited.
Section 171(1)
“A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family except where and insofar as a finding of partition has been given under this section in respect of the Hindu undivided family.“
On the basis of facts of the case, the HUF had never been assessed to tax in such status and thus, the phrase ” hitherto assessed as undivided ” finding mention in the aforementioned section could not be made applicable. This implies that the deciding factor is whether the assesssee has been assessed as an HUF in the past.
Therefore, ITAT Bangalore held that an HUF once disrupted, cannot be assessed as an HUF. If it is so assessed, the same will be void unless it has been so assessed in the past prior to disruption, in addition to the fact that the partition is not informed to the Revenue.
The Copy of the aforementioned Order has been attached below for reference purpose.
