SINGIREDDY VENKATRAM REDDY,HYDERABAD vs. INCOME TAX OFFICER, WARD-11(4), HYDERABAD

The assessee has raised several grounds in his appeal however, the crux of the issue is that the Ld. CIT (A) has erred in upholding the order of the ld. AO who had erroneously assessed the interest income earned by the assessee’s HUF in the hands of the assessee.

The brief facts of the case are that the assessee is an individual filed his return of income of the AY 2013-14 on 13/2/2016 admitting income of Rs. 3,33,000/. Subsequently, the case of the assessee was selected for scrutiny under CASS and assessment was finally completed U/s. 143(3) of the Act on 30/12/2016 wherein the Ld. AO assessed the interest income of Rs. 2,30,642/- in the hands of the assessee though the assessee had claimed that the interest income was earned by the assessee’s HUF. On appeal, the ld. CIT (A) confirmed the order of the ld. AO. Both the Ld. Revenue Authorities held so because the explanation offered by the assessee that the source of deposit on which the interest was earned had accrued from the income earned from the agricultural land owned by the HUF of the assessee was not correct because it was revealed that the source of the deposits was from the income earned by the assessee.

At the outset, we do not agree with the view of the Ld. Revenue Authorities because any coparcener of a HUF can throw his or her self- earned income into the pool of the HUF fund and the same shall be treated as the fund belonging to the HUF as per the provisions of the relevant Act. In the case of the assessee, it is apparent that the assessee has deposited the income earned by him in the bank account of the assessee’s HUF. The bank in which the funds of the assessee’s HUF was deposited has also issued a certificate certifying that the amount deposited had earned interest of Rs. 2,13,642/- (PB page 2). In this situation, it cannot be stated that the fund possessed by the assessee’s HUF belongs to the assessee alone. Further, the Ld. AR had also clarified that the assessee’s HUF had earned income below the taxable limit and therefore, the assessee’s HUF had not filed its return of income for the relevant assessment year. Further the existence of the assessee’s HUF cannot be challenged more so when the Revenue has recognised the HUF of the assessee by allotting PAN viz., AAVHS 2830 P. Considering these facts and circumstances of the case, we are of the view that the Ld. Revenue Authorities are not right in assessing the income of the assessee’s HUF in the hands of the assessee on the pretext that the source of the fund deposited by the assessee’s HUF had belonged to the assessee. Therefore, we hereby set-aside the order of the Ld. CIT (A) and further direct the Ld. AO to delete the interest income of Rs. 2,13,642/- assessed in the hands of the assessee.

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