KANTIBHAI PUNJYABHAI PATEL HUF,SURAT vs. INCOME TAX OFFICER, WARD 1(3)(7), SURAT

Facts of the case in brief are that assessee filed his return of income on 31.03.2018 for AY.2017-18, declaring total income of Rs.3,58,840/- and claimed exempt income of Rs.51,17,029/- on account of agricultural income. The case was selected for scrutiny on account of “Large agricultural income in comparison to total income”. Various statutory notices and show cause notice were issued but there was no compliance, which has been noted by AO in tabular form at page 2 of the assessment order. In view of the same, AO made best judgement assessment u/s 144 of the Act. In the show cause notice, the AO pointed out that the assessee simply uploaded copy of the gazette notification for using the land for laying pipeline for Reliance Gas Pipelines Ltd. He also pointed out that the bills/receipts of agricultural produce was for nominal amount and those were not in the name of the HUF. Also as per the bank statement, it was found that the name of the individual account holder was mentioned and it was not in the name of HUF. In response to the show cause notice, there was no response. The AO found that assessee had shown agricultural income of Rs.3,33,599/- and Rs.5,64,793/- in AY.2015-16 and 2016-17 respectively. He allowed 50% of the gross receipt of Rs.6,19,987/- /AY.2017-18 Kantibhai Punjyabhai Patel received from Shree Sayan Vibhag Sahakari Khand Udhyog Mandali Ltd. and The Pal Group Group Co-op. Cotton Sale Society Ltd., as the net agricultural income of assessee and difference of Rs.48,07,036 (51,17,029 – 3,09,993) was added to the total income u/s 68 of the Act. The AO determined the total income of Rs.51,65,876/- as against the returned income of Rs.3,58,840/-.

Aggrieved by the addition made by AO, assessee preferred appeal before CIT(A). The CIT(A) has considered the materials and facts of the case and the objection of the AO at para 7. He observed that the receipt on account of damage to the standing crop from Reliance Gas Pipeline Ltd. pertain to Shri Kantilal Punjyabhai Patel in Individual capacity and not to Kantilal Punjyabhai Patel HUF, the assessee herein. Even in the bank account, the name of the individual is there and not that of the HUF. The status of HUF is different from that of an individual as per section 2(31) of the Act. He further stated that the provisions for exemption or deduction have to be investigated thoroughly before allowing the same. For this, he has relied on the decision in case of Ramnath & Co., (2020) 116 taxmann.com 885 (SC) and New Nobel Education Society, (2022) 143 taxmann.com 276 (SC) and thereafter dismissed the appeal.

Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee filed a paper book containing 20 pages and submitted that no income has been offered on account of the agricultural income in the hands of individual. The /AY.2017-18 Kantibhai Punjyabhai Patel income has been offered by the appellant HUF. The ld. AR has submitted copy of e-filing in the Income-tax portal and submitted that bank account No. 005001000010394 is shown as belonging to the assessee HUF. He requested that the compensation of Reliance Gas Pipeline Ltd. for the pipeline has been included in the return of income of the assessee and not in any other returns.

On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of lower authorities. He submitted that the AO had to pass the order u/s 144 of the Act due to non-compliance by the assessee to the notices issued by him. The income has not been offered in the name of the individual but in the name of the assessee HUF. The income of the individual cannot be assessed in the hands of HUF. For this, he relied on the decision of the Hon’ble Supreme Court in case of Ch. Atchaiah, (1996) 84 Taxman 630 (SC).

We have heard both the parties and perused the materials on record. We have also deliberated upon the decisions relied upon by both the parties. There is no dispute that assessee had claimed exempt agricultural income of Rs.51,17,029/-. However, from the perusal of the details submitted by the assessee, it was found by the AO that the receipts were in the name of Shri Kantilal Punjyabhai Patel ad not in the name of Kantilal Punjyabhai Patel HUF. Even in the bank statement, name of the individual is mentioned. The ld. AR of the assessee has given a screenshot of the e-filing of Income-tax portal and submitted that name of the assessee HUF is appearing therein. However, from /AY.2017-18 Kantibhai Punjyabhai Patel the bank statement submitted at page 2 of the paper book, it is seen that the name of the customer for the same account is Kantilal Punjyabhai Patel and not Kantilal Punjyabhai Patel HUF. Hence, the contention of the ld. AR is not even supported by the details submitted by himself. It is, therefore, clear that the impugned income was of Kantilal Punjyabhai Patel and not that of the appellant HUF. The ld. Sr. DR has relied on the decision of Ch. Atchaiah (supra). The Hon’ble Supreme Court in the said case and held that when section 4(1) speaks of levy of income-tax on the total income of every person, it necessarily means the person who is liable to pay income-tax in respect of that total income according to law. Merely because a wrong person is taxed with respect to a particular income, the AO is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the revenue. In the authoritative decision of the Hon’ble Supreme Court, the income needs to be taxed in the hands of Shri Kantilal Punjyabhai Patel and not the appellant HUF. However, we find that the AO has passed an ex parte order and the details submitted by the appellant have also not been considered by the CIT(A). Therefore, in the interests of justice, we set aside the order of CT(A) and remit the issue back to the file of AO for fresh assessment in terms of discussion made hereinabove, after granting adequate and reasonable opportunity of hearing to the assessee. The assessee is directed to be diligent and furnish all the details and /AY.2017-18 Kantibhai Punjyabhai Patel explanation as may be called for by the AO by not seeking adjournment without any valid reason.

Since we have set aside the order of CIT(A) and remit the issue back to AO for fresh assessment, the other grounds became academic and do not require adjudication. 9. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced under proviso to Rule 34 of ITAT, Rules, 1963 on 22/05/2025 in the open court.