The Tribunal held – If the capital gain wrongly showed in hands of HUF while the individual owned the property then, the said capital gain shall be the income of the individual.  

Case: Rajnish Chaudhary (HUF) vs. Additional Commissioner of Income Tax

Facts:

The assessee being HUF filed its return of income showing long-term capital gain on sale of land as its income for the relevant assessment year. During the assessment proceedings, the assessee submitted to AO the details with evidences showing that it was not the owner of the said land and that the individual owned the land.

The AO stated that the assessee failed to file belated return and even HUF did not revise the return to show that they were of the conscious view that the property in question was of HUF. Thus, AO computed capital gain in hands of HUF.

CIT upheld the order of the AO.

On appeal to the Tribunal:

Held:

The Tribunal noticed that the HUF has shown the long-term capital gain as income in its return and the AO computed the long-term capital gain in the hands of the HUF on the basis that HUF was the owner of the land. In addition, it was found that HUF made detailed submissions with evidences during assessment proceedings itself showing that it was not the owner of the agricultural land and that the individual owned the land.

On the basis of above, the Tribunal took the view that HUF was not owning the land and thus, there was no question of bringing to tax any capital gain in the hands of the HUF. Thus, merely on the basis that the HUF filed its return by treating itself as the owner of land, the capital gain not be treated as income of HUF.

Following pleadings and evidences submitted by the assessee would establish that the land in question was the property of individual and not the property of HUF. Hence, capital gain shall be the income of owner of land even if wrongly shown as income of HUF.

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