Section 4 of the Income-tax Act, 1961—Income - Hindu undivided family - Issue of taxation of capital gain was remanded to AO to find whether the property belongs to HUF or individual.

Facts: The property which is subject matter of the present appeal was allotted to the 4 children (of which the Assessee is one) and they sold property. Assessee computed his share of Long terms capital gain on sale of the property . AO also did not accept the index cost of acquisition of the property computed by the Assessee and AO thus computed Capital gain at Rs. 4,82,10,8000 and arrived at share of Assessee's capital gain at Rs. 1,47,24,056/- as against the Assessee's computation of Rs. 74,98,442/-. Assessee had claimed that the property was not a capital asset within the meaning of the term as defined in Sec.2(14) as it was Agricultural land which falls within the ambit of exception to the definition of capital asset u/s.2(14)(iii) . AO held that land in question was a capital asset and hence the gain on sale of the land was exigible to tax on capital gain. Before CIT(A), assessee claimed that the property belongs to HUF and therefore the capital gain on sale of such property, assuming that it is exigible to tax, can be assessed only in the hands of the HUF and not in the individual hands of the Assessee.

Held, that CIT(A) without deciding the correctness of the claim made by the Assessee in law, proceeded not to decide the issue by merely holding that the claim of the Assessee cannot be examined because the Assessee has not revised return of income filed in the individual capacity and further the HUF did not file return of income in the status of HUF within the time required in law .It was incumbent upon CIT(A) to have decided the issue in accordance with law rather than on technicalities. It is fundamental that the right income has to be assessed in the right hands and the question whether the property is HUF property or that of the Assessee in his individual capacity should be assessed. Since the said issue which is fundamental and vital has not been decided by CIT(A) and since the view of the Revenue on this aspect in the form of order of AO/CIT(A) is not available for consideration by the Tribunal, We are of the view that the order of the CIT(A) should be set aside and the entire issues that arise for consideration before the Tribunal should be directed to be decided afresh by the AO. In this regard we find the issue whether the property belongs to HUF or individual was raised by the Assessee for the first time only before CIT(A). We therefore set aside the order of the CIT(A) and remand the issue of taxation of capital gain to the AO for consideration de novo after affording opportunity of being heard to the Assessee. We make it clear that all issues set out in the earlier part of this order is left open for adjudication de novo by the AO. In the result, the appeal is treated as allowed for statistical purpose. - RAJASHEKAR REDDY (DR. K.R.) V/s DY. CIT - [2020] 182 ITD 121 (ITAT-BANGALORE)