Manisha Sharma, V. ITO, Ward 1(2),

ITA 1443/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9714 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-09-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 22-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: V K TULSIYAN
• Keywords: Depreciation; Difference of opinion; Reason to believe; Change of opinion; Capital Gains
• Section: 143(3); 234B; 143(1); 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHAN I.T.A. NO. 1443(DEL)/2007 ASSESSMENT YEAR: 2003-04 SMT. MANISHA SHARMA, INCOM E-TAX OFFICER, 459, RAMBAGH ROAD, VS. WARD 1 (2), MUZAFFARNAGAR. MUZAFFARNGAR (U.P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K. TULSIYAN, ADVOCATE RESPONDENT BY : SHRI B.K. GUPTA, SR. DR ORDER PER K.G. BANSAL : AM IN THIS CASE, THE TRIBUNAL HAD PASSED THE O RDER ON 9.4.2008, IN WHICH THE APPEAL OF THE ASSESSEE WAS DISMISSE D IN LIMINE FOR NON- PROSECUTION. ON A MISCELLANEOUS APPLICATION O F THE ASSESSEE, THIS ORDER WAS RECALLED ON 30.4.2009. THE ASSESSEE HAS TAKEN UP 5 SUBSTANTIVE GROUNDS IN THE APPEAL CHALLENGING THE REOPENING OF THE ASSESSMENT, THE INCOME DETERMINED AND THE INTEREST LEVIED BY THE AO. ITA NO.1443(DEL)/2007 2 2. GROUND NO. 1 IS THAT THE ORDER PASSED U/S 14 3(3) READ WITH SECTION 147 ON 28.12.2005 WAS ARBITRARY, UNJUST AND IL LEGAL. 2.1 THE FACTS OF THE CASE ARE THAT THE RETU RN OF INCOME WAS FILED ON 30.11.2003 DECLARING TOTAL INCOME OF RS. 1,23 ,203/-. THIS RETURN WAS PROCESSED ON 5.2.2004. THE ASSESSEE HAD CLAIME D LOSS OF RS. 4,24,934/-, BEING 70% SHARE IN THE LOSS OF THE BUSINESS OF A PARTNERSHIP FIRM, M/S MANISH & COMPANY. THIS LOSS WAS SET OFF AGAIN ST OTHER INCOME OF RS. 5,60,137/- BY WAY OF SHORT-TERM CAPITAL GAIN, INTEREST AND TEACHING JOB. THE AO NOTED THAT THE SHARE OF LOSS OF A PERSON FROM A PARTNERSHIP FIRM IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE P ERSON U/S 10(2A) OF THE ACT. THEREFORE, THE LOSS OF RS. 4,24,934/- COUL D NOT BE SET OFF AGAINST THE OTHER INCOME. IN VIEW THEREOF, THE REASONS WERE RECORDED U/S 147 ON 5.4.2004 AND NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE. IN REPLY, THE ASSESSEE MENTIONED THAT HER EARLIER RETU RN MAY BE TAKEN AS A RETURN U/S 148. IN THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE CHALLENGED THE VALIDITY OF ISSUE OF NOTICE U /S 148. THE OBJECTIONS TAKEN BY THE ASSESSEE WERE DISMISSED BY WAY OF A WRITTEN ORDER ON 6.8.2004, IN WHICH IT WAS MENTIONED THAT THE SHARE OF LO SS FROM A PARTNERSHIP ITA NO.1443(DEL)/2007 3 FIRM CANNOT BE SET OFF AGAINST OTHER INCOMES U /S 78 OF THE ACT, AS CLAIMED IN THE OBJECTIONS. IT WAS FURTHER ME NTIONED THAT THE PERSON SUFFERING THE LOSS ONLY IS ENTITLED TO CARRY F ORWARD THE LOSS FOR THE PURPOSE OF SET OFF IN SUBSEQUENT YEAR. THUS, T HE AO PROCEEDED TO MAKE ASSESSMENT U/S 147. IN THESE PROCEEDINGS ALSO, THE AO CAME TO THE CONCLUSION THAT THE LOSS CANNOT BE SET OFF AGAI NST OTHER INCOMES. THUS, THE INCOME OF THE ASSESSEE WAS INCREASED BY AN AMO UNT OF RS. 4,24,934/-. 2.2 THE MATTER REGARDING VALIDITY OF ISSUE OF NOTICE U/S 148 WAS ALSO AGITATED BEFORE THE LEARNED CIT(APPEALS). AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE PROVISIONS CON TAINED IN SECTIONS 75 AND 78, HE ALSO CAME TO THE CONCLUSION THAT THE LOSS FROM A PARTNERSHIP FIRM CANNOT BE SET OFF IN THE HANDS OF THE AS SESSEE. 2.3 BEFORE US, THE LEARNED COUNSEL FOR THE ASS ESSEE SUBMITTED THAT IN THIS CASE, THE ASSESSMENT HAD BEEN COMPLETED U/S 143(1), IN WHICH THE INCOME RETURNED BY THE ASSESSEE WAS ACCEPTED . THEREAFTER, NO NEW INFORMATION CAME IN THE POSSESSION OF THE AO. THUS , NOTICE U/S 148 WAS ISSUED MERELY ON CHANGE OF OPINION, WHICH COULD NO T BE DONE. IN ORDER TO SUPPORT HIS CONTENTION, RELIANCE WAS PLACED O N THE DECISION OF HONBLE ITA NO.1443(DEL)/2007 4 ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KR ISHNA TEXTILES (2009) 315 ITR 271, IN WHICH IT WAS HELD THAT REOPENI NG OF AN ASSESSMENT IS NOT PERMITTED ON A MERE CHANGE OF OPINION ON THE PART OF THE ASSESSING AUTHORITY. THUS, IT WAS HELD THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ITO WAS NOT JUSTIFIED IN INITIATING THE PR OCEEDINGS U/S 147(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. FU RTHER, RELIANCE WAS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASTEROIDS TRADING & INVESTMENTS (P) LTD. VS. DY . CIT (2009) 308 ITR 190, IN WHICH A REFERENCE WAS MADE TO THE DE CISION OF FULL BENCH OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1, IN WHICH THE HONBLE COURT OBSERVED THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TE RMS OF SECTION 143(3), A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED AFTER APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED THAT IN TERMS OF SECTION 114(E) OF TH E EVIDENCE ACT, JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER, WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLIC ATION OF MIND, WOULD ITSELF CONFER JURISDICTION UPON THE AO TO REOP EN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO G IVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN ITA NO.1443(DEL)/2007 5 WRONGS. FURTHER, THE HONBLE COURT REFERRED T O ITS OWN DECISION IN THE CASE OF GERMAN REMEDIES LTD. VS. DCIT (2006) 285 ITR 26, IN WHICH IT WAS HELD THAT ALTHOUGH THE POWERS C ONFERRED U/S 147 FOR REOPENING THE CONCLUDED ASSESSMENT ARE VERY WIDE, THE SAID POWERS CANNOT BE EXERCISED MECHANICALLY OR ARBITRAR ILY. THE EXPRESSION REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT MEANS ENTERTAINING A REASONABLE B ELIEF THAT A PARTICULAR INCOME WENT UNNOTICED BY THE AO AND HENCE ESC APED ASSESSMENT. EVEN AFTER INTRODUCTION OF THE CONCEPT OF D EEMED ESCAPEMENT OF INCOME BY EXPLANATION-2 TO SECTION 147 OF THE ACT WITH EFFECT FROM 1.4.1989, THE BELIEF THAT INCOME HAD ESCAPE D ASSESSMENT ENTERTAINED BY THE AO MUST BE A PRUDENT BELIEF AND NOT MERE CHANGE OF OPINION. THUS, AN ASSESSMENT ORDER PASSED AFTER DETAIL ED DISCUSSION CANNOT BE REOPENED WITHIN A PERIOD OF FOUR YEARS FROM T HE END OF RELEVANT ASSESSMENT YEAR, UNLESS THE AO HAS REASON TO BELIEVE THAT DUE TO SOME INHERENT DEFECT IN THE ASSESSMENT, THE INCOME CHARGEABLE TO TAX HAS BEEN UNDER-ASSESSED OR ASSESSED AT TOO LOW A RATE OR EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THE ACT HAS BEEN COMPUTED. IN VIEW OF THE AFORESAID DECISIONS, IT WAS HELD THAT THE ASSESSMENT WAS REOPENED IN THIS CASE MERELY ON CHANGE OF OPINION, ITA NO.1443(DEL)/2007 6 WHICH WAS NOT JUSTIFIED. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASIAN PAINTS LTD. VS. DCIT & ANOTHER (2009) 308 ITR 195, IN WHICH THE DECISION IN THE CASE OF KELVINATOR OF INDIA (SUPRA) WAS REFERRED TO AN D APPLIED. HE ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF INDIAN OIL CORPORATION VS. ITO (1986) 159 ITR 956, IN WH ICH IT WAS HELD THAT SINCE THE ASSESSEE HAD MADE FULL AND TRUE D ISCLOSURE OF FACTS, THE ASSESSMENT ORIGINALLY MADE COULD NOT HAVE BEEN REOPENED U/S 147(A) OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DEC ISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHAKIAT AGEN CIES (P) LTD. (2009) 314 ITR 200, IN WHICH IT WAS HELD THAT AN ASSESS MENT COMPLETED U/S 143(3) COULD NOT BE REOPENED MERELY ON CHANGE OF OPINION. 2.4 IN REPLY, THE LD. DR SUBMITTED THAT THIS IS NOT A CASE OF RE- ASSESSMENT, BUT A CASE OF ASSESSMENT U/S 14 7 BECAUSE THE RETURN WAS ONLY PROCESSED U/S 143(1) AND NO ASSESSMENT WAS MADE U/S 143(3) PRIOR TO INITIATING PROCEEDINGS U/S 147. T HE PROCESSING OF THE RETURN INVOLVES MERELY CLERICAL WORK, AND, THEREFOR E, THERE CANNOT BE ANY CHANGE IN OPINION WHEN ASSESSMENT PROCEEDINGS A RE INITIATED, AS NO OPINION IS FORMED IN THE COURSE OF PROCESSING THE RETURN. FOR THIS ITA NO.1443(DEL)/2007 7 PURPOSE, HE RELIED ON THE DECISION OF HON' BLE DELHI HIGH COURT IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD. VS. CHAIRM AN, CENTRAL BOARD OF DIRECT TAXES & ANOTHER (2000) 246 ITR 173, IN WHICH IT WAS POINTED OUT THAT THE SCOPE AND EFFECT OF SECTION 147 AFTER AMENDMENT, EFFECTIVE FROM 1.4.1989, IS SUBSTANTIALLY DIF FERENT FROM THE SCOPE AND EFFECT PRIOR TO THE AMENDMENT. BEFORE AMENDMEN T, THERE WERE TWO SEPARATE CLAUSES (A) AND (B), LAYING DOWN THE CIRCUMSTANCES IN WHICH THE ASSESSMENT COULD BE REOPENED. HOWEVER, AFTER THE AMENDMENT, THE ONLY REQUIREMENT IS THAT THE AO MUST HAVE REASON TO BELIEVE THAT THE INCOME ESCAPED ASSESSMENT, WHICH WOULD MEAN THAT THERE IS A CAUSE OR JUSTIFICATION TO SUPPOSE THAT THE INCOME HAS E SCAPED ASSESSMENT. FURTHER, IT WAS SUBMITTED THAT AFTER THE AMEN DMENT OF LAW, THE ONLY REQUIREMENT IS THAT THE AO SHOULD HAVE REASON T O BELIEVE THAT THE INCOME ESCAPED ASSESSMENT. THERE WAS NO REQUIREMENT THAT THERE SHOULD BE ANY FRESH MATERIAL COMING INTO THE POSSESSION OF THE AO OR ANY ERROR OR OMISSION COMMITTED BY THE ASSESSEE IN DISCLOSIN G FULLY AND TRULY ALL MATERIAL FACTS IN THE RETURN OR IN THE COURSE OF ORIGINAL ASSESSMENT. IN ORDER TO SUPPORT THESE SUBMISSIONS, RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (2007) 291 IT R 500. ITA NO.1443(DEL)/2007 8 2.5 IN THE REJOINDER, THE LD. COUNSEL DISTINGUI SHED THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) BY STAT ING THAT IN THAT CASE INFORMATION WAS RECEIVED AFTER PROCESSING THE R ETURN. THE DECISION IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD. WAS ALSO SOUGHT TO BE DISTINGUISHED BY STATING THAT BIFURCATION WAS N OT GIVEN IN THAT CASE BY THE ASSESSEE. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE A ND RIVAL SUBMISSIONS. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED RETURN SHOWING INCOME OF RS. 1,23,200/- ON 30.11.2003. THIS RETURN WAS PROCESSED ON 5.2.2004, IN WHICH THE INCOME WAS TAKEN AS P ER THE RETURN. SUBSEQUENTLY, THE AO NOTICED THAT THE ASSESSE E HAD CLAIMED SET OFF OF LOSS OF THE SHARE FROM PARTNERSHIP FIRM OF M/S MANISHA & COMPANY AGAINST SHORT-TERM CAPITAL GAINS AND OTHER INCOME . IT WAS RECORDED THAT SUCH A SET OFF WAS NOT PERMISSIBLE IN VIEW OF SECTION 10(2A) AS THE SHARE OF LOSS OR INCOME FROM A PARTNERSHIP WA S NOT INCLUDIBLE IN THE INCOME OF THE PARTNERS. THEREFORE, NOTICE U/S 148 WAS ISSUED AS HE HAD REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. TO OUR MIND, THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY ITA NO.1443(DEL)/2007 9 THE DECISION OF THE APEX COURT IN THE CASE O F RAJESH JHAVERI STOCK BROKERS (P) LTD. IN THAT CASE, THE ASSESSEE HAD FILED RETURN FOR ASSESSMENT YEAR 2001-02 ON 30.10.2001, DECLARIN G TOTAL LOSS OF RS. 2,70,85,105/-. THIS RETURN WAS PROCESSED U/S 143(1) ACCEPTING THE LOSS RETURNED BY THE ASSESSEE. THEREAFTER, NOTICE U /S 148 WAS ISSUED ON THE GROUND THAT THE CLAIM OF BAD DEBT WAS NOT ADMIS SIBLE AS THE CONDITIONS MENTIONED IN SECTION 36(1)(VII) AND SECTION 36(2) WERE NOT SATISFIED. THE HONBLE COURT MENTIONED THAT TECHNICALLY TH E INTIMATION ISSUED WAS DEEMED TO BE A DEMAND NOTICE, BUT THAT DID NOT PER SE PRECLUDE THE AO FROM PROCEEDING U/S 143(2) OF THE ACT. THERE IS A CONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS INTI MATION AND ASSESSMENT ORDER. THE ASSESSMENT IS USED SOMETIMES T O MEAN THE COMPUTATION OF INCOME AND SOMETIMES TO MEAN THE DETERMINATION O F TAX PAYABLE. IN THE CONTEXT OF THE THINGS, THE INTIMATION U/S 143( 1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT. THEREFORE, IT WAS HELD THAT IN A CASE WHERE NO ASSESSMENT HAS BEEN FRAMED, THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE. FURTHER, IT WAS HELD THAT THE ONLY REQUIREMENT NOW U/S 147 IS THAT THE AO SHOULD HAVE REASON TO BELIEVE T HAT THE INCOME HAD ESCAPED ASSESSMENT. THIS MEANS THAT THERE SHOU LD BE SOME CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT THE INCO ME HAD ESCAPED ITA NO.1443(DEL)/2007 10 ASSESSMENT. THE EXPRESSION CANNOT BE EQUATED WITH FINAL ASCERTAINMENT OF FACTS BY WAY OF LEGAL EVIDEN CE OR CONCLUSION. WHAT IS REQUIRED AT THIS STAGE IS THAT THERE SHOULD B E SOME RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED T HE REQUISITE BELIEF. WE ALSO FIND THAT IN SO FAR AS REASON TO BELIEVE IS CONCERNED, THE CASE OF THE REVENUE STANDS FULLY SUPPORTED BY THE D ECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD. (SUPRA). 3.1 COMING TO THE CASES REFERRED TO BY THE LD. COUNSEL, THE DECISION IN THE CASE OF ASTEROIDS TRADING & INVESTMENT S (P) LTD. WAS RENDERED IN THE CONTEXT OF THE FACT THAT THE ORIGINAL ASSESSMENT HAD BEEN MADE U/S 143(3), IN WHICH THE CLAIM OF THE ASSESSEE U/S 80-M WAS ALLOWED AFTER CONSIDERATION. THUS, IT WAS HELD THAT IN ABSENCE OF ANY NEW MATERIAL, IT WAS A CASE OF MERE CHANGE OF O PINION. SUCH WERE ALSO THE FACTS IN THE CASE OF KELVINATOR OF INDIA L TD. AND ASIAN PAINTS LTD. (SUPRA). IN THE LATTER CASE, IT WAS ALSO M ENTIONED THAT ALLOWING THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT WITH OUT ANYTHING FURTHER WOULD AMOUNT TO GIVING A PREMIUM TO BE AUTHOR ITY TO TAKE BENEFIT OF ITS OWN WRONGS. SUCH WERE ALSO THE FACTS I N THE CASE OF CHAKIAT AGENCIES (P) LTD. (SUPRA), IN WHICH THE CLAIM OF T HE ASSESSEE U/S 80-O ITA NO.1443(DEL)/2007 11 HAD BEEN FULLY EXAMINED IN THE COURSE OF ORIGIN AL ASSESSMENT PROCEEDINGS, LEADING TO ASSESSMENT U/S 143(3 ). THE DECISION IN THE CASE OF KRISHNA TEXTILES WAS RENDERED U/S 147(B), WHICH NO LONGER EXISTS ON THE STATUTE BOOK. THE DECISION IN TH E CASE OF INDIAN OIL CORPORATION WAS RENDERED U/S 147(A), WHICH NO LONGER EXISTS ON THE STATUTE BOOK. THE REVENUE ALSO RELIED ON T HE ORDER OF THE TRIBUNAL IN THE CASE OF JOHRI LAL SHARMA, IN ITA NO. 2465(DEL)/20 08, IN WHICH IT WAS HELD THAT INTIMATION U/S 143(1) OPERATES AS A N ORDER OF ASSESSMENT AND INCOME CAN ESCAPE ON ACCOUNT OF INTIMATION. IF IT IS A CASE OF ESCAPEMENT, NOTICE CAN STRAIGHTWAY BE ISSUED U/S 148 EVEN IN ABSENCE OF MAKING ASSESSMENT U/S 143(3) AFTER ISSUING NOTICE U/S 143(2). THUS, EVEN AS PER THIS ORDER, IF THERE IS A REASON TO BELIEVE ABOUT ESCAPEMENT OF INCOME AFTER MAKING AN INTIMATION, ACTION CA N BE TAKEN U/S 148. THE LD. COUNSEL HAD ALSO REFERRED TO THE CASE OF C IT VS. EICHER LTD., (2007) 163 TAXMAN 259 (DEL). THE ISSUE IN THAT CASE WAS WHETHER THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS IN TH E RETURN OR ORIGINAL ASSESSMENT SO AS TO SAVE THE CASE FROM APPLICAT ION OF SECTION 147. THE FACTS ARE DISTINGUISHABLE AS IN THIS CASE THER E IS NO PRIOR ORDER U/S 143(3). ITA NO.1443(DEL)/2007 12 3.2 THUS, FOLLOWING THE RATIO OF THE DECISION IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD. AND RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA), WHICH HAVE NOT BEEN DISTINGUISHE D IN ANY MANNER BY THE LEARNED COUNSEL, IT IS HELD THAT THE LEARNED CIT( APPEALS) WAS RIGHT IN UPHOLDING THE REOPENING OF THE ASSESSMENT. 4. GROUND NOS. 2 AND 3 ARE AGAINST NON-DEDUCTION OF 70% SHARE OF THE ASSESSEE IN THE LOSS OF THE DISSOLVED FIRM OF M/S MANISHA & COMPANY. THE CASE OF THE LEARNED COUNSEL WAS THAT THIS FIRM WAS DISSOLVED ON 31.3.2003. UPON DISSOLUTION OF THE FIRM, THE LO SS WAS DISTRIBUTED TO THE PARTNERS IN THE BOOKS OF THE FIRM. THE LOSS AL LOCATED TO THE ASSESSEE WAS ADJUSTED TOWARDS THE SHORT-TERM CAPITAL GAIN. T HIS LOSS COULD OBVIOUSLY BE NOT CLAIMED BY THE FIRM. THEREFORE, IT WAS ARGUED THAT THE LOSS WAS RIGHTLY CLAIMED BY THE ASSESSEE. THE IMPORT OF SECTION 10(2A) WAS STATED TO BE THAT INCOME SHOULD NOT BE TAXED TWICE, ONCE IN THE HANDS OF THE FIRM AND FOR THE SECOND TIME IN THE HANDS OF THE PARTNERS. THEREFORE, THE SHARE OF INCOME IN THE FIRM WAS NOT TO BE IN CLUDED IN THE TOTAL INCOME OF THE PARTNERS. THIS, HOWEVER, DOES NOT MEAN THAT THE SHARE OF LOSS FROM THE FIRM COULD NOT BE ADJUSTED AGAINST THE PROFIT OF THE ASSESSEE. THE LD. COUNSEL COULD NOT REFER TO ANY PROVISION IN THE ACT OR THE CASE LAW ITA NO.1443(DEL)/2007 13 APPLICABLE UNDER AMENDED PROVISIONS TO SUPPORT EITHER OF HIS CONTENTIONS. HOWEVER, WE FIND THAT SECTIONS 75 AND 78 WE RE CONSIDERED BEFORE THE LOWER AUTHORITIES FOR THIS PURPOSE. THE CASE OF THE LD. DR WAS THAT NONE OF THESE SECTIONS WERE RELEVANT TO THE FACTS O F THE CASE. THUS, IT WAS AGITATED THAT THE SHARE OF LOSS FROM THE FIRM COULD NOT BE DEDUCTED FROM SHORT-TERM CAPITAL GAIN EARNED BY THE ASSES SEE IN VIEW OF THE PROVISION CONTAINED IN SECTION 10(2A). 4.1 WE HAVE CONSIDERED THE FACTS OF THE CASE A ND RIVAL SUBMISSIONS. CLAUSE (2A) OF SECTION 10 STATES THAT IN THE CASE OF A PERSON, BEING A PARTNER OF A FIRM, WHICH IS SEPARATELY ASSESS ED AS SUCH, HIS SHARE IN THE TOTAL INCOME OF THE FIRM SHALL NOT BE INCLUDED IN HIS TOTAL INCOME. THIS CLAUSE USES THE WORDS HIS SHARE IN THE TOTA L INCOME OF THE FIRM. THE TOTAL INCOME COULD BE A POSITIVE FIGURE OR A N EGATIVE FIGURE AND, THEREFORE, IN OUR CONSIDERED VIEW THE TOTAL INCOM E OF THE FIRM INCLUDES WITHIN ITS AMBIT THE TOTAL LOSS OF THE FIRM. S ECTION 75 DEALS WITH THE LOSSES OF THE FIRM AND IT IS PROVIDED THAT AN Y LOSS IN RELATION TO ASSESSMENT YEAR COMMENCING ON OR BEFORE 1.4.1992, WHICH COULD NOT BE SET OFF AGAINST ANY OTHER INCOME OF THE FIRM AND WHICH HAS BEEN APPORTIONED TO A PARTNER OF THE FIRM BUT COULD NOT BE SET OFF BY SUCH ITA NO.1443(DEL)/2007 14 PARTNER PRIOR TO ASSESSMENT YEAR COMMENCING ON 1.4.1993, THEN, SUCH LOSS SHALL BE ALLOWED TO BE SET OFF AGAINST TH E INCOME OF THE FIRM SUBJECT TO THE CONDITION THAT THE PARTNERS CONTINUED IN T HE SAID FIRM. THE PROVISION DEALS WITH LOSSES PRIOR TO ASSESSME NT YEAR 1993-94. IN THIS CASE, WE ARE DEALING WITH THE LOSSES OF ASSES SMENT YEAR 2003-04. THE LAW REGARDING ASSESSMENT OF FIRMS WAS CHANG ED WITH EFFECT FROM 1.4.1993, CONSEQUENT TO WHICH CLAUSE (2A) WAS INSERTED IN SECTION 10. THEREFORE, THE PROVISION CONTAINED IN THIS SECT ION DOES NOT ADVANCE THE CASE OF THE ASSESSEE. SECTION 78 DEALS WITH CARRY FORWARD AND SET OFF OF LOSSES IN A CASE OF CHANGE IN CONSTITUTION O F THE FIRM OR ON ITS SUCCESSION. NONE OF THESE CONDITIONS IS APPLICA BLE IN THIS CASE AS THE FIRM WAS DISSOLVED. THE CASE OF GARDEN SILK W EAVING FACTORY VS. CIT, (1991) 189 ITR 512 (S.C.), DEALS WITH ASSESSM ENT YEAR 1967-68. IN VIEW OF CHANGE IN THE LAW, THE RATIO OF THE CAS E IS NOT APPLICABLE. THUS, IT IS HELD THAT THE ASSESSEE IS NOT ENTITLED TO SET OF THE SHARE OF LOSS FROM THE FIRM AGAINST HER OTHER INCOMES. 5. GROUND NO.4 IS THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE BROKERAGE OF RS. 20,000/- PAID IN RESPECT OF SALE OF PROPERTY IN ABSENCE OF THE VOUCHER. THE CASE OF THE LD. COUNSEL WAS THAT IT IS A COMMON ITA NO.1443(DEL)/2007 15 KNOWLEDGE THAT BROKERAGE HAS TO BE PAID AT THE T IME OF SELLING THE PROPERTY. IN THIS CASE, A CLAIM OF RS. 20,000 /- WAS RAISED AGAINST SALE CONSIDERATION OF RS. 16.24 LAKH. THE CLAIM WAS DISALLOWED ON ACCOUNT OF ABSENCE OF PROOF OF PAYMENT. IN REPLY, THE LEARNED DR SUBMITTED THAT NO EVIDENCE WHATSOEVER WAS FILED TO SUPPORT THE CLAIM OF THE BROKERAGE. HAVING CONSIDERED THE FACTS AND R IVAL SUBMISSIONS, IT IS HELD THAT THE NOMINAL EXPENDITURE CLAIMED BY THE ASSESSEE WAS JUSTIFIED EVEN IN ABSENCE OF THE EVIDENCE THER EOF. THUS, THE AO IS DIRECTED TO DEDUCT THE AFORES AID AMOUNT IN COMPUTING THE CAPITAL GAINS. 6. GROUND NO. 5 REGARDING CHARGE OF INTEREST U NDER SECTIONS 234B AND 234C WAS STATED TO BE CONSEQUENTIAL IN NATU RE. THE AO SHALL RECOMPUTED THESE INTERESTS AFTER GIVING EFFECT TO THIS ORDER. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18TH SEPT.,2009. SD/- SD/- (GEORGE MATHAN) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 18TH SEPT.,2009. ITA NO.1443(DEL)/2007 16 SP SATIA COPY OF THE ORDER FORWARDED TO:- SMT. MANISHA SHARMA, MUZAFFARNGAR. ITO, WARD 1(2), MUZAFFARNAGAR. CIT CIT(A) THE DR, ITAT, NEW DELHI. ASSISTANT REGIST RAR.