Krishan Lal Nagpal, New Delhi V. ACIT, New Delhi

ITA 5398/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65775 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 13-09-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 01-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMANA SEN
• Assessee Lawyers: P N CHAWLA
• Keywords: Wrong claim; Revised return; Ignorance of law
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.5398 & 5399/DEL/2010 ASSESSMENT YEAR : 2002-03 & 2004-05 SHRI KRISHAN LAL NAGPAL, ACIT, P/O M/S GOODWILL MACHINERY STORE, CIRCLE-2(1), 79-G.B. ROAD, DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AABPN AABPN AABPN AABPN- -- -9898 9898 9898 9898- -- -G GG G APPELLANT BY : SHRI P.N. CHAWLA, ADVOCATE. RESPONDENT BY : SMT. SUMANA SEN. SR. DR. ORDER PER TS KAPOOR, AM: THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD CIT(A) BOTH DATED 4.10.2000. THE GROUNDS OF APPE ALS TAKEN IN BOTH THE APPEALS ARE ON ACCOUNT OF UPHOLDING OF PENALTY U /S 271(1)( C) OF THE INCOME TAX ACT, 1961. THE ONLY DIFFERENCE IS IN THE AMOUNT WHICH IS ` .38,900/- IN RESPECT OF ASSESSMENT YEAR 2002-03 AND ` .1,37,000/- IN RESPECT OF ASSESSMENT YEAR 2004-05. THESE APPEALS WERE HE ARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON CON SOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, THE GROUNDS OF A PPEALS IN THE ASSESSMENT YEAR 2002-03 ARE REPRODUCED BELOW:- ASSESSMENT YEAR 2002 ASSESSMENT YEAR 2002 ASSESSMENT YEAR 2002 ASSESSMENT YEAR 2002- -- -03: 03: 03: 03:- -- - ITA NO5398 & 5399/DEL/10 2 1. THAT THE ORDER OF LD CIT(A) XXV, IS CONTRARY TO LAW AND FACTS ON RECORD. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) WAS RIGHT IN CONFIRMING THE PENALTY OF ` .38,900/- LEVIED U/S 271(1)( C) IN VIEW OF THE CASE OF RELIANCE PETROC HEMICALS LTD. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A) WAS JUSTIFIED IN TREATING THE LOSS CLAIMED BY THE ASSESSEE IN A FIRM WHICH WAS DULY DECLARED IN THE STATEME NT OF INCOME UNDER THE WRONG NOTION THAT LOSS OF THE FIRM I S ALLOWABLE UNDER THE INCOME TAX ACT, 1961. 4. IT IS PRAYED THAT THE PENALTY ORDER BE SET ASIDE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURNS OF INCOME WERE FILED AFTER SETTING OFF OF SHARE OF LOSS FROM THE TWO P ARTNERSHIP FIRM M/S SAN INTERNATIONAL & M/S SAN OVERSEAS IN WHICH THE ASSE SSEE WAS A PARTNER. THE ASSESSEE HAD ADJUSTED AGAINST INCOME IN HIS I NDIVIDUAL CAPACITY THE SHARE OF LOSS SUFFERED BY HIM/BROUGHT FORW ARD FROM EARLIER YEARS FROM THE FIRMS. ORIGINALLY THE RETURNS WERE PROC ESSED U/S 143(1) AND WERE REOPENED U/S 148 OF THE ACT AND IN RESPONSE T O THE NOTICE U/S 147/148, THE ASSESSEE HAD FILED REVISED RETURN IN WHICH HE DID NOT CLAIM THE SHARE OF LOSS SUFFERED FROM THE PARTNERSHIP FI RM. THE RE- ASSESSMENT PROCEEDINGS WERE COMPLETED AND SIMULTANEOUSLY P ENALTY PROCEEDINGS U/S 271(1)( C) WERE ALSO INITIATED ON THE BASIS THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME TO EVADE TAX ON HIS INDIVIDUAL INCOME. THE CONTENTION OF THE ASSESSEE THAT HE HAD FILED A REVISED RETURN AND HIS INCOME FROM REVISED RE TURN HAD BEEN ACCEPTED AND HENCE NO PENALTY U/S 271(1)( C) WAS LEV IABLE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. ITA NO5398 & 5399/DEL/10 3 3. DISSATISFIED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) AND SUBMITTED AS UNDER:- I) THAT THE ASSESSEE HAD EXPLAINED BEFORE ASSESSING OFFICER TH AT WRONG CLAIM OF SET OFF SHARE OF LOSS WAS MADE AGAINST TH E INDIVIDUAL INCOME ON ACCOUNT OF WRONG INTERPRETATIO N OF LAW. II) THAT HE HAD ADMITTED HIS MISTAKE AND HAD FILED REVISED RETURN SHOWING CORRECT INCOME AND SO PENALTY SHOULD NOT BE LE VIED. III) THAT IT IS ONLY THE WRONG CLAIM OF THE ASSESSEE TO SET OF F THE LOSS FROM THE FIRM AGAINST THE INDIVIDUAL INCOME OF TH E ASSESSEE AND IT WAS NOT A FALSE CLAIM, AND PENALTY IS NOT LEVIABLE IN THIS CASE. 4. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSE SSEE DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND RELYING U PON THE JUDGMENTS IN THE CASE OF UOI V. DHARMENDRA TEXTILE LT D. 306 ITR 277 (SC) AND IN THE CASE OF CIT V. ZOOM COMMUNICATION P VT. LTD. IN I.T.A. NO.7 OF 2010 DECIDED BY HON'BLE DELHI HIGH COURT UP HELD THE PENALTIES IMPOSED BY THE ASSESSING OFFICER. 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THIS TRI BUNAL. 6. AT THE OUTSET, THE LD AR ARGUED THAT LOSSES IN THE F IRMS WERE THERE AND IT WAS ONLY DUE TO IGNORANCE OF LAW THAT T HE ASSESSEE CLAIMED SHARE OF LOSS FROM THESE FIRMS AGAINST HIS INDIVI DUAL INCOME. IN THIS RESPECT HE INVITED OUR ATTENTION TO PAGES 18 TO 2 1 OF PAPER BOOK WHERE RELEVANT RETURNS OF FIRMS WERE PLACED. HE FURTH ER ARGUED THAT UP TO 1992, THERE WAS A LAW TO INCLUDE SHARE OF PROFIT O R LOSS IN THE RETURN OF INCOME OF A PARTNER. THEREFORE, BELIEVING THE SAM E THE ASSESSEE BY MISTAKE HAD CLAIMED SET OFF OF LOSS AGAINST HIS INDIVI DUAL INCOME. ITA NO5398 & 5399/DEL/10 4 RELIANCE WAS PLACED IN THE CASE OF NATH BROTHERS 288 ITR 670 (DEL.) PROPOSING THAT IN CASE THERE WAS FULL DISCLOSURE OF PART ICULARS OF INCOME, PENALTY WAS NOT LEVIABLE. SIMILARLY, RELIANC E WAS PLACED IN THE CASE OF CIT V. VIDYAGAURI NATVERLAL 238 ITR 91 (GUJ. ) AND CIT V. NELLAI TRADING AUTOMOBIL;ERS AGENCY 288 ITR 557 WHEREIN IT WAS HELD THAT DISTINCTION MUST BE BETWEEN WRONG CLAIM AND FALSE CLA IM AND FURTHER RELIANCE WAS PLACED IN THE CASE OF RELIANCE PETROPPRO DUCTS LTD. 322 ITR 158. IN VIEW OF THE ABOVE, THE LD AR ARGUED THAT TH E CLAIM WAS NOT A FALSE CLAIM RATHER IT WAS A WRONG CLAIM WHICH SHOULD H AVE BEEN CARRIED FORWARD IN THE HANDS OF THE FIRMS INSTEAD OF SET OFF M ADE BY THE ASSESSEE AGAINST HIS INDIVIDUAL INCOME. HOWEVER, HE ARGUE D THAT THE CLAIMS WERE NOT FALSE. 7. THE LD DR, ON THE OTHER HAND, ARGUED THAT THERE IS NO GROUND FOR TWO OPINIONS AS IT IS AN ESTABLISHED LAW THAT SHARE OF PR OFIT OR LOSS IN THE CASE OF A PARTNER IS NOT ADJUSTABLE AGAINST INDIVID UAL INCOME. THEREFORE, HE ARGUED THAT ASSESSING OFFICER HAD RIGHTLY IMPOSED THE PENALTY AND LD CIT(A) HAD RIGHTLY RELYING UPON THE CASE OF M/S ZOOM COMMUNICATION PVT. LTD. (SUPRA) HAD UPHELD THE SAME. 8. THE LD AR IN HIS REJOINDER REITERATED HIS ARGUMEN TS AND ARGUED THAT KEEPING IN VIEW THE JUDGMENT IN THE CASE OF REL IANCE PETROPRODUCTS LTD. THERE IS MENS REA. LOSSES WERE THERE I N THE FIRMS. THE ONLY WRONG DONE BY THE ASSESSEE WAS THAT HE WRONGLY CLAIMED AS SET OFF AGAINST HIS INDIVIDUAL INCOME. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES A ND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE H AVE NOTED FROM THE RETURNS OF INCOME AND COMPUTATION OF INCOME FILE D BY THE ASSESSEE THAT BESIDES INTEREST & SALARY FROM FIRMS THE ASSESSEE HAD CLAIMED ITA NO5398 & 5399/DEL/10 5 SHARE OF LOSS FROM THE PARTNERSHIP FIRM AND HAD SET OFF THE SAME AGAINST HIS INDIVIDUAL INCOME. THE CASES WERE ORIGINA LLY PROCESSED U/S 143(1). HAD THESE CASES BEEN NOT PICKED UP FOR RE-ASSESSM ENT U/S 148 OF THE ACT, THE WRONG CLAIMS OF THE ASSESSEE WOULD HAVE GONE UN- NOTICED AND ASSESSEE WOULD HAVE REAPED THE BENEFIT OF CARRY FORWARD LOSSES IN THE NEXT YEARS. THE FIRMS IN WHICH THE ASSESSEE HA D HIS SHARE OF LOSS HAD INCURRED HUGE LOSSES AND IT MUST HAD HUGE TURNOVER AND HUGE INFRASTRUCTURE INCLUDING TAX CONSULTANTS AND IT C ANNOT BE SAID THAT ASSESSEE BY MISTAKE HAD CLAIMED THESE LOSSES AGAINST HIS IND IVIDUAL INCOME. AS CLAIMED BY THE LD AR THAT INCLUSION OF SHAR E OF LOSS/PROFIT IN THE IT ACT UP TO YEAR 1992 WAS PERMISSIBLE AND THEREFO RE THE ASSESSEE HAD BY MISTAKE CLAIMED THE SAME IN 2002-03 AND 2004-0 5 IS NOT JUSTIFIED BECAUSE A CONSIDERABLE PERIOD HAS LAPSED BETWE EN THE AMENDMENT AND THE YEAR IN WHICH THE ASSESSEE HAD CLAIME D SET OFF OF LOSSES. THE CASE LAWS RELIED UPON BY THE LD AR CANNOT CO ME TO THE RESCUE OF ASSESSEE BECAUSE IN THE CASES RELIED UPON BY AR & THERE WERE WRONG CLAIMS MADE BY ASSESSEE RELATING TO ITS OWN IN COME OR EXPENDITURE AND ASSESSEE HAD FURNISHED FULL DISCLOSURE OF ALL RELEVANT MATERIAL WHEREAS IN THE PRESENT CASE THE ASSESSEE HAD CLAI MED SET OFF OF LOSSES SUFFERED BY DIFFERENT ASSESSEES IN THE FIRMS IN WHI CH HE WAS A PARTNER AND CASE OF ASSESSEE IS SQUARELY COVERED BY THE CA SE OF M/S ZOOM COMMUNICATIONS RELIED UPON BY LD CIT(A) AND LD DR WHEREIN WRONG DEDUCTIONS WERE CLAIMED IN RESPECT OF EXPENSES ON WHICH THERE WERE NO TWO OPINIONS. IN THE PRESENT CASE ALSO, THE SHAR E OF LOSSES IN A FIRM CANNOT BE ALLOWED AS SET OFF AGAINST INDIVIDUAL I NCOME AS IT IS AN ESTABLISHED LAW AND THIS LAW IS THERE FOR MORE THAN 10 YEARS FROM AMENDMENT TILL THE DATE OF FILING OF RETURNS BY ASSESSEE . THE IGNORANCE OF LAW CANNOT BE AN EXCUSES. THEREFORE, WE HOLD THAT PENALTY WAS RIGHTLY IMPOSED AND WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). ITA NO5398 & 5399/DEL/10 6 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON DAY OF NOVEMBER, 2012. (U.B.S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. .11.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 13.9.2012 DATE OF DICTATION 7.11.2012 DATE OF TYPING 8.11.2012 DATE OF ORDER SIGNED BY 9.11.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 9.11.2012 & SENT TO THE BENCH CONCERNED.