Shri Pravinbhai Mohanbhai Kheni, Surat V. The DCIT.,C.C.-2, Surat

ITA 756/AHD/2014

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2029 (ITAT-SURAT)
• Duration Of Justice: 8 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-03-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 12-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ASHWIN PAREKH
• Keywords: Capital asset; Business income; Question of law; Speculation loss; Difference of opinion; Revised return
• Section: 271(1)(c); 143(3); 54F; 139(4); 113; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.756/AHD/2014 (AY 2007-08) (Hearing in Virtual Court) Shri Pravinbhai Mohanbhai Kheni, 73, Sadhana Society, Varachha Road, Surat – 395006. PAN: AFZPK 3277 N Vs The Deputy Commissioner of Income Tax, CC-2, Surat. Appellant/ Revenue Respondent/ Assessee Assessee by Shri Ashwin Parekh – CA Revenue by Shri H.P. Meena – CIT-DR Date of hearing 03.03.2022 Date of pronouncement 27.05.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee under section 253 of Income-tax Act (Act), is directed against order of learned Commissioner of Income Tax (Appeals)-2, Ahmedabad dated 16.12.2013 in confirming penalty levied under section271(1)(c) of the Act vide order dated 29.03.2012 for the A.Y. 2007- 08. The Assessee raised following grounds of appeal: “I. The learned CIT(A) has grievously erred in law and on facts in confirming the penalty u/s.271(1)(c) of the Act at Rs.5,20,43,909/- on addition for property income, short term capital loss and deduction u/s.54F of the Act without appreciating the detailed evidences and explanation of appellant on records. The penalty should be deleted. II. The learned CIT(A) has grievously erred in law and on facts in confirming the penalty u/s.271(1)(c) of the Act at Rs.5,20,43,909/- without appreciating the ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 2 facts that income of assesse was long term capital gain for which tax was levied at 20% in the assessment order and penalty at this rate works out to Rs.3,46,95,939/-. The penalty should be deleted.” 2. Brief facts of the case are that the Assessing Officer(AO) while passing scrutiny assessment order under section 143(3) made addition on account of deemed house income of Rs. 8,640/- by taking view that the assessee was having more than one house property including two self-occupied properties. The AO made addition of notional rental income in respect of house No. RS No. 361/2-B, TP No. 4, FP No. 193 Mohan Ni Chal, Varachha Road, Surat, disallowance on foreign exchange loss of Rs.9,99,41,056/- by holding that foreign exchange loss was suffered in the firm namely M Kantilal Exports, where assessee is partner and there is no provision to allocate loss to individual partner. Even in the contract notes issued by the bank about loss on forex trading was of the firm. The amount invested for trading where loss. Thus, setoff of such loss was disallowed. The AO also disallowed exemption under section 54F of the Act of Rs.7,35,30,000/- by holding that no documents were furnished to substantiate such claim. It was also held that the claim of section 54F is incorrect. The capital gain as per calculation is Rs. 71,67,73,035/-. The assessee has not fulfilled the conditions for seeking exemption of section 54F. Had the assessee fulfilled the conditions of ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 3 section 54F, he would have been entitled for exemption to the extent of Rs. 6,40,67,338/- against the claim of Rs. 7,35,30,000/-. The AO while passing the assessment order initiated the penalty under section 271(c) of the Act for concealing income and furnishing inaccurate particulars. 3. On appeal before the ld.CIT(A) in quantum assessment, both the disallowances were upheld vide order dated 24.09.2010. After receipt of order from the ld.CIT(A) in confirming the additions/disallowances, the AO issued fresh show cause notice dated 10.02.2012, as to why penalty under section 271(1)(c) be not levied against the assessee. The AO recorded that no reply was furnished by assessee. The AO levied penalty @100% of tax sought to be evaded on all three additions/ disallowances. The AO worked out the penalty of Rs.5.20 crore being 100% of tax sought to be evaded. The AO passed the penalty order after obtaining prior approval from the Additional CIT, Central Range, Surat. 4. Aggrieved by the penalty levied under section 271(c) of the Act, the assessee filed appeal before the ld.CIT(A).Before the ld.CIT(A), the assessee filed his detailed written submission. The ld.CIT(A) recorded the submission of assessee separately against each of the additions/disallowances. Against the addition of deemed income of House Property, before the ld.CIT(A), the ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 4 assessee stated that no appeal is filed against this addition since it is a small amount. The property bearing no.RS No.361/2-B, TP No.4, F.P.193, Mohan Ni Chal, Varachha Road, Surat is not a residential property. It is a factory premises. The copy of Wealth Tax Return showing nature of property were furnished. It was contended that said property was sold on 14.07.2008. On the date of sale, it was an open land. The assessee also contended that in subsequent assessment year, the AO accepted that it is an open land and requested to delete the penalty. The contention of assessee was not accepted by the ld.CIT(A). The ld.CIT(A) held that a substantive provision of law creates an obligation on the person who received income under the head Income from ‘House Property’, the head is not applicable to House Property only, but was extends to all buildings whether they are used for dwelling house or other purposes, thus, the AO was justified in making the addition, and penalty was rightly levied. 5. On the disallowance of Foreign Exchange Loss/Short Term Capital Loss of Rs 9.99 crore, the assessee stated that he had purchased Foreign Currency of a fixed price and sold after some period on forex transaction. The assessee incurred losses in forex market on utilising the fund of firm namely Kantilal Exports, in which the assessee is a partner. The other partners of the firm ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 5 strictly instructed the assessee not to carry out any business other than business of import of rough diamonds manufacturing export of polished diamonds. Despite the objection and without knowledge of the partner, the assessee utilized foreign exchange and suffered loss. The assessee also relied on Clause-4 (11)(12) and (13) of the partnership deed dated 01.04.2003 to impress upon that as per such clause, the partnership firm has to carry the business of manufacturing export and import of Precious Stone, Gold Ornaments. All partners has to give all information and truthful explanation to other partners relating to the affairs of the partnership and none of the partners is entitled to use or any money of the firm without the consent of others and all partners shall keep the others harmless and indemnify against the consequences result from any Act or Deed by any of them in breach of any of the terms and conditions and Deed or Act unauthorisedly. The ld.CIT(A) after considering the submission of assessee held that the assessee deliberately made an attempt to claim loss though he was not entitled to claim in his individual capacity. 6. On the disallowance of exemption under section 54F of the Act, the assessee submitted that that assessee furnished all particulars of facts. None of the particulars furnished by the assessee are inaccurate or incorrect. The ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 6 assessee has not suppressed or concealed the Capital Gain. The particulars furnished by assessee were not found inadequate and incorrect. The taxable capital gain is shown in the return of income. Even assuming that assessee’s claim is wrong, the issue is debatable. The assessee has disclosed full capital gain transaction in the return of income, hence it cannot be said that assessee has concealed income. Making a claim which is not sustainable in law by difference, will not amount to furnishing inaccurate particulars regarding the income of the assessee. The assessee also relied on certain case laws. 7. The ld.CIT(A) after considering the submission held that the condition of Section 54F of the Act were not fulfilled and the claim of exemption was made wrongly by the assessee. The total investment should have been made within two Years of the transfer of capital asset i.e. by 05.12.2008. The claim has been made for payments made up to 31.03.2009. The ld.CIT(A) in para 6.10 of his order specifically recorded that the issue of disallowance under section 54F of the Act travelled up to Tribunal where the ld. Authorised Representative (ld.AR) of the assessee fairly admitted that there is no case of assessee on this issue, because admittedly, the assessee was also having two residential properties, income of which were assessable ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 7 under the head Income from House Property. Therefore, the assessee is not eligible for deduction under section 54F of the Act and the appeal of the assessee was dismissed vide ITA No.2838/AHD/2010.On the aforesaid observation of all three additions /disallowances, the ld.CIT(A) upheld the order of AO in levying penalty. Further aggrieved, the assessee filed appeal before this Tribunal. 8. We have heard the submission of ld.AR of the assessee and ld.CIT-DR for the Revenue and have gone through the orders of authorities below. The ld.AR of the assessee submits that the AO made three additions /disallowances of which penalty under section 271(1) (c) of the Act was levied. The penalty levied on disallowance of short term capital gain and forex loss is not sustainable. The ld AR for the assessee submits that the working of the penalty is wrong. The total addition made by the AO were Rs.9.99 crore + Rs.7.35 crore + Rs. 8,640 = Rs.17.34 crore (round figure). The returned capital gain of Rs.54.33 crore was assessed at Rs.71.67 crore by disallowing deduction of Rs.17.34 crore under the head Capital Gain. The copy of computation is placed at page no.158 to 160 of the paper book. The entire capital gain has been taxed @20% in the assessment order. The amount of tax sought to be evaded, therefore, is 20% of Rs.17.34 crore is ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 8 Rs.3,46,94,211/- + 30% of Rs.8,640/- i.e. 2,592/-, thus, total of Rs.3,46,96,803/- and not of Rs.5,20,43,909/-, which is 30% worked out by the AO. The capital gain is taxable at 20% of the capital gain. 9. On the addition, the ld.AR of the assessee submits that the assessee was a partner in a partnership firm i.e. Kantilal Export, copy of partnership deed is placed on record. The assessee incurred huge losses by utilising fund of firm, without the knowledge and consent of other partners which loss though not allow by the AO, Tribunal and Hon’ble High Courts. The fact remains that loss was incurred and the same was claimed as deduction by relying upon the decision of Hon’ble Madras High Court in Gopalkishan and Ramkishan vs. CIT reported 170 ITR 368. There is no tax planning or tax evasion by claiming loss by assessee. The assessee has setoff loss against the Long Term Capital Gain by which tax is reduced @22.44% whereas if loss is allowed in case of firm, the tax will be reduced @ 33.66%, thus, by claiming loss in case of assessee instead of firm, the assessee paid more tax by 11.22% of Rs.9.99 crore which works out to Rs.1.12 crore. During the proceedings before the ld.CIT(A) in remand proceedings, the AO accepted for availing credit facility by firm of assesses M/s.Kantilal Export, the loss incurred by the partner by utilising funds of the firm was claimed by ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 9 assessee/partner which is supported by the letter issued from the bank. The AO accepted the disallowance in case of firm is only due to legal provision that the AO cannot allow a claim made otherwise than by filing return of income or revised return of income and that time of filing revised return of income in case of firm was expired. The AO has not considered business loss as a speculative loss. No penalty can be levied for interpretation in way of the decision of Tribunal in Bhartesh Jain vs. ITO reported in 137 TTJ (Del) 200, Hon’ble Madhya Pradesh High Court in CIT vs Praveen B. Gada (244 CTR 463) and the CBDT Circular No. 3/2010 dated 23.03.3010. The AO has not hold that claim of assessee was false, but held that it is eligible in case of firm and not allowed the deduction in case of firm only agreed that the firm has not filed that revised return of income. The copy of assessment order in case of firm passed under section 143(3) of the Act for the A.Y. 2007-08 dated 30.12.2009 is placed on record. The ld.AR of the assessee also relied upon the decision of jurisdictional High Court in CIT vs. Manibhai & Brothers reported in 294 ITR 501, decision of Hon’ble Punjab and Haryana High Court in CIT vs Sahabad Cooperative Sugar Mills Ltd., reported in 322 ITR 73 and the decision of Tribunal in DCIT vs. Pathankot Primary Cooperative Development Bank Limited reported by 142 TTJ 401. ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 10 10. On the addition of disallowance of deduction under section 54F of the Act of Rs.7.35 crore. The ld.AR of the assessee submits that assessee in its written submission filed before the ld.CIT(A) explained that AO had not disallowed deduction under section 54F of the Act in assessment on the ground that assessee owns two residential houses, disallowance was on the ground that assessee has not taken possession of flat of Signature Island, G-Block, Bandra Kurla Complex (BKC), Bandra, Mumbai. Section 54F of the Act does not stipulate such condition. The assessee furnished booking receipt and contended that building in which the assessee made booking of flat were under construction. The ld.AR submits that CBDT in its Circular No.667 dated 18.10.1993 granted period of three years for investment in scheme of booking, whereas in the penalty order, the AO and ld.CIT(A) held that period of investment is made only for two years. The AO in assessment order disallowed the claim on the ground that Capital Asset was transferred on 06.12.2006 and assessee has to take possession specifically before 05.12.2009. The assessee failed to take the possession on 05.12.2009. There was no case of AO that assessee owns two residential houses. In the Remand Report dated 28.06.2010 copy of which is placed at page no.144 to 150 paper book, the AO disallowed the claim as return of income was filed ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 11 under section 139(4) of the Act and possession of house was not taken before 05.12.2009. 11. The ld.AR further submits that the ld.AR appearing before the Tribunal in quantum appeal in ITA NO.2839/AHD/2010 mistakenly admitted that assessee has already having two residential properties and did not press the ground. In fact, the ld.Counsel was instructed to withdraw the ground due to cancellation of booking as the project of Signature Island, indulged into litigation and there was unexpected view of completion of project. 12. On the Third addition regarding addition and deemed rental value, the ld.AR of the assessee submits that as per purchase deed, the property is an open land adjacent to factory building of Kantilal Export used for parking place of factory. In Wealth Tax report, the property has shown as factory building. But the assessee owns only one house as per assessment order. The Remand Report were overlooked by the ld.CIT(A) and the Tribunal in quantum appeal. The ld.AR further submits that assessee surrendered the deduction under section 54F of the Act due to cancellation of booking of flat in A.Y. 2011-12 and as per provision of Section 54F(3) of the Act, the disallowance of Rs.7.35 crore is income of A.Y. 2011-12 and not of A.Y.2007-08. But the assessee agreed to assessment of this income of 2007-08. For levy of ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 12 penalty, the year of income is strict precondition and even if assessee had agreed, but the income does not accrue as per law is the income of the year, penalty cannot be levied. Penalty under section 271(c) of the Act can be levied if the mandates of the sections are fulfilled and it is not automatic in relation to addition made to the income of the assessee. The ld.AR of the assessee submits that on identical facts the ld.CIT(A)-4 levy of penalty was deleted in case of Lavjibhai Dungarbhai Daliya vide order dated 12.09.2019, copy of which is filed on record. 13. To support his submissions, the ld.AR of the assessee filed following documents on record as follows:  Written Submissions to CIT(A)-II, Ahmedabad.  Copy of Reply dated. 10.06.2010 to Assessing Officer  Copy of letter for adjournment dated 16.03.2012 to Assessing Officer  Chart showing the relevant information on loss on Foreign Exchange Sales  Copy of partnership deed dated 01.04.2003  Copy of Affidavit dated 29.12.2009 submitted to Assessing Officer  Copies of contract notes issue by ICICI Bank and Axis Bank  Certificate from Axis Bank for claim by partners  Copy of Agreement between assessee and other partners  Copy of computation of Income of the firm ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 13  Copy of Assessment Order of Firm M/s.M.Kantilal Exports for A.Y. 2007/08  Copy of decision of Gauhati High Court in CIT(A) V/s. Rajeshkumar Jalan reported at 206 CTR 361  Copy of decision of ITAT Bangalore Bench in NepunMehrotraVs. ACIT reported at 113 TTJ 223.  Payment made to Starlight System Pvt. Ltd., till 31.03.2009 for purchase of flat  Copy of payment receipt from starlight system Pvt. Ltd.,  Copy of Registered Deed of land bearing Revenue Survey No.361/2B, TP-4, F-193 of Mohan-Ni-Chawl, Varachha Road, Surat.  Copy of Remand Report  Copy of Wealth-tax Return of appellant for A.Y.2007-08  Copy of Assessment Order of appellant for A.Y. 2008-09  Copy of Computation of Income for A.Y. 2008-09  Copy of order of ITAT for A.Y. 2007-08 of assessee  Copy of order of High Court for A.Y. 2007-08 of assessee  Copy of order of High Court for A.Y. 2007-08 of M/s.M.Kantilal Exports.  Copy of order of CIT(A) in case of assessee against the order u/s.143(3) of the Act. 14. At the time of conclusion of hearing, the ld.AR of the assessee was directed to file all his submission by way of written submissions, so that all his submissions can be considered. The ld.AR filed his submissions on 05.01.2022. We have included all the points/submissions raised by the ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 14 ld.AR of the assessee as referred above. Since, the copy of the written submissions filed before us does not bear the acknowledgment, thereby we fixed the hearing for clarification, if the ld CIT-DR wishes to submit against the written submission filed by the assessee. 15. On the other hand, the ld.CIT-DR for the Revenue supported the order of Lower Authorities. The ld.CIT-DR submits that alleged Foreign Exchange Loss was suffered by firm where the assessee is a partner. The assessee claimed the said loss in his individual return of income instead of claiming in case of viz firm. The assessee is not legally entitled to claim loss of firm in his individual case/ return. The assessee claimed the loss to reduce the tax liability and thus, furnished inaccurate particulars of income and thereby concealed income. So far as disallowance on account of exemption under section 54F of the Act, the ld.CIT-DR for the revenue submits that assessee was not eligible for making claim under section 54F of the Act. The AO on the basis of fact brought before him, disallowed the exemption. The assessee contested both the additions upto to the Hon’ble High Court wherein both the additions/disallowance has been upheld. The ld.CIT-DR for the revenue submits that the assessee through his ld.AR before Tribunal ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 15 admitted that the assessee was having (02) two residential house and thus, not eligible for deduction under section 54F of the Act. 16. On the quantum/working of penalty, the ld.CIT-DR for the revenue submits that it is merely a arithmetic calculation that assessee was liable to pay tax at 20% rate on Long Term Capital Gain, which can be reworked rectified by the AO. The ld.CIT-DR for the revenue submits that it is a glaring example for concealing income by filing inaccurate particulars of income. The assessee deserves no leniency and the appeal is liable to be dismissed. 17. We have considered the submission of both the parties and have gone through the orders of authorities below. There is no dispute that the main additions of disallowance of forex loss and exemption of section 54F, on the basis of which the penalty was levied by the assessing officer, was contested by the assessee up to the High Court and both the additions are upheld. The Coordinate bench of Ahmedabad Tribunal while considering the quantum appeal of the assessee in ITA No. 2839/Ahd/2010 passed the following order; “8. We have considered the rival submissions, perused the material on records and have gone through the orders of authorities below and the judgements cited by the Ld. A.R. First we decide as to whether the claim of the assessee in the hands of Shri P M Kheni, a partner of the firm M/s. M Kantilal Exports is ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 16 allowable or not. We find that in para 4.4 of the assessment order, it is held by the A.O. that there is no provision in the Act to allocate the loss of a firm only to a partner but the same is required to be adjusted against other income of the firm. The A.O. has noted that even the contract note/certificate issued by the banks in respect of the loss on forex trading is in the name of the firm and the amount invested for such treading is from the funds of the firm only and therefore, individual assessee being a partner of the said firm, cannot claim such loss in his case merely by passing internal entry and debiting his account with the firm. There is no dispute regarding the facts and under these facts, we are of the considered opinion that no interference is called for in the orders of authorities below in the case of the individual Shri P M Kheni because when the loss has been incurred by investing the funds of the firm and the contract notes are also in the name of the firm, such loss cannot be claimed by individual being a partner of the firm. Hence, ground No.1 of the appeal in the case of individual P M Kheni is rejected. 9. Now, we consider the issue in the hands of the firm as to whether the loss is allowable in the hands of the firm. Regarding the judgment cited I.T.A.No. /Ahd/200 by the Ld. A.R., we find that Ld. CIT(A) has discussed the issue in detail and he has noted the judgment of Hon'ble Apex Court rendered in the case of National Thermal Power Corporation Ltd. as reported in 229 ITR 386 (S.C.) in which it was held that the Tribunal has to examine the question of law which arises from the facts as found by the authorities below. He has given a finding that all the facts are not available on record as to whether the assessee was having sufficient foreign exchange on the relevant date against which the assessee has entered for hedging transaction to avoid future loss. It goes to show that the Ld. CIT(A) had rejected the ground of the assessee on this basis that necessary facts are not available on record and for this reason, this issue cannot be admitted. Before us, in the case of the firm also, a paper book has ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 17 been filed by the assessee containing 62 pages which contains copy of partnership deed, copy of affidavit, copy of forward foreign exchange contracts, copy of contract note issued by ICICI Bank and Axis Bank and a certificate from Axis Bank etc. but there is no evidence available on record regarding any foreign exchange held by the assessee firm on the relevant date when forward foreign exchange contract was entered into by the assessee firm. As per the copy of contract note issued by ICICI Bank and Axis Bank, which are contained in pages 24-48 of the paper book, entire loss has arisen on account of forward contract cancellation and there is no delivery. As per the certificate of ICICI Bank on page 24 of the paper book, the forward contract was booked by the bank was on 12.07.2006 and the same was cancelled on 27.10.2006 resulting into a loss of Rs.42,74,820/-. Similarly, as per the contract note of ICICI Bank available on page 29 of the paper book, forward contract was booked on 10.07.2006 and it was cancelled on 14.07.2006 resulting into loss of I.T.A.No. /Ahd/200 Rs.9,98,331/-. As per the contract note of ICICI Bank on page 31 of the paper book, forward contract was booked on 10.07.2006 and it was cancelled on 26.10.2006 resulting into loss of Rs.52,50,180/- In some other contracts, there is gain also which has been adjusted against total losses. As per the certificate of UTI Bank available on page 40 of the paper book, the accounts of the assessee was debited by Rs.14,52,750/- on 12.04.2006 on account of cancellation of forward foreign exchange contract. As per the certificate of Axis Bank at page 49 of the paper book, it has been certified by he bank that the firm has booked and cancelled several forward contracts and has taken some contracts on delivery during the financial year 2006-07 and the loss amount of Rs.6,19,73,171.23 arising out of forward contract cancellation loss during financial year 2006-07 is debited to the current account of the firm. In the revised computation of the firm available on page 57 of the paper book, the assessee has claimed the entire loss in the business of foreign exchange dealing against regular business income of the assessee without bringing on record any ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 18 evidence in support of this contention that such loss was incurred in the course of hedging transaction. As per the affidavit of the partner Shri P M Kheni which is available on page 21-24 of the paper book, filed in his case, it has been stated by him that he had carried on this business without the knowledge of other 8 partners of M/s. M Kantilal Exports and contrary to the terms of partnership deed. When a partner of the assessee firm was carrying on this business of foreign exchange forward contract without the knowledge of the other partners of the assessee firm and contrary to the terms of the partnership deed, we fail to understand as to how this loss can be claimed as business loss in the hands of the firm and moreover, the same is not shown to be on I.T.A.No. /Ahd/200 account of loss incurred in the course of hedging transaction or in the course of delivery based transaction and, therefore, for this reason also, this loss is not allowable in the hands of the firm also. The judgements cited by the Ld. A.R. of the assessee are of no help to the assessee because as per these judgments, the issue can be raised in appeal as additional ground and it has to be decided on the basis of facts on record. As per the facts on record, the assessee firm could not establish that the loss has arisen in course of hedging or in course of delivery of forex. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A) in the case of the firm also. Ground NO.2 of the appeal in the case of the firm is also rejected. 10. Ground No.2 in the appeal of individual Shri P M Kheni i.e. I.T.A.No. 2839/Ahd/2010 is as under: "The Ld. CIT(A) has grievously erred in law and on facts in confirming the order of the A.O. of not allowing deduction u/s 54F of the Act at Rs.6,40,67,338/- against the investment in a residential flat at Rs.8,38,00,000/- made out of long term capital gain in share transactions. As the appellant satisfied all the conditions u/s 54F of the Act, the deduction u/s 54F of the Act at Rs.6,40,67,338/- should be allowed." ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 19 11. It was fairly admitted by the Ld. A.R. that there is no case of the assessee on this issue because admittedly, the assessee was already having two residential properties income of which was assessable under the head 'income from house property' and therefore, it is correctly held by the Ld. CIT(A) that the assessee is not eligible for deduction u/s 54F. This ground is, therefore, rejected. 12. In the result, the appeal of the individual in I.T.A.No. 2839/Ahd/2010 is dismissed.” 18. We find that the assessee challenged the order of Tribunal in quantum assessment before High Court vide Tax Appeal No. 181 of 2012, wherein the order of the Tribunal was upheld. The Hon’ble High Court held that the alternatively firm also claimed deduction of loss from its business profits. The Tribunal in common judgment disallowed the loss so claimed in case of assessee being individual partner as well as firm. Though, the appeal of firm was admitted for adjudication separately. However, so far as addition/disallowance of forex loss was upheld by holding that the deduction of such loss cannot be claimed in the individual capacity. 19. We are conscious of the fact that penalty proceedings are separate and independent, however, the initiation of penalty under Section 271(1)(c) emanates from the action of Assessing Officer in making various additions and disallowances. It is also settled law that mere confirmation of addition or ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 20 disallowance ipso facto will not lead to levy of penalty if the same is based on difference of opinion or claimed inadvertently. However, we find that in the present case, all the additions/disallowance discovered to be a false claim. So far as addition of income from house property of Rs. 8640/- is concerned which was added by Assessing Officer by holding that the assessee was in possession of more than one house and the income of house property at Mohan ni chal, Varchha Road was not shown by assessee. The Assessing Officer accordingly added Rs. 8640/- on account notional rent. So far as disallowance of forex loss is concerned, the assessee intentionally and deliberately claimed loss of his firm in his individual return of income which is not allowable under the law. And the other disallowance of exemption under Section 54F was also discovered to be wrong. Moreover, it was admitted before the Tribunal that the assessee was having two residential house, income of which was assessable under income from house property. This finding of the Tribunal was not challenged before the Hon’ble High Court. Thus, it is proved beyond reasonable doubt that all three additions/disallowances made by Assessing Officer while passing the assessment order, on the basis of which, penalty was initiated were absolutely wrong and assessee attempted to claim wrong benefit. Hence, it is ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 21 a clear case for default without any reasonable cause for levy of penalty under Section 271(1)(c) which we affirm. However, we direct the Assessing Officer to correct the quantum of penalty as claimed by assessee that penalty should have been levied at Rs. 3.46 crores instead of Rs.5.20 crores. 20. So far as reliance on the case law in Gopalkishan and Ramkishan vs. CIT (supra) is concerned, which is mainly relied by the ld. AR of the assessee the ratio of said decision is not applicable on the facts of the present case. In the said case, the question before the High Court was whether regarding allocation of profit to the partners is valid and the allocation has been done in accordance with Section 67(2). Thus, the question before the High Court was quite different. 21. In view of the aforesaid factual and legal discussion, we do not find any merit in the grounds of appeal raised by assessee except for proper working of quantum of penalty. In the result, appeal of the assessee is dismissed. Order announced on May 27, 2022 in open court by placing result on the notice board. Sd/- Sd/- /- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 27/05/2022 *Ranjan ITA No.756/AHD/2014 (AY 2007-08) Pravinbhai Mohanbhai Kheni, Surat 22 Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order / / TRUE COPY / / Sr.Pvt. Secretary, ITAT, Surat