TMI Blog2009 (9) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... of a partnership firm, M/s. Manish Company. This loss was set off against other income of Rs. 5,60,137 by way of short-term capital gain, interest and teaching job. The Assessing Officer noted that the share of loss of a person from a partnership firm is not to be included in the total income of the person under section 10( 2A ) of the Act. Therefore, the loss of Rs. 4,24,934 could not be set off against the other income. In view thereof, the reasons were recorded under section 147 on 5-4-2004 and notice under section 148 was issued to the assessee. In reply, the assessee mentioned that her earlier return may be taken as a return under section 148. In the course of assessment proceedings, the assessee challenged the validity of issue of notice under section 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 loss from a partnership firm cannot be set off against other incomes under section 78 of the Act, as claimed in the objections. It was further mentioned that the person suffering the loss only is entitled to carry forward the loss for the purpose of set off in subsequent year. Thus, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrongs. Further, the Hon ble Court referred to its own decision in the case of German Remedies Ltd. v. Dy. CIT [2006] 285 ITR 26 (Bom.), in which it was held that although the powers conferred under section 147 for reopening the concluded assessment are very wide, the said powers cannot be exercised mechanically or arbitrarily. The expression "reason to believe that any income chargeable to tax has escaped assessment" means entertaining a reasonable belief that a particular income went unnoticed by the Assessing Officer and hence escaped assessment. Even after introduction of the concept of deemed escapement of income by Explanation 2 to section 147 of the Act with effect from 1-4-1989, the belief that income had escaped assessment entertained by the Assessing Officer must be a prudent belief and not mere change of opinion. Thus, an assessment order passed after detailed discussion cannot be reopened within a period of four years from the end of relevant assessment year, unless the Assessing Officer has reason to believe that due to some inherent defect in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that after the amendment of law, the only requirement is that the Assessing Officer should have reason to believe that the income escaped assessment. There was no requirement that there should be any fresh material coming into the possession of the Assessing Officer or any error or omission committed by the assessee in disclosing 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 of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 3 . 2.5 In the rejoinder, the ld. counsel distinguished the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. ( supra ) by stating that in that case information was received after processing the return. The decision in the case of Mahanagar Telephone Nigam Ltd. ( supra ) was also sought to be distinguished by stating that bifurcation was not given in that case by the assessee. 3. We have considered the facts of the case and 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 ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat insofar as "reason to believe" is concerned, the case of the revenue stands fully supported by the decision 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 Investments (P.) Ltd. ( supra ) was rendered in the context of the fact that the original assessment had been made under section 143(3), in which the claim of the assessee under section 80M was allowed after consideration. Thus, it was held that in absence of any new material, it was a case of mere change of opinion. Such were also the facts in the case of Kelvinator of India Ltd. ( supra ) and Asian Paints Ltd. ( supra ). In the latter case, it was also mentioned that allowing the Assessing Officer to reopen the assessment without anything further would amount to giving a premium to be authority to take benefit of its own wrongs. Such were also the facts in the case of Chakiat Agencies (P.) Ltd. ( supra ), in which the claim of the assessee under section 80-O had been fully examined in the course of original assessment proceedings, leading to assessment under section 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 applicable under amended provisions to support either of his contentions. However, we find that sections 75 and 78 were 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 of 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 assessee in view of the provision contained in section 10(2A). 4.1 We have considered the facts of the case and rival submissions. Clause ( 2A ) of section 10 states that in the case of a person, being a partner of a firm, which is separately assessed 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 total income of the firm". The total income could be a positive figure or a negative figure and, therefore, in our considered view the total income of the firm includes within its ambit the total loss of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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