TMI Blog2011 (2) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the order passed by the Commissioner of Income-tax (Appeals) dated May 25, 2010 for the assessment year 2004-05. Grounds of appeal read as under : (1) On the facts and in the circumstances of the case, the assessee learned Commissioner of Income-tax (Appeals) has erred in law and on the facts in deleting the penalty imposed by the Assessing Officer at Rs.2,43,118 under section 271(1)(c) of the Income-tax Act, 1961. (2) The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of the hearing of the appeal. 2. A sum of Rs. 7,36,723 was claimed by the assessee out of his other business incomes by making the following narration : "Set off and carry forward of business loss of 25 per cent. share in M/s. Gee Marketing Network in which the assessee was a partner." 3. The Assessing Officer issued a show-cause notice to the assessee as to why such amount should not be disallowed and in the show-cause notice dated December 15, 2006, the Assessing Officer required the assessee to submit explanation in this regard as follows : "You have claimed business loss for Rs. 7,36,723 which was transferred from M/s. GMN. You have to justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other show-cause notice under section 271(1)(c) of the Income-tax Act dated May 29, 2007 was issued fixing the case for June 11, 2007. However, on June 11, 2007 also neither anybody attended nor any request for adjournment was made. This clearly shows that the assessee has nothing to state in his defence for the default which has occurred and narrated and accordingly penalty proceedings are decided on the basis of material available on record. The assessee had wrongly adjusted the loss of his partnership concern amounting to Rs. 7,36,723 against the business income of his proprietary concern thereby reducing the taxable income in his own hand. The said adjustment was against the law and therefore the same was disallowed and penalty proceedings under section 271(1)(c) of the Income-tax Act was initiated. The case of the assessee falls within the ambit of section 271(1)(c) of the Income-tax Act, 1961 as the assessee has furnished inaccurate particulars of income. The act of the assessee cannot be regarded as an innocent act as the same is a conscious act. This act is an act of gross and willful neglect on his part and he has furnished inaccurate particulars deliberately which is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court. However, at the time of dictation, it was found that the claim of the assessee of business loss of Rs. 7,36,723 was regarding the concern in which the assessee was a partner. Taking note of such fact, it was considered proper to call for the assessment record and the present case was refixed for clarification on December 31, 2010 itself and the learned Departmental representative was required to submit the assessment record. The case was fixed on January 21, 2011 and, thereafter, it was adjourned to February 18, 2011 on which date both parties had appeared. 9. The learned Departmental representative, after narrating the facts, submitted that the assessee has made a claim which could not be supported by him either by the provisions of the Income-tax Act or by showing any decision. She submitted that in response to a query raised by the Assessing Officer regarding justification of such claim, the assessee did not submit any reply. She submitted that in response to show-cause notice, no explanation whatsoever was filed by the assessee. Thus, she submitted that the case of the assessee clearly falls within the ambit of section 271(1)(c) and Explanation 1 thereto as the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on 31st March, 2004. 1,27,623.54 Set off and carried forward of losses of previous year net loss of assessment year 2002-03 28,53,847.80 Net loss of assessment year 2003-04 2,20,668.95 30,74,516.75 Net loss of the firm is distributed among partners in their profit sharing ratio 29,46,893.21 Dinesh Goel 25 per cent. 7,36,723.30 Parikshit Goel 25 per cent. 7,36,723.30 S. C. Goel 25 per cent. 7,36,723.30 Ajay Gupta 25 per cent. 7,36,723.30 This firm has closed its business activities during this financial year. Hence, net loss of Rs. 29,46,893.21 is distributed among partners in their profit sharing ratio and to be carried over by partners. The firm had discontinued its business. This is the last financial year of business activities of the firm. for Gee Marketing Network, Sd/- (Parikshit Goel), Partner." 12. As it can be seen that it is not even the loss of the current financial year, but it is a loss pertaining to the assessment years 2002-03 and 2003-04. For the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o show that on the date on which he has filed the return, it was the bona fide belief of the assessee according to which such claim could be made. The computation of income in the case of Gee Marketing Network itself will show that earlier those losses were never carried forward in the hands of the partners, but were carried on in the hands of the firm itself. That fact itself shows that the claim of the assessee is not bona fide and the assessee is aware of the fact that claim of losses in respect of the firm cannot be claimed in the hands of its partners. 14. The decision in the case of Reliance Petroproducts (P.) Ltd. (supra) will not be applicable to the facts of the present case and it has also been distinguished in the aforementioned decision of Zoom Communication (P.) Ltd. 's case (supra) by the hon'ble jurisdictional High Court in the following words: "In the case of Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC), the addition made by the Assessing Officer in respect of the interest claimed as a deduction under section 36(1)(iii) of the Act was deleted by the Commissioner of Income-tax (Appeals) though it was later restored, by the Tribunal, to the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 271(1)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bona fide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have. We find that the assessee before us did not explain either to the income-tax authorities or to the Income-tax Appellant T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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