2009 (9) TMI 687 - AT - Income Tax

Tribunal Rules on Assessment Reopening & Loss Deduction, Adjusts Interest Charges

Smt. Manisha Sharma Versus Income-tax, Officer, Ward 1(2), Muzaffarnagar

Smt. Manisha Sharma Versus Income-tax, Officer, Ward 1(2), Muzaffarnagar - [2010] 35 SOT 37 (DELHI) Issues Involved:1. Validity of reopening the assessment u/s 147.2. Non-deduction of 70% share of loss from a dissolved partnership firm.3. Disallowance of brokerage paid in respect of sale of property.4. Charge of interest u/s 234B and 234C.Summary:1. Validity of Reopening the Assessment u/s 147:The Tribunal initially dismissed the assessee's appeal for non-prosecution but later recalled the order. The assessee challenged the reopening of the assessment u/s 147, arguing it was based on a mere change of opinion. The return was processed u/s 143(1), and the Assessing Officer (AO) later issued a notice u/s 148, believing the income had escaped assessment due to an improper set-off of a partnership firm's loss against other income. The Tribunal upheld the reopening, referencing the Supreme Court's decision in *Rajesh Jhaveri Stock Brokers (P.) Ltd.*, which clarified that processing a return u/s 143(1) does not constitute an assessment, and thus, reopening does not amount to a change of opinion.2. Non-Deduction of 70% Share of Loss from a Dissolved Partnership Firm:The assessee claimed a set-off of her share of loss from a dissolved firm against short-term capital gains. The Tribunal examined sections 10(2A), 75, and 78, concluding that the share of loss from the firm could not be deducted from the assessee's other incomes. Section 10(2A) excludes the share of income or loss from a partnership firm from the partner's total income. Sections 75 and 78 were deemed inapplicable as they pertain to losses prior to assessment year 1993-94 and changes in the firm's constitution, respectively.3. Disallowance of Brokerage Paid in Respect of Sale of Property:The assessee claimed a brokerage expense of Rs. 20,000 for selling a property, which the AO disallowed due to lack of evidence. The Tribunal held that such a nominal expenditure is common and justified even without proof, directing the AO to deduct this amount in computing capital gains.4. Charge of Interest u/s 234B and 234C:The charge of interest u/s 234B and 234C was deemed consequential. The AO was instructed to recompute these interests after giving effect to the Tribunal's order.Conclusion:The appeal was partly allowed, upholding the reopening of the assessment and the non-deduction of the partnership firm's loss, but allowing the brokerage expense. The interest charges were to be recalculated accordingly.