RAJAT R. PATEL,MUMBAI vs. DCIT CEN CIR 25, MUMBAI

All these assessments have been framed u/s 153C of the Act, consequent to search conducted in the case of M/s Patel Engineering Ltd on 16.12.2010, during the course of which certain documents relating to the assessee were found.

The common issue urged in all the four years relates to disallowance of expenses claimed by the assessee against the interest income received from partnership firm. Since the assessee did not substantiate that the expenses were incurred towards earning interest income from the partnership firm, the AO disallowed the same in all the four years. The Ld CIT(A) also confirmed the said disallowance made in all the four years.

We heard Ld D.R and perused the record. We notice that the assessee did not establish that the expenses were necessary to earn the interest income from the partnership firm. Hence we do not find any infirmity in the order passed by Ld CIT(A) on this issue in all the four years.

In assessment year 2009-10, the assessee has urged following issues also:- (a) Rejection of claim of set off of business loss against business income. (b) Rejection of claim of set off of short term capital loss.

The first issue relates to the rejection of claim of set off of business loss against business income. The assessee had declared capital loss of Rs.10,34,772/-. The AO treated a sum of Rs.2,01,274/- as business loss. The assessee sought set off of above said business loss against business income declared by him. Since the assessed income would go below the returned income, if the above said set off is allowed, the AO rejected the said claim and Ld CIT(A) also confirmed the same.

We heard Ld D.R and perused the record. We notice that it is the AO, who has treated a part of capital loss declared by the assessee as business loss. Since the assessee accepted the same, he has sought for setting off of the same against business income in accordance with the law. We notice that the tax authorities have rejected the said claim only for the reason that the assessed income shall go below the returned income, if such set off of loss is allowed. In our view, the said stand of the tax authorities does not appear to be in accordance with the law. It is settled principle that there is no estoppel against law. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow set off of loss in accordance with the law.

The next ground relates to the rejection of claim of set off of short term capital loss. The tax authorities have rejected the same on the ground that the assessee did not make this claim in the return of income. We notice that the assessee did not substantiate his claim with proper evidences. Under these set of facts, we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue.

In assessment year 2010-11 and 2011-12, the assessee is challenging the assessment of rental income on protective basis. The assessee retired from a partnership firm and upon his retirement, he was allotted five flats. The assessee converted three flats into one residential unit and let out the remaining two flats. The assessee did not offer rental income on the plea that the same was offered by the partnership firm. However, the AO assessed the rental income on protective basis. The Ld CIT(A) also confirmed the same.

We have heard Ld D.R and perused the record. Since the rental income has been assessed on protective basis, we are of the view that the Ld CIT(A) was justified in not disturbing the protective assessment so made.

In the result, the appeals filed by the assessee for AY 2008-09, 2010-11 and 2011-12 are dismissed. The appeal filed for AY 2009-10 is treated as partly allowed.