SHRI ASHWANI KUMAR,AMRITSAR vs. INCOME TAX OFFICER WARD-1, BATALA

4.4 The present appeal is being filed against the order of CPC for addition of share of loss from firm i.e. Rs.2,50,022 in the total income of the assessee and creating a demand of Rs. 77,320. Being aggrieved the assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) adjudicated the issue and upheld the order of the ld. AO. Being aggrieved assessee filed an appeal before us.

“5. After careful consideration of appellant’s submissions and keeping in view of the facts of case involving passing of order u/s. 143(1) by the A.O (CPC), Bangalore etc., it is observed that the appellant is claiming that the appellant’s share of loss from another partnership firm, M/s. J.D. Trading amounting to Rs. 2,50,022/- has been added to appellant’s business income of Rs. 5,48,219/- and same has resulted in incorrect assessing of income by the A.O., CPC, Bengaluru as claimed by the appellant. On further perusal, it is observed that the A.O., CPC, Bengaluru has considered share of income from firm at a loss of Rs. 2,50,022/- as at Col. No.5 of Annexure - Business and profession of 143(1) order dated 8.12.2021. Accordingly, while adjusting the same as at Col.No.6, the same has been added to the total income of the assessee as at Col.No.6 under the same annexure as it involves a loss of Rs. 2,50,022/- having credited to P&L Account which resulted in net business income of Rs. 5,48,219/- as admitted by the appellant in the Return of Income i.e. to say alternatively appellant’s total income of Rs. 7,98,241/- under business and profession stands reduced on account of credit of this loss from other firms to the P&L A/c. thereby reducing net income to Rs. 5,48,219/- and same is admitted by the appellant in the Return of Income. With reference to this, appellant merely claims that this share of loss from another firm M/s. J.D. Trading was not even claimed as business loss in Return of Income filed and accordingly, such addition by the A.O., (CPC) Bengaluru in the 143(1) order is claimed as not maintainable by the appellant. The appellant’s claims on this analogy is neither arithmetically reconcilable nor factually justified by the appellant with supporting proof of such P&L Account resulting in net income of Rs.5,48,219/- and reconciling that this share of loss of Rs.2,50,022/- from other firm having not credited to such P&L A/c which resulted in this net income of Rs. 5,48,219/-. In the absence of appellant’s supporting proofs of such income computation with relevant P&L account it would be improper on the part of the appellant to contend that this share of loss as not claimed by the appellant in the Return of Income filed. Once appellant claimed any loss as credited in the P&L A/c, it has the effect of reducing the gross/net income out of such P&L A/c, Accordingly, the same do not warrant to claim again in the Return of Income computation as the same stands claimed already in the P&L Account as a credit entry of such loss income. In the light of these observations, as the appellant failed to establish the same with supporting proofs of such loss having not claimed in the relevant P&L Accounts, it would be improper on the part of the appellant to hold to the view, that the same is mistakenly added by the A.O., CPC, Bengaluru when such adjustments are indeed taken from the claims of appellant in their ITR involving P&L Account, Balance Sheet entries etc., as filed by the appellant. Accordingly, appellant’s appeal and its grounds of appeal on this issue are neither maintainable nor justified without supporting total income computation as claimed by the appellant with relevant books of accounts of Profit & Loss A/c., Balance sheet etc., as applicable to the appellant’s facts of case of business. Accordingly, appellant’s Grounds of appeal are not allowable and appellant’s appeal is dismissed as not maintainable, as these involves no apparent mistake on the part of AO, CPC, Banguluru, as not evidenced by the appellant with supporting workings/proofs of such P & L account credit entries, having no loss income of other firms of appellant.”

7. We heard the rival submission and relied on the documents available in the record. The assessee claimed in the return the business loss from partnership firm amount to Rs.2,50,022/-. The profit or loss of partner from the partnership firm is exempted u/s 10(2A) of the Act. So, the same amount cannot be part of the total income. During process of the return the ld. AO added this loss with the business income amount to Rs.5,48,219/- and total income is re-computed amount to Rs.7,98,243/-. In the return, the assessee claimed share of income from firm which is exempted. If the addition made on the total income the share of profit or loss should be deducted by pursuing section 10(2A) of the Act.

In any case, the assessee had not made any mistake during filing the return or not claimed any wrong deduction in this impugned assessment year.

Accordingly, the order passed by the revenue authorities, are duly setting aside and the demand which is raised u/s 143(1) is quashed. The addition amount of Rs.2,50,022/- is dismissed.