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TMI Blog2012 (11) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... artner of a firm with his brother. The assessee succeeded to the business by way of family settlement which also dissolved the firm with effect from 18.09.2004. The petitioner, who took over the business, assets, liabilities and affairs of the ongoing business, filed a return in which he claimed set-off of the losses of the erstwhile firm. These losses were by way of unrecoverable expenses over the income of the erstwhile firm. The Assessing Officer (AO), the CIT (A) and later the Income Tax Appellate Tribunal (ITAT) rejected the claim on the ground that Section 78(2) did not entitle the assessee to it. On appeal, this Court affirmed that view and also held as follows: "5. It will be appropriate to refer to Section 170(1) of the Act, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for a situation where a person carrying on business or profession is succeeded to by another person, who continues to carry on that business. In such a situation, the sub-section says that predecessor in business shall be assessed in respect of the income of the previous year up to the date of succession and the successor in business shall be assessed in respect of the income after the date of succession. This sub-section only provides as to who will be assessable in respect of the income of the previous year from business, when there is a change in the person carrying on the business by succession. Section 78(2) provides for a different situation. It speaks only of carry forward of the losses of a person who was carrying on a busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gued that this was a case where Section 78(2) squarely applied and the position of the law being clear and known to the assessee, it has claimed for setting-off of the losses, which was plainly untenable. Since the assessee consciously made it, the set-off claim was clearly a "bogus" one and fell within the meaning of that expression. Reliance was placed upon the judgment of this Court reported as CIT v. Harparshad and Company Ltd. 328 ITR 53. 5. This Court has considered the submissions. The order of the AO and the CIT(A) would reveal that there is no separate discussion apart from the fact that the assessee had made a claim for set-off of all the losses incurred by the erstwhile entity. The assessee is to that extent correct in arguing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a false claim which was not allowable as deduction. Explanation (1) to Section 271(1)(c) of the Act provides for two situation under which the additions made will be deemed to represent the income in respect of which particulars have been concealed. Clause (A) of the Explanation91) to Section 271(1)(c) of the Act takes into the ambit the cases, where a person fails to offer an explanation or offers an explanation which is found by the Assessing officer or CIT(A) or Commissioner to be false whereas under Clause (B), a person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and all the material facts relating to the same and material to the computation of his total income have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts, the ultimate disallowance was on account of Section 170(1) which was not even reflected in the orders of the lower authorities, nor adverted to by the orders of the lower authorities as well as the Tribunal in either round of litigation, i.e. quantum and penalty. Such being the case, the upholding of the quantum proceedings by the Court could not have been the only basis for the imposing of the penalty. Learned counsel for the Revenue, on the other hand, argued that this Court, in the quantum proceedings had clearly stated that Section 78(2) applied to the facts of the case. In the circumstances, the claim for setting-off was plainly inadmissible despite which the assessee had put it forward which in turn meant that it was bogus cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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