Shri Dharmendrasinh G. Gohil, Bhavnagar V. The Income Tax Officer, Ward-1(3), Bhavnagar

ITA 2772/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5869 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 17-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Assessee Lawyers: B R POPAT WITH ROHAN POPAT
• Keywords: Reason to believe
• Section: 143(3); 10(14); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NOS. 277 1 TO 2773/AHD/2014 (ASSESSMENT YEARS: 200 6-07 TO 2008-2009) SHRI DHARMENDRASINH G. GOHIL 3/B-1, ANANTWADI, OPP: JILLA UDYOG KENDRA, BHAVNAGAR APPELLANT VS. THE INCOME-TAX OFFICER, WARD -1(3), BHAVNAGAR 364001 RESPONDENT PAN: AAPPG9258D /BY ASSESSEE : MR. B. R. POPAT WITH ROHAN POPAT, A.R. /BY REVENUE : MR. SANTOSH KARNANI, SR. D.R. /DATE OF HEARING : 18.05.2017 /DATE OF PRONOUNCEMENT : 19.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE THREE ASSESSEES APPEALS FOR ASSESSMENT YEARS 2006-07 TO 2008- 09 ARISE AGAINST THE CIT(A)-XX, AHMEDABADS SEPARAT E ORDERS; ALL DATED 19.08.2014, IN CASES NOS. CIT(A)-XX/187/13-14, CIT( A)-XX/188/13-14 & ITA NOS. 2771 TO 2773/AHD/2014 (SHRI DHARMEDRASINH G. GOHIL VS. ITO) A.YS. 2006-07 TO 2008-09 - 2 - CIT(A)-XX/189/13-14; RESPECTIVELY, IN PROCEEDINGS U NDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT. 2. WE NOTICE AT THE OUTSET THAT THE ASSESSEES FIRS T APPEAL ITA NO.2771/AHD/2014 RAISES THE FOLLOWING SUBSTANTIVE G ROUNDS: THE LEARNED CIT(A) XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN- 1. CONFIRMING THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT FOR THE REASONS AS SPECIFIED IN THE SATISFACTION NOTE. 2. CONFIRMING THE ACTION OF THE AO IN DISALLOWING T HE CLAIM OF EXPENSES OF RS.2,34,145/- FROM INCENTIVE BONUS RECEIVED FROM LIFE INSURANCE CORPORATION OF INDIA. 3. CONFIRMING THE ACTION OF THE AO IN DISALLOWING T HE CLAIM OF THE CONVEYANCE ALLOWANCE OF RS.40,620/- UNDER THE RELEV ANT PROVISIONS OF THE ACT, RECEIVED FROM LIFE INSURANCE CORPORATION OF IN DIA. 3. LEARNED COUNSEL REPRESENTING BOTH PARTIES INFORM US THAT ASSESSEES LATTER TWO APPEALS ITA NOS. 2772 & 2773/AHD/2014 AL SO RAISE THE VERY SUBSTANTIVE GROUNDS. THE ONLY DISTINCTION STATED TH EREIN IS THAT OF THE RELEVANT FIGURES INVOLVED OF RS.2,55,452/- & RS.3,98,530/- R ELATING TO SECOND SUBSTANTIVE GROUND AS FOLLOWED BY CONVEYANCE DISALL OWANCE AMOUNTS OF RS.36,600/- & RS.49,001/-; RESPECTIVELY QUA THE THI RD SUBSTANTIVE GROUND RAISED THEREIN. WE THUS TREAT ASSESSEES FIRST APP EAL HEREINABOVE AS THE LEAD CASE. 4. WE START WITH THE RELEVANT FACTS IN ASSESSMENT Y EAR 2006-07. THE ASSESSEE IS A DEVELOPMENT OFFICER EMPLOYED IN LIFE INSURANCE CORPORATION OF INDIA LIC HEREINAFTER. HE FILED HIS RETURN ON 20 .03.2007 STATING INCOME OF RS.7,37,627/-. THE ASSESSING OFFICER THEREAFTER IS SUED HIM SECTION 148 ITA NOS. 2771 TO 2773/AHD/2014 (SHRI DHARMEDRASINH G. GOHIL VS. ITO) A.YS. 2006-07 TO 2008-09 - 3 - NOTICE DATED 22.02.2013 AFTER FORMING REASONS TO BE LIEVE OF HIS TAXABLE INCOME HAVING ESCAPED ASSESSMENT AS FOLLOWS: 'THE ASSESSEE IS DEVELOPMENT OFFICER OF THE LIC OF INDIA, INCENTIVE BONUS IF ANY RECEIVED BY THE DEVELOPMENT OFFICER, O F LIC IS TREATED AS PART OF SALARY AND IS NOT ENTITLED TO ANY DEDUCT/ON OVER AND ABOVE THE STANDARD DEDUCTION IF ADMISSIBLE. THEREFORE, THE CLAIM OF AS SESSEE ON ACCOUNT OF INCENTIVE BONUS OF RS. 234145/-OUT OF TOTAL INCENTI VE BONUS RECEIVED RS.780485/-AS PER DATA RECEIVED FROM AUTHORITY OF L IC OF INDIA IS IMPERMISSIBLE. IN ABSENCE OF PROOF OF ACTUAL EXPENSE INCURRED AND WITHOUT CERTIFIED BY THE EMPLOYER THAT IT IS WHOLLY NECESSARILY AND E XCLUSIVELY FOR THE PERFORMANCE OF DUTIES. THE CLAIM OF RS.40620/- ON ACCOUNT OF CONVEYANCE ALLOWANCE IS ALSO IMPERMISSIBLE. CONSIDERING THE ABOVE I HAVE REASON TO BELIEVE THAT THE CLAIM OF THE ASSESSEE ON OF INCENTIVE BONUS OF RS.234145/-AND CO NVEYANCE ALLOWANCE OF RS. 40620/- IS WRONG AND IMPERMISSIBLE. AS SUCH THERE IS FAILURE ON THE PART OF THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSE SSMENT FOR AY 2006-07, AS A RESULT OF WHICH INCOME OF RS. 274765/-IS CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME OF RS, 274765/- IS CHARGEABLE TO TAX AS ESCAPED ASSESSMENT AND THE CASE IS FIT FOR ISSUE OF NOTICE U/S 148 OF THE I.T.ACT. THE RELIANCE IS ALSO PLACED ON DECISION OF HONOURAB LE SUPREME COURT: THE HONORABLE APEX COURT HAD DISMISSED SPECIAL LEAV E PETITION (CIVIL) NO.22350 (FROM THE JUDGMENT AND ORDER DATED 09.05.2003 IN ITA 56/00 OF THE HIGH COURT OF M.P AT JABALPUR) OF GURD EV SINGH JAGGI V/S CIT BY HOLDING AS UNDER : 'IN OUR VIEW, THE VIEW TAKEN IN THE IMPUGNED JUDGME NT IS ABSOLUTELY CORRECT AND THE VIEW TAKEN BY THE GUJARAT HIGH COUR T IS WRONG. THE SPECIAL LEAVE PETITION IS DISMISSED.' 5. THE ASSESSING OFFICER THEN FRAMED THE IMPUGNED R E-ASSESSMENT ON 31.12.2013 DISALLOWING ASSESSEES EXPENDITURE CLAIM ED AGAINST INCENTIVE ITA NOS. 2771 TO 2773/AHD/2014 (SHRI DHARMEDRASINH G. GOHIL VS. ITO) A.YS. 2006-07 TO 2008-09 - 4 - BONUS OF RS.2,34,145/- AND THAT PERTAINING TO CONVE YANCE ALLOWANCE OF RS.40,620/-; RESPECTIVELY. 6. THE ASSESSEE PREFERRED APPEAL INTER ALIA CHALLEN GING VALIDITY OF REOPENING AS FOLLOWED BY HIS SUBSTANTIVE GROUNDS ON MERITS AGAINST THE ABOVESTATED TWO DISALLOWANCES. THE CIT(A) REJECTS FORMER TWO ABOVE SUBSTANTIVE GROUNDS AND RESTRICTS CONVEYANCE ALLOWA NCE DISALLOWANCE OF RS.40,620/- TO RS.20,310/- ONLY. THIS LEAVES THE A SSESSEE AGGRIEVED RAISING THE ABOVE REPRODUCED THREE SUBSTANTIVE GROUNDS. 7. LEARNED COUNSEL REPRESENTING ASSESSEE FIRST OF A LL TAKES UP ASSESSEES CHALLENGE TO VALIDITY OF REOPENING. HIS CASE IS TH AT THE ISSUE OF ALLOWABILITY OF EXPENDITURE @30% OF THE INCENTIVE BONUS IN ORDER TO MEET THE CORRESPONDING EXPENSES ALREADY STANDS SETTLED IN HO NBLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. KIRANBHAI H SHELAT & OR S. (1999) 235 ITR 635 (GUJ) AS REITERATED IN THEIR LORDSHIPS LATTER DECI SION IN TAX APPEAL NO. 1005/2005 CIT VS. NITINBHAI T. BHUPATANI DECIDED ON 08.02.2006. HE THEREFORE PLEADS THAT THE ASSESSING OFFICER HAS COM MITTED A GRAVE ILLEGALITY IN RELYING UPON HONBLE M. P. HIGH COURTS JUDGMENT IN CIT VS. GURUDEO SINGH JAGGI 267 ITR 763 TAKING A CONTRARY VIEW AS UPHELD IN HONBLE APEX COURT IN SPECIAL LEAVE PETITION (SUPRA). MR. POPAT CONTENDS THAT MERE DISMISSAL OF SPECIAL LEAVE PETITION AGAINST A NON-JURISDICTIONAL HIGH COURTS DECISION DOES NOT FORM A VALID PRECEDENT. MORE SO WHEN HONBLE J URISDICTIONAL HIGH COURTS LATTER JUDGMENT HEREINABOVE CONSIDERS THE SAME IN D ECIDING THE VERY ISSUE AGAINST THE REVENUE (SUPRA). WE FIND NO REASON TO AGREE WITH THIS LEGAL PLEA. HONBLE APEX COURTS DECISION IN RAYMOND WOLLEN MIL LS LTD. VS. ITO (1999) 236 ITR 34 (SC) SETTLES THE LAW THAT A REOPENING CA N BE RESORTED TO ON THE BASIS OF A MERE PRIMA FACIE MATERIAL WHEREIN SUFFIC IENCY AND CORRECTNESS OF ITA NOS. 2771 TO 2773/AHD/2014 (SHRI DHARMEDRASINH G. GOHIL VS. ITO) A.YS. 2006-07 TO 2008-09 - 5 - THE SAME IS NOT TO BE CONSIDERED AT THE THRESHOLD S TAGE. WE OBSERVE IN THIS BACKDROP OF FACTS AND LAW THAT THE ASSESSING OFFICE R RIGHTLY REOPENED ASSESSMENT IN ASSESSEES CASE AFTER TAKING NOTE OF HONBLE APEX COURTS DECISION HEREINABOVE. THIS FIRST SUBSTANTIVE GROUN D IN ASSESSEES APPEAL IS ACCORDINGLY DECLINED. SO IS THE OUTCOME OF CORRESP ONDING LEGAL ISSUE IN LATTER TWO APPEALS. 8. WE NOW COME TO ASSESSEES SECOND SUBSTANTIVE GRO UND CHALLENGING CORRECTNESS OF DISALLOWANCE OF EXPENSES CLAIMED OF RS.2,34,145/- FROM HIS INCENTIVE BONUS. THERE IS NO DISPUTE THAT THE LIC HAS ISSUED A CLARIFICATION WAY BACK W.E.F. 01.04.1989 ENTITLING DEVELOPMENT OF FICERS FOR REIMBURSEMENT TO THE EXTENT OF 30% OF THE INCENTIVE BONUS GRANTED TO THEM. HONBLE JURISDICTIONAL HIGH COURTS FORMER JUDGMENT ALSO CAPS THE SAME @30%. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENT LY CONTENDS THAT THE ASSESSEES EXPENDITURE IN QUESTION IS MUCH LESS THA N THE ONE IN HAND. MR. POPAT STRONGLY REBUT THE SAME BY REFERRING TO ASSES SEES REPLY DATED 30.12.2013 AT PAGE 6 OF ASSESSMENT ORDER CLAIMING T HE ACTUAL EXPENDITURE TO BE MUCH MORE THAN THE ONE IN QUESTION. WE FIND THA T THE SAME HAS NOWHERE BEEN CONTROVERTED IN ASSESSMENT ORDER. THE REVENUE S ARGUMENT REGARDING QUANTIFICATION STANDS REJECTED. 9. WE PROCEED FURTHER TO NOTICE THAT HONBLE JURISD ICTIONAL HIGH COURTS TWO DECISIONS GO CONTRARY TO HONBLE MADHYA PRADESH HIGH COURTS JUDGMENT AS WELL AS SIMILAR OTHER PRECEDENTS. THE REVENUE V EHEMENTLY CONTENDS THAT HONBLE APEX COURTS DECISION (SUPRA) MAKES IT VERY CLEAR THAT HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN CASE OF KIR ANBHAI H SHELAT (SUPRA) IS WRONG. THERE IS NO DISPUTE ABOUT THIS FACTUAL POSI TION. IT HOWEVER EMERGES THAT HONBLE JURISDICTIONAL HIGH COURTS LATTER DEC ISION IN NITHINBHAIS CASE (SUPRA) TAKES DUE NOTE THEREOF IN ALLOWING ASSESSEE S IDENTICAL CLAIM ONCE ITA NOS. 2771 TO 2773/AHD/2014 (SHRI DHARMEDRASINH G. GOHIL VS. ITO) A.YS. 2006-07 TO 2008-09 - 6 - AGAIN AT PAGE 4. WE THUS ASSUME THAT THEIR LORDSHI PS HAVE VERY WELL CONSIDERED HONBLE APEX COURTS DECISION BEFORE ARR IVING AT THE VERY CONCLUSION IN ASSESSEES FAVOUR. WE ACCORDINGLY AL LOW ASSESSEES CLAIM OF EXPENSES IN QUESTION OF RS.2,34,145/- AGAINST HIS I NCENTIVE BONUS RECEIVED FROM LIC. THIS SECOND SUBSTANTIVE GROUND THEREFORE SUCCEEDS IN ALL THREE APPEALS AS WE HAVE ALREADY CLARIFIED THAT THERE IS NO DISTINCTION EXCEPT THAT OF THE RELEVANT FIGURES INVOLVED THEREIN. 10. THIS LEAVES US WITH ASSESSEES THIRD SUBSTANTIV E GROUND CHALLENGING THE LOWER APPELLATE FINDINGS RESTRICTING CONVEYANCE DIS ALLOWANCE OF RS.40,620/- TO RS.20,310/- ONLY AFTER ADOPTING ESTIMATION METHO D. THE ASSESSEE HAD QUOTED SECTION 10(14) OF THE ACT IN RAISING THE IMP UGNED CLAIM. THE ASSESSING OFFICER TOOK INTO ACCOUNT HIS ALLEGED FAI LURE IN PRODUCING EVIDENCE IN INCURRING THE EXPENSES IN THE COURSE OF PERFORMI NG HIS INSURANCE JOB. THE CIT(A) AGREES WITH ASSESSEES CLAIM IN PRINCIPLE. HE OBSERVES IN LOWER APPELLATE ORDER THAT SUCH KIND OF EXPENDITURE IN TH E FORM OF PETROL, VEHICLE, INSURANCE, OFFICE EXPENSES ARE BOUND TO BE THERE EV EN IN ABSENCE OF THE RELEVANT SUPPORTIVE EVIDENCE. WE OBSERVE IN THESE FACTS THAT THERE IS NO PLAUSIBLE REASON FOR THE CIT(A) TO RESTRICT THE IMP UGNED EXPENDITURE IN ABSENCE OF ANY SPECIFIC IRREGULARITY BEING POINTED OUT. THE FACT HOWEVER ALSO REMAINS THAT THE ASSESSEES EVIDENCE IN THE CASE FI LE DOES NOT PRODUCE THE RELEVANT DETAILS. WE THUS CONCLUDE THAT THE IMPUGN ED DISALLOWANCE OF CONVEYANCE ALLOWANCE @50% IS TOO HIGH. THE SAME IS ACCORDINGLY ORDERED TO BE DELETED TO THE EXTENT OF 75%. THE BALANCE 25 % DISALLOWANCE AMOUNT OF RS.10,155/- IS ACCORDINGLY UPHELD. THE VERY ORDER SHALL BE FOLLOWED IN LATTER TWO YEARS REGARDING THIS THIRD SUBSTANTIVE GROUND ( SUPRA) WHEREIN THE IMPUGNED DISALLOWANCE WOULD STAND CONFIRMED @25% OF THE ORIGINAL CLAIM ITA NOS. 2771 TO 2773/AHD/2014 (SHRI DHARMEDRASINH G. GOHIL VS. ITO) A.YS. 2006-07 TO 2008-09 - 7 - RAISED BEFORE THE ASSESSING OFFICER. THIS THIRD SU BSTANTIVE GROUND IN ALL THREE APPEALS IS PARTLY ACCEPTED. 11. THESE THREE ASSESSEES APPEALS ARE PARTLY ALLOW ED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF MAY, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD: DATED 19/05/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0