DHANESH JAYANTILAL CHOKSHI, VADODARA V. DCIT CPC, BENGALARU

ITA 59/SRT/2022

AI Insights

The case involves Dhanesh Jayantilal Chokshi, an employee of ONGC, who appealed against the order of the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals), Vadodara-3, concerning adjustments made to his income tax return for the Assessment Year 2017-18. The CPC had made adjustments to his declared income, which included disallowances related to conveyance maintenance reimbursement expenses and excess contributions to a superannuation fund. The primary legal issues revolved around the interpretation of Sections 10(14)(i) and 17(2)(vii) of the Income Tax Act, 1961, concerning what constitutes a perquisite and the taxability of certain reimbursements and contributions. The Tribunal's decision addressed these issues by examining the statutory provisions and relevant case law, ultimately deciding on the merit of the claims made by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301604 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-12-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 24-03-2022
• Other Referred Cases: CIT Vs L.W. Russel (53 ITR 91-SC), CIT Vs ONGC (2002) 254 ITR 121- Guj, CIT Vs Maher Singh Sampuran Singh Chawala (1973) 90 ITR 219 (Delhi), Yoshio Kubo Vs CIT (2013) 36 taxmann.com 1 (Delhi), CIT Vs Tata Oil Mills Company Limited (1990) 182 ITR 130 (Bombay), CIT Vs JN Vas (1999) 240 ITR 101 (Bom), JCIT Vs Pramod Bhasin (2006) 8 SOT 72 (Delhi), The Royal Bank of Scotland NV. (AAR) AAR No.964 of 2010 dated 9th May 2014
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Principle of natural justice; Rule of consistency
• Section: 154; 10(14); 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 59/Srt/2022 (Assessment Year 2017-18) Dhanesh Jayantilal Chokshi, B-17, Jash Villa, Satsang Bungalows, Old Padra Road, Vadodara, Gjuarat-390020. [e-mail] Ph;942744114204 PAN No. ACAPC 0450 E Vs. ITO- Ward 2(5), Bharuch, Gujarat / CPC Bangalore . Appellant/ assessee Respondent/ revenue Assessee represented by Shri Krutarth Desai-Advocate Department represented by Shri Vinod Kumar Sr-DR Date of hearing 07/12/2022 Date of pronouncement 09/02/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals), Vadodara-3 (in short, the ld. CIT(A)) dated 29/12/202 for the Assessment year (AY) 2017-18. The assessee has raised following grounds of appeal: 1. The learned CIT(A) grossly erred in violating the principles of natural justice before deciding the appeal. 2. The learned CIT(A) grossly erred on the facts and law considering the material available with the ld AO before passing the order u/s 154 in holding that as per the adjustment of Rs. 85,318/- as perquisite chargeable under the head salaries is concerned there was no mistake apparent from the record and the AO was thus fully justified in rejecting appellants request for deletion of same through rectification u/s 154. ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 2 3. The learned CIT(A) grossly erred on the facts and law considering the material available with the ld AO before passing the order u/s 154 in holding that it is not a case of rectifying the error apparent from the record and the claimed amount of Rs. 65,642/- is totally unmeritorious and deserve to be rejected. 4. The ld. CIT(A) considering the facts of the case is not justified in holding that there is no merit in the ground of applicability of Rule of consistency. 5. By dismissing the appeal the confirming the adjustments made by the ld. AO your appellant has been over assessed under the Act and is entitled to be refunded. 6. Your appellant craves leave to add, alter and amend any ground of appeal and place such other further evidences as may be available applicable at the time of hearing of the Appeal.” 2. Brief facts of the case are that the assessee is an employee of Oil and Natural Gas Corporation (ONGC), filed his return of income for assessment year (AY) 2017-18 on 15.03.2018 declaring income of Rs. 29,74,291/-, which consist of ‘income from salary’ of Rs. 29,63,342/- and income from ‘other sources’ of Rs. 10,949/-. The return of income was processed by Central Processing Centre (CPC) Bangalore. The CPC while processing such return of income noted certain discrepancies in the returned income and the ‘salary income’ shown in Form-16 & 26AS. The CPC generated (issued) notice to assessee about such discrepancies and proposed to make adjustment of Rs. 1,50,961/- under section 143(1)(a)(iv). In response to such notice the assessee filed his reply and explained that said amount consist of Rs. 66,642/- on account of conveyance maintenance reimbursement expenses (CMRE) which is exempt under section 10(14) (i) and balance of Rs. 85,319/- employer’s contribution to approved superannuation fund not be treated as ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 3 perquisite under section 17(2). The reply of assessee was not accepted by assessing officer / CPC and made adjustment under section 143(1)(a)(iv) by assessing total income of Rs. 31,14,303/- thereby disallowing Rs. 1,50,961/- (65,642 + 85,319) vide intimation dated 21.03.2019. The assessee filed application under section 154 for seeking rectification of the order, vide application dated 26.04.2019. The application under section 154 was rejected by CPC/ assessing officer vide intimation / order dated 01.06.2019. 3. Aggrieved by the order under section 154, the assessee filed appeal before ld. CIT(A). The appeal of the assessee was migrated to NFAC for faceless adjudication. Before NFAC/ Ld CIT(A) the assessee filed his written submissions. The submissions of the assessee are recorded in para 6 & 7 of the order of ld CIT(A). On the issue of adjustment of Rs. 85,319/- on account of employer’s contribution towards approved superannuation fund the assessee relied on the decision of Hon’ble Apex Court in CIT Vs L.W. Russel (53 ITR 91-SC) and submitted that such employer contribution towards approved superannuation fund could not be treated as “perquisites” so as to tax it under the head “income from salaries”, thus, the assessing officer committed mistake which is apparent from record. 4. The ld CIT(A) after considering the submissions of assessee noted that in the salary slip issued by ONGC for the month of March 2017, it is seen ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 4 that a sum of Rs. 2,35,318/-was aggregate contribution to the assessees account for FY 2016-17 for contribution to approved superannuation fund. And as per section 17(2)(vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the employee, to the extent it exceeds Rs. 1,50,000/-, shall be treated ‘perquisite’ to be chargeable under head ‘salaries’. Therefore, an amount of Rs. 85.318/-, which is in excess of Rs. 1,50,000/- is to be treated as perquisites and there is no mistake in the order of CPC. The ld CIT(A) after referring the provision of section 17(2)(vii) of Income-tax Act 1962 ( new Act) and section 7(1)(v) of the 1922 Act (Old Act), held that ratio in case law relied by the assessee in CIT Vs L.W. Russel (supra) is not applicable on the present case. It was held that section 7(1) of Old Act is somewhat in pari materia with clause (v) of section 17(2) of new Act. The present appeal relates to clause (vii) of sub-section (2) of Section 17 of New Act. Thus, the assessing officer was fully justified in rejecting the assessees application under section 154. 5. On the issue of adjustment of CMRE of Rs. 65,642/- the assessee submitted that such amount is exempt under section 10(14)(i) and placed reliance on decision of Gujarat High Court in CIT Vs ONGC (2002) 254 ITR 121- Guj). 6. The ld CIT(A) after considering the submissions of assessee on this issue held that as per salary slip issued by the employer of assessee, in March ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 5 2017, the assessee was paid Rs. 82,050/- during FY 2016-17 and 80% of which is Rs. 65,642/-, which was not included by the assessee in his taxable income by assuming it exempt under section 10(14) (i). The assessee made claim on ad hoc basis and is not based on actual expenditure, which is requirement of section 10(14)(i). It was held that the ratio of the case law relied by the assessee is not applicable as the same relates to the obligation of the employer to deduct tax at source on CMRE and does not empower the assessing officer to examine the issue on merit in the assessment of the employee concerned. As per decision for claiming exemption of CMRE expenses require investigation of fact relation to the quantum received and actually utilised and unutilised amount lose exemption, such exercise may give more than one view, often fallen into a debatable area, such exercise is outside the scope of section 154. The assessee has not filed any appeal against the intimation dated 23.01.2019. The adjustment was made on the basis of information available in the return of income and Form-26AS. if the assessee was aggrieved, should have challenged in appeal. The scope of application under section 154 is limited and can be exercise only in case where the mistake is apparent and not on debatable issue. On the basis of such observation, the ld.CIT(A)/NFAC confirmed the action of Assessing officer. Further aggrieved, the assessee has filed the present appeal before the Tribunal. ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 6 7. I have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr -DR) for the revenue and have gone through the orders of the lower authorities. Ground No.1 is general and otherwise the ld AR for the assessee has not made any specific submissions for violation of natural justice, thus, this ground of appeal is treated as not pressed and dismissed. Ground No. 2 relates to disallowance of Rs. 85,319/- which was part of superannuation fund in excess of Rs. 1.50 lakhs. The ld. AR of the assessee submits that the “Scheme of Superannuation Fund” is approved by Commissioner of Income Tax, and condition of such scheme specifically stipulate that accumulated amount can only be used only on attaining the age of superannuation or the employee become incapable to continue in service. Premature withdrawal like provident fund is not allowed. Thus, the amount contributed by the employer to the superannuation fund is not vested in the hand of employee till the event his superannuation or becoming incapable of services. Unless right of the employee is vested in the said amount, it cannot be treated amount of perquisite. The ld AR for the assessee further submits that any contribution to any superannuation fund may be considered as perquisite as it is not carrying stringent condition with it. However, where superannuation fund is approved by Commissioner of Income tax, then, it has to be in consonance with the condition of Schedule-4, which ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 7 prohibit any partition of fund till some future events like superannuation or incapability to continue in service. Therefore, taxing the same without having any right to realise it, is totally against basic principles of taxing jurisprudence and the law declared by Apex Court in L W Russel (supra). Further, contribution to recognised provident fund (RPF) cannot be compared with contribution towards superannuation fund because realisation of amount from RPF is exempt from tax whereas any monthly income from superannuation fund is taxable under heard salary as regular pension income. Therefore, same transaction is taxed twice in the hand of same assessee. To support all such submissions, the ld AR for the assessee relied on the following case laws;  CIT Vs Maher Singh Sampuran Singh Chawala (1973) 90 ITR 219 (Delhi),  Yoshio Kubo Vs CIT (2013) 36 taxmann.com 1 (Delhi),  CIT Vs Tata Oil Mills Company Limited (1990) 182 ITR 130 (Bombay),  CIT Vs JN Vas (1999) 240 ITR 101 (Bom),  JCIT Vs Pramod Bhasin (2006) 8 SOT 72 (Delhi),  The Royal Bank of Scotland NV. (AAR) AAR No.964 of 2010 dated 9 th May 2014. 8. On the other hand, the ld SR DR for the revenue supported the order of lower authorities. The ld Sr DR for the revenue submits that the provisions of section 17(2)(vii) are very clear and unambiguous, which clearly prescribed that any amount in excess of Rs. 1.50 Lakhs contributed by employer towards approved superannuation fund is to be considered as perquisite, which has been rightly treated by ld CIT(A) / ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 8 NFAC in its order. The facts in case laws relied by ld AR for assessee are quite different and the ration of such decision cannot be applied on the facts of the present case. Moreover, facts of any case law is not similar thus, the ratio of such case laws are not applicable. 9. I have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. I have also deliberated on the various case laws relied by ld AR for the assessee. The CPC while processing the return of assessee made adjustment (disallowance) of Rs. 85, 318/-, out of employer contribution for superannuation fund, which was in excess of Rs. 1.50 Lakhs. The ld CIT(A) upheld the adjustment by taking view that a total sum of Rs. 2,35,318/-was an aggregate contribution to the assessees account for FY 2016-17 for contribution to approved superannuation fund. As per section 17(2)(vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the employee, to the extent it exceeds Rs. 1,50,000/-, shall be treated ‘perquisite’ to be chargeable under head ‘salaries’. Before me, the ld AR for the assessee vehemently submitted that the amount contributed by the employer to the superannuation fund is not vested in the hand of employee till the event his superannuation or becoming incapable of services and unless right of the employee is vested in the said amount, it cannot be treated amount of perquisite. The submissions of the ld AR for the assessee, though seems to be convincing ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 9 but against the statutory provisions of section 17(2)(vii). None of the case laws relied by the ld AR for the assessee has considered the provisions of section 17(2)(vii). Therefore, I do not find any reason to interfere with the finding of the ld. CIT(A). 10. In the result, ground No. 2 of the appeal is dismissed. 11. Ground No.3 relates to adjustment/ addition of Rs. 65,642/- on account of conveyance maintenance reimbursement expenses (CMRE). The ld AR for the assessee submits that the assessee disallowed (offered) 20% of CMRE to tax and remaining of Rs. 65,642/- was offered to tax. The assessee was very well conscious about the provisions of section 10(14) (i), which restrict the claim to the extent of actual claim. The assesse restricted his claim to the extent of 80%, only which is spent. In the limited scrutiny it was disallowed without demanding any details from assessee, thereby taxing 100% of CMRE. The addition made by assessing officer is nothing but act of presumption as that nothing was spent. It is not open to the assessing officer to make such addition, which otherwise must be after examining the documentary evidences and the explanations, thus, the adjustment made by assessing officer deserve to be quashed. To support such contention, the ld AR for the assessee relied on the decision of Tribunal in SV Engineering Construction India (P) Limited Vs DCIT (ITA No. 130/Viz/ 2021 and Prowiz Manysystems Private Limited Vs DCIT (ITA No. 817/Del/2021. ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 10 12. On the other hand, the ld. CIT-DR for the revenue supported the orders of lower authorities. The ld. Sr-DR for the revenue submits that the assessee claimed deduction on ad-hock basis, which against the spirit of statutory provisions. The assessee still has not provided the detailed of actual expenses made from the payment of CMRE. The technical objection raised by the assessee is not worth considerable, which is against the legal provisions. And if the assessee claimed that he had spent such amount as claimed in the grounds of appeal the issue may be restored to the file of assessing officer, with the direction to the assessee to prove the actual amount spent by him. 13. I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. I have also deliberated on the materials placed before me. I have also deliberated on various case laws cited before me. I find that during the relevant financial year the assessee received total sum of Rs. 82,050/- on account of CRME. The assessee while filing return of income which restrict the claim to the extent of actual claim. The assesse restricted his claim to the extent of 80%, only which is spent and remaining was disallowed by assessee voluntarily. The CPC while processing return disallowed the same. The ld. CIT(A) upheld the adjustment (disallowance) by taking view that for claiming exemption of CMRE, such deduction of expenses requires investigation of fact in relation to the quantum received and actually ITA 59/Srt/2022 Dhanesh Jayantilal Chokshi Vs DCIT (CPC) 11 utilised and unutilised amount lose exemption, such exercise may give more than one view and such was beyond the scope of section 154. Before me the ld AR for the assessee vehemently submitted that the assessee restricted the claim to the extent of actually spent and the XCPC taxed the entire claim without seeking any details. I find merit in the submissions of the ld AR for the assessee that the disallowance was made without giving opportunity of explanation or seeking details of the actual expenditure. On considering the facts and the wage structure of assessee, I am convinced that the assessee has reasonably disallowed 20% of CMRE payment while filing return of income. Therefore, I direct the assessing officer to delete the addition/ disallowance n of CMRE. 14. In the result, the grounds of appeal raised by the assessee is allowed. 15. In the result, this appeal of assessee is allowed. Order pronounced in the open court on 09 th February, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 09/02/2023 *Ranjan /Self Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr. Private Secretary, ITAT, Surat