Appeal details
RSA Number
67625314 RSA 2008
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-06-2010
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
06-05-2010
Assessment Year
2002-2003
Appeal Filed On
29-12-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.673 TO 677/VIZAG/2008 ASSESSMENT YEAR : 1999-2000 TO 2003-04 DR. KODELA SIVA PRASADA RAO NARASARAOPET ITO WARD-1 NARASARAOPET (APPELLANT) VS. (RESPONDENT) PAN NO.ADSPK8784G APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE ASSESSEES AGAI NST THE ORDER OF THE CIT(A) ON VARIOUS COMMON GROUNDS. FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUNDS RAISED IN ITA NO.673 OF 2008: 1. THE ASSESSMENT IS BAD IN LAW AND AGAINST THE PRINCI PLES OF NATURAL JUSTICE. 2. THE LD. CIT(A) HAS ERRED IN TREATING ALL THE ALLOWA NCES RECEIVED BY THE APPELLANT AS MEMBER OF LEGISLATIVE ASSEMBLY AND ASSESSING THE SAME U/S 17(2). 3. THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE DET AILS OF EXPENDITURE SUBMITTED TO THE ITO FOR THE AMOUNT EXP ENDED BY THE APPELLANT AGAINST THE ALLOWANCES RECEIVED BY HIM. 4. THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE EXP ENDITURE AND TREATING THE TOTAL OF ALL THE ALLOWANCE AS INCOME O F THE APPELLANT. 5. THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE FAC T THAT SO CALLED ALLOWANCES GRANTED TO MLA/MINISTER IS IN THE COURSE OF DISCHARGING HIS DUTY AS PER THE CONSTITUTION. 6. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT TH AT THE APPELLANT IN DISCHARGING THE CONSTITUTIONAL DUTIES HAS SPENT THE ENTIRE AMOUNT OF ALLOWANCES, AND IN FACT MORE THAN THE AMOUNT REC EIVED AS ALLOWANCES. 7. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT TH AT THE SO CALLED ALLOWANCES NEVER FALL UNDER THE DEFINITION OF INCOM E AS PER THE PROVISIONS OF THE ACT. 8. THE LD. CIT(A) HAS ERRED IN TREATING THE APPELLANT AN MLA/MINISTER AS A BUSINESS MAN AND DISALLOWING EXPENDITURE UNDER VARIOUS HEADS ON THE PRETEXT THAT THE APPELLANT HAS NOT MAI NTAINED BOOKS OF ACCOUNTS, VOUCHERS AND RECEIPTS FOR PAYMENTS MAD E BY HIM. 2 9. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE APPELLANT PRAYS THE ENTIRE DELETION OF THE ADDITION MADE TO THE INCOME RETURNED. 2. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND CHALLENGI NG THE VALIDITY OF THE RE- OPENING OF THE ASSESSMENT WHICH IS AS UNDER: IN THE FACTS & CIRCUMSTANCES OF THE CASE, THE NOT ICE ISSUED U/S 148 BY THE ASSESSING OFFICER IS CONTRARY TO LAW AND AS SUCH THE SAME IS LIABLE TO BE QUASHED AS ILLEGAL AND CONSEQUENTLY TH E ENTIRE REASSESSMENT PROCEEDINGS BASED ON SUCH ILLEGAL NOTI CE ARE ALSO LIABLE TO BE QUASHED AS VOID-AB-INITIO. SINCE THIS ADDITIONAL GROUND IS OF LEGAL IN NATURE WE ADMIT THE SAME AND PREFER TO ADJUDICATE IT AT THE THRESHOLD. 3. DURING THE COURSE OF HEARING OF THE APPEAL THE L D. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE REASONS R ECORDED FOR RE-OPENING THE ASSESSMENT WHICH IS AVAILABLE AT PG NOS.139 TO 148 OF THE COMPILATION OF THE ASSESSEES IN WHICH THE ASSESSING OFFICER HAS OB SERVED THAT THE ASSESSEE HAS RECEIVED TOTAL REMUNERATIONS OF THE SALARY FROM GOVERNMENT OF ANDHRA PRADESH MORE THAN DECLARED BY IT IN ITS RETURN OF I NCOME. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ASSESSING OFFIC ER HAS DRAWN AN INFERENCE THAT THE INCOME HAS ESCAPED ASSESSMENT ON THE BASIS OF A LETTER WRITTEN BY THE ACIT ON 26.5.2005. THE LD. COUNSEL FOR THE ASS ESSEE FURTHER CONTENDED FOR INVOKING THE PROVISIONS OF SECTION 147 OF THE A CT, THE ASSESSING OFFICER IS REQUIRED TO FORM A PROPER BELIEF THAT INCOME HAS ES CAPED ASSESSMENT. ON MERE SURMISES THE ASSESSMENT SHOULD NOT BE RE-OPENE D AND ASSESSING OFFICER SHOULD NOT BE ALLOWED TO MAKE A ROVING INQU IRIES. IN SUPPORT OF THESE CONTENTIONS HE PLACED A RELIANCE UPON THE JUDGEMENT OF BOMBAY HIGH COURT OF PRASANTH S. JOSHI VS. ITO IN WRIT PETITION NO.22 87 OF 2009 DATED 22.2.2010 COPY OF THE SAME IS AVAILABLE ON RECORD A T PG. 64 TO 80. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THIS JUDGEMENT THEIR LORDSHIP OF THE BOMBAY HIGH COURT HAVE EXAMINED THE JUDGEMEN T OF THE APEX COURT IN THE CASE OF ACIT VS. RAJESH JAVERI STOCK BROKERS PVT. LTD. 291 ITR 580 (SC) AND HAVE HELD THAT FOR THE PURPOSE OF CLAUSE B TO EXPLANATION 2 TO SECTION 147 THE ASSESSING OFFICER MUST NOTICE THAT THE ASSESSEE HAS 3 UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOS S, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. THE TAKING OF SUCH NOTICE MUST BE CONSISTENT WITH THE PROVISIONS OF THE APPLICABLE LAW. THE ACT OF TAKIN G NOTICE CANNOT BE AT THE ARBITRARY WHIM OR CAPRICE OF THE ASSESSING OFFICER AND MUST BE BASED ON A REASONABLE FOUNDATION. THE SUFFICIENCY OF THE EVID ENCE OR MATERIAL IS NOT OPEN TO SCRUTINY BY THE COURT BUT THE EXISTENCE OF THE BELIEF IS SIN-QUA-NON FOR A VALID EXERCISE OF POWER. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SINCE THE ASSESSING OFFICER DID NOT POSSESS ANY CONCRETE MATERIAL TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE RE-OPENING OF THE ASSESSMENT WAS NO T VALID. 4. THE LD. D.R. ON THE OTHER HAND HAS CONTENDED THA T THE RETURN OF INCOME WAS ORIGINALLY ASSESSED U/S 143(1) OF THE I. T. ACT. THERE AFTER THE ASSESSING OFFICER RECEIVED A COMMUNICATION VIDE LET TER DATED 26.5.2005 FROM THE ACIT, GUNTUR THAT ASSESSEE HAS RECEIVED MORE AL LOWANCES THAN DECLARED IN ITS RETURN OF INCOME. ON THE BASIS OF THIS INFO RMATION, THE ASSESSING OFFICER HAS FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND HAS ISSUED A NOTICE U/S 148 OF THE A CT AFTER OBTAINING A PROPER APPROVAL BY THE HIGHER AUTHORITIES. THE REQ UEST FOR APPROVAL WAS SENT ON 29.7.2005 WHERE AS THE INFORMATION WAS RECE IVED ON 26.5.2005. THEREFORE THE ASSESSING OFFICER HAS A COGENT MATERI AL TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. T HUS THE RE-OPENING OF THE ASSESSMENT IS VALID. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT UNDISPUTEDLY THE A SSESSEE FILED ITS RETURN OF INCOME DECLARING THE LESSER RECEIPTS OF THE ALLOWAN CES. THE RETURNS WERE PROCESSED U/S 143(1) OF THE ACT. THEREFORE THE ASS ESSING OFFICER HAS NO OCCASION TO EXAMINE THE VERACITY OF THE CLAIM OF TH E ASSESSEES. THE ASSESSING OFFICER HOWEVER RECEIVED A LETTER FROM TH E ACIT, GUNTUR ON 26.5.2005 ALONG WITH THE DETAILS OF ALLOWANCES RECE IVED BY THE ASSESSEES FOR VERIFICATION OF THE CLAIM OF THE ASSESSEES RAIS ED IN ITS ORIGINAL RETURN OF INCOME. HAVING RECEIVED THIS INFORMATION THE ASSES SING OFFICER HAS FORMED A BELIEF THAT ASSESSEE HAS DECLARED LESSER ALLOWANCES IN ITS RETURN OF INCOME 4 AND HE ACCORDINGLY FORMED A BELIEF THAT INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT AND INITIATED THE PROCESS FOR RE -OPENING THE ASSESSMENT. WE HAVE ALSO CAREFULLY EXAMINED THE JU DGEMENT OF THE APEX COURT IN THE CASE OF RAJESH JAVERI (SUPRA) AND THAT OF THE BOMBAY HIGH COURT IN THE CASE OF PRASANTH S. JOSHI VS. ITO (SUP RA) AND WE FIND THAT THEIR LORDSHIP OF THE BOMBAY HIGH COURT HAVE CATEGORICALL Y HELD THAT THE ASSESSMENT CAN BE RE-OPENED IF REASONABLE BELIEF IS BASED ON A REASONABLE FOUNDATION. IN THE INSTANT CASE, THE ASSESSING OFFI CER HAS COLLECTED THE MATERIAL ON THE BASIS OF WHICH HE FORMED A BELIEF T HAT ASSESSEE HAS NOT DECLARED THE COMPLETE ALLOWANCES RECEIVED BY HIM FR OM THE STATE GOVERNMENT OF ANDHRA PRADESH, THEREFORE, THE INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. WE THEREFORE DO NOT FIND A NY INFIRMITY OR ILLEGALITY IN THE RE-OPENING OF THE ASSESSMENT. ACCORDINGLY, WE UPHOLD THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT. 6. COMING ON MERIT, WE FIND THAT THE ASSESSEE HAS C HALLENGED THE DISALLOWANCES MADE BY THE REVENUE AUTHORITIES OF VA RIOUS ALLOWANCES UNDER DIFFERENT HEADS. THIS ISSUE WAS EXAMINED BY US IN THE CASE OF M. VENKATA SUBBAIAH, PESARLANKA VS. ITO ITA NOS. 381 TO 385/VI ZAG/2008 DATED 9.2.2010. FOR THE SAKE OF REFERENCE, WE EXTRACT TH E RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL AS UNDER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND VARIOUS ORD ERS/JUDGEMENTS REFERRED TO BY THE ASSESSEES. WE HAVE CAREFULLY EX AMINED THE VARIOUS ORDERS OF THE TRIBUNAL PASSED ON THIS SUBJE CT AND WE FIND THAT DIFFERENT BENCHES OF THE TRIBUNAL HAVE HELD IN ONE VOICE THAT THE SALARY GIVEN TO THE MLAS CANNOT BE ASSESSED UND ER THE HEAD SALARY. IT IS RATHER AN INCOME FROM OTHER SOURCES. THE ISSUE REGARDING NATURE OF RECEIPT WAS EXAMINED BY THE RAJ ASTHAN HIGH COURT IN THE CASE OF CIT VS. SHIVCHARAN MATHUR (SUP RA) AND HAS CATEGORICALLY HELD THAT THE FUNDAMENTAL REQUIREMENT FOR ATTRACTING SECTION 15 IS THAT, THERE SHOULD BE A RELATIONSHIP OF EMPLOYER AND EMPLOYEE WHETHER IN EXISTENCE OR IN THE PAST. OBVI OUSLY AND NECESSARILY IN THE VERY NATURE OF THINGS FOR BRINGI NG ABOUT SUCH RELATIONSHIP, THE ASSESSEE, BEING THE PERSON CONCER NED, EMPLOYED BY THE EMPLOYER AND HAS A NECESSARY COROLLARY, THE EMPLOYER SHOULD HAVE RIGHT TO DISCHARGE OR TERMINATE THE EMP LOYEE. THE BASIC INGREDIENT IS MISSING IN THE CASE OF MLAS AND MPS AS THEY ARE NOT EMPLOYED BY ANYBODY RATHER THEY ARE ELECTED BY THE PUBLIC 5 FORMING THEIR ELECTION CONSTITUENCIES AND IN CONSEQ UENT UPON SUCH ELECTION THAT THEY ACQUIRE CONSTITUENCY POSITION AN D DISCHARGE CONSTITUENCY FUNCTIONS AND OBLIGATIONS. MAY BE, TH AT THEY RECEIVE REMUNERATIONS AFTER SWEARING IN BUT THAT CANNOT BE SAID TO BE THE SALARY WITHIN THE MEANING OF SECTION 15. THEREFORE , THE REMUNERATIONS RECEIVED BY THE MLAS & MPS CANNOT BE TAXED UNDER THE HEAD INCOME FROM SALARY BUT CAN ONLY BE TAXED U NDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, THERE IS NO CONTROVERSY IN THIS REGARD AND FOLLOWING THE AFORESAID ORDERS, WE HOLD THAT IN THE INSTANT CASE, THE REVENUE HAS RIGHTLY TREATED THE R EMUNERATION RECEIVED BY THE ASSESSEE MLAS UNDER THE HEAD INCOM E FROM OTHER SOURCES. 10. WITH REGARD TO ANOTHER ISSUE WHETHER THE PROVIS IONS OF SECTION 10(14) OF THE ACT CAN BE INVOKED FOR OTHER ALLOWANCES GIVEN TO THE MLAS IN THE INSTANT CASE, WE FIND THAT THE V ARIOUS BENCHES OF THE TRIBUNALS IN THE AFORESAID CASES HAVE CATEGORIC ALLY HELD IN ONE STREAM THAT ASSESSEE IS ENTITLED TO THE BENEFIT OF EXEMPTION U/S 10(14) OF THE I.T. ACT FOLLOWING THE JUDGEMENTS OF T HE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MADDI SUDARSANAM (SUPRA) IN WHICH IT HAS BEEN HELD THAT SECTION 10(14) PROVIDES THAT ANY SPECIAL ALLOWANCE OR BENEFIT SPECIFICALLY GRANTED TO MEET E XPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORM ANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT, TO THE EXTENT TO WHICH SUCH EXPENSES ARE ACTUALLY INCURRED FOR THAT PURPOS E, WOULD BE EXEMPT. THEIR LORDSHIP FURTHER IN THAT CASE HELD T HAT THE EXTENT OF EXPENSES NOT ACTUALLY INCURRED FOR THE PURPOSE WOUL D NOT EARN EXEMPTION. THE LANGUAGE OF SECTION 10(14) WOULD CL EARLY SHOW THAT ANY SPECIAL ALLOWANCE OR BENEFIT SPECIFICALLY GRANTED TO MEET EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY INCURR ED IN THE PERFORMANCE OF DUTIES OF AN OFFICE OR AN EMPLOYMENT OF PROFIT WOULD BE EXEMPT. THE SECTION 10(14) DOES NOT USE THE EXPRESSION OFFICE OF PROFIT. THE EXPRESSION USED IS OFFICE OR EMPLOYMENT OF PROFIT. THE EXPRESSION OF PROFIT QUALIFIES ONLY EMPLOYMENT AND DOES NOT QUALIFY OFFICE. IT IS ENOUGH IF A PERSON IS HOLDING AN OFFICE AND FOR THE PURPOSE OF PERFORMING THE DUTIES ASSOCIATED WITH HIS OFFICE IS GRANTED AN ALL OWANCE OR BENEFIT SPECIFICALLY TO MEET THE EXPENSES. IN THE CASE OF A N MLA, HE MAY NOT BE HOLDING AN EMPLOYMENT OF PROFIT BUT HE IS CE RTAINLY HOLDING AN OFFICE OF MLA AND AS SUCH WHATEVER ALLOWANCES OR BENEFIT GRANTED TO IT TO MEET THE PARTICULAR EXPENSES, HE I S ENTITLED FOR EXEMPTION UPTO THE APPLICABILITY OF SECTION 10(14) OF THE I.T. ACT TO THE ALLOWANCES GRANTED TO THE ASSESSEE MLAS. THERE IS NO DIFFERENCE IN ANY OF THE AFORESAID ORDERS OF THE TR IBUNALS WITH REGARD TO APPLICABILITY OF SECTION 10(14) OF THE AC T. 11. THE ONLY DIFFERENCE OF THE OPINION IS WITH REGA RD TO THE ALLOWABILITY OF THE EXPENSES. IN THE CASE OF SHRI N. INDRASENA REDDY (SUPRA), THE TRIBUNAL HAS HELD THAT THE MLA I S HOLDING AN OFFICE THOUGH NOT ON OFFICE OF PROFIT AND SECTION 1 0(14) OF THE ACT 6 WOULD APPLY TO HIS CASE. HOWEVER, THE EXPENSES WHI CH ARE EXEMPT ARE REQUIRED TO BE PRESCRIBED BY THE COMPETENT AUTH ORITIES AND THE ASSESSEE IS REQUIRED TO FILE THE EVIDENCE THAT SUCH EXPENDITURE HAS ACTUALLY BEEN INCURRED BY HIM AND FOR THAT PURPOSE, THE ALLOWANCES AND ITS EXPENSES ARE TO BE GOVERNED BY RULE 2BB (1) OF THE I.T. RULES. IN ORDER TO ESTABLISH THAT THE ALLOWANCES G RANTED TO THE ASSESSEES WERE SPENT FOR A PARTICULAR PURPOSE TO WH ICH IT WAS GRANTED, THE ASSESSEE IS REQUIRED TO FILE SOME EVID ENCE TO THE SATISFACTION OF THE ASSESSING OFFICER. IN THAT CASE , SINCE THE ASSESSEE DID NOT FILE ANY DOCUMENTARY EVIDENCE IN S UPPORT OF THE EXPENDITURE INCURRED, THE TRIBUNAL HELD THAT ASSESS EE WAS NOT ENTITLED TO THE EXEMPTION U/S 10(14) OF THE ACT OF THOSE EXPENSES WHICH ARE COVERED AS PER RULE 2BB(1) OF THE I.T. RUL ES. THIS ORDER WAS FOLLOWED BY ANOTHER BENCH IN THE CASE OF SHRI B . PARTHASARATHI REDDY VS. ACIT (SUPRA) BUT WHILE ALLOWING THE ENTIR E CLAIM, THE BENCH HAS NOT DISCUSSED THE PROVISIONS OF RULE 2BB AS DISCUSSED BY THE TRIBUNAL IN ITS EARLIER ORDER IN THE CASE OF N. INDRASENA REDDY AND THE TRIBUNAL HAS DIRECTED THE A.O. TO ALLOW DED UCTIONS IN RESPECT OF THE ALL ALLOWANCES GIVEN TO THE ASSESSEE S. THEREAFTER OTHER ORDER OF THE SAME BENCH WAS PASSED IN THE CAS E OF SHRI P. KISTA REDDY (SUPRA) IN WHICH THE TRIBUNAL HAS FOLLO WED THE ORDER OF ITS BENCH IN THE CASE OF B. PARTHASARATHI REDDY AND ALLOWED THE ENTIRE CLAIM OF ALLOWANCES GIVEN TO THE ASSESSEES W ITHOUT REALIZING AS TO WHY THE PROVISIONS OF RULE 2BB ARE NOT APPLIC ABLE WHILE GRANTING THE EXEMPTION U/S 10(14). THE SIMILAR WAS THE POSITION IN THE CASE OF R. RAVINDRANATH REDDY IN WHICH THE SMC BENCH HAS ALSO FOLLOWED THE CASE OF B. PARTHASARATHI REDDY. WHEREAS, THE OTHER SMC BENCH OF THE TRIBUNAL IN THE CASE OF Y. Y ELLA REDDY VS. ITO (SUPRA) HAS DIRECTED THE A.O. TO VERIFY THE GEN UINENESS OF THE EXPENDITURE CLAIMED BY THE ASSESSEE IN CONNECTION W ITH THE PERFORMANCE OF DUTIES OF HIS OFFICE AS MLA AND TO A LLOW DEDUCTIONS OF EXPENDITURE AFTER DUE VERIFICATIONS. 12. NOW THE QUESTION POSED BEFORE US IN THE LIGHT O F THESE AFORESAID ORDERS OF THE TRIBUNAL WHETHER THE COMPLI ANCE OF RULE 2BB IS IMPOSED WHILE ALLOWING AN EXEMPTION U/S 10(1 4) OF THE I.T. ACT. IN THIS REGARD, WE EXTRACT THE PROVISIONS OF RULE 2BB AS UNDER:- 2BB (1) FOR THE PURPOSES OF SUB-CLAUSE (I) OF CLAU SE (14) OF SECTION 10 PRESCRIBED ALLOWANCES, BY WHATEVER NAME CALLED, SHALL BE THE FOLLOWING, NAMELY:- (A) ANY ALLOWANCE GRANTED TO MEET THE COST OF TRAVEL ON TOUR OR ON TRANSFER. (B) ANY ALLOWANCE, WHETHER, GRANTED ON TOUR OR FOR THE PERIOD OF JOURNEY IN CONNECTION WITH TRANSFER, TO MEET THE OR DINARY DAILY CHARGES INCURRED BY AN EMPLOYEE ON ACCOUNT OF ABSEN CE FROM HIS NORMAL PLACE OF DUTY; (C) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCUR RED ON CONVEYANCE IN PERFORMANCE OF DUTIES OF AN OFFICE OR EMPLOYMENT OF 7 PROFIT: PROVIDED THAT FREE CONVEYANCE IS NOT PROVIDED BY THE EMPLOYER. (D) ANY ALLOWANCE GRANTED TO MEET THE EXPENDITURE INCUR RED ON A HELPER WHERE SUCH HELPER IS ENGAGED FOR THE PERFORM ANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT; (E) ANY ALLOWANCE GRANTED FOR ENCOURAGING THE ACADEMIC, RESEARCH AND TRAINING PURSUITS IN EDUCATIONAL AND RESEARCH I NSTITUTIONS. (F) ANY ALLOWANCES GRANTED TO MEET THE EXPENDITURE INCU RRED ON THE PURCHASE OR MAINTENANCE OF UNIFORM FOR WEAR DUR ING THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMEN T OF PROFIT. EXPLANATION: FOR THE PURPOSE OF CLAUSE (A), ALLOWA NCE GRANTED TO MEET THE COST OF TRAVEL ON TRANSFER INCLUDES ANY S UM PAID IN CONNECTION WITH TRANSFER, PACKING AND TRANSPORTATIO N OF PERSONAL EFFECTS ON SUCH TRANSFER. 13. IN ORDER TO ASCERTAIN WHETHER THE SPECIAL ALLOWA NCES OR THE BENEFITS OTHER THAN THE PERQUISITES, FORMS PART OF THE TOTAL INCOME DEFINED IN SECTION 2(24) OF THE ACT, WE HAVE TO CAR EFULLY EXAMINE THE PROVISIONS OF SEC.2(24) OF THE ACT. SEC.2(24)OF THE ACT DEFINES THE INCOME OF THE ASSESSEE AND IT INCLUDES DIFFEREN T TYPE OF RECEIPTS. AS PER CLAUSE (IIIA) OF THIS DEFINITION, INCOME INCLUDES ANY SPECIAL ALLOWANCE OR BENEFIT OTHER THAN THE PERQUIS ITES INCLUDED UNDER SUB-CLAUSE (III) OF THIS SUB-SECTION SPECIFIC ALLY GRANTED TO THE ASSESSEE TO MEET EXPENSES WHOLLY, NECESSARILY AND E XCLUSIVELY FOR THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR EMPLO YMENT OF PROFIT. IN ORDER TO BRING THE SPECIAL ALLOWANCES WITHIN THE FOLD OF INCOME, THE SUB CLAUSE (IIIA) WAS INSERTED BY THE DIRECT TA X LAWS AMENDMENT ACT, 1989 RETROSPECTIVELY W.E.F. 1 ST APRIL, 1962. THIS ALLOWANCES WHICH THE LEGISLATURE ENTITLED TO SHOWER THE BENEFICIAL TREATMENT MAY BE SEEN IN SECTION 10(14). THUS ALL THOSE SPECIAL ALLOWANCES OTHER THAN THOSE SPECIFICALLY EXEMPT WOU LD BE TAXED AS AN INCOME OF THE ASSESSEES. WE HAVE ALSO EXAMINED THE PROVISIONS OF SECTION 10(14) AND RULE 2BB OF THE I.T. RULES AND WE FIND THAT RULE 2BB IS SUPPLEMENT TO SECTION 10(14) OF THE ACT AND IT PUTS A CAP ON THE QUANTUM OF THE ALLOWANCE OR BENEFIT GRAN TED TO THE ASSESSEES. IN SECTION 10(14) A GENERAL REFERENCE W AS MADE WITH REGARD TO THE SPECIAL ALLOWANCES BUT THE NATURE OF THE ALLOWANCES WERE NOT SPELLED OUT IN THAT SECTION. THIS LEFT OV ER WORK IS DONE BY RULE 2BB IN WHICH THE SPECIAL ALLOWANCES WERE IDENT IFIED AND THEIR QUANTUM OF EXEMPTION FROM TAX WAS ALSO FIXED TO THE EXTENT AS NOTIFIED IN THE NOTIFICATION. THESE EXEMPTIONS IS IN RESPECT OF AFORESAID SPECIAL ALLOWANCES TO THE EXTENT TO WHICH THE SAID EXPENSES ARE ACTUALLY INCURRED IN THAT PURPOSE. 14. THE SUB CLAUSE 1 OF SECTION 10(14) GRANTS EXEMP TION IN RESPECT OF ANY SPECIAL ALLOWANCE OR BENEFIT, NOT BE ING THE NATURE OF PERQUISITE WITHIN THE MEANING OF CLAUSE (2) OF SECT ION 17, SPECIFICALLY GRANTED TO MEET THE EXPENSES WHOLLY, N ECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF DUTIES O F AN OFFICE OR 8 EMPLOYMENT OF PROFIT AS MAY BE PRESCRIBED TO THE EX TENT TO WHICH SUCH EXPENSES ARE ACTUALLY INCURRED FOR THAT PURPOS E. THE SUB CLAUSE (II) GRANTS EXEMPTION IN RESPECT OF ANY ALLO WANCE GRANTED TO THE ASSESSEES EITHER TO MEET HIS PERSONAL EXPENSES AT THE PLACE WHERE THE DUTIES OF HIS OFFICE OR EMPLOYMENT OF PRO FIT OR ORDINARILY PERFORMED BY HIM OR THE PLACE WHERE HE ORDINARILY R ESIDES OR TO COMPENSATE THE ASSESSEES FOR THE INCREASED COST OF LIVING. THE ALLOWANCES SHALL BE ONE WHICH IS PRESCRIBED AND THE EXEMPTION SHALL BE TO THE EXTENT AS MAY BE PRESCRIBED. RULE 2BB HAS PRESCRIBED THE ALLOWANCE AS WELL THE AMOUNT EXEMPT U/S 10(14)(II). FROM 1 ST APRIL, 1989 TO 30 TH JUNE, 1995 THE SAID ALLOWANCES HAD TO BE ONE SPECIFIED BY THE CENTRAL GOVERNMENT AND QUAN TUM OF EXEMPTION WAS TO THE EXTENT SPECIFIED IN THE CONCER NED NOTIFICATION. SECTION 14 DEALS WITH 2 TYPES OF ALLOWANCES (1) SUC H ALLOWANCES OR BENEFIT NOT BEING THE NATURE OF THE PERQUISITE WITH IN THE MEANING OF CLAUSE (2) OF SECTION 17 SPECIFICALLY GRANTED TO ME ET EXPENSES WHOLLY, NECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORMANCE OF THE DUTIES OF AN OFFICE OR AN EMPLOYMENT OF PROFIT AS MAY BE PRESCRIBED TO THE EXTENT TO WHICH SUCH EXPENSES ARE ACTUALLY INCURRED FOR THAT PURPOSE. (2) ANY SUCH ALLOWANCES GRANTED TO THE ASSESSEES EITHER TO MEET HIS PERSONAL EXPENSES AT T HE PLACE WHERE THE DUTIES OF HIS OFFICE OR EMPLOYMENT OF PROFIT AR E ORDINARILY PERFORMED BY HIM OR AT THE PLACE WHERE HE ORDINARIL Y RESIDES OR TO COMPENSATE HIM FOR THE INCREASED COST OF LIVING. T HE SPECIAL ALLOWANCES OR THE BENEFITS PRESCRIBED IN CLAUSE 1 A RE TO BE GOVERNED BY SUB RULE 1 OF RULE 2BB IN WHICH THE SPE CIAL ALLOWANCES WERE IDENTIFIED AND ARE ALSO ALLOWED TO BE EXEMPTED TO THE EXTENT TO MEET THE EXPENDITURES INCURRED FOR THAT PURPOSE. WHEREAS SUB CLAUSE (2) OF CLAUSE 14 OF SECTION 10 IS GOVERNED B Y SUB RULE (2) OF RULE 2BB IN WHICH THE ALLOWANCES WERE ALSO IDENTIFI ED BUT THEY WERE ALLOWED TO BE EXEMPTED UPTO A PARTICULAR LIMIT. AS PER SUB RULE (2) THE EXEMPTION OF ALLOWANCE IS LIMITED, IRRESPECTIVE OF THE FACT THAT THE ENTIRE ALLOWANCE WAS SPENT OR NOT FOR THE PURPO SE TO WHICH IT WAS GRANTED. 15. IN THE CASE OF COAL MINES OFFICERS ASSOCIATION O F INDIA VS. UOI AND OTHERS 181 ITR 346 MP IT WAS HELD THAT ANY P ARTICULAR ALLOWANCE UNLESS IT IS NOTIFIED BY THE CENTRAL GOVE RNMENT FOR ITS EXEMPTION U/S 10(14) READ WITH RULE 2BB IT CANNOT B E ALLOWED TO BE EXEMPTED. MEANING THEREBY THAT THE ALLOWANCE SHALL BE ONE WHICH IS PRESCRIBED AND THE EXEMPTION SHALL BE TO THE EXT ENT AS MAY BE PRESCRIBED. RULE 2BB HAS PRESCRIBED THE ALLOWANCE S AS WELL AS THE AMOUNT EXEMPT UNDER SECTION 10(14)(II) [FROM 1 ST APRIL, 1989 TO 30 TH JUNE, 1995, THE SAID ALLOWANCE HAD TO BE ONE SPECI FIED BY THE CENTRAL GOVT. AND THE QUANTUM OF EXEMPTION WAS TO T HE EXTENT SPECIFIED IN THE CONCERNED NOTIFICATION.] IT HAS ALS O BEEN CLARIFIED THROUGH VARIOUS JUDICIAL PRONOUNCEMENTS THAT IN ORD ER TO AVAIL THE EXEMPTION UNDER THIS CLAUSE, THE ASSESSEE HAS TO PR OVE THAT THE EXPENDITURE IN RESPECT OF WHICH SPECIAL ALLOWANCE O R BENEFIT WAS GRANTED, HAS BEEN INCURRED WHOLLY, NECESSARILY AND EXCLUSIVELY IN THE PERFORMANCE OF HIS DUTIES OF AN OFFICE OR EMPLO YMENT OF PROFIT. 9 THE REQUIREMENT OF `WHOLLY, NECESSARILY AND EXCLUSI VELY IS CUMULATIVE AND NOT ALTERNATIVE. ASSESSEE MUST ESTA BLISH THAT HE IS REQUIRED TO SPEND SUCH SPECIAL ALLOWANCE OR BENEFIT NOT ONLY WHOLLY BUT ALSO NECESSARILY AND EXCLUSIVELY IN THE PERFORM ANCE OF HIS DUTIES. IN THE CASE OF J.G. MANKED VS. CIT 55ITR 448 (GUJ.) ASSESSEE WHO WAS PRACTISING CHARTERED ACCOUNTANT WA S APPOINTED AS A PART TIME PROFESSOR IN A COLLEGE SITUATED AT A NOTHER PLACE. HE WAS PAID A CERTAIN MONTHLY SALARY INCLUDING TRAVELL ING ALLOWANCES AND ALL OTHER ALLOWANCES. THE GUJARAT HIGH COURT H ELD THAT ASSESSEE WAS NOT ENTITLED TO CLAIM EXEMPTION U/S 4( 3)(VI) OF 1922 ACT (CORRESPONDING TO SECTION 10(14) OF THE I.T. ACT , 1961), AS IT FELT THAT THE SAID TRAVELLING ALLOWANCE WAS NOT A S PECIAL ALLOWANCE OR BENEFIT GRANTED TO THE ASSESSEES, MUCH LESS SPEC IFICALLY GRANTED TO MEET THE EXPENSES OF TRAVELLING. 16. WE THEREFORE OF THE VIEW THAT WHILE DEALING WIT H THE ISSUE OF SPECIAL ALLOWANCES GIVEN TO THE ASSESSEES ONE HAS T O EXAMINE THE PROVISION OF SECTION 2(24) & 10(14) OF THE I.T. ACT AND RULE 2BB OF THE I.T. RULES. AS PER SECTION 2(24) ALL ALLOWANCE S FORMS PART OF THE INCOME OF THE ASSESSEES. SECTION 10(14) DEALS WITH THE EXEMPTION OF CERTAIN SPECIAL ALLOWANCES AND RULE 2BB IDENTIFY THE ALLOWANCES AND THEIR LIMIT OF EXEMPTION FROM TAX. 17. SO FAR AS PROOF OF ACTUAL EXPENDITURE OF THE AL LOWANCES ARE CONCERNED, WE HAVE EXAMINED THE VARIOUS JUDGEMENTS INCLUDING THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. TEJAJI FARASHRAN KARAWALA LTD. 67 ITR 1995 (SC) IN WHICH I T HAS BEEN OBSERVED THAT TO QUALIFY THE EXEMPTION THE ALLOWANC E MUST BE GRANTED TO MEET EXPENSES INCURRED OR TO BE INCURRED WHOLLY, AND NECESSARILY IN THE PERFORMANCE OF DUTIES OF AN OFFI CE OR EMPLOYMENT OF PROFIT. THE PURPOSE FOR WHICH THE ALLOWANCE IS GRANTED IS ALONE NOT DETERMINATIVE OF CLAIM OF EXEMPTION. THE INTEN TION OF THE FRAMERS OF THE ACT WAS TO GRANT EXEMPTION IN RESPEC T OF AMOUNTS RECEIVED BY THE ASSESSEES NOT FOR HIS OWN BENEFIT B UT FOR THE SPECIFIED PURPOSE OF MEETING THE EXPENSES WHOLLY AN D NECESSARILY TO INCUR OR TO BE INCURRED FOR THE PERFORMANCE OF T HE DUTIES. THEREFORE, THE ALLOWANCES GRANTED TO MEET THE EXPEN SES WHOLLY AND NECESSARILY INCURRED OR TO BE INCURRED FOR THE PERFORMANCE OF THE DUTIES OF THE OFFICE OR EMPLOYMENT OF THE GRANT EE ALONE QUALIFIES FOR EXEMPTION UNDER THE ACT AND ANY SURPL US REMAINING IN THE HANDS OF THE GRANTEE AFTER MEETING THE EXPENSES DOES NOT BEAR THE CHARACTER OF THE ALLOWANCES FOR THE MEETING EXP ENSES BUT FOR PERFORMING THEIR DUTIES OF THE OFFICE FOR EMPLOYMEN T. THIS WOULD BE SO EVEN IF THE EMPLOYER HAS DISABLED HIMSELF FROM D EMANDING REFUND OF THE AMOUNT NOT EXPENDED FOR MEETING THE E XPENSES INCURRED OR TO BE INCURRED IN THE PERFORMANCE OF DU TIES OF OFFICE OR EMPLOYMENT OF PROFIT AND THE SURPLUS REMAINING IN T HE HANDS OF THE GRANTEE ACQUIRES FOR THE PURPOSE OF INCOME TAX ACT THE CHARACTER OF THE ADDITIONAL REMUNERATION. MEANING THEREBY, THE ONUS IS UPON THE ASSESSEE TO PLACE RELEVANT EVIDENCE IN ORDER TO PROVE THAT THE 10 ALLOWANCES GIVEN TO HIM ARE SPENT FOR THE PURPOSE T O WHICH IT WAS GRANTED. 18. TURNING TO THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE WAS GRANTED THE CONSTITUENCY ALLOWANCE, CONVEYANCE ALLOWANCE, TELEPHONE ALLOWANCE, CLERICAL ALLOWANCE, MEDICAL AL LOWANCE AND CONTINGENCY ALLOWANCE BESIDES SALARY. DURING THE R ELEVANT ASSESSMENT YEAR AS PER SECTION 10(17) THE MLAS ARE ENTITLED FOR EXEMPTION OF THE DAILY ALLOWANCES AND ALL OTHER ALL OWANCES NOT EXCEEDING RS.2000/- P.M. THOUGH W.E.F 1.4.2007 MLA S ARE ALSO ENTITLED FOR EXEMPTION OF ANY CONSTITUENCY ALLOWAN CE RECEIVED BY THEM BY VIRTUE OF AN AMENDMENT IN SECTION 10(17) BU T IT WAS WITH THE PROSPECTIVE EFFECT AND IN THE IMPUGNED ASSESSM ENT YEARS THE ASSESSEE CANNOT TAKE THE BENEFIT OF IT AND ALL OTHE R ALLOWANCES ARE LIMITED TO RS.2000/- P.M. ONLY. THOUGH IN SECTION 10(17) THE LEGISLATURE HAS RESTRICTED THE EXEMPTION OF ALL OTH ER ALLOWANCES UPTO RS.2000/- P.M. YET THROUGH VARIOUS JUDICIAL PRONOUN CEMENTS IT HAS BEEN HELD THAT THE MLAS ARE ENTITLED TO TAKE THE BE NEFIT OF SECTION 10(14) ALSO. WE THEREFORE OF THE VIEW THAT ACCORDI NG TO THE RULE 2BB READ WITH SECTION 10(14) OF THE ACT, ONLY THE C ONVEYANCE ALLOWANCE OR THE CLERICAL ALLOWANCE ARE REQUIRED TO BE EXEMPTED, SUBJECT TO PROOF THAT IT WAS INCURRED IN PERFORMANC E OF DUTIES OF AN OFFICE. SO FAR AS THE TELEPHONE ALLOWANCE AND CON STITUENCY ALLOWANCE ARE CONCERNED, WE DO NOT FIND ANY SPECIFI C CLAUSE IN RULE 2BB(1) OF THE I.T. RULES. THUS THESE ALLOWANCES CAN NOT BE ALLOWED U/S 10(14) OF THE I.T. ACT. WITH REGARD TO THE MED ICAL ALLOWANCES THE COMPLETE FACTS ARE NOT AVAILABLE ON RECORD WHET HER IT WAS A REIMBURSEMENT OR IT WAS AN ALLOWANCE LIKE OTHER ALL OWANCES GRANTED TO THE MLA. IF IT IS A REIMBURSEMENT OF THE MEDICAL EXPENDITURE, IT CAN BE ALLOWED IN THE LIGHT OF THE JUDGEMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHIVCHA RAN MATHUR (SUPRA). OTHERWISE NO DEDUCTION CAN BE ALLOWED AS IT DOES NOT FIND PLACE IN RULE 2BB(1) OF THE IT RULES. 19. WE DO NOT AGREE WITH THE PROPOSITION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ALL TYPE OF ALLOWANCES GRANTED TO THE ASSESSEE ARE ELIGIBLE FOR EXEMPTION U/S 10(14) OF ACT. IF T HAT BE THE CASE, THERE WAS NO NEED OF PROVIDING A SEPARATE SUB SECTI ON 17 IN SECTION 10 FOR ALLOWING CERTAIN OTHER ALLOWANCES; LIKE DAIL Y ALLOWANCE TO MLAS FOR ITS EXEMPTION FROM THE TOTAL INCOME OF THE ASSESSEE. MEANING THEREBY, BOTH THE PROVISIONS RELATING TO TH E EXEMPTION OF THE ALLOWANCES I.E. 10(14) & 10(17) ARE TO BE READ TOGETHER AND IN CASE OF MLAS & MPS THEY ARE ENTITLED FOR THE EXEMPT ION OF ALLOWANCES UNDER BOTH THE CLAUSES SIMULTANEOUSLY. IN THE CASE OF SECTION 10(17), THE MLAS & MPS ARE GRANTED A LUMPSU M EXEMPTION OF PARTICULAR ALLOWANCE WITHOUT PRODUCING ANY EVIDE NCE WITH REGARD TO ITS EXPENDITURE, WHEREAS U/S 10(14), THE ALLOWAN CES ARE ONLY ALLOWED TO BE EXEMPTED SUBJECT TO PROOF THAT IT WAS INCURRED TO MEET A PARTICULAR PURPOSE. 11 20. WE HAVE ALSO GONE THROUGH THE HISTORY OF PROVIS IONS OF SECTION 10(17) OF THE ACT AND WE FIND THAT AT THE T IME OF ENACTMENT OF THE INCOME TAX ACT, 1961, ONLY DAILY ALLOWANCES RECEIVED BY THE MPS OR THE MLAS OR ANY MEMBER OF THE COMMITTEE THER E OF ARE EXEMPTED FROM THE TOTAL INCOME. THE SCOPE OF THE EXEMPTION WAS WIDENED TIME TO TIME AND BY TAXATION LAWS AMENDMENT AND MISCELLANEOUS PROVISIONS ACT, 1986 W.E.F. 1 ST APRIL 1986, THE AMENDMENT WAS MADE AND BESIDES THE DAILY ALLOWANCES , ALL OTHER ALLOWANCES UPTO RS.1250/- P.M. IN AGGREGATE IN THE CASE OF MP AND RS.600/- P.M. IN THE CASE OF MLA WERE EXEMPTED FROM TAX. FURTHER AMENDMENT WAS MADE IN THIS CLAUSE BY THE FINANCE AC T, 1997 AND THE AMOUNT OF RS.600/- P.M. IN CASE OF MLAS WAS INC REASED TO RS.2000/- P.M. THEREAFTER, FURTHER AMENDMENT WAS A LSO MADE BY THE FINANCE ACT, 2006 AND LIKE THE MPS, THE CONSTIT UENCY ALLOWANCE RECEIVED BY THE MLAS WAS ALSO MADE EXEMPTIVE FROM T HE TOTAL INCOME OF THE ASSESSEES. AMENDMENT BY FINANCE ACT, 2006 WAS BROUGHT IN ORDER TO BRING THE UNIFORMITY OF CONSTIT UENCY ALLOWANCES ALLOWED BY DIFFERENT STATES THROUGH THEIR INDEPENDE NT NOTIFICATIONS WITH RESPECT TO OTHER ALLOWANCES BY AMENDING CLAUSE 3 OF SECTION 10(17) AND THE LEGISLATURE HAS ALLOWED THE EXEMPTIO N OF THE ENTIRE CONSTITUENCY ALLOWANCE GRANTED TO MLAS. 21. FROM A CAREFUL STUDY OF THE AMENDMENTS BROUGHT TIME TO TIME IN SECTION 10(17) OF THE ACT, WE ARE OF THE VI EW THAT LEGISLATURE HAS BEEN QUITE CONSCIOUS ABOUT THE ALLO WANCES GRANTED TO THE MLAS OR THE MPS AND TIME TO TIME THEY ARE BR INGING ENACTMENTS TO GRANT EXEMPTION OF PARTICULAR TYPE OF ALLOWANCES FROM THE TOTAL INCOME OF THE MLAS OR MPS. HAD IT B EEN A CASE THAT FOR ALL ALLOWANCES SECTION 10(14) CAN BE INVOKED SU BJECT TO PROOF OF THE EXPENDITURE TO BE INCURRED IN RESPECT OF THAT P URPOSE TO WHICH THE ALLOWANCES ARE GIVEN, THERE WOULD BE NO NEED TO MAKE A NECESSARY AMENDMENT TIME TO TIME IN SECTION 10(17). WE THEREFORE, OF THE VIEW THAT WHILE DEALING WITH THE ISSUE OF SPECIAL ALLOWANCES GRANTED TO THE MLAS OR MPS ONE HAS TO KE EP IN MIND BOTH THE PROVISIONS OF SECTION 10(17) AND 10(14) OF THE ACT AND ONLY THOSE ALLOWANCES ARE TO BE EXEMPTED FROM THE T OTAL INCOME OF THE ASSESSEES WHICH ARE SPECIFIED IN THESE SECTIONS OR RULE 2BB OF THE I.T. RULES. UNDER SECTION 10(17), THE LEGISLAT URE HAS PRESCRIBED A PARTICULAR LIMIT UPTO WHICH THE ALLOWANCES ARE TO BE EXEMPTED FROM THE TOTAL INCOME OF THE ASSESSEES BUT SECTION 10(14) IS TO BE READ WITH RULE 2BB OF THE I.T. RULES AND ONLY THOSE ALLOWANCES ARE TO BE ALLOWED TO BE EXEMPTED FROM THE TOTAL INCOME OF THE ASSESSEES WHICH ARE SPECIFICALLY MENTIONED IN RULE 2BB SUBJECT TO PROOF OF ITS BEING SPENT FOR THE PURPOSE TO WHICH I T IS RECEIVED OR GRANTED. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF A.O. WITH A DIREC TION TO RE-EXAMINE THE ISSUE AND GRANT AN EXEMPTION OF THE CONVEYANCE ALLOWANCE AND THE CLERICAL ALLOWANCE AFTER MAKING NECESSARY VERIF ICATION OF THE EXPENDITURE INCURRED FOR THE SAID PURPOSE. REST OF THE ALLOWANCES I.E. TELEPHONE ALLOWANCE, CONSTITUENCY ALLOWANCE AN D CONTINGENCY ALLOWANCE DO NOT FALL EITHER IN THE PURVIEW OF SECT ION 10(14) OR 12 10(17) AND THEY CANNOT BE ALLOWED TO BE EXEMPTED FR OM THE TOTAL INCOME OF THE ASSESSEES. SO FAR AS MEDICAL ALLOWAN CES ARE CONCERNED, THE A.O. SHOULD VERIFY THE NATURE OF THE SE ALLOWANCES. IF IT IS A REIMBURSEMENT OF THE MEDICAL EXPENSES INC URRED BY THE MLA, IT MAY BE ALLOWED IN THE LIGHT OF THE JUDGEMEN T OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHIVCHA RAN MATHUR. OTHERWISE, NO EXEMPTION CAN BE ALLOWED AS IT DOES N OT FALL EITHER IN THE PURVIEW OF SECTION 10(14) AND 10(17) OF THE I.T. ACT. ACCORDINGLY, THESE APPEALS ARE DISPOSED OFF. 7. SINCE THE IMPUGNED ISSUES ARE COVERED BY AFORESA ID ORDER OF THE TRIBUNAL, WE FIND NO JUSTIFICATION TO ADJUDICATE TH ESE ISSUES AFRESH. WE ACCORDINGLY FOLLOWING THE ORDER OF THE TRIBUNAL RES TORE THE MATTER TO THE FILE OF THE A.O. WITH THE DIRECTION TO ADJUDICATE THE IS SUE IN TERMS OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M. VENKATA SUBBAIAH, PE SARLANKA (SUPRA). 8. THE ASSESSEE HAS RAISED ONE MORE GROUND IN APPEA L NO.677/VIZAG/2008 THAT THE CIT(A) HAS ERRED IN CONF IRMING THE ADDITION OF RS.22,76,750/- AS UNEXPLAINED CASH CREDIT HAVING DO UBTED THE GENUINENESS OF THE GIFTS RECEIVED FROM THE NRI FRIEND OF THE ASS ESSEE. 9. THE FACTS BORNE OUT FROM THE RECORD IN THIS REGA RD ARE THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED AN AMOUNT OF RS.22,76,750/- IN U.S. DOLLARS FROM A NRI WHICH WAS CREDITED TO HIS CAPITAL ACCOUNT. OUT OF THIS, RS.7,76,750/- WAS FOUND REFLECTED IN HIS BANK ACCOU NT STATEMENT AND THE BALANCE AMOUNT OF RS.15 LAKHS WAS STATED TO BE THE CASH GIFTS RECEIVED FROM THE SAME PERSON. THE ASSESSING OFFICER ADDED BACK THE ENTIRE AMOUNT OF RS.22,76,750/- HOLDING THAT NO PROOF WAS FURNISHED TO ESTABLISH THE GENUINENESS OF IDENTITY AND CREDITWORTHINESS OF THE DONOR. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBM ISSIONS THAT THE VERACITY OF GIFTS CANNOT BE EXAMINED BY THE A.O. IN RE-OPENE D ASSESSMENT WHEN IT WAS RE-OPENED ON DIFFERENT ISSUES. IT WAS ALSO CONT ENDED BEFORE THE CIT(A) THAT THE ASSESSEE HAS PRODUCED THE CONFIRMATION AND COMPLETE DETAILS OF THE DONOR BEFORE THE A.O. AND BY DOING SO THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS LAY UPON IT. IT WAS ALSO CONTENDED THA T THE ENTIRE CREDIT IS IN RESPECT OF ONLY ONE INDIVIDUAL SHRI NANNAPANENI MOH AN, BOSTON, USA. THE DETAILED ADDRESS OF MR. MOHAN AND COPY OF THE BANK ACCOUNTS THROUGH WHICH THE RECEIPTS OF US DOLLARS WAS REFLECTED WERE FILED DURING THE COURSE OF 13 ASSESSMENT PROCEEDINGS. THE BANK ACCOUNT REFLECTS THE RECEIPT OF U.S. DOLLAR TO THE EXTENT OF RS.7,76,750/- AND ASSESSING OFFICER SIMPLY CALLED FOR THE PROOF OF THE REMAINING AMOUNT OF RS.15 LAKHS AN D IN RESPONSE THERETO THE ASSESSEE HAS FILED A CONFIRMATION LETTER FROM T HE SAID MOHAN CONFIRMING THE TRANSFER OF FUNDS FROM HIS BANK ACCOUNT IN INDI A TO THE EXTENT OF RS.15 LAKHS. IT WAS FURTHER CONTENDED THAT MR. MOHAN IS A N IMMIGRANT TO US MANY YEARS BACK AS SOFTWARE EXPERT OWNING A SOFTWARE COM PANY. DURING THOSE YEARS I.E. 2002-03 HE IS HAVING AN ASSESSED YEARLY INCOME OF MILLION DOLLARS (RS.4 CRORES) AND AT PRESENT HIS ANNUAL INCOME IS R EDUCED TO HALF OF MILLION DOLLARS I.E. RS. 2 CRORES DUE TO INCREASED STIFF CO MPETITION AMONGST SOFTWARE COMPANIES. AS ON DATE AS AN INDIVIDUAL OWNING A SO FTWARE COMPANY HAVING WORTH OF 25 MILLION DOLLARS (RS.100 CRORES). THE C IT(A) WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES AND HE CONFI RMED THE ADDITION MADE BY THE A.O. 10. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE ASSESSEE HAS PLACED THE RELEVAN T EVIDENCE TO PROVE THE IDENTITY AND THE CREDITWORTHINESS OF THE DONOR AND ALSO THE GENUINENESS OF THE TRANSACTIONS. HE HAS ALSO RAISED A PRELIMINARY OBJECTION THAT THE ASSESSMENT WAS RE-OPENED ON DIFFERENT GROUNDS BUT T HE ADDITION WAS MADE U/S 68 OF THE ACT AS UNEXPLAINED CASH CREDIT. THE OTHER OBJECTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ASSESS EE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNTS AS SUCH THE ADDITION OF THIS GIFT RECEIVED IN ITS BANK ACCOUNT CANNOT BE DISALLOWED U/S 68 OF THE ACT. IN SUPPORT OF THIS CONTENTION HE HAS PLACED A RELIANCE UPON THE JUDGEM ENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND H. GANDHI 14 1 ITR 67 IN WHICH IT HAS BEEN HELD THAT THE CASH CREDIT FOUND ONLY IN BANK P ASS BOOK AND NOT IN THE CASH BOOK MAINTAINED BY THE ASSESSEES WOULD NOT BE INCLUDABLE U/S 68 AS PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE IS N OT A BOOK MAINTAINED BY HIM. RELIANCE WAS ALSO PLACED UPON THE JUDGEMENT O F PATNA HIGH COURT IN THE CASE OF L.N. PODDAR VS. ITAT AND ANOTHER 322 IT R 513 IN WHICH THEIR LORDSHIP HAVE HELD THAT PASS BOOK MAINTAINED BY BAN K ARE NOT THE BOOKS OF ACCOUNTS OF THE ASSESSEES. THEREFORE THE CLAIM FOR DEDUCTION OF EXPENDITURE ON THE BASIS OF THE PASS BOOK OR BANK ACCOUNT CANNO T BE ALLOWED. SO FAR AS 14 ON MERIT IS CONCERNED, THE LD. COUNSEL FOR THE ASSE SSEE HAS INVITED OUR ATTENTION TO A LETTER DATED 27.12.2006 APPEARING AT PG.NO.16 THROUGH WHICH THE ASSESSEE FILED THE CONFIRMATION LETTER AND INFO RMED THE A.O. THAT MR. MOHAN, THE DONOR IS AVAILABLE IN THE TOWN DUE TO TH E SAID DEMISE OF HIS MOTHER-IN-LAW. HE HAS ALSO FURNISHED THE COMPLETE DETAILS OF THE ADDRESSES AND THE MOBILE NOS. OF THE DONOR TO THE REVENUE AUT HORITIES FOR VERIFICATION. BUT THE REVENUE AUTHORITIES WITHOUT VERIFYING THE F ACTS HAVE DOUBTED THE GENUINENESS OF THE GIFT RECEIVED BY THE ASSESSEES. THE DETAILED SUBMISSIONS IN THIS REGARD WAS ALSO FILED BEFORE THE CIT(A) AND THE CIT(A) CALLED THE REMAND REPORT FROM THE ASSESSING OFFICER. EVEN IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER DID NOT VERIFY THE GENUINENES S OF THE GIFT RECEIVED BY THE ASSESSEES. THE DONOR HAS AGAIN FILED A CONFIRM ATION IN THE FORM OF CERTIFICATE STATING THEREIN ABOUT HIS FINANCIAL CRE DITWORTHINESS AND THE LETTER DATED 10.7.2007 IS AVAILABLE AT PG.NO.83 OF THE COM PILATION OF THE ASSESSEES AND IN THIS LETTER MR. MOHAN HAS CATEGORICALLY STAT ED THAT HIS GIFTS TO ASSESSEE ARE TO HELP HIS EXTENDED FAMILY BACK HOME AND THEIR GENUINE. IT WAS ALSO STATED THAT DURING THE SAME PERIOD MR. MOH AN HAS DONATED MORE THAN RS.2 CRORES TO REBUILD A GOVERNMENT SCHOOL, CO NSTRUCTED A GUEST HOUSE FOR SHRI SITARAMACHANDRA SWAMY TEMPLE AT BHADRACHAL AM AND MANY OTHER CHARITABLE CAUSES. THE RETURN OF INCOME FILED IN U .S. SHOWING THE STATUS AND FINANCIAL POSITION OF THE DONOR WAS ALSO PLACED BEF ORE THE REVENUE AUTHORITIES BUT IT WAS OVERLOOKED BY THEM AND THEY HAVE SIMPLY DOUBTED THE GENUINENESS OF THE GIFT. 11. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITE D OUR ATTENTION TO THE DETAILED AFFIDAVIT FILED IN SUPPORT OF HIS CONTENTI ONS APPEARING AT PG.NO.130 TO 132 IN WHICH HE HAS REITERATED ALL THESE FACTS. HE HAS ALSO GIVEN THE DETAILS OF HIS WEB-SITE IN WHICH SERVICE ACTIVITIES RENDERED BY HIM ARE LISTED. IT WAS STATED IN THIS AFFIDAVIT THAT THE DONOR IS IN CONTACT WITH THE ASSESSEES WHO HAS BEEN EVOLVED FROM A GREAT LOCAL DOCTOR IN T O A COMMITTED POLITICIAN WORKING FOR THE BENEFIT OF THE POOR AND DOWNTRODDEN THROUGHOUT ALL OVER INDIA AND WITH THAT DEDICATION HE HAS ACHIEVED THE C HAIRMANSHIP OF THE INDO-AMERICAN CANCER HOSPITAL, HYDERABAD. THE LD. C OUNSEL FOR THE ASSESSEES FURTHER CONTENDED SINCE HE HAS FILED THE COMPLETE DETAILS OF THE 15 DONORS ALONG WITH HIS FINANCIAL STATUS AND HIS REPE ATED CONFIRMATIONS, THE GENUINENESS OF THE GIFT SHOULD NOT HAVE BEEN DOUBTE D ON CONJUNCTURES AND SURMISES. IF THE REVENUE AUTHORITIES HAVE ANY DOUBT IN THE GENUINENESS OF THE GIFT THEY COULD HAVE EXAMINED THE DONOR IN THIS REGARD. BUT THE REVENUE AUTHORITIES OPTED NOT TO EXAMINE THE DONOR BUT TO D OUBT THE GENUINENESS OF THE GIFT. SINCE THE ASSESSEE HAS DISCHARGED ITS ON US PRIMARILY LAY UPON IT, THE GENUINENESS OF THE GIFT SHOULD BE ACCEPTED. IN SUPPORT OF HIS CONTENTIONS, HE HAS PLACED A RELIANCE UPON THE FOLL OWING JUDGEMENTS: 1. CIT VS. KULWANT INDUSTRIES 214 CTR (P&H) 223 2. CIT VS. PADAM SINGH CHOUHAN 315 ITR 433 3. JAWAHAR LAL OSWAL VS. ACIT 71 ITD 324 4. AVNISH KUMAR SINGH VS. ITO 124 TTJ 750 12. THE LD. D.R. ON THE OTHER HAND BESIDES PLACING A RELIANCE UPON THE ORDER OF THE CIT(A) HAS CONTENDED THAT THE ASSESSEE WAS FAILED TO PROVE THE GENUINENESS OF THE GIFT RECEIVED BY IT. HE HAS REC EIVED THE GIFT OF RS.15 LAKHS IN CASH FOR WHICH NO DOCUMENTARY EVIDENCE WAS PLACED EXCEPT THE ORAL SUBMISSIONS. SO FAR AS MAINTENANCE OF BOOKS OF ACC OUNTS ARE CONCERNED, THE LD. D.R. HAS CONTENDED THAT ASSESSEE HAS PREPAR ED ITS FINAL BALANCE SHEET IN WHICH THE RECEIPT OF GIFT FORMS PART OF TH E CAPITAL ACCOUNT. SINCE THE BALANCE SHEET WAS PREPARED ON THE BASIS OF BOOK S OF ACCOUNTS, IT IS NOT PROPER TO SAY THAT ASSESSEE WAS NOT MAINTAINING THE BOOKS OF ACCOUNTS IN WHICH THE RECEIPT OF GIFT WAS NOT SHOWN. SINCE THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE GIFT, THE REVENUE AUTHORITIE S HAVE RIGHTLY TREATED THE SAME AS BOGUS AND MADE THE ADDITION U/S 68 OF THE A CT. 13. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE RECORD, WE FIND THAT THE ASSESSEE HAS RECEIVED THE GIFT OF RS.22,76,750/- OUT OF WHICH RS.7,76,750/- WAS RECEIVED THROUGH CHEQUE AND THE BALANCE AMOUNT WAS RECEIVED IN CASH. THIS AMOUNT WAS CREDI TED IN THE PASS BOOK OF THE ASSESSEES. THE ASSESSING OFFICER HAS WRITTEN A LETTER TO THE ASSESSEE ON 26.12.2006 ASKING THE ASSESSEE EXPLAIN OR TO PROVE THE RECEIPT OF REMAINING AMOUNT OF RS.15 LAKHS RECEIVED IN CASH. COPY OF TH E LETTER IS AVAILABLE AT PG.NO.14 AND FROM ITS CAREFUL PERUSAL, WE FIND THAT THE A.O. HAS NOT DOUBTED 16 THE RECEIPT OF GIFT OF RS.7,76,750/- AS IT WAS RECE IVED THROUGH A BANKING CHANNEL. HE HAS SIMPLY ASKED THE ASSESSEE TO EXPLA IN OR TO PROVE THE RECEIPT OF GIFT OF RS.15 LAKHS IN CASH. THE RELEVA NT PORTION OF THIS LETTER IS EXTRACTED HEREUNDER TO UNDERSTAND THE INTENTION OF THE A.O.:- AS PER THE INFORMATION FURNISHED BY YOU (BANK ACCO UNT STATEMENT), YOU HAVE RECEIVED GIFTS TO THE EXTENT O F RS.7,76,750/- ONLY, WHEREAS YOU HAVE CLAIMED TO HAVE RECEIVED GIF TS TO THE EXTENT OF RS.22.76 LAKHS DURING THIS ACCOUNTING YEAR (ACCO UNTING 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003-04). YOU ARE REQUESTED TO FURNISH PROOF OF RECEIPT OF THE REMAINING AMOUNT OF ABOUT RS.15 LAKHS AS GIFTS, ON OR BEFORE 28.12.2006 FAILING WHI CH IT IS PROPOSED TO ADD RS.15 LAKHS AS INCOME FROM OTHER SOURCES. AS THE ASSESSMENT INVOLVED IS GETTING BARRED BY LIMITATION BY 31.12.2006, NO FURTHER ADJOURNMENT WILL BE GRANTED. 14. THIS LETTER WAS RESPONDED TO BY THE ASSESSEES W ITH THE SUBMISSIONS THAT IT HAD RECEIVED A GIFT IN U.S. DOLLARS TO THE EXTENT OF RS.22.76 LAKHS. HE HAS FURNISHED THE COMPLETE DETAILED ADDRESS OF THE DONOR. THE ASSESSEE ALSO ENCLOSED A COPY OF HIS BANK ACCOUNT ALONG WITH HIS LETTER. THE LETTER DATED 22.12.2006 & 27.12.2006 ARE AVAILABLE AT PG.N O.15 & 16 OF THE COMPILATION. THROUGH LETTER DATED 27.12.2006, THE ASSESSEE HAS FILED THE CONFIRMATION LETTER OF THE DONOR WITH REGARD TO THE GIFT OF RS.15 LAKHS. IN THIS LETTER, THE A.O. WAS INFORMED THAT DONOR IS AV AILABLE IN INDIA AS HE HAS TO ATTEND THE TANA CULTURAL FESTIVAL AND ALSO DUE T O SAID DEMISE OF HIS MOTHER-IN-LAW. THE CONFIRMATION LETTER IS AVAILABL E AT PG.NO.17 OF THE COMPILATION. BESIDES THESE CONFIRMATION LETTERS, T HE ASSESSEE HAS EXPLAINED THE DETAILS OF THE FINANCIAL STATUS OF THE DONOR BE FORE THE CIT(A) THROUGH HIS WRITTEN SUBMISSIONS WHICH ARE AVAILABLE AT PG.NO.18 TO 25 OF THE COMPILATION OF THE ASSESSEES. IN THIS WRITTEN SUBMISSIONS IT W AS STATED THAT DURING THE YEARS 2002-03 MR. MOHANS YEARLY INCOME IS OF A MIL LION DOLLARS I.E. RS.4 CRORES AND AT PRESENT HIS ANNUAL ASSESSED INCOME IS REDUCED TO HALF A MILLION DOLLAR I.E. RS.2 CRORES DUE TO INCREASED STIFF COMP ETITION AMONG SOFTWARE COMPANIES. THE MOBILE NO. OF MR. MOHAN WAS ALSO FU RNISHED TO CIT(A). THOUGH CIT(A) CALLED A REMAND REPORT, BUT THE ASSES SING OFFICER DID NOT MAKE ANY ENQUIRIES WITH REGARD TO THE GENUINENESS O F THE GIFT. HE HAS SIMPLY RELIED UPON THE ASSESSMENT ORDER PASSED BY T HE A.O. AND ARRIVED AT SAME CONCLUSION THAT THE GIFT WAS NOT GENUINE. A C ONFIRMATION IN THE FORM 17 OF CERTIFICATE DATED 10.7.2007 WAS ALSO FILED BEFOR E THE CIT(A). IN THIS CONFIRMATION LETTER, IT WAS STATED BY MR. MOHAN THA T DURING THE SAME PERIOD, HE HAS DONATED MORE THAN 2 CRORES TO REBUILD A GOVE RNMENT SCHOOL, CONSTRUCT A GUEST HOUSE FOR SRI SITARAMACHANDRA SWA MY TEMPLE AT BHADRACHALAM AND MANY OTHER CHARITABLE CAUSES. IN ORDER TO PROVE HIS FINANCIAL STATUS, THE COPIES OF THE INCOME TAX RETU RNS FILED IN U.S.A. WERE ALSO PLACED BEFORE THE CIT(A). COPIES OF THE SAME ARE AVAILABLE AT PG.NO.84 TO 120 OF THE COMPILATION OF THE ASSESSEES AND FROM A CAREFUL PERUSAL OF THE RETURNS AND THE DOCUMENTS, IT IS ABUNDANTLY CLEAR T HAT THE DONOR IS A MAN OF MILLION DOLLARS AND HE IS HAVING SUFFICIENT FUNDS F OR MAKING DONATIONS TO VARIOUS CHARITABLE INSTITUTIONS. IN THIS CERTIFICAT E DATED 10.7.2007, THE DONOR HAS CATEGORICALLY STATED THAT HE HAS GIVEN A CASH G IFT TO THE ASSESSEE AND TO HIS CHILDREN WHO ARE HIS RELATIVES. HE HAS FILED T HE NOTARIZED PERSONAL FINANCIAL STATEMENTS TO GIVE A SNAPSHOT OF HIS CURR ENT NETWORTH WHICH EXCEEDS 31 U.S. MILLION DOLLARS. 15. FROM A CAREFUL PERUSAL OF ALL THE EVIDENCE FILE D BY THE ASSESSEE, IT IS CRYSTAL CLEAR THAT THE DONOR IS A MAN OF MEANS AND WAS IN A POSITION TO DONATE THE AFORESAID GIFT TO THE ASSESSEE. THE REA SONS FOR DONATING SUCH HUGE AMOUNT WAS ALSO EXPLAINED BY THE DONOR. THE D ONOR HAS FILED REPEATED CONFIRMATION LETTERS ALONG WITH THE INCOME TAX RETURNS FILED IN USA AND HIS AFFIDAVIT ALSO. IN THE LIGHT OF THESE DOCU MENTS, THE CONTENTION OF THE REVENUE CANNOT BE ACCEPTED THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE GIFT TRANSACTIONS. THE REVENUE HAS NOT DOUBTED THE IDENTITY OF THE DONOR. THEY HAVE SIMPLY DOUBTED TH ESE GENUINENESS OF THE TRANSACTIONS WITHOUT BRINGING ANY MATERIAL ON RECOR D. IF THE REVENUE HAVE ANY DOUBT WITH REGARD TO THE GENUINENESS OF THE GIF T, THE A.O. COULD VERY WELL EXAMINE THE DONOR WHEN HE WAS AVAILABLE IN IND IA AND IT WAS INFORMED BY THE ASSESSEES VIDE ITS LETTER DATED 27.12.2006. THE A.O. HAS DISBELIEVED THE ASSESSEE ON THE BASIS OF CONJUNCTURES AND SURMI SES WITHOUT BRINGING ANY MATERIAL ON RECORD. IF HE HAS ANY DOUBT, HE COULD HAVE MADE THE INDEPENDENT ENQUIRY FROM THE DONOR WITH REGARD TO T HE AFORESAID GIFT. BUT NO STEP WAS TAKEN BY THE ASSESSING OFFICER AND HE H AS STARTED DISBELIEVING 18 THE CLAIM OF THE ASSESSEES WITHOUT ANY BASIS. WE H AVE ALSO EXAMINED THE JUDGEMENTS REFERRED TO BY THE ASSESSEES. 16. IN THE CASE OF CIT VS. KULWANT INDUSTRIES 311 IT R 377, THEIR LORDSHIP OF THE HIGH COURT HAVE HELD THAT THE GIFT FROM MATE RNAL UNCLE OF THE ASSESSEE THROUGH CHEQUE FROM NRI ACCOUNT COULD NOT BE HELD TO BE NON- GENUINE WHEN NRI ACCOUNT IS FOUND TO BE GENUINE AND IDENTITY OF THE DONOR WAS ESTABLISHED. IN THE CASE OF CIT VS. PADAM SING H CHOUHAN 315 ITR 433 THEIR LORDSHIP OF THE RAJASTHAN HIGH COURT HAVE HEL D THAT ASSESSEE HAVING PRODUCED COPIES OF GIFT DEEDS AND AFFIDAVIT OF NRI DONORS, IN THE ABSENCE OF ANYTHING TO SHOW THAT TRANSACTION WAS BY WAY OF MON EY LAUNDERING, ADDITION COULD NOT BE MADE IN THE HANDS OF THE ASSESSEE DONE E FOR ABSENCE OF BLOOD RELATIONSHIP BETWEEN THE DONOR AND THE DONEE. IN TH E CASE OF JAWAHAR LAL OSWAL VS. ACIT 71 ITD 324, THE TRIBUNAL HAS ALSO TA KEN A VIEW THAT WHERE BOTH THE NON-RESIDENT DONORS HAVING CONFIRMED THE G IFTS AND ESTABLISHED THEIR FINANCIAL STATUS, THE GIFTED AMOUNT RECEIVED BY THE ASSESSEE ON BEHALF OF HIS MAJOR DAUGHTERS BY WAY OF DRAFTS AND DEPOSIT ED IN THEIR RESPECTIVE BANK ACCOUNTS COULD NOT BE TREATED AS UNACCOUNTED M ONEY AND ADDITION COULD NOT BE MADE U/S 69A OF THE ACT. IN THE CASE OF AVNISH KUMAR SINGH VS. ITO 124 TTJ (AGRA) 750, THE TRIBUNAL HAS AGAIN TAKEN A VIEW THAT WHERE DONOR HAVING CONFIRMED THE GIFT BY FILING AN AFFIDAVIT AS WELL AS IN EXAMINATION ON OATH BEFORE THE A.O. AND EXPLAINED T HAT GIFT WAS MADE FROM THE AMOUNT RECEIVED BY REPAYMENT OF DEPOSIT MADE BY HIM WITH A FIRM, THE IMPUGNED GIFT RECEIVED BY THE ASSESSEES THROUGH DEM AND DRAFT BY DECLARATION DEED HAS TO BE TREATED AS GENUINE GIFT AND THE ADDITION U/S 68 MADE BY THE A.O. CANNOT BE SUSTAINED. 17. WE HAVE ALSO EXAMINED THE OTHER JUDGEMENTS WITH REGARD TO THE APPLICABILITY OF PROVISIONS OF THE SECTION 68 OF TH E ACT IN THOSE CASES, WHERE THE ENTRIES WERE FOUND IN THE PASS BOOK AND NOT IN A REGULAR BOOKS OF ACCOUNTS AND WE FIND THAT BOMBAY HIGH COURT AS WELL AS THE PATNA HIGH COURT HAVE CATEGORICALLY HELD THAT THE PASS BOOK OR BANK ACCOUNT ARE NOT THE BOOKS OF ACCOUNTS OF THE ASSESSEES AND AS SUCH THE CASH CREDIT FOUND ONLY IN BANK PASS BOOK WOULD NOT BE INCLUDABLE U/S 68 OF THE ACT. 19 18. IN THE INSTANT CASE, NOTHING HAS BEEN BROUGHT OU T BY THE REVENUE THAT THE ENTRIES OF THE GIFTS WERE FOUND IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEES. ADMITTEDLY ENTRIES WE RE FOUND IN THE BANK PASS BOOK OF THE ASSESSEES. THEREFORE, THE PROVISI ONS OF SECTION 68 CANNOT BE INVOKED. HOWEVER, IN SUCH TYPE OF CASES, THE AD DITION CAN BE MADE U/S 69C OF THE ACT. BUT ON MERIT ALSO WE ARE OF THE VI EW THAT ASSESSEE HAS PLACED AMPLE MATERIAL BEFORE THE ASSESSING OFFICER TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE DONOR AND THE GENUINENESS O F THE GIFT AND WITHOUT BRINGING ANY EVIDENCE IN ORDER TO DISPUTE THE CLAIM OF THE ASSESSEES THE REVENUE CANNOT DOUBT THE CLAIM OF THE ASSESSEES. T HEREFORE, THE A.O. WAS NOT JUSTIFIED IN TREATING THIS GIFT RECEIVED BY THE ASSESSEES AS NON-GENUINE. WE THEREFORE, DO NOT FIND ANY MERIT IN THE ADDITION S MADE BY THE A.O. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) A ND DELETE THE ADDITIONS IN THIS REGARD. 19. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE P ARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT O N 29.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 29 TH JUNE, 2010 COPY TO 1 DR. KODELA SIVA PRASADA RAO, RAJAGARI KOTA, NARAS ARAOPET-522 601, GUNTUR DIST. 2 ACIT, CIRCLE-2(1), GUNTUR 3 THE CIT, GUNTUR 4 THE CIT(A), GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM
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