Income Tax Appellate Tribunal - Hyderabad
The Asst. Commissioner Of Income-Tax vs Hon'Ble Justice Shri Motilal B. Naik on 30 September, 2003
Equivalent citations: [2004]91ITD384(HYD), [2004]270ITR141(HYD), (2005)92TTJ(HYD)749
ORDER
N.D. Raghavan, Vice President
1. This is an appeal of the Revenue challenging the order dated 22.9.1998 of the Commissioner of Income-tax (Appeals) as erroneous.
2. Facts of the case as gathered from the record are briefly these. The assessee is a sitting Judge of the High Court of Andhra Pradesh. Prior to his elevation on 5.2.92 he carried on his profession of advocacy as also a Government Pleader in the High Court of ASP. from 5.8.88 till the date of his elevation. During the accounting period relevant to the assessment year in question, he was in receipt of the sum of Rs. 6,61,610/- as professional fees for the services rendered as Government Pleader. In the statement of income filed along with the return the assessee disclosed these receipts and deducted an amount of Rs. 1,92,098/- as expenses incurred to earn the income and arrived at the net income of Rs. 4,69,512/- The net income so arrived was claimed as not taxable but as exempt. The Assessing Officer rejected his claim as such and also disallowed of one said expenditure too. On appeal, the Commissioner of Income-tax (Appeals) granted relief to the assessee. in so far as the said disallowance of expenditure. yet, the instant appeal by the Revenue before us.
3. The learned counsel for the assessee submitted THAT: In order to claim fees in respect of cases where the assessee appeared as a Government Pleader copies of Judgments along with copies of grounds of appeal etc. are required to be obtained before preparation of separate bills in respect to each case. A lot of effort is required for obtaining the judgment copies grounds of appeal and the same has to be segregated from out of huge volumes of files and papers in various counts all over the State. The assessee has to necessarily entrust the matter to certain staff (SIC) to the office of the Govt. Pleader. They were assisting him while lie was working as a Government Pleader. He had to pay them salary or remuneration for this purpose. Persons who are put on the job of collection relevant copies of judgments and other particulars like group of appeal and value of the appeals, had to travel to Srisailam on number of occasions and stay there as majority of the appeal were filed by the Land Acquisition Officer, Srisailam Project in which the assessee had appeared. The assessee is not in a position to furnish complete details and vouchers in respect of the expenses of Rs. 1,92,098/-. For that reason it cannot be said that no expenditure has been incurred in processing the claim of the professional fees. The arrears of fees received by the assessee were not liable to tax in the hands of the assessee Without prejudice it is also submitted that in case of discontinuing business or profession while taxing receipt in terms of sec. 176(3A) or 176(4), the expenditure incurred in connection with the same has to be necessarily allowed as a deduction. If the professional receipts are not considered as non-taxable than the expenditure incurred by the assessee may be allowed. Reliance is placed on the decisions following:
(1) C.I.T. v. Justice R.M. D'atta (1989) 180 ITR 86 (Cal) (2) Justice Kuldip Singh v. ITO (1993 46 ITD 251 (Chandigarh) (3) United Construction Contractors v. CIT (1994) 208 ITR 914) (Ker.) (4)C.I.T. v. Foresole Ltd. (1985) 153 ITR 349 (Raj.) (5) ITO v. Dipson and Co. (49 ITD 125) (Del.)
4. On the other hand, the learned representative for the Revenue Countered by defending the order impugned besides highlighting page 3 of the assessment order and that the receipts were by cheque dated 21.11.1994 when the assessee's elevation was on 1.2.92 and the order of assessment is dated 30.3.1998 besides also relying upon the decision following:
Commissioner of Income-tax v. Transport Corporation of India Ltd. (2002) (256 ITR 701)(AP).
Hence the order impugned has to be set aside by restoring the order of assessment genuineness of the factum of payments having been not proved.
5. On the other hand, the learned counsel for the assessee replied by submitting that: The Assessing Officer grossly erred in making the disallowances without appreciating the submissions of the assessee and in the circumstances of the case. He ought to have approached that on the basis or the decision of the Chandigarh Bench of the Tribunal and of the Hon'ble Calcutta High Court, the assessee was not taxable with respect to the arrears of fees received by the assessee after the assessee became the sitting Judge of the High Court, Without prejudice, the assessee could not have earned income without incurring any expenditure thereon and therefore, the Assessing Officer ought not have disallowed the expenditure. He erred in stating that no data was filed. The Assessing Officer has not considered the material filed before her except to pass her order in a mechanical fashion. Hence on the facts and circumstances of the cawed, the Assessing Officer erred in not accepting the return of income field by the assessee and in making the additions to the returned income which has been correctly set right by the order impugned relying on the facts and circumstances of the case and in the light of six case-laws relied upon, more so in the light of paras 4 to 8 of the statement of facts before the Commissioner (Appeals) clearly throwing light on the issue in question in favour of the assessee.
6. The learned representative for the Revenue reiterated its stand by taking us through para 3(1) of the order impugned besides the relevant portions of the assessment order at the bottom of page 3 and in the first half of page 4 thereof.
7.1 Rival submissions heard and relevant orders read besides the case laws relied upon by both the parties. After doing so we are of the considered opinion that the stand of the assessee has substantial force that that of the Revenue for the reasons following.
7.2 Indeed and in fact the assessee before has no grievance again the order impugned holding that the Assessing Officer is justified in bringing to tax professional receipts received by the assessee by following the decision of the jurisdiction a high Court in the case of V. Parthasarathy v. Addl. CIT (103 ITR 508 (AP) ignoring the decision in the come of Roma Bose v. in 95 ITR 299 (Cal.) relied upon by the asaessee besides observing that the decision in the case of C.I.T. v. Justice R. Dutta (180 ITR 85 (Cal.) holding no taxability under sec. 176(4) of the Act has not also referred to or considered or dealt with the decision in the case of Roma Bose V. IIC (95 ITR 299 (Cal.) This aspect of the matter has not been challenged by the assessee the decision of the jurisdictional High Court being binding unlike the decisions of the other High Courts. At the same time, the light thrown by the decision of the Calcutta High Court though Pending on the main issue the decision of the jurisdiction High Court in the case of V. Parthasonthy v. (SIC) cannot be brushed aside lightly, being that has a persuasive value at least with reference to the (SIC) issue agitated by the assessee before us in this appeal pertaining to the allowance of the expenditure met out of the professional receipts, thus coming to the rescue of the assessee in this restricted sense Though the Revenue relied upon the decision of the jurisdictional High Court of C.I.T. v. Transport Corporation of India Ltd., we are of the opinion that the issue therein was for the secret commission unlike in the instant case where it pertains to professional receipts. Thus in our View of the matter, the decision in the case of C.I.T. v. Transport Corporation of India Ltd. rendered by the ASP. High Court is distinguishable. In the case of C.I.T. v. Foresole Ltd. (153 ITR 349 (Raj.) it has been held that in the case of disputes relating to business which was discontinued referred to arbitration and amount awarded to the assessee in a subsequent year out of the amount received the expenses relating to arbitration was held to be deductible and the Tribunal's decision allowing such deduction was thus sustained by the Hon'ble High Court. Further in the case of United Construction Contractors V. C.I.T. (208 ITR 914) the Hon'ble Kerala High Court similarly that in the case of discontinuance of a business the amount received thereafter though assessable, the expenditure incurred for earning the income was held to be deductible. Similarly in the case of Income-tax Officer v. Dipson & Co. (49 ITD 125) (Del.) it was held that where the assessee firm claimed expenditure incurred on engagement of lawyer for earning amount of arbitration award in respect of discontinued business for computing the assessee's income for the purpose of assessment, expenditure was necessarily to be excluded from the amount received and thus the assessee's claim had to be allowed, That apart it may also be appreciated when looking at the provisions of sec. 44AD to AF of the Act that they provided for assessing a particular percentage of receipt as income when the turnover is below a particular limit irrespective of the fact whether books of accounts are maintained. Further-more it may also be seen that our view supporting the stand of the assessee is also strengthened by the CBDT Instruction No. 1894 dated 16.6.92 which would be worthwhile to extract as hereunder:
"Section 255(2) of I.T. Act empowers the CSIT to authorise of appeals to the ITAT against the order of DCIT (Appeals)/ CIT(Appeals). The Board has from time to time issued instructions emphasising that the Commissioners should add selective approach in filing appeals before the ITAT and that such appeals should be authorised after careful scrutiny, so that frivolous appeals are not filed.
2. It is noticed that the Board's instructions are not being strictly followed and there are many instances of appeals being authorised without due care and scrutiny. It is, therefore, retried that the CSIT should authorise appeals only where there is proper justification and for this purpose, should examine in detail the issues arising out of the orders of DCIT (Appeals)/CIT (Appeals), especially on points of fact. Board's instructions No. 1493 (F.No. 279/189/82-ITS dated 18-11-82) providing that orders of the CIT (Appeals) on questions of fact should be accepted by the Commissioners unless the findings are otherwise, should be strictly adhered to and the monetary limits provided for by F.No. 279/26/83-ITJ) dated 6-4-85 should also be followed.
3. the CCs IT/DGs IT should review monthly all appeals before the ITAT filed on questions of fact as well as at least 10% of the remaining appeals. This scrutiny may be completed within the succeeding month and if any appeals are found to be not justified, they may be withdrawn and the matter reported to the Board. A quarterly report of the review carried out by the CCs IT/ DOsIT may be submitted in statistical form to the Board by the end of the following month."
7.3 The aforesaid instruction of the CBDT is binding on the Department in the even of which the order of the Commissioner (Appeals) impugned before (SIC) has necessarily to be maintained in view of the fact that as stated by the aforesaid instruction of the CBDT the order of the Commissioner (Appeals) in the instant case Transferred to be accepted by the Department since as stated by the aforesaid instruction it is a question of fact and that the finding of the Commissioner (Appeals) are also not perverse. Therefore, as prescribed in the instruction, the order of the Commissioner of Income-tax (Appeals) should have been strictly adhered to and followed but not questioned. Our View that the CBDT's instruction has got binding effect on the Department is also strengthened by the decision of the jurisdictional High Court not only in the case of T.V. Ramanaiah and Sons reported in 157 ITR 300 (ASP.) but also by the decision of the Apex Court in the case of Collector of Central Excise v. Usha Martin Industries Ltd. reported in (1977) 7 Supreme Court Cases 47. The relevant portion of the Supreme Court's decision is worthwhile to be extracted as hereunder:
"21. Through a catena of decisions this Court has pronounced that the Revenue cannot be permitted to take a stand contrary to the instructions issued by the Board. It is a different matter that an assesses can contest the validity or legality of a departmental instruction. But that right cannot be conceded to the Department, more so when others have acted according to such instructions, (Vide CCE v. Jayant Dalal. (P) Ltd. (1997) 10 SCC 402: (1996) ELT 638, Ranadey Micro- nutrients v. CCE; (1996)m 10 SCC 387; (1996) 87 ELT 19; Oiykise abd Mathen v. CCE; (1997) 3 SCC 50; (1997) 90 ELT 264) 9 SCC 663; (1996) 86 ELT 449. of course the appellate authority is also not bound by the interpretation given by the Board but the assessing officer cannot take a view contrary to the Board's interpretation."
Similarly, it will also be further worthwhile to extract from the decision of the jurisdictional High Court in the case of T.V. Ramanaiah and Sons (157 ITR 300);
"Whenever instructions given by the Central Board of Direct Taxes to relieve hardship to an assessee are violated and if such instructions are issued in exercise of the powers Vested in the Central Board of Direct Taxes under Section 119 of the Act, it is Certainly open to the Court to compel the Income-tax Officer to follow the instructions of the Central Board of Direct Taxes. This is not so that this Court is bound by the instructions of the Central Board of Direct Taxes. All that it required to be said is that so far as the officials of Income-tax Department are concerned, it is not open to them to say that they would not follow the instructions of the Central Board of Direct Taxes and carry matters in appeals and references."
7.4 Before parting with we would also like to observe that it is not in consonance with decency to pass adverse observations by the Assessing Officer against the sitting constitutional functionary in her assessment order to state that the assessee was precluded from adducing any evidence before any appellate authority and further more to attribute that the assessee's claim is false. At best the claim could have been attributed of at all as wrong and not as false, the latter word carrying heavy meaning. Unless deliberate intention of original nature is found out by the Department such kind of words as "false" cannot be attributed especially against a constitutional functionary and further irrespective of the status of any assessee bearing in mind that the assessees are the payers-payers on account of which the Govt. is able to run itself It is a different matter that the assessee was not able to adduce any evidence relating to the expenditure inspite of sufficient time having been given. This cannot also be the basis for the Assessing Officer to give a finding to preclude the assessee from adducing any evidence before any appellate authority for which he has no business to say so as no authority has any right to lay down such finding
9. In the result, the appeal of the Revenue is dismissed hereby.