Income Tax Appellate Tribunal - Agra
Gopilal Khatri, Gwalior vs Assessee on 22 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 398/Agra/2011
Asstt. Year : 2001-02
Gopilal Khatri, vs. Income-tax Officer,
S/o Shri P.R. Khatri, Ward 2(2), Gwalior.
J-18, City Centre No. 1,
Gwalior.
(PAN: ADJPK 8300 R)
(Appellant) (Respondent)
Appellant by : S/Sri Rajendra Sharma & Manuj Sharma, Adv.
Respondent by : Shri K.K. Mishra, Jr. D.R.
Date of hearing : 22.04.2013
Date of pronouncement of order : 03.05.2013
ORDER
Per Bhavnesh Saini, J.M.:
This appeal by the assessee is directed against the order of the ld. CIT(A), Gwalior dated 07.10.2011 for the assessment year 2001-02.
2. This appeal was earlier dismissed in default by order dated 30.04.2012. The assessee moved M.A. No. 33/Agra/2012 explaining the reasons for non-appearance on the date of hearing. The MA of the assessee has been allowed and earlier order was recalled and the appeal of the assessee was re-fixed for hearing on merits. 2 ITA No.398/Agra/2011
3. We have heard the ld. representatives of both the parties, perused the findings of the authorities below and considered the material available on record.
4. The assessee on ground No. 1 challenged the order of the ld. CIT(A) in upholding the proceedings u/s. 147/148 of the IT Act. The assessee is a Development Officer in LIC. As per his return filed on 31.07.2001, declaring income from salary, house property and other sources, which has been processed on returned income, the assessee has claimed standard deduction of Rs.20,000/-. Further, on incentive bonus of Rs.2,92,655/-, expenses of Rs.1,17,062/- has also been claimed. Since as per decision of jurisdictional M.P. High Court given in case of CIT vs. A.K. Ghosh & Others, 263 ITR 536, the assessee is not entitled to claim expenses in respect of incentive bonus earned during the year, therefore, notice u/s. 148 has been issued on 19.07.2005 by the A.O. by recording the reasons as under :
"Assessee filed return of income for A.Y. 2001-02 declaring total income of Rs.4,17,210/- which was processed on 14.02.2003 granting a refund of Rs.58,721/- to assessee. Perusal of returns reveals that the assessee is a development officer in LIC wherefrom he has received an incentive bonus amounting Rs.2,92,655/-. However, out of this amount of Rs.2,92,655/- assessee has claimed expenses amounting Rs.1,42,333/-. Since the assessee is development officer, hence in view of M.P. High Court's judgment in the case of A.K. Ghosh ;vs. CIT reported in 263 ITR 536, deduction availed by the assessee is not allowable.
Similarly assessee's salary income is above Rs.5 lakhs including incentive bonus. Standard deduction availed by assessee 3 ITA No.398/Agra/2011 amounting Rs.20,000/- is not allowable in view of section 16(1) of Income Tax Act, 1961.
I have, therefore, reason to believe that by reason of omission or failure on the part of the assessee by not disclosing the full and true facts of the case, income of assessee has escaped Rs.1,62,333/-. Issue therefore notice u/s. 148."
4.1 The ld. CIT(A) confirmed the reopening of assessment. His findings in para 2.2 of the impugned order are reproduced as under :
"2.2. Appellant's submissions regarding objection to issue of notice u/s. 148 being based on a decision of a High Court rendered subsequently and not pertaining to the asstt. Year under consideration have been considered carefully. Information received by the A.O. subsequent to the original assessment as to law having a bearing on the assessment and indicating its escapement will justify initiation of reassessment proceedings. It has been held by various Courts that subsequent retrospective legislation, decisions of the Supreme Court and High Court, decisions of the Appellate Tribunal can be relied upon as constituting information leading the AO to have reason to believe that income has escaped assessment. Further, the bar of change of opinion cannot arise where there have earlier been no proceedings of assessment in respect of amount in question [Raj Bahadur Bhatnagar vs. CIT (1995) 98 ITR 382 (All.). The question of change of opinion would arise only when an opinion has already been expressed on materials on record. In the appellant's case return filed by him has been processed only and no order u/s. 143(3)/147 been made. On the basis of similar facts, where a Development Officer of LIC has claimed deduction on incentive bonus and additional conveyance allowance and the concerned AO has initiated proceedings for reassessment on the basis of decision of Hon'ble Punjab & Haryana High Court in case of B.M. Parmar, Development Officer, LIC vs. CIT (1999) 235 ITR 679 (P&H), holding that the assessee's case is to be governed by the head salary, reassessment proceedings have been upheld by Hon'ble Punjab & Haryana High Court in case of Ramesh Chander Singla vs. CIT(Appeals) and another (2011) 330 ITR 288 (P&H). In the case mentioned above, the 4 ITA No.398/Agra/2011 Hon'ble High Court has held that the decision of jurisdictional High Court is binding on the AO and is the law for the AO working under the jurisdiction of P&H. It was this knowledge and information which lead to the formation of the belief of the AO that the income of the assessee has been under assessed and so as per Explanation 2(c)(i) of sec. 147 of the I.T. Act, the income of the appellant has escaped assessment and the assessment reopened by the AO and the additions made by framing the assessment u/s. 147 read with section 143(3) was valid and legal. Further, issuance of notice u/s. 147 could not be challenged on the ground that the original assessment was not made u/s. 143(3) of the Act. Respectfully following the decision of Hon'ble Punjab & Haryana High Court, (2011) 330 ITR 288 and on the basis of facts, this ground of appellant is, hereby dismissed."
5. The ld. counsel for the assessee submitted that in this case, original return was processed u/s. 143(1) and the assessee declared all the particulars. Since the assessee has declared all the particulars in the return of income, therefore, reopening of assessment on mere change of opinion is not justified. He has relied upon the following decisions :
(i). ACIT vs. ICICI Securities, 253 CTR 305 (SC)
(ii). Dinesh Kumar Gordhandas vs. CIT, 140 ITR 211 (M.P.)
(iii). Star Automobiles vs. ITO, 178 ITR 613 (MP)
(iv). CIT vs. Corporation Bank Ltd., 254 ITR 791 (SC)
(v). CIT vs. Ram Lal Manohar Lal, 158 ITR 9 (Del.)
(vi). Addl. CIT vs. Ganeshi Lal Lal Chand, 154 ITR 275 (Raj.).
The ld. DR, on the other hand, relied upon the orders of the authorities below.
6. The AO reopened the assessment on the reasons reproduced above. The assessee has claimed deduction out of incentive bonus in a sum of Rs.1,17,062/-. 5 ITA No.398/Agra/2011 Hon'ble M.P. High Court in the case of CIT vs. A.K. Ghosh (supra) has held that incentive bonus received by the Development Officer, LIC constitutes salary and no deduction is allowable. The said decision was rendered on 05.05.2003. The reasons for reopening were recorded on 19.07.2005. The reasons are, therefore, based on the decision of jurisdictional High Court, which is binding on the AO. Hon'ble Madras High Court in the case of CIT vs. Devi Marine Food Exports Pvt. Ltd., 254 ITR 484 held that the decision of High Court constitutes information. There is no dispute about the fact that the reopening was done within time allowed by law. Further, according to section 16(1) of the IT Act, which was relevant to the assessment year under appeal, deduction of Rs.20,000/- would be allowed as standard deduction if the salary does not exceed five lakhs of rupees. It is admitted fact that in the case of assessee, as per salary certificate also, total salary of the assessee was more than Rs.5,00,000/-. Therefore, standard deduction of Rs.20,000/- was not allowable u/s. 16(1) of the IT Act. The AO in the reasons for reopening of assessment has taken both these grounds and was having reasons to believe that there is escapement of income. Since in this case, no order u/s. 143(3) was passed earlier, therefore, there is no question of any change of opinion on the part of the AO because the return was merely processed u/s. 143(1) of the IT Act. No opinion has been expressed by the AO on merits. The decision relied upon by the ld. CIT(A) of Hon'ble Punjab & Haryana High Court in the case of Ramesh 6 ITA No.398/Agra/2011 Chander Singla vs. CIT, 330 ITR 288 squarely apply in favour of the Revenue and against the assessee. Considering the facts of the case in the light of above decision, we do not find any justification to take a contrary view. The decisions cited by the ld. counsel for the assessee are clearly distinguishable on facts. Reopening of assessment is, therefore, justified in the matter. Ground No. 1 of the appeal of the assessee has no merit and is accordingly dismissed.
7. On ground No.2, the assessee challenged the addition of Rs.1,78,603/- on account of deduction claimed for conveyance allowance and addl. Conveyance allowance. The assessee claimed deduction u/s. 10(14) of the IT Act before the AO, which was not allowed. The AO was of the view that the claim of assessee is acceptable to the extent of actual expenditure incurred by the assessee. No vouchers have been produced for verification. As such, conveyance allowance as already claimed at Rs. 61,433/- is allowed. It was submitted before the ld. CIT(A) that conveyance expenses of Rs.2,03,766/- have been expended out of which Rs.61,433/- pertains to normal duties whereas balance of Rs.1,42,333/- has been incurred to earn the declared incentive bonus. LIC has admitted and paid conveyance expenses of Rs.1,78,495/- (Rs.61,433/- + 1,17,062/-). As per decision in the case of A.K. Ghosh (supra), the conveyance and additional conveyance allowance is exempt u/s. 10(14) of the IT Act. The ld. CIT(A), however, did not 7 ITA No.398/Agra/2011 accept the contention of the assessee. According to the salary certificate, the LIC has mentioned that amount of Rs.61,433/- has been paid to the assessee to meet out the expenses wholly, necessarily and exclusively incurred for the purpose of development duties and have been actually incurred for that purpose and as such, the same are exempt u/s. 10(14) of the IT Act. The ld. CIT(A) found that, however, while filing the return of income, the assessee declared income from salary and allowances at Rs.3,42,650/- whereas incentive bonus of Rs.2,92,655/- has been shown under the head income from other sources. The assessee claimed expenses of Rs.1,42,333/- to earn the incentive bonus and part of the same was disallowed in a sum of Rs.25,271/- in view of the decision of Kerala Hgh Court in the case of CIT vs. Sudhakaran Nair. Since incentive bonus is part of salary as per decision of M.P. High Court in case of A.K. Ghosh (supra), therefore, there is no question of allowing deduction. The ld. CIT(A) further found that exemption u/s. 10(14) in respect of conveyance allowance and additional conveyance allowance has already been allowed of Rs.61,433/- as per salary certificate and, therefore, no deduction is admissible in favour of the assessee. This ground was accordingly rejected.
8. The ld. counsel for the assessee reiterated the submissions made before the authorities below. On the other hand, the ld. DR relied upon the orders of the authorities below.
8 ITA No.398/Agra/2011
9. On consideration of the rival submissions, we do not find any justification to interfere with the order of the ld. CIT(A) in confirming the addition. ITAT, Agra Bench in the case of Dinesh Kumar Gupta vs. ACIT in ITA No. 77/Agra/2011 vide order dated 23.08.2012, considering the provisions of section 10(14) of the IT Act, dismissed the appeal of the assessee. The findings of the Tribunal in para No. 5 and 5.1 of the order are reproduced as under :
"5. We have considered the rival submissions and do not find any merit in both the grounds of appeal of the assessee. Section 10(14)(i) of the IT Act provides as under :
"(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office or employment of profit as may be prescribed, to the extent to which such expenses are actually incurred for that purpose."
It is admitted fact that the assessee has not produced any evidence before the authorities below that the expenses wholly, necessarily and exclusively were incurred on conveyance in performance of duties of an office or employment. Thus, the assessee failed to prove the necessary ingredients of section 10(14)(i) of the Act. The ld. CIT(A) very elaborately discussed this issue in the impugned order and also considering the decision of Hon'ble Rajasthan High Court in the case of LIC of India vs. Union of India, 260 ITR 41 rightly held that the assessee would be entitled for deduction if the amounts were actually incurred in performance of duties. However, no evidences were furnished before the authorities below to satisfy the conditions of the above provisions and even no certificate from the employer, i.e., LIC, was furnished to certify if the assessee spent any amount in 9 ITA No.398/Agra/2011 performance of his duties. Therefore, it was very clear on record that the assessee did not adduce any evidence to prove that any expenses were incurred in performance of duties. Therefore, the ld. CIT(A) rightly rejected the claim of the assessee. The assessee's counsel relied upon unreported decision of Agra Bench in the case of Ashok Kumar Sharma (supra) in which no reasons have been given as to why deduction was restricted to 20% on the issue. In the absence of any evidence on record, the assessee would not be entitled for any deduction on this issue. Further, the Hon'ble Allahabad High Court in the case of CIT vs. Ramesh Chand Agarwal , 286 ITR 566 held -
"Incentive bonus received by Development Officer of LIC forms part of salary and expenditure incurred over and above standard deduction under s. 16(i) for earning that income is not allowable deduction."
5.1 In view of the above discussion and following the decision of Hon'ble Allahabad High court, we do not find any merit in ground No. 1 of assessee's appeal. The same is accordingly dismissed." 9.1 It is admitted fact that the assessee did not produce any vouchers for claiming the expenses on account of conveyance and addl. Conveyance allowances. According to the salary certificate, LIC has specifically mentioned that the amount of Rs.61,433/- has been paid to the employee to meet the expenses wholly, necessarily and exclusively incurred for performing the development duties and have been actually incurred wholly for that purpose and is exempt u/s. 10(14) of the IT Act. The assessee, however, in the return of income claimed deduction of excessive amount of Rs.1,17,062/- for earning incentive bonus. As per decision in the case of A.K. Ghosh (supra), since the incentive bonus is part of the salary, therefore, no further deduction is permissible. The assessee has not 10 ITA No.398/Agra/2011 produced any other evidence before the AO and ld. CIT(A) to prove necessary ingredients of Rs.10(14) that the amount now claimed as deduction was actually incurred for that purpose. In the absence of any evidence produced before the authorities below, the assessee has failed to prove necessary ingredients of Sec. 10(14)(i) of the IT Act. The ld. CIT(A) was, therefore, justified in rejecting the claim of the assessee. This ground of appeal of the assessee is, accordingly, dismissed.
10. On ground No.3, the assessee claimed standard deduction of Rs.20,000/- u/s. 16(1) of the IT Act. The claim of standard deduction was not allowed by the AO because the salary exceeded to Rs.5,00,000/-. The assessee did not raise any ground before CIT(A) on this issue. Therefore, this issue was not considered in favour of the assessee. Admittedly, the total salary of assessee as per salary certificate is more than Rs.5,00,000/-, therefore, standard deduction u/s. 16(1) as was applicable to assessment year under appeal, is not permissible to the assessee. Further, this ground was not raised before the ld. CIT(A). Therefore, this ground of appeal of the assessee is rejected.
11 ITA No.398/Agra/2011
11. On ground No.4, the assessee challenged charging of interest u/s. 234D of the IT Act, which has not been argued by the ld. counsel for the assessee. The same is, therefore, dismissed.
12. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy