Income Tax Appellate Tribunal - Madras
R. Kedarnath vs Income-Tax Officer on 10 June, 1991
Equivalent citations: [1991]38ITD574(MAD)
ORDER
A. Satyanarayana, Accountant Member
1. These appeals filed by the assessee are against the common order of the Commissioner of Income-tax dated 31-1-1989 passed under Section 263 of the Income-tax Act, 1961 for the Assessment years 1986-8.7 to 1988-89.
2. On a perusal of the Income-tax records of the assessee for the assessment years under consideration the Commissioner noticed that while completing the assessments, the ITO had allowed a deduction of Rs. 10,000 each for the assessment years 1986-87 to 1987-88 and Rs, 15,000 for the assessment year 1988-89 under Section 80U of the Income-tax Act, 1961 as claimed by the assessee. He was of the opinion that deduction under Section 80-U was not allowable for those assessment years "since the conditions laid down in Section 80-U were not fulfilled". Accordingly notice under Section 263 dated 17-1-1989 was issued to the assessee, proposing to revise, modify or cancel the assessment orders for making fresh assessment in accordance with law. Before the Commissioner the assessee himself was present.
3. According to the Commissioner, it was explained to the assessee that his earnings had increased over the years from Rs. 31,950 in the assessment year 1982-83 to Rs. 55,390 in the assessment year 1988-89 and further that he was the General Manager of the company where he was employed, though he was the Deputy General Manager earlier and, therefore, the disability suffered by him could not be said to have had the effect of reducing substantially his capacity to engage himself in a gainful employment, as laid down in Sub-section.(ii) of Section 80-U(1). On being pointed out so, the assessee only replied stating that considering his disability a lenient view may be taken and the deductions under Section 80-U granted to him may not be withdrawn. The Commissioner observed that though the assessee has no doubt permanent physical disability of left hand of more than 50% as per the medical certificate produced, the said physical disability had not affected in any way his capacity to engage himself in a gainful employment in view of the increase in the earnings over the assessment years 1982-83 to 1988-89. The details of the total incomes in the said assessment years 1982-83 to 1988-89 are given in the order under Section 263. He, therefore, held that the assessee was incorrectly granted the benefit of deduction under Section 80-U, in the assessments under consideration. Accordingly he directed the ITO to revise and modify the assessments by withdrawing the deduction under Section 80U and raise additional tax demand. Aggrieved by the order of the Commissioner under Section 263, the assessee preferred the present appeals before the Tribunal.
4. At the time of hearing, the assessee's counsel filed a paper book of 23 pages, notice of demand for the assessment year 1985-86 dated 6-11-1985 showing total income assessed at Rs. 8,730 and copy of the Tribunal's order dated 28-7-1989 for the assessment years 1986-87 to 1988-89 in the case of V. N. Gopal in [IT Appeal Nos. 1226 to 1228 (Mad.) of 1989]. The arguments of the assessee's counsel were to the following effect. In the course of assessment proceedings for the assessment year 1985-86 the assessee had filed a certificate dated 5-11-1985 from Dr. S.P. Prabhakar, Madras. In the said certificate the Doctor certified that the assessee had got a total permanent disability of left-hand of more than 50% as a result of major crush injury. Earlier, for the assessment year 1982-83 the assessee had filed another medical certificate dated 28-4-1982 from Dr. R. Venkateswaran, Plastic Surgeon based on which deduction under Section SOU was granted. On the basis of the medical certificate dated 5-11-1985 the assessee was granted deduction under Section 80U in the assessment years under consideration. In similar circumstances, in the case of Sri V. N. Gopal (supra) the Tribunal had held, when that assessee suffered a permanent physical disability in both his legs of more than 60% and when he had produced a Doctor's certificate, the question of the assessee further establishing the fact that the disability had impaired his capacity for gainful employment did not arise for consideration. In that view, the Tribunal set aside the orders of the Commissioner under Section 263 in that case. Reliance is placed on the said decision of the Tribunal dated 28-7-1989. In the circumstances, the Tribunal should also set aside the impugned orders of the Commissioner under Section 263 in the present assessee's case. The Departmental Representative supported the order of the Commissioner.
5. I have considered the matter and perused the papers filed before me. The Commissioner had issued the show-cause notice dated 17-1-1989 under Section 263 reading as under:
Revision under Section 263 - Assessment years 1986-87 to 1988-89 - Your own -Reg.
On a perusal of your income-tax records, it is ascertained that the assessments completed in your case for the assessment years 1986-87 to 1988-89 are erroneous and prejudicial to the interests of the revenue due to the following reasons : .
2. While completing the assessment, the Income-tax Officer has allowed a deduction of Rs. 10,000 each for the assessment years 1986-87 and 1987-88 and Rs. 15,000 for the assessment year 1988-89 under Section SOU as claimed by you. Since the conditions laid down under Section 80U are not fulfilled, deduction under Section 80U is not allowable for all these assessment years.
3. I, therefore, propose to revise, modify or cancel the order of the ITO for the assessment years 1987-88 to 1988-89 under the powers vested in me under Section 263 of the Income-tax Act, 1961 for making fresh assessments in accordance with law.
4. You are hereby given an opportunity of being heard at my office at No. 121 Nungambakkam High Road, Madras-34, on 31-1-1989 at 12 Noon when you can appear either in person or through a duly authorised representative.
5. If you do not wish to be heard, you may. file your objections, if any, against the proposed revision which will be duly considered before passing of an order.
However, in the order dated 31-1-1989 passed under Section 263, the Commissioner had considered the increase in the earnings of the assessee from Rs. 31,950 in the assessment year 1982-83 to Rs. 55,390 in the assessment year 1988-89 as under :
Assessment Salary Commission Bonus Total year Rs. Rs. Rs. Rs.
1982-83 22950 7200 1800 31950 1983-84 24750 8775 1800 35325 1984-85 26550 9450 1800 37800 1985-86 28350 10125 1800 40275 1986-87 30400 10800 2840 45040 1987-88 33900 12600 3840 50340 1988-89 37600 13950 3840 55390
The Commissioner held that though the assessee had permanent physical disability of left hand of more than 50% the same had not affected in any way his capacity to engage himself in a gainful employment and that his earnings had increased over the years. He also stated that the assessee had been elevated by his employer to the rank of General Manager from the post of Dy. General Manager earlier. Thus it would be seen that the non-mentioning in the show-cause notice dated 17-1-1989 by the Commissioner for invoking the provisions of Section 263 of the ground used by him in his order under Section 263 entails his order to be invalid as principles of natural justice were not observed. In similar circumstances, the Calcutta High Court in the case of CIT v. General Trade Agencies [1973] Tax LR 1383 held that the order under Section 263 cannot be sustained by observing as under :
Where the show-cause notice did not fairly indicate the grounds used by the Commissioner in his order under Section 263, it was held that the assessee was deprived of fair opportunity to show cause against proposed action. In such a case, the revisional order of the Commissioner cannot be sustained.
6. I, therefore, cannot sustain the impugned order of the Commissioner. Accordingly, I annul the same.
7. Even on merits, the assessee has to succeed for the following reasons : According to Section 80U(1)(ii) and Clause (b) to the proviso to the said Section, if the assessee suffers from a permanent physical disability, which has the effect of reducing substantially his capacity to engage in a gainful employment or occupation, he is entitled to the deduction as provided therein, provided the assessee produces before the ITO a certificate as to the permanent disability from a Registered Medical Practitioner (R.M.P). For availing the deduction under Section 80U, the production of the medical certificate is essential. The assessee need not do anything beyond that. The question of the assessee further establishing the fact that the disability has substantially impaired his capacity for gainful employment does not arise at all. Further, whether the permanent disability of the assessee had the effect of reducing substantially his capacity to engage in a gainful employment or occupation is not for the ITO or the Commissioner concerned to decide. It is not a requirement under Section 80U. The subjective satisfaction of the ITO or the Commissioner concerned is totally irrelevant. If the subjective satisfaction of the concerned officer was intended by the legislature, it would have been so provided as in Section 271(1) wherein the words used are "if the ITO...in the course of any proceedings under the Act, is satisfied that any person...". The underlying intention of the certificate from the R.M.P. under Section 80U is that the Doctor should satisfy himself hat because of the permanent physical disability, the assessee's capacity to engage in gainful employment or occupation has been substantially reduced. Further, the substantial reduction in the assessee's capacity to engage in a gainful employment because of the. permanent physical disability cannot be gauged by a mere comparison of incomes over a number of years. In this particular case, had the assessee not been affected by this permanent physical disability, he would have got abetter employment or occupation and he would have earned double or triple of the incomes he had actually earned during the years under consideration. In view of these facts and circumstances of the case, I hold that the Commissioner is not justified in assuming lawful jurisdiction under Section 263 and in directing the Assessing Officer to modify the assessments by withdrawing deduction already allowed under Section 80U in the assessment years under consideration. Accordingly I annul the impugned order of the Commissioner passed under Section 263.
8. In the result, the appeals are allowed.