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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-III, Rajkot dated 19/12/2013 ( in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dt. 16/12/2011 relevant to the Assessment Year 2008-2009.
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The assessee has raised the following grounds of appeal: 1. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 28,042/- in respect of fixed conveyance allowance. The same needs deletion. 2. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 50,000/- treating the same as unexplained expenses towards house hold expenses out of Rs. 1,00,0007- added by the Ld. A.O. The same needs deletion. 3. The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 77,352/- in respect of profit from trading in shares. The same needs deletion. 4.1 The Ld. CIT(A) erred in law as well as on facts in confirming an amount of Rs. 1,39,217/- in respect of expenditure out of incentive bonus. The same needs deletion. 4.2. The Ld. CIT(A) erred in law as well as on facts in not considering that the incentive bonus was allowed as deduction as expenses following the guidelines issued by the Hon. Gujarat High Court in the case of Kiranbhai H. Shelat 235 ITR 635. The claim needs to be allowed. 4.3. Without prejudice, the claim of the assessee confirmed by the Ld. CIT(A) is allowable as per C.B.D.T' direction. 4.4 Without prejudice, the claim of the assessee confirmed by the Ld. CIT(A) is allowable as per Hon. Supreme Court decision in the case of Shri N.T. Bhuptani. The disallowance needs deletion.
Taking into consideration legal, statutory, factual and administrative aspects no disallowance 7 additions ought to have been confirmed as stated above in respect of grounds mention that Sr. No. 1 to 4. The same needs cancellation. 6. The Ld. CIT(A) erred in law as well as on facts in not allowing deduction claimed at U/s. 80G. The same needs deletion. 7. Without prejudice, the assessment proceedings are bad in law deserves annulment. 8. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while framing assessment. The assessment needs annulment. 9. Without prejudice, the assessment made being illegal, void, bad in law and against statutory provisions, needs annulment.
The appellant craves leave to add/alter/amend and/or substitute any or all grounds of appeal before the actual hearing takes place.
The 1st issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for Rs. 28,042 out of the fixed conveyance allowance of Rs. 40,060.00
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Pertinent facts of the case are that the assessee is a development officer working with life insurance Corporation of India. The assessee from the LIC has received fixed conveyance allowance of Rs. 40,060.00 which was claimed as deduction under the provisions of section 10(14) of the Act. However the assessee during the assessment proceedings could not furnish the documents evidencing that he has incurred expenses out of such fixed conveyance allowance. Thus the AO in the absence of documentary evidence treated 30% of fixed conveyance allowance as an expenditure incurred in performing the official duty. Hence the AO disallowed the claim of the assessee for the balance amount of Rs. 28,042.00 being 70% of fixed conveyance allowance and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The issue in the present case relates to the disallowance of the expenses for Rs. 28,042.00 on account of non-availability of the supporting evidences. The view taken by the AO was subsequently confirmed by the learned CIT-A.
6.1 The learned AR at the time of hearing has not made any representation in the written submission filed before us. As there was no representation from
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the side of the learned AR for the assessee qua the disallowances made by the authorities below against the fixed conveyance allowance received by the assessee from LIC, we do not find any infirmity in the order of the authorities below. Indeed, the onus lies on the assessee to furnish the details of the expenses incurred by him against the fixed conveyance allowance received from LIC. Hence, in the absence of the documentary evidence, the ground of appeal of the assessee is dismissed.
The 2nd issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by sustaining the addition of ₹ 50,000.00 on account of unexplained household expenses.
The AO during the assessment proceedings observed that there should be cash outflow in the year under consideration of the assessee for ₹ 3,25,328.00 only. The details of such outflow of cash stands as under:
Cash outgoing of the assessee throughout the relevant year 1. Expenses for allowances Rs.1,79,2877/- 2. Cash deposited in Axis Bank Rs.22,000/- 3. Donation in cash Rs.4,051/- 4. Household expenses Rs.1,20,000/- Total Rs.3,25,328/-
8.1 However, the AO found that all the incomes of the assessee were directly deposited in his bank account and there was no income in cash of the assessee. But the assessee in the year under consideration has withdrawn the sum of Rs. 2,18,000.00 only from his axis bank account. Thus the AO observed the deficiency of cash for ₹ 1,07,382.00 only. On question by the AO about such deficiency of cash, the assessee failed to make any reply. Accordingly the AO treated the sum of ₹ 1,07,382.00 as unexplained income from the undisclosed sources. However, the AO finally made the addition of ₹1 lakh to the total income of the assessee.
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Aggrieved assessee preferred an appeal to the learned CIT (A) who partly allowed relief to the assessee by observing as under: 5. The assessing officer has made an addition of Rs. 1,00.000/- on account of unexplained expenses towards household. The assessing officer has quantified an amount of Rs. 3,25,382/- is required to meet the payments towards housing loan instalments, donation, investments in mutual fund, PPF, Bank deposits and household expenditure. As against this, he found that the assesses has sources to the extent of Rs. 2,18,000/- by way of withdrawals from the bank account. However, the assessing officer did not consider the cash in hand by way of past savings, looking at the financial back ground of the appellant. The appellant has filed return of income for assessment year under consideration declaring total income of Rs. 5,88,170/-. If the cash on hand out of past savings is taken into consideration, the addition made at Rs. 1,00,000/- is on a higher side. I therefore, direct the assessing officer to restrict this addition to Rs. 50,000/-. This ground of appeal is partly allowed.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us filed written submissions which are available on record. The learned AR in the written submission contended that the addition of Rs. 1 lacs has been made by the AO without any tangible materials. Therefore the same needs to be deleted.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the AO has made the addition for ₹1 lakh on account of low household expenses. The AO was of the view that the assessee is high ranked employee and to maintain his status according to the income he should have incurred monthly household expenses for ₹ 10,000.00. Accordingly, the AO made the addition to the tune of ₹1 lakh on account of household expenses. However, the learned CIT (A) restricted the addition to the tune of ₹ 50,000.00.
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12.1 From the preceding discussion, we note that the AO has made the addition on the basis of the guesswork. In fact, the AO has not brought anything on record about the actual expenses incurred by the assessee with respect to the telephone, mobile, electricity, education of his daughter etc. it is the settled law that there cannot be any addition based on guess work despite how strong the guesswork is. In the case on hand, the reasoning given by the AO for making the impugned addition appears to be strong and reasonable but the same is not supported on the basis of documentary evidence. Therefore we are of the view that no such addition is warranted in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed.
The next issue raised by the assessee is that the learned CIT (A) erred in confirming the profit of Rs. 77,352.00 with respect to share trading activities.
The assessee in the year under consideration has carried out certain transactions of purchase and sales of shares. However the assessee has not disclosed the same in the income tax return. Accordingly, the assessee on question by the AO has submitted vide letter dated 15 December 2011 that he has earned a profit of ₹ 33,138 on the trading of shares. The assessee in support of his claim produced the working sheet showing the impugned amount of profit.
14.1 However, the AO during the assessment proceedings observed certain discrepancies except with respect to certain shares, in the amount of profit shown by the assessee in his working sheet. These discrepancies are categorized as under:
Table A The assessee in table A has shown a profit of Rs. 23,851 in trading of shares with respect to certain number of companies which was accepted by the AO as correct. Table B
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The assessee in table B has shown a profit of ₹ 76 in trading of 22 shares with respect to one company namely M/s Dhanustech. However, the AO noticed that the assessee has claimed inflated cost of acquisition of the shares by ₹ 25 per share. Accordingly the AO re-determined the profit at ₹ 6,26 only with respect to the trading of shares in the company as discussed above.
Table C The assessee in table C has shown the profit of ₹ 32,670.00 in the trading of shares of certain number of companies. However the assessee has not furnished the cost of acquisition of the shares of these companies. Accordingly, the AO, in the absence of information about the cost of acquisition of the shares, has reduced the cost of shares as shown by the assessee by 10%. Thus the AO re- determined the profit of Rs. 41,790 against the profit disclosed by the assessee as discussed above.
Table D The assessee has sold shares of the certain companies which were not disclosed in the working sheet submitted by him during the assessment proceedings. The AO worked out the sale price of the shares of these companies at Rs. 38,445.00 and determined the profit at ₹ 11,635.00 being 30.25% of the sale price of the shares as the assessee has not furnished the cost of acquisition of these shares.
In view of the above the AO determined the profit of the assessee from the share trading activities for ₹ 77,352.00 only which was not disclosed by the assessee in the income tax return. Accordingly the AO added the impugned amount of profit to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing as under: 4. As regards to the addition of Rs. 77,352/-- on account of undisclosed profit from trading in shares, the assessing officer has discussed this aspect in detail from paragraph 8.1 to 8.9 of the assessment order passed. The assessing officer has tabulated the profits
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accrued / arisen on sale of shares in Table-A, Table-B, Table-C and Table-D in the assessment order passed. The authorized representative could not give any credible explanation in support of the ground raised pertaining to this addition. Thus, the addition made at Rs.77,352/- on account of profit in trading of shares stands confirmed. This ground of appeal is dismissed.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The issue in the present case relates to the addition of the profit earned by the assessee for share trading transactions which was not disclosed in the income tax returns. The assessee before the AO has not produced any documentary evidence, therefore the addition was made for Rs. 77,352.00 only. The view taken by the AO was subsequently confirmed by the learned CIT-A.
17.1 The learned AR at the time of hearing has not made any representation in the written submission filed before us. As there was no representation from the side of the learned AR for the assessee qua the addition made by the authorities below against the share trading transactions, we do not find any infirmity in the order of the authorities below. Indeed, the onus lies on the assessee to furnish the details of the profit earned by him against the share trading transactions. Hence, in the absence of the documentary evidence, the ground of appeal of the assessee is dismissed.
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The issue raised by the assessee in ground No. 4 is that the learned CIT (A) erred in confirming the disallowance of ₹13,92,174/- for the expenditures incurred against the incentive bonus.
The assessee in the year under consideration has received the incentive bonus of ₹ 4,64,056/- from the LIC of India. The assessee against such incentive bonus has claimed deduction of ₹ 1,39,217/- being 30 percent of Rs. 4,64,056/-. As per the assessee, he has incurred the expenses as development officer of LIC to recruit the LIC agents, development of the agents, their arrangement, teamwork and field work expenses. However, the assessee during the assessment proceedings admitted the fact that he does not maintain any documentary evidence in support of such expenses.
19.1 However the AO was of the view that the impugned incentive bonus is part of the salary as provided under section 17 of the Act. The assessee received such bonus for the quantity, quality or volume of the work done by him. As such the amount of incentive bonus does not represent any allowance or reimbursement of expenses provided by the employer. Accordingly, he disregarded the contention of the assessee and added the amount of ₹ 1,39,217/- to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned DR before us vehemently supported the order of the authorities below.
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We have heard the learned DR and perused the materials available on record. The issue in the present case relates to the disallowance of the expenses for Rs. 1,39,217.00 claimed against the incentive bonus received by the assessee from the employer. The AO was of the view that the impugned amount of incentive bonus represents the salary income as provided under section 17 of the Act. Therefore, no deduction against such incentive bonus can be provided for the expenditure claimed to be incurred against it. The view taken by the AO was subsequently confirmed by the learned CIT-A.
22.1 The learned AR at the time of hearing has not made any submission in the written submission filed before us. As there was no representation from the side of the learned AR for the assessee qua the disallowances made by the authorities below against the incentive bonus received by the assessee from LIC, we do not find any infirmity in the order of the authorities below.
22.2 We also note that there is no provision under the Act authorizing the assessee to claim the deduction against the incentive bonus which is part of the salary as provided under section 17 of the Act. Similarly the case laws referred by the assessee in the ground of appeal in the case of Shri Kiranbhai H. Shelat 235 ITR 635 of Hon’ble Gujarat High Court has been overruled by the Hon’ble packs court in the case of T.K. Ginarajan VS CIT reported in 36 taxmann.com 583 wherein it was held as under: “8. That apart, what is excluded under Section 10(14) as it stood prior to 01.04.1989 is the expenses incurred in the performance of the duty. It is for the employer to certify the actual expenses incurred in the performance of duty and in which case, as clarified by the CBDT, to that extent, the same shall not be shown as part of salary. On facts, as clearly noted in the Judgment of the High Court of Kerala, there is no claim by the employee either for reimbursement or exclusion of the actual expenditure incurred in performance of the duty. These two distinctions unfortunately missed the notice of the High Court of Gujarat. The Court in fact was swayed by the letter written by the LIC of India to the CBDT for clarification that, to the extent of 40% of the incentive bonus could be exempted as expenditure incurred for the development of business which made them eligible for the incentive bonus. The High Court of Gujarat failed to take note of the reply by the CBDT that it was for the LIC of India to reimburse the actual expenditure involved in the performance of the duty by the Development Officers and to that extent the same was not to be shown as salary.
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Compartmentalization of income under various heads and computation of the taxable portion strictly in accordance with the formula of deductions, rebates and allowances are to be done only as per the scheme provided under the Act. As held by this Court in Karamchari Union v. Union of India [2000] 3 SCC 335, the Income-Tax Act, 1961 is a self contained code and taxability of the receipt of any amount or allowance has to be determined on the basis of the meaning given to the words or phrases given in the Act. Thus, we do not agree with the view taken by the High Court of Gujarat in Kiranbhai's case (supra). The same does not lay down the correct principle of law. 10. Though learned counsel for the appellant made a persuasive attempt to place reliance on the decision of this Court in State of West Bengal v. Texmaco Ltd. [1999] 1 SCC 198, we are afraid the same is of no assistance to the appellant. The incentive bonus referred to in the said decision is the special scheme of the company. The question considered in the said decision was as to whether the said bonus would form part of salary as defined under the West Bengal State Tax on Professions, Trades, Callings and Employments Act, 1979. This Court held, placing reliance on the definition of 'salary' in the said Act that only in case there was remuneration on a regular basis, the same was exigible to tax under the said Act. On facts, it was found that there was no regular payment of incentive bonus. That is not the factual or legal position in the case of the appellant under the Act and, therefore, the said decision is not relevant at all for the purpose of this case. 11. The appellant being a salaried person, the incentive bonus received by him prior to 01.04.1989 has to be treated as salary and he is entitled only for the permissible deductions under Section 16 of the Act. The expenses incurred in the performance of duty as Development Officer for generating the business so as to make him eligible for the incentive bonus is not a permissible deduction and, hence, the same is exigible to tax. There is no merit in the appeal. The appeal is accordingly dismissed. No costs.”
In view of the above, we do not find any infirmity in the order of the authorities below. Hence, the ground of appeal of the assessee is dismissed.
The issue raised by the assessee in ground No. 5 is general in nature which requires no separate adjudication and therefore we dismiss the same.
The issue raised by the assessee in ground No. 6 is that the learned CIT (A) erred in confirming the order of the AO by disallowing the deduction under section 80 G of the Act.
At the outset we note that the assessee has claimed the deduction under section 80 G of the Act for the amount of donation paid to Shri Lalpur Gau Rakshak Mandal for ₹3000.00 only. But the same was disallowed by the AO in the absence of any documentary evidence. The assessee has not preferred an appeal to the learned CIT (A) against the non-disallowance of deduction for the donation
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paid under section 80 G of the Act. However, the assessee in the ground of appeal has raised the issue before us 1st time. This is also pertinent to note that the assessee or his authorized representative has not made any representation against the ground of appeal raised by the assessee as discussed above. Thus, in the absence of any representation the ground of appeal of the assessee is dismissed.
The issues raised by the assessee in ground No. 7 to 10 are general in nature which requires no separate adjudication and therefore we dismiss the same.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 10/12/2019 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 10/12/2019 manish