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Facts
The assessee, an individual, failed to file an income tax return for AY 2017-18 despite earning salary and interest income. A reassessment order was passed, taxing his total income at Rs. 72,46,859. The CIT(A) partly allowed the appeal. The assessee claims certain amounts, including gratuity and transport allowance, are exempt under Section 10 of the Act.
Held
The Tribunal held that the assessee's claims for exemption on gratuity (Rs. 10 lakhs), transport allowance (Rs. 14,916), and other deductions such as profession tax (Rs. 2,000) and PF (Rs. 1,50,000 under 80C) are legitimate. However, as these facts were not properly considered by the lower authorities, the issue is restored to the AO for examination of Form 16 and granting deductions if found in accordance with law.
Key Issues
Whether the assessee is entitled to exemptions and deductions claimed for gratuity, transport allowance, profession tax, and PF, which were not duly considered by the lower authorities.
Sections Cited
10(10), 10(14)(ii), 139, 147, 144B, 80C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI PRAKASH CHAND YADAV
Per Prashant Maharishi, Vice President
This appeal is filed by Shri Raksit Karnavat (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 09.08.2024 wherein the appeal filed by the assessee against the reassessment order passed u/s. 147 r.w.s. 144B of the Income-tax Act, 1961 (the Act) dated
30.03.2022 by the National Faceless E-Assessment Centre, Delhi [ld. AO] was partly allowed.
The assessee is aggrieved and has raised the following grounds of appeal before us:-
“ 1. The appellate order u/s 250 of the Act of Commissioner of Income Tax (Appeals)/ NFAC dt. 09.08.2024, in so far it is against the appellant is opposed to law, weight of evidence, facts and circumstances of the Appellant's case.
2. The NFAC has grossly erred in upholding the action of the Id. Assessing Officer in taxing the gross salary income of the appellant under the facts and circumstances of the case. 2.1 The NFAC has grossly erred in upholding the action of the Id. Assessing Officer in taxing the gross salary income of the appellant earned by M/s Netapp India Pvt. Ltd. To the tune of Rs.56,35,898/- under the facts and circumstances of the case.
The NFAC has grossly erred in upholding the order of the Id. Assessing Officer by not giving credit to the tax on employment paid by the appellant amounting to Rs.2,000/- under the facts and circumstances of the case.
The NFAC has grossly erred in upholding the order of the Id. Assessing Officer in not extending the benefit of exemption 10(14)(ii) of the Act in respect of transport allowance received from M/s Netapp India Pvt. Ltd. During the course of his employment amounting to Rs.14,9161- under the facts and circumstances of the case.
5. The NFAC has grossly erred in upholding the order of the Id. Assessing Officer in not extending the benefit of exemption u/s 10(10) of the Act in respect of gratuity received from M/s Netapp India Pvt. Ltd. During the course of his employment amounting to Rs.10,00,000/- under the facts and circumstances of the case.
6. The NFAC has grossly erred in upholding the order of the Id. Assessing Officer by not giving credit to the TDS totaling to Rs.14,19,186/- deducted by the employer on salary income and the bank on interest income under the facts and circumstances of the case. 6.1 The NFAC has grossly erred in upholding the order of the Id. Assessing Officer by not giving credit to the TDS deducted by the employer M/s Netapp India Pvt. Ltd. Amounting to Rs.12,00,670/- under the facts and circumstances of the case. 6.2 The NFAC has grossly erred in upholding the order of the Id. Assessing Officer by not giving credit to the TDS deducted by the employer M/s Amazon Development Centre (India) Private Limited amounting to Rs.1,78,0481- under the facts and circumstances of the case. 6.3 The NFAC has grossly erred in upholding the order of the Id. Assessing Officer by not giving credit to the TDS deducted by M/s HDFC Bank on the interest earned by the appellant amounting to Rs.40,468/- under the facts and circumstances of the case.
7. Without prejudice to the above, the Commissioner of Income Tax (Appeals)/ NFAC has grossly erred in not admitting the appeal and adjudicating the appeal on merits of the case.
8. Without prejudice to the above, the appellant denies himself liable to be assessed at a total income of Rs.72,46,859/- under the facts and circumstances of the case. 9. The appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal
urged above.”
3. The brief facts of the case show that assessee is an individual earing income from salary and other sources. During this year, assessee was employed with Netapp India Pvt. Ltd. (Netapp) and thereafter with Amazon Development Centre (India) Pvt. Ltd. (Amazon). Assessee is earning interest from his bank account also.
Assessee has not filed any return of income u/s. 139 of the Act and therefore assessee was issued notice u/s. 148 of the Act on 26.3.2021. The reassessment notice was not responded to. The reassessment was made because of the reason that assessee has earned salary income of Rs.68,42,178, but did not file any return of income. Other information revealed that assessee has purchased time deposit receipt of Rs.29,32,414 and earned interest income of Rs.4,04,681 on which tax is deducted at source. Assessee was provided sufficient opportunities, but did not comply with any of the same and therefore the ld. AO as per information available with him, made assessment of total income of Rs.72,46,859 comprising of salary received from Amazon of Rs.12,06,280, salary from Netapp of Rs.59,35,898 and bank interest of Rs.4,04,681.
4. Against the assessment order, the assessee preferred appeal before the ld. CIT(A) wherein so far as salary income and interest income is earned , its inclusion in computation was upheld. The assessee before the CIT(A) submitted that in the above salary income there is a sum of Rs.10,14,916 which is not taxable because of the reason that same is exempt u/s. 10 of the Act. Rs 10 lakhs was gratuity income exempt u/s 10 (10) of The Act and Transport allowance of Rs 14916/- is also exempt u/s 10 . The ld. CIT(A) did not consider the same and confirmed the order of ld. AO to that extent.
The assessee is in appeal before us and submitted that assessee is seeking only relief of deduction u/s. 10(10) of the Act where the assessee received a sum of Rs.10 lakhs towards gratuity. He further submitted that assessee has earned transport allowance of Rs.14,916 and has also paid Rs.2,000 of profession tax. All these sums are not chargeable to tax. He further submitted that as pr Chapter VIA, assessee is entitled to deduction of Rs.1,50,000 as evidence in Form 16. He further submitted that merely because tax is deducted at source on salary income which is exempt u/s. 10(10) as gratuity, same cannot be charged to tax. He submitted copies of Form 16 received from Netapp wherein in Form 16 also transport allowance of Rs.14,916 and gratuity of Rs.10 lakhs was considered as exempt u/s. 10 of the Act. Further deduction of tax on employment of Rs.2,000 and deduction of PF of Rs.2,14,079 restricted to Rs.1,50,000 is certified by the employer. He therefore submitted that though assessee is a non-filer, but whatever benefit is eligible to assessee according to law, should have been granted by the lower authorities.
The ld. DR submitted that assessee did not furnish these information before the AO, therefore the AO has not granted such benefit to the assessee. Before the ld. CIT(A), assessee could not substantiate the claim of exemption and therefore no fault can be found with those orders.
We have carefully considered the rival contentions and perused the orders of ld. lower authorities. We find that assessee is an individual, who did not file his return of income, despite deduction of tax at source on salary income and did not comply with the notices issued by the ld. AO. The above reason stated by the assessee is that the assessee is presently staying in USA together with his family for employment. As the work of return filing was entrusted to other person, who could not file the return and therefore it has resulted into an ex parte order of reassessment. We are not concerned here about the non-compliance of the assessee, but the limited prayer of assessee is that whatever benefit is available to him in accordance with law, should be granted. First claim of assessee is that there must be deduction u/s. 10(10) of the Act of gratuity of Rs.10 lakhs received from Netapp which is certified in Form 16 issued by the employer dated 29.5.2017. Further the assessee has received transport allowance of Rs.14,916 which is exempt u/s.
10. This is also certified in Form 16. Undoubtedly, assessee has paid tax on employment of Rs.2,000 and has deposited PF of Rs.2,14,079 out of which Rs.1,50,000 is deductible u/s. 80C of the Act. These are legitimate deductions which the assessee should be granted in accordance with law. However, these facts are not available before the ld. lower authorities, therefore we restore this issue back to the file of ld. AO to examine Form 16 and then grant the assessee these deductions, if found in accordance with law. Thus, grounds 3, 4 & 5 of the appeal are allowed as indicated above.
The ld. AO is also directed to verify the claim of deduction of tax at source as per Form 16 and Form 26AS and after verification, the correct tax credit of tax deduction at source is also to be granted. Accordingly ground no.6 is also allowed as indicated above.
All other grounds are supportive & general in nature and therefore dismissed.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 02nd day of December, 2024.