Loading judgment…
Facts
The assessee, a salaried employee, was employed by Reliance Capital Ltd. and its subsidiary Reliance Commercial Finance Pvt. Ltd. The AO computed the assessee's salary income at Rs. 9,24,815, while the assessee claimed it to be Rs. 5,48,830. The lower authorities confirmed the AO's addition.
Held
The Tribunal held that the AO and CIT(A) erred in their computation of salary income. The assessee had provided documentary evidence, including Form-26AS and bank statements, which supported his declared income. The issue of unsigned Form-16 was a procedural lapse and did not invalidate the income declared.
Key Issues
Whether the salary income computed by the AO and confirmed by the CIT(A) is correct, or if the salary income declared by the assessee supported by documentary evidence should be considered.
Sections Cited
Sec 24b, Sec 80C, Sec 80CCF, Sec 10(13A), Sec 148, Sec 250(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC’’ JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 227/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 25-01-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2011-12 raising therein following grounds of appeal.
1. The ld CIT(A) erred in law, as well as facts, in sustaining the addition of Rs.3,75,985/- made by the AO under the head SALARIES.
2. That the ld CIT(A) erred in sustaining the addition of Rs.3,75,985/- without considering the bank account and Form-26AS, which clearly showed that the assessee had received a total salary of Rs.5,48,830/- only against Rs.9,24,815/- computed by the AO.
2 VIKRAM PUROHIT VS ITO,WARD 7(3), JAIPUR 2.1 Apropos Ground No. 1 & 2 of the assessee, brief facts of the case are that the assessee is a salaried employee who had been working with Reliance Capital Ltd. since 2007. The Company placed his services with Reliance Commercial Finance Pvt. Ltd. which is a subsidiary of Reliance Capital Ltd. During the FY 2010-11, till October, 2010, he worked with Reliance Commercial Finance Pvt. Ltd. Thereafter, again the Company transferred him to Reliance Capital Ltd. The company Reliance Capital Ltd. issued him a consolidated Form-16 incorporating the salary and deductions of Reliance Commercial Finance Pvt. Ltd. along with two annexures forming part of it. One of these annexures contained the salary details of Reliance Commercial Finance Pvt. Ltd. while the other the cumulative salary details of both employers. The AO and the ld. CIT(A) misinterpreted the figures of salary and deductions. The assessee extracted 26AS from the Income Tax Portal, on the basis of which he filed his ITR. The relevant para of order of the AO at page 1 & 2 of assessing the salary income at Rs.9,24,815/- is mentioned as under :-
Para 3: During the period, which is under consideration, the assessee was a salaried employee. As per Form-16 issued by both the employers, the salary income of the assessee is computed as under- I. M/s Reliance capital Ltd. Rs.5,60,999/- II. M/s Reliance Commercial Finance Pvt. Ltd. Rs.3,63,816/- Total Rs.9,24,815/- 3 VIKRAM PUROHIT VS ITO,WARD 7(3), JAIPUR Para 3.1: As, the assessee has not filed his return of income for the relevant period, therefore the salary income of Rs.9,24,815/- received from both the employers as computed above, is treated as undisclosed salary income of the assessee and is assessed accordingly under the head “Income from salary”. ……………..
2.2 Aggrieved by the addition so made, assessee preferred appeal to the ld.CIT(A), who dismissed the appeal on this issue. Hence, the present appeal has been filed against the order so passed by ld. CIT(A). The relevant observation as to the additions of Rs.9,24,815/- mentioned at page-44 of the appellate order is reproduced as under:- Para 7.4: As seen from the above, it can be noticed that the above documents (Form No.16 and attachments to form no.16) submitted by the appellant have not been signed by ‘The person responsible for deduction of tax’. In such a case, the documents submitted by the appellant can not be relied upon. Further, the appellant has not submitted any documentary evidence in support of additional exemptions and deductions claimed.
Para 7.5: In view of the above, in the absence of documentary proof with regard to the aforementioned additional exemptions and deductions claimed by the appellant, the request of the appellant made in this ground of Appeal No.3 is not acceptable and accordingly, this ground of appeal is required to be dismissed.
It is noted that in these grounds of appeal, assessee has challenged the action of ld. CIT(A) in confirming the action of the AO in computing the salary income as Rs.9,24,815/- against Rs.5,60,999/-. As these grounds of appeal are interrelated, the same are dealt with together for the sake of convenience. 2.3 During the course of hearing, the ld. AR of the assessee, filed the following written submission alongwith - Submission of the assessee is as under: 1.1 At the outset it may be mentioned that notice u/s 148 was issued to the assessee for verification of information made available by DGIT(System) New Delhi. The copy of the reasons as provided by the AO is available at Page-7 of the Paper book. As can be seen from the reasons, the AO believed that salary of Rs.4,33,690/- received from Reliance Consumer Finance Ltd. has escaped assessment, besides other incomes (which are not the subject matter of the present appeal). 1.2 The assessee is a salaried employee. He was employed with Reliance Capital Ltd. since 2007. The Company later placed his services with Reliance Commercial Finance Pvt. Ltd. which is a subsidiary of Reliance Capital Ltd. During the FY 2010 -11, till October, 2010, he worked with Reliance Commercial Finance Pvt. Ltd. Thereafter, again the Company transferred him to Reliance Capital Ltd. A copy of Transfer of Employment to this effect is available at Page-8 of the PB. As both the companies were basically under the same management, Form-16 was issued by Reliance Capital Ltd. incorporating the details of salary received from Reliance Commercial Finance Pvt. Ltd. and TDS deducted thereon was also accounted for. 1.3 In the backdrop of the above facts, the assessee had filed his ITR in compliance to section 148, showing salary income accordingly. The AO did not take cognizance of this ITR. The assessee had given the bifurcation of salary received from the two companies. As an evidence, he enclosed copy of Form-16 and annexures to Form-16 issued by the Employer. But the AO ignored these evidences which were placed on record, and out of nowhere calculated the salary received as Rs.9,24,815/- (Reliance Capital Ltd. Rs.5,60,999/-, Reliance Commercial Finance Pvt. Ltd. Rs.3,63,816/-) as against Rs.5,60,999/- It would be pertinent to mention that in the reasons, the salary escaping assessment was shown at a figure of Rs.4,33,690/- He also ignored Form-26AS which was provided by the assessee and was also available with the department and could have been easily referred to, which clearly reflected that the total amount paid/credited aggregated Rs.5,48,830/- (on the basis of which the assessee had filed his ITR). The assessee also provided copy of his bank account in which his salary was being credited each month. But the Ld.AO brushed aside all these evidences and went on to assess the salary income according to his whims and fancy. Had he bothered to see these documents meticulously, his doubts about receipt of excess salary as believed by him would have got cleared. From the perusal of the documents stated supra, it is clear that the assessee has received aggregate salary of Rs.5,48,830/- from both the employers during the year, on which TDS of RS.14,515/- has been deducted.
5 VIKRAM PUROHIT VS ITO,WARD 7(3), JAIPUR 1.4 All these facts along with the supporting documents were put up before the Ld.CIT(A). The Ld.CIT(A) reproduced the submission in his appellate order. But while giving his finding, he totally ignored the documentary evidence going in favor of the assessee. He did not take into consideration Form-26AS which clearly showed that the assessee had received salary aggregating Rs.5,48,830/-(Rs.2,30,721/- from Reliance Capital Ltd. and Rs.3,18,109/- from M/s Reliance Commercial Finance Pvt. Ltd.) on which TDS of Rs.14,515/- had been made, in spite of the same being pointed out to him. He also ignored the bank statements of the assessee which substantiated the salary disclosed by the assessee. While confirming the addition, he laid emphasis on a trivial issue that the Form-16 issued by the Employer is unsigned. While dismissing the appeal on this count, the Ld.CIT(A) has made the following observations- 7.2 The contention of the appellant in his submissions, that the appellant admitting income under the head salary at Rs.5,48,830/-, whereas the assessing officer computed the gross salary at Rs.9,24,815/- (M/s Reliance Capital Ltd - Rs.5,60,999/- + M/s Reliance Commercial Finance Pvt Ltd - Rs.3,63,816/-). Further, as seen from the computation of assessed income in the assessment order, it is noticed that the assessing officer allowed loss from House Property of Rs.1,50,000/-, Deduction u/s 80C - Rs.1,00,000/- and Deduction u/s 80CCF - Rs.20,000/-. However, as seen from copies of Form No.16 and Annexure to Form No.16 issued by M/s Reliance Capital Ltd and M/s Reliance Commercial Finance Pvt. Ltd., the appellant claimed the following deductions and exemptions in addition to the exemptions and deductions allowed by the assessing officer in the assessment order.
Loss from house property under section 24b at Rs.91,193/- from the salary received from Reliance Commercial Finance Pvt. Ltd.
HRA exemption of Rs.44,709/- from the salary received from Reliance Commercial Finance Pvt Ltd.
HRA exemption of Rs.78,247/- from the salary received from Reliance Capital ltd. 7.3 The copy of Form No.16 submitted by the appellant in respect of employer M/s Reliance Capital Limited and attachments to Form No.16 submitted by the appellant in respect of employers M/s Reliance Capital Limited and M/s Reliance Commerical Finance Pvt. Ltd. are affixed here as under: ……………………………….. 7.4 As seen from the above, it can be noticed that the above documents (Form No.16 and Attachments to Form No.16) submitted by the appellant that they have not been signed by ‘The persons responsible for deduction of tax’. In such a case, the documents submitted by 6 VIKRAM PUROHIT VS ITO,WARD 7(3), JAIPUR the appellant cannot be relied upon. Further, the appellant has not submitted any documentary evidence in support of additional exemptions and deductions claimed. 7.5 In view of the above, in the absence of documentary proof with regard to aforementioned additional exemptions and deductions claimed by the appellant, the request of the appellant made in this ground of appeal No.3 is not acceptable and accordingly, this grounds of appeal No.3 is required to be dismissed. 1.5 The entire observation in all the 3 points made by Ld.CIT(A) in Para 7.2 of his order is factually incorrect and misleading. The assessee, in the ITR filed by him (which has not been given any cognizance to by the AO) had rightly and lawfully claimed the deduction to which he was entitled. In his Computation of Income attached with his ITR, copies of which were made available to the AO through letter dated 13.11.2017, the assessee had shown the salary receipts from both the employers on the basis of Form-26AS. From this salary income, he had set off loss from House property (Interest paid u/s 24b in case of SOP) of Rs.1,50,000/- which was appearing in Form-16 issued by Reliance Capital Ltd. Your honor’s attention is invited to Form 16 issued by Reliance Capital Ltd.(Page-14-18 of PB) It is not a case that the Loss from house property has been claimed in excess. As a matter of fact, the loss from house property on account of interest payment allowed by the AO in the assessment order and claimed by the assessee in his return are the same. So, the observation/finding of the CIT(A) as to excess claim of Loss from house property under section 24b at Rs.91,193/- from the salary is factually incorrect. As regards HRA exemption, the AO has not allowed any exemption from Salary u/s 10(13A), whereas he ought to have allowed the same. The assessee has not claimed any separate exemption in respect of HRA of Rs.44,709/- and Rs.78,247/- In Form 16, the net salary after exemptions u/s 10 is shown. The assessee has taken the net salary shown in Form-16 and has filed his ITR accordingly. The finding of CIT(A) on this aspect is again incorrect and unfounded. It would be pertinent to mention that the AO had allowed deduction of Rs.1,00,000/- u/s 80C whereas the assessee has only claimed a deduction of Rs.82,970/- u/s 80C. The Ld.CIT(A) has endorsed the action of the AO. Para-7.3 of the CIT(A)’s observation needs no comments as it is a factual statement. Para-7.4 is a factual statement and is admitted. In this regard, the submission of the assessee is that for non-signing of Form-16 or its annexures by the DDO, the assessee can’t be penalized. Form-16 still remains valid. Non-signing of Form-16 by the DDO is an inadvertent error. The CIT(A) with due diligence, could have verified the contents of Form-16. Alternatively, he could have used his powers conferred on him u/s 250(4). But instead of making further inquiry himself or through the AO or even providing an opportunity to the assessee to clarify the issue, he sustained the addition. Now that the discrepancy has been pointed out by the CIT(A), the assessee has written to the Company and sought clarification in this regard. The present incumbent of the Company has issued a 7 VIKRAM PUROHIT VS ITO,WARD 7(3), JAIPUR letter accepting the mistake and has put his signatures on Form-16 and the related annexures after verifying it from the records of the Company. The assessee may kindly be allowed to adduce these documents as additional evidence. An application for admission of additional evidence is being filed separately for your Honor’s kind consideration. As regards non submission of any documentary evidence in support of additional exemptions and deductions claimed, it may be mentioned that no additional exemption or deduction apart from the ones shown in Form-16 have been claimed by the assessee.
2.4 On the other hand, the ld. DR supported the orders of the ld. CIT(A) . 2.5 The Bench has considered the rival contentions, perused the material available on record and gone through findings of the lower authorities recorded in their respective orders. Brief facts pertaining to the issue are that assessee filed ITR in compliance to notice issued u/s 148. The ITR not being filed within the time provided in the notice u/s 148, the AO did not take the cognizance of the same. The assessee had, however filed his ITR on the basis of data available in Form-26AS. The AO, though correctly, picked up the salary of Rs.5,60,999/- shown in Form-16, issued by Reliance Capital Ltd., but failed to appreciate that salary of Rs.3,63,816/- received from Reliance Commercial Finance Pvt. Ltd. stood duly incorporated in it. It is noted that if had seen the annexures to Form-16 diligently then he would not have committed such mistake. Page-17 of assessee’s paper book clearly shows that Previous employment salary u/s 17(1) of Rs.4,08,524.55 has been incorporated/ included in this annexure and it is on the basis of this annexure that Form-16 has been issued. This aspect was also not seen 8 VIKRAM PUROHIT VS ITO,WARD 7(3), JAIPUR by the Ld.CIT(A). It is thus explicitly clear that the assessee received aggregate salary of Rs.5,60,999/- from the employers, viz. (i) M/s Reliance Capital Ltd. & (ii) M/s Reliance Commercial Finance Pvt. Ltd. From M/s Reliance Capital Ltd., he received gross salary of Rs.2,30,821/- and from M/s Reliance Commercial Finance Pvt. Ltd., gross salary of Rs,4,08,525/- out of which after deducting the allowances exempt u/s 10 of the Act, the income chargeable under the head salaries works out to Rs.5,60,999/- only. It is also noted that since the AO had also relied on the unsigned Form-16, for computing the salary income of the assessee, there is no point in disputing Form-16 by the ld. CIT(A), observing that it is unsigned. However, the same having been got signed by the present incumbent and a letter to that effect by the company having been adduced as evidence by the assessee and thus there remains no doubt that the gross salary received by the assessee during FY 2010-11 was Rs.6,39,245/- only, and after deducting the allowances exempt u/s 10 (as reflected in Form-16) the correct salary income works out to Rs.5,60,999/- .Now Coming to the issue of additional exemptions and deductions held to have been claimed by the assessee, the observation made by the ld.CIT(A) in this regard is erroneous. Hence, Considering the above facts and circumstances and taking into consideration, the various documentary evidences furnished by the assessee in support of his claim, it is held that the income of the assessee under the head Salaries for the