RANJEET S. MUDHOLKAR, MUMBAI vs. DCIT CIR 20(2), MUMBAI

During hearing the assessee appeared in person and explained that he was Chief Executive Officer and Director of M/s. Financial Planning Standards Board, India (in short hereinafter EPSB). In the month of September 2008, Statutory Auditors of the company pointed out that since the assessee is designated Director of the company, therefore, his remuneration should be within the prescribed limit as provided in the Company’s Act 1956. The salary of the assessee was in excess of the limit as laid down in Section 309(3) of the Company’s Act, therefore, the excess amount received by the assessee for A.Ys 2006-07, 2007-08 and 2008-09 and remuneration received from 01/04/2008 to 31/07/2008 aggregating Rs. 90,31,450/- was voluntarily refunded by the assessee to EPSB in the month of September 2008. The income tax returns for the A.Y.2007-08 and 2008-09 were revised by the assessee to reflect the correct amount of salary income after deducting the amount refunded in September 2008. In the return for A.Y. 2009-10 (the appeal before us) the assessee claimed the entire amount salary repaid i.e., Rs.90,31,450/- for various years as a deduction under the head “income from salary” which resulted in a loss under the salary head which was set off against the income under the head “business / profession”, which was disallowed by the Assessing Officer. The assessee further ascertained that identically in subsequent years identical claim was allowed by the department for which our attention as invited to page 87 of the paper book and further pages 94 & 95 of the paper book. It was explained that Rs.4 lakhs relates to A.Y.2005-06. This factual matrix was not controverted by learned AR though he contended that the claim of the assessee cannot be allowed.

We have considered the rival submissions and perused the material available on record. Under the aforementioned facts, we find that in its tax computation form (pages 94, 95) the assessee has clearly mentioned the balance amount as refundable. There is no dispute to the fact that the in remand notice u/s.156 of the Act (page 87 & 88) of the paper book, it has been mentioned as under:-

“1. This is to give you notice that for the Assessment Year 2007-08 a sum of Rs.16,51,160/- the details of which are given on the reverse has been determined to be payable to you.” In the light of the foregoing discussion and the assertion made from both sides, we are of the view that the entire facts needs reexamination at the level of the Assessing Officer. The assessee is directed to produce the relevant record before the Assessing Officer, who will examine the case of the assessee with open mind. The assessee be given opportunity of being heard with further liberty to furnish evidence, if any. Even otherwise, the mandate of Article 265 of Constitution of India is to levy and collect due taxes only. The appeal of the assessee is thus allowed for statistical purposes.