SHRI DHARMENDRASINH G. GOHIL,,BHAVNAGAR vs. THE INCOME TAX OFFICER, WARD-1(3),, BHAVNAGAR

We notice at the outset that the assessee’s first appeal ITA No.2771/Ahd/2014 raises the following substantive grounds:

Learned counsel representing both parties inform us that assessee’s latter two appeals ITA Nos. 2772 & 2773/Ahd/2014 also raise the very substantive grounds. The only distinction stated therein is that of the relevant figures involved of Rs.2,55,452/- & Rs.3,98,530/- relating to second substantive ground as followed by conveyance disallowance amounts of Rs.36,600/- & Rs.49,001/-; respectively qua the third substantive ground raised therein. We thus treat assessee’s first appeal hereinabove as the lead case.

We start with the relevant facts in assessment year 2006-07. The assessee is a Development Officer employed in Life Insurance Corporation of India “LIC” hereinafter. He filed his return on 20.03.2007 stating income of Rs.7,37,627/-. The Assessing Officer thereafter issued him Section 148

The Assessing Officer then framed the impugned re-assessment on 31.12.2013 disallowing assessee’s expenditure claimed against incentive

The assessee preferred appeal inter alia challenging validity of reopening as followed by his substantive grounds on merits against the abovestated two disallowances. The CIT(A) rejects former two above substantive grounds and restricts conveyance allowance disallowance of Rs.40,620/- to Rs.20,310/- only. This leaves the assessee aggrieved raising the above reproduced three substantive grounds.

Learned counsel representing assessee first of all takes up assessee’s challenge to validity of reopening. His case is that the issue of allowability of expenditure @30% of the incentive bonus in order to meet the corresponding expenses already stands settled in hon’ble jurisdictional high court’s decision in CIT vs. Kiranbhai H Shelat & Ors. (1999) 235 ITR 635 (Guj) as reiterated in their lordships’ latter decision in Tax Appeal No. 1005/2005 CIT vs. Nitinbhai T. Bhupatani decided on 08.02.2006. He therefore pleads that the Assessing Officer has committed a grave illegality in relying upon hon’ble M. P. high court’s judgment in CIT vs. Gurudeo Singh Jaggi 267 ITR 763 taking a contrary view as upheld in hon’ble apex court in Special Leave Petition (supra). Mr. Popat contends that mere dismissal of Special Leave Petition against a non-jurisdictional high court’s decision does not form a valid precedent. More so when hon’ble jurisdictional high court’s latter judgment hereinabove considers the same in deciding the very issue against the Revenue (supra). We find no reason to agree with this legal plea. Hon’ble apex court’s decision in Raymond Wollen Mills Ltd. vs. ITO (1999) 236 ITR 34 (SC) settles the law that a reopening can be resorted to on the basis of a mere prima facie material wherein sufficiency and correctness of

We now come to assessee’s second substantive ground challenging correctness of disallowance of expenses claimed of Rs.2,34,145/- from his incentive bonus. There is no dispute that the LIC has issued a clarification way back w.e.f. 01.04.1989 entitling Development Officers for reimbursement to the extent of 30% of the incentive bonus granted to them. Hon’ble jurisdictional high court’s former judgment also caps the same @30%. Learned Departmental Representative vehemently contends that the assessee’s expenditure in question is much less than the one in hand. Mr. Popat strongly rebut the same by referring to assessee’s reply dated 30.12.2013 at page 6 of assessment order claiming the actual expenditure to be much more than the one in question. We find that the same has nowhere been controverted in assessment order. The Revenue’s argument regarding quantification stands rejected.

We proceed further to notice that hon’ble jurisdictional high court’s two decisions go contrary to hon’ble Madhya Pradesh high court’s judgment as well as similar other precedents. The Revenue vehemently contends that hon’ble apex court’s decision (supra) makes it very clear that hon’ble jurisdictional high court’s judgment in case of Kiranbhai H Shelat (supra) is wrong. There is no dispute about this factual position. It however emerges that hon’ble jurisdictional high court’s latter decision in Nithinbhai’s case (supra) takes due note thereof in allowing assessee’s identical claim once

This leaves us with assessee’s third substantive ground challenging the lower appellate findings restricting conveyance disallowance of Rs.40,620/- to Rs.20,310/- only after adopting estimation method. The assessee had quoted Section 10(14) of the Act in raising the impugned claim. The Assessing Officer took into account his alleged failure in producing evidence in incurring the expenses in the course of performing his insurance job. The CIT(A) agrees with assessee’s claim in principle. He observes in lower appellate order that such kind of expenditure in the form of petrol, vehicle, insurance, office expenses are bound to be there even in absence of the relevant supportive evidence. We observe in these facts that there is no plausible reason for the CIT(A) to restrict the impugned expenditure in absence of any specific irregularity being pointed out. The fact however also remains that the assessee’s evidence in the case file does not produce the relevant details. We thus conclude that the impugned disallowance of conveyance allowance @50% is too high. The same is accordingly ordered to be deleted to the extent of 75%. The balance 25% disallowance amount of Rs.10,155/- is accordingly upheld. The very order shall be followed in latter two years regarding this third substantive ground (supra) wherein the impugned disallowance would stand confirmed @25% of the original claim

These three assessee’s appeals are partly allowed.