2006 (10) TMI 265 - AT - Income Tax

Summary

Issues:
1. Re-opening of assessment under section 147 of the Income-tax Act.
2. Taxability of Rs. 22 lakhs received by the assessee.

Analysis:

Issue 1: Re-opening of assessment under section 147 of the Income-tax Act
The assessee appealed against the order of the ld. CIT(A) XXIX, Mumbai dated 28-2-2003 for assessment year 1997-98, challenging the re-opening of assessment under section 147. The counsel for the assessee did not press this ground of appeal during the hearing, leading to its rejection by the tribunal.

Issue 2: Taxability of Rs. 22 lakhs
The dispute revolved around the taxability of Rs. 22 lakhs received by the assessee from the employer after resigning from the company. The assessee claimed this amount as exempt from tax, considering it as an ex gratia payment voluntarily made by the employer. However, the Assessing Officer taxed this amount under section 17(3)(i) of the Income-tax Act.

Upon detailed examination, the tribunal found that the payment of Rs. 22 lakhs was closely associated with the employment of the assessee, as it was received shortly after the termination of his job. The tribunal interpreted the expression 'profit in lieu of salary' under section 17(3)(i) to encompass such payments made by an employer to an employee in connection with the termination of employment. The tribunal emphasized that the termination referred to in the provision includes voluntary resignation or retirement. Therefore, the tribunal upheld the taxability of the amount based on the legislative intent and the circumstances of the case.

The counsel for the assessee argued that the ex gratia payment should not be taxed as 'profit in lieu of salary' under section 17(3)(i), citing various judgments. However, the tribunal distinguished those judgments as inapplicable to the present case and dismissed the appeal, ruling that the amount was rightfully taxed by the authorities.

In conclusion, the tribunal dismissed the appeal of the assessee, affirming the taxability of the Rs. 22 lakhs received as part of the employment termination benefits.

This comprehensive analysis highlights the key legal aspects and arguments presented in the judgment regarding the re-opening of assessment and the taxability of the amount received by the assessee, providing a detailed understanding of the tribunal's decision.