2017 (5) TMI 1157 - AT - Income Tax

Reopening of assessment - disallowing of expenditure claimed against incentive bonus and conveyance allowance - Held that - Hon ble apex court s decision in Raymond Wollen Mills Ltd. vs. ITO (1997 (12) TMI 12 - SUPREME Court) settles the law that a reopening can be resorted to on the basis of a mere prima facie material wherein sufficiency and correctness of the same is not to be considered at the threshold stage. We observe in this backdrop of facts and law that the Assessing Officer rightly reopened assessment in assessee s case after taking note of hon ble apex court s decision hereinabove. This first substantive ground in assessee s appeal is accordingly declined Expenditure claimed against 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. Assessee appeal allowed. Restricting conveyance disallowance only after adopting estimation method - 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 ₹ 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 raised before the Assessing Officer. This third substantive ground in all three appeals is partly accepted.

Summary

Issues:
- Validity of reopening assessment
- Disallowance of expenses claimed from incentive bonus
- Restriction of conveyance allowance disallowance

Validity of Reopening Assessment:
The assessee challenged the validity of the reopening, arguing that the Assessing Officer erred in relying on a non-jurisdictional high court's judgment. The counsel contended that dismissal of a Special Leave Petition does not form a valid precedent. However, the Tribunal disagreed, citing the Supreme Court's decision in Raymond Wollen Mills Ltd. vs. ITO, which allows reopening based on prima facie material without considering its sufficiency. The Tribunal upheld the reopening of assessment, denying the appeal on this ground.

Disallowance of Expenses Claimed from Incentive Bonus:
The Tribunal examined the claim of expenses amounting to &8377;2,34,145 from the incentive bonus. The LIC had clarified that Development Officers were entitled to a reimbursement of 30% of the incentive bonus. The Tribunal noted that the Revenue's argument regarding the quantification of the expenditure was rejected as the actual expenditure claimed was not contradicted. Despite conflicting high court judgments, the Tribunal observed that the jurisdictional high court's decision favored the assessee. Consequently, the Tribunal allowed the claim of expenses against the incentive bonus in all three appeals.

Restriction of Conveyance Allowance Disallowance:
Regarding the disallowance of conveyance allowance, the Tribunal analyzed the restriction imposed by the CIT(A) on the disallowance. The assessee had cited Section 10(14) of the Act to support the claim. The CIT(A) acknowledged the necessity of such expenses in the insurance job but restricted the disallowance using an estimation method. The Tribunal found no specific irregularity in the expenses claimed but noted the lack of detailed evidence in the case file. Consequently, the Tribunal ordered the deletion of 75% of the disallowance, upholding the remaining 25%. The same decision was applied to the subsequent years. The third substantive ground was partly accepted in all three appeals.

In conclusion, the Tribunal partly allowed all three appeals, addressing the issues of the validity of reopening assessment, disallowance of expenses claimed from the incentive bonus, and the restriction of conveyance allowance disallowance. The judgment provided detailed analysis and legal reasoning for each issue, ultimately resulting in partial success for the assessee.