2019 (4) TMI 770 - AT - Income Tax

Reopening of assessment u/s 148 - validity of reasons to believe - reimbursement of claim of LTC was not offered for tax by the assessee - HELD THAT - Provisions of sec. 147 r.w.s. 148 are not applicable since the reasons recorded for reopening the assessment are not valid as per law. On this issue we have perused the material on record and it is noticed that AO has reopened the case of the assessee on the ground that while availing LTC the assessee has also performed journey to foreign destination and such kind of LTC is not exempt u/s. 10(5) of the Act. The reimbursement of such claim of LTC was not offered for tax by the assessee. No merit on this ground of appeal of the assessee that provision of sec. 147 r.w.r. 148 are not applicable in the case of the assessee . The assessee has also failed to substantiate how the reason recorded for reopening assessment were not valid. Therefore we do not find any merit in this ground of appeal of the assessee. Accordingly this ground of appeal of the assessee stand dismissed. Addition on account of Leave Travel Concession claim by the assessee by virtue of sec. 10(5) - HELD THAT - We find that as per provision of sec. 10(5) of the Act only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to any place in India and nowhere in this clause it had been stated that even if the employee travel to foreign countries exemption would be limited to the expenditure incurred to the last destination in India. On identical facts and similar issue in proceedings under section 201(1) &201(IA) of the act the relevant part of the decision of the ITAT Lucknow in the case of the State Bank of India Vs. DCIT(TDS) 2016 (3) TMI 282 - ITAT LUCKNOW of the view that the said sub-section provides that where an individual had received travel concession or assistance from his employer for proceeding on leave to any place in India both for himself and his family then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service. The provisions of the Act are in relation to the travel concession/assistance given for proceeding on leave to any place in India and the said concession is thus exempt only where the employee has utilized the travel concession for travel with in India. In view of the above facts and provision of law we do not find any infirmity in the decision of Ld. CIT(A) therefore the appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Validity of the order passed by the CIT(A) - 4 Vadodara.
2. Applicability of provisions under section 147 r.w.s. 148 for reopening the assessment.
3. Disallowance of ?4,06,452/- claimed by the assessee as Leave Travel Concession (LTC) under section 10(5) of the Income Tax Act.
4. Charging of interest under sections 234A/B/C/D and initiation of penalty proceedings under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by CIT(A) - 4 Vadodara:
The first ground of appeal claimed that the order by CIT(A) - 4 Vadodara was "bad in law" and contrary to legal pronouncements. However, this ground was deemed general in nature and was not adjudicated further.

2. Applicability of Provisions Under Section 147 r.w.s. 148:
The assessee argued that the provisions of section 147 r.w.s. 148 were not applicable because the reasons recorded for reopening the assessment were invalid. The AO had reopened the case on the grounds that the assessee's LTC included foreign travel, which is not exempt under section 10(5). The tribunal found no merit in the assessee's claim and upheld the reopening of the assessment, stating that the assessee failed to substantiate how the reasons recorded were invalid.

3. Disallowance of ?4,06,452/- Claimed as LTC:
The main contention was whether the LTC claim, which included foreign travel, was exempt under section 10(5). The assessee argued that the foreign travel was complementary and not part of the LTC claim. However, the AO and CIT(A) disallowed the claim, stating that section 10(5) and Rule 2B only allow exemptions for travel within India. The tribunal upheld this view, referencing similar cases and legal provisions, emphasizing that the intention of the legislature was to promote tourism within India, not abroad. The tribunal concluded that the LTC exemption does not apply to journeys that include foreign travel, even if part of the journey is within India.

4. Charging of Interest Under Sections 234A/B/C/D and Penalty Proceedings Under Section 271(1)(c):
The assessee challenged the interest charged under sections 234A/B/C/D and the initiation of penalty proceedings under section 271(1)(c). The tribunal upheld the charging of interest, citing the Supreme Court decision in Anjum M.H. Ghaswala, which mandates the charging of interest. Regarding the penalty proceedings, the tribunal noted that no appeal lies against the initiation of penalty under section 271(1)(c).

Conclusion:
The tribunal dismissed all four appeals, upholding the AO's and CIT(A)'s decisions on all grounds. The order emphasized that LTC exemptions are strictly for travel within India, and any inclusion of foreign travel disqualifies the exemption under section 10(5). The charging of interest under sections 234A/B/C/D was deemed mandatory, and the initiation of penalty proceedings under section 271(1)(c) was considered non-appealable. The judgment was pronounced in the open court on 10-04-2019.