Commissioner of Income-tax Vs. Gurudeo Singh Jaggi - Court Judgment

1.This is an appeal under Section 260A of the Income-tax Act, 1961.

2. This court at the time of admission had framed the following question of law :

'Whether the learned Tribunal is justified in setting aside the orders passed by the lower authorities disallowing the assessee's claim of deduction towards conveyance allowance and additional conveyance allowance and while doing so, whether the learned Tribunal has correctly interpreted the provision of Sections 16, 17 and 10(14) of the Income-tax Act ?'

3. In the course of hearing learned counsel for the parties very fairly agreed that another question of law does emerge in this case. The said question reads as under :

'Whether the respondent was entitled to any deduction as per actual expenditure incurred out of the incentive bonus paid to him by the employer, namely, LIC ?'

4. The facts which are necessary to be stated here are that the respondent is a Development Officer in the Life Insurance Corporation of India. For the assessment year 1994-95, he was given certain benefits with regard to the conveyance allowance and additional conveyance allowance. That apart there was also a claim with regard to the benefit of a sum towards incentive bonus. The Assessing Officer finally allowed the deduction of the incentive bonus on the basis of the actual expenditure. The adjustment made by the Assessing Officer under Section 143(1)(a) was accepted by the assessee. Later on, the Assessing Officer reopened the assessment on the ground that there was escapement of income to the extent of Rs. 27,539, i.e., the deduction allowed in respect of incentive bonus. The assessee feeling aggrieved by the order preferred an appeal before the Commissioner of Income-tax, Gwalior. Being unsuccessful there he approached the Tribunal. The Tribunal in paragraph 5 held as under :

'5. I have carefully considered the arguments of both the sides and have perused the material placed before me. As per Section 147 as amended with effect from April 1, 1989, the Assessing Officer is empowered to open reassessment under Section 147 if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Thus, even under the provision, it is necessary that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment. In this case, the Assessing Officer had allowed the deduction of Rs. 27,539 for earning incentive bonus. In the case of Shri S.N. Mishra, the Income-tax Appellate Tribunal, Jabalpur Bench, has come to the conclusion that the actual expenditure incurred out of incentive bonus is to be allowed. In this case, the assessee had incurred the actual expenditure of Rs, 27,789, while the deduction allowed was only Rs. 27,539. Thus, it cannot be said that any income had escaped assessment. Therefore, in my opinion, it was not a fit case for reopening under Section 147. Hence I quash the initiation of proceedings under Section 147 and consequently the assessment order dated September 10, 1998, is quashed restoring the original intimation under Section 143(1)(a) dated March 20, 1995. Since I have quashed the order of re-assessment, the various other grounds of appeal by the asses-see need no adjudication.'

5. This court recently in the case has held that the assessee is entitled to get conveyance allowance and additional conveyance allowance as incurred by him. As far as expenditure relating to incentive bonus is concerned this court in CIT v. A.K. Ghosh : [2003]263ITR536(MP) I. T. A. No. 19 of 1999 and other connected appeals has held that deduction on that score is impermissible.

6. In view of this we are of the considered opinion that the order of the Tribunal is bound to be set aside and is accordingly set aside.

7. The appeal is accordingly disposed of.