Madan Mohan Sharma, Patiala vs Assessee

Madan Mohan Sharma, Vs. The Income Tax Officer, House No.173/2, Ward 6, Jodian Bhattian, Patiala. Patiala. PAN No. ALVPS5081R

(Appellant) (Respondent)

Appellant by : Shri M.R.Sharma Respondent by : Shri R.K.Gupta, D R

Date of hearing : 15.06.2015 Date of Pronouncement : 17.06.2015

PER H.L.KARWA, VP :

This appeal filed by the assessee is directed against

the order of the learned Commissioner of Income Tax

(Appeals), Patiala dated 14.9.2012 relating to assessment year

2007-08.

2. In this appeal, the assessee has raised following

grounds :

2

"1. That the order of the Assessing Officer as upheld by the Commissioner of Income Tax (Appeals) Patiala is bad in law and is beyond all the cannons of law and justice.

2. That the order of the Commissioner of Income Tax (Appeals) Patiala dismissing the appeal filed by the appellant on the ground of the same being late and by not condoning the delay is bad in law and needs to be set-aside inspite of the fact that the appellant was likely to succeed in appeal..

3. That the orders of the Assessing Officer as upheld by the Commissioner of Income tax (Appeals) Patiala disallowing the claim of the appellant at Rs.5,00,000/- u/s 10(10C) of the Income Tax Act is bad in law and needs to be set aside.

4 . that the order of the Assessing Officer as upheld by the Commissioner of Income Tax (Appeals) Patiala disallowing Rs.24295/- out of the leave encashment received by the appellant u/s 10(10AA) of the Income Tax Act 1961 more so when the same has been calculated and allowed by the employer of the appellant while deducting tax at source is bad in law and needs to be set -aside.

5. That the order of the Assessing Officer as upheld by the Commissioner of Income tax (Appeals) Patiala initiating reassessment proceedings is bad in law and needs to be set aside.

6. That the appellant craves leave to add, amend, and delete any of the grounds before the appeal decided."

3. Ground No.1 of the appeal is general in nature and

hence, no comments are being given.

4. As regards to ground No.2 of the appeal, the brief

facts are that the assessee filed return of income for the year

under consideration declaring taxable income of

Rs.2,23,430/-. In the return of income, the assessee had

claimed Rs.5 lacs as exempt under section 10(10C) of the 3 Income Tax Act, 1961 (in short 'the Act') out of total amount

of Rs.6,86,346/- being the amount of ex-gratia received by

him from his the then employer, State Bank of Patiala at the

time of his retirement under the scheme known as Exit Option

Scheme floated by the State Bank of Patiala. The assessee

had also received gratuity and leave encashment, which

amount was also claimed by the assessee as deduction under

sections 10(10C) and 10(10AA) of the Income Tax Act, 1961.

The Assessing Officer did not allow the claim of the assessee

for the reasons stated in the assessment order dated

13.12.2010 passed under section 143(3) r.w.s. 147 of the Act.

5. Being aggrieved by the order of the Assessing

Officer, the assessee carried the matter before the learned CIT

(Appeals) and the learned CIT (Appeals) vide his order dated

14.9.2012 dismissed the appeal of the assessee mainly on the

ground that there was a delay of about 11 months in filing the

appeal. The learned CIT (Appeals) refused to condone the

delay of about 11 months in filing the appeal. However, the

learned CIT (Appeals) has not given any findings on the merits

of the case and hence, the assessee is in appeal before the

Tribunal.

6. I have heard Shri M.R. Sharma, learned counsel for

assessee and Shri R.K.Gupta, learned D.R for the Revenue at

length and also perused the materials available on record. It

is apparent from the records that the assessment order in this

case was passed by the Assessing Officer on 13.12.2010 and

the relevant notice of demand and the assessment order was 4

served on the assessee on 28.12.2010. However, the assessee

filed the appeal before the learned CIT (Appeals) on

21.12.2011. Thus, there is delay of about 11 months in filing

the appeal before the learned CIT (Appeals). It is observed

that alongwith memo of appeal, the assessee submitted an

application for condonation of delay in filing the appeal duly

supported by an affidavit. The reason for the delay given by

the assessee was that he could not file an appeal against the

order of assessment for the reasons beyond his control. The

assessee was advised not to file any appeal due to the reasons

that in case the appeal is preferred the provisions with regard

to the penalty would be attracted. Ho wever, the assessee on

15.12.2011 cam e to kno w that hi s other col l eag ues have fi l ed

appeal s before th e I ncome Ta x Ap pel l ate Authori ti es and most of

them had succee ded i n such app eal s. The asse ssee had al so

recei ved a l etter from the associ ati on of whi ch he i s a member,

who i nformed him that he wi l l be enti tl ed to the refund as a

resul t of the appeal fi l ed. Thereafter, the assessee sought l egal

advi ce and as s uch, an appeal was fi l ed before the l earned CI T

( Appeal s) . I t was al so cl ai med by the assessee before the

l earned CI T ( Appeal s) that the i ssue appeal ed agai nst was

covered i n hi s favour as per the deci si on of the I .T.A. T., Di vi si on

Bench, Chandi garh i n I TA No.925/Chd/2011 vi de order dated

1.11.2011 i n the case of Shri Bi kram Ji t Passi Vs. DCI T,

Ambal a Cantt rel ati ng to assessment year 2008-09. Shri

Bi kram Ji t Passi was an empl o yee of the State Bank of I ndi a, a

si mi l arl y si tuated and had sought reti rement under the sai d

scheme. Ho we ver, the l e a r n e d C I T ( A p p e a l s ) h e l d t h a t t h e 5

reasons submitted by the assessee are very general in nature.

He, therefore, held that there was no sufficient reason for

condoning the delay in filing the appeal. The learned CIT

(Appeals) did not consider and decide the merits of the case.

At the stage, it will worthwhile to refer the decision of the

I.T.A.T., Lucknow Bench 'A', Lucknow dated 24.8.2007 in the

case of Shri Arun Rohtagi & Others Vs. ITO 4(1), Kanpur &

Others in ITA No.1275/LUC/2006 to 1279/LUC/2006 relating

to assessment year 2004-05 wherein there was substantial

delay in filing the appeal before the Tribunal. The Tribunal

followed its earlier order in the case of Shri Charan Singh

Vs. ITO-1(1), Lucknow in ITA No.461/LUC/2007 & Others

relating to assessment year 2004-05, wherein the Tribunal

held as under:

"3. I.T.A. Nos. 461, 462, 463, 464 and 469 are filed late, by 324, 325, 325, 324 and 329 days respectively. An-application for condonation of delay has been filed. The mason given by them is that they were advised by their consultants not to file appeal against the order of CIT(A) who is highest authority 'in the department. The employees were constantly in search of the exact legal position regarding the taxability of the retirement benefit. It was a/so explained to them that TDS was deducted at source by RBI on these payments and therefore employees were under the bonafide belief that the retirement benefits are taxable under l.T. Act, 1961. However on 28/3/2007, Bombay Tribunal had in 222 appeals of the RBI employees held that they are entitled to benefit u/s 10(1 OC) and also u/s 89(1). Following that decision, the employees have filed the appeal. The delay Is therefore attributable to the incorrect legal advice. Appeal is filed after knowing an order of the Bombay Tribunal in favour of the employees. On this basis, these employees have prayed for condonation of delay.

6 4. On this issue we have heard Learned D. R. who has' submitted that the reason so advanced could not be said to be satisfactory. An assessee, who is not vigilant about his right, could not be helped by the machinery provided in the statute. On the other hand learned authorised representative for the assesses submitted that in the interest of justice, delay in filing appeal should be condoned.

5. We have considered the rival submission. In our view, delay in filing appeal by the above employees needed to be condoned in the interest of imparting substantial justice. Hon'ble Madras High Court in Venkatadri Traders Limited vs CIT (2001) 248 ITR 681 held that while considering the question of condonation of delay in filing an application (for revision in that case) the revisional authority is not all together exclude from consideration the merits of the revision petition. If the case of justice requires that a liberal view be taken then a liberal view would indeed be warranted. It is not the policy of the Act to enable the state to collect money, from citizen and retain the same even when the money 1$ not required to be paid as tax. - The fact that the payment has been made erroneously cannot by itself be allowed to stand in the way of the relief being granted to the assesses. If relief is permissible by exercise of a discretionary power vested in the statutory authority then these authorities are required to exercise such discretionary power in a manner which would protect and promote the interest of the assessee. In Voltas Limited vs. DCIT (2000) 241 ITR 471, it was held by Hon'ble A.P. High Court that a party should not suffer for the laps on the part of the counsel and opportunity should be given to the parties to have a decision on merits.

Hon'ble Delhi High Court in Pramod Bansal and Sons vs. Income Tax Officer (1999) 237 ITR 65 held that where there is an adverse decision of a High Court then it is futile to file an appeal but where that decision of High Court is reversed by Hon'ble Supreme Court, then the delay occurred in filing the appeal on the basis of Supreme Court decision should be condoned

6. In the present case, the employees did not file appeals to the Tribunal on the ground that RBI had deducted tax and their counsel 7

had advised against filing appeal to the Tribunal. But after receipt of the order of the Tribunal (Bombay Bench) in favour of the assesses, the appeal have been filed and there is no delay thereafter. In view of this and in order to impart justice to these employees, we do not find hesitation in condoning the delay and admit the appeals. Their explanation is satisfactory and is accepted.

7. As a result, the appeals are admitted for decision on merits."

7. In the above case, the employees did not file appeals

before the Tribunal on the ground that the RBI had deducted

tax and their counsel had advised against filing of the

appeals. But after receipt of the order of the I.T.A.T. (Bombay

Bench) in favour of the assesses, the appeals were filed and

there was no delay thereafter. In such circumstances, the

Tribunal held that in order to impart justice to the

employees/assesses the delay deserves to be condoned.

Accordingly, the Tribunal condoned the delay in filing the

appeals. In the instant case also, the assessee was advised

not to file appeal before the learned CIT (Appeals). However,

the assessee came to know about the decision of the I.T.A.T.,

Division Bench, Chandigarh in the case of Shri Bikram Jit

Passi (supra) and thereafter immediately the assessee

preferred the appeal before the learned CIT (Appeals). The

facts of the present case are similar to the facts of the case of

Shri Arun Rohtagi & Others (supra). Respectfully following

the order of the I.T.A.T., Lucknow Bench in the case of Shri

Arun Rohtagi & Others (supra) I hold that the learned CIT

(Appeals) should have condoned the delay in filing the appeal. 8

Accordingly, I condone the delay in filing the appeal and

admit the appeal for decision on merits.

8. As far as the merits of the case are concerned, the

issue is squarely covered in favour of the assessee and

against the Revenue by the decision of the I.T.A.T., Division

Bench, Chandigarh in the case of Shri Bikram Jit Passi Vs.

DCIT, Ambala Cantt in ITA No.925/Chd/2011 relating to

assessment year 2008-09. While deciding a similar issue in

favour of the assessee the Tribunal held as under :

"5. We have heard both the parties and caref ully perused and considered the f acts of the appeal. The ld. 'AR' placed reliance, on the decision, in the case of Pandya Vinod Chandra Bhogilae V ITO (2010) 045 DTR 105 ITAT, Ahmedabad, to state that the f act-situation of the present appeal is squarely covered by the decision. Having considered the decision, we f ound that the same is applicable to the f acts of the present cases. The relevant and operative part of the decision is reproduced hereunder :

"2. Thus the only issue involved in this appeal is about allo wabil ity of exemption under section 10(10C) of the Income Tax Act, 1961.

3. The f acts of the case are that assessee is a Deputy Manager in SBI and has taken VRS on 31-5-2006 under exit option scheme introduced by the bank of India with effect f rom 7-5-2005. The assessee received sal ary and pension amounting to Rs.3,81,894 (including exgratia). On examination of Form No.16 the Assessing Off icer noticed that assessee received exgratia of Rs.3,07,236 on VRS. He claimed exemption under section 10(10C) of the Act. The Assessing Off icer disallowed the claim by 9

following circular No. Chief CIT, Baroda letter BRD/Chief CIT/Tech/MICS/10(10C)/2009-10, dated 17-6-2006. The assessee rel ied on the decision of Tribunal, Kolkata in the case of Dy.CIT v. Krishna Gopal Saha (2009) 29 DTR (Kol)(TM)(Trib) 385 but the learned Assessing Off icer did not agree and made the addition. The learned Commissioner (Appeals) also conf irmed the disallo wance by trying to distinguish the decision of Third Member in Dy.CIT v. Krishna Gopal Sahas case (supra).

4. We have heard the parties and perused the material on record. In our considered view the distinction cited by the learned Commissioner (Appeals) is not sound and does not stand to reason. The only basis for not allo wing the claim has been that scheme f or VRS is not in accordance with rule 2BA. Ho wever,, it has not been pointed out ho w the employer has not f ramed the scheme in accordance with rule 2BA. Earl ier till 2002 schemes were required to be approved by the Chief Commissioner but thereaf ter such requirement has been dispensed with and, theref ore, it is only f or the employer to f rame the scheme f or VRS or f or earl ier exit option. If Assessing Off icer had any doubt about the scheme he could have enquired f rom the employer. So f ar as the assessee employee is concerned, he cannot be penal ized and tax will be levied on him on the assumption that the scheme f ramed by employer is not in accordance with rule 2BA. In any case, the judgment of Third Member in Dy.CIT v. Krishna Gopal Saha (supra) is clearly applicable and we do not f ind any reason to take a diff erent vie w. For the sake of convenience we ref er to f ollo wing para f rom the Third Member judgment in Dy.CIT v. Krishna Gopal Sahas case (supra) as under :

10 5. At the time of hearing bef ore me, none appeared on behalf of the assessee-respondent. I have, theref ore, heard the learned department Representative and perused the material placed bef ore me. I f ind that the issue has been considered by the Hon'ble jurisdictional High Court in the case of SAIL DSP VR Employees Association 1998 v. Union of India (supra) in which their Lordships held as under :

Section 10(10C) of the Income T ax Act, 1961, uses the expression any amount received by an employee.... At the time of his voluntary retirement in accordance with any scheme or schemes of voluntary retirement.... if a plain l iteral interpretation of statutory provision produced a manif estly absurd and unjust resul t, which the legislature could not have intended, the court is supposed to modif y the language used by the legislature even to do some violence to it so as to achieve the obvious intention of the legislature and produce a rational construction. An expression used in the statute is not al ways to be interpreted literally or grammatically. Sometimes it has to be interpreted having regard to the context in which the expression is used and having regard to the object and purpose f or which the same is enacted. Sec.10(10C) was inserted in order to make voluntary retirement attractive so as to reduce human complements f or securing economic viabil ity of certain companies. This object was el aborated by various departmental circulars and expl anatory statements issued f rom time to time. Simil arly, rule 2BA of the Income T ax Rules, 1962, which was inserted by IT (Sixteenth Amendment) Rules, 1962, was amended f rom time to time. All these go to sho w that this was intended to make voluntary retirement more attractive and benef icial to the 11

employee opting for voluntary retirement. Theref ore, this has to be interpreted in a manner benef icial to the optee f or voluntary retirement, if there is any ambiguity.

Sums paid on voluntary retirement to the extent of rupees five lakhs are exempted f rom being charged to tax by reason of section 10(10C). Even if the payment is stretched over a period of years, the same would not become chargeable to tax in any subsequent assessment year.

From the above it is evident that their Lordships of the jurisdictional High Court held that an employee, who takes voluntary retirement, is entitled to deduction under section 10(10C) even if the payment is stretched over a period of years. They have also held that provision of section 10(10C) should be interpreted in a manner benef icial to the optee f or voluntary retirement. It may be pointed out that in the above-mentioned case, the employer i.e. SAIL was of the opinion that the employees were not entitled to exemption under section 10(10C) and accordingly, SAIL had been deducting tax at source on the amount paid under their voluntary retirement scheme. The f acts are simil ar in the assesses case, because in the case of the assessee also, the employer believing that the assessee is not entitled to deduction under section 10(10C) has deducted tax at source on the amount paid on voluntary retirement. The f acts being identical, the above decision of Hon'ble jurisdictional High Court would be squarely applicable to the case under appeal bef ore the Tribunal.

6. Simil arly, Hon'ble Bombay High Court in the case of CIT v. Nagesh Devidas Kulkarni (supra) held as under :

12 The assessee is entitled to the exemption under section 10(10C) of the Act and also rebate under section 89 of the Act in respect of the amount received in excess of Rs.5,00,000 on account of voluntary retirement.

Thus their Lordships have held that the assessee, who opts f or voluntary retirement, is not only entitled to exemption under section 10(10C) but also rebate under section 89 of the Income Tax Act. Simil ar vie w is taken by the Hon'ble Karnataka High Court in the case of CIT v. P. Surendra Prabhu (supra) wherein their Lordships held as under :

That the assessee, employee of the respondent bank was not only entitled to the benef it of exemption under section 10(10C) of the Act to the extent prescribed in the provision itself but f or any amount over and above the prescribed limit; under the af oresaid provision, the assessee was also entitled to relief under section 89(1) of the Act read with rule 21A.

6. From the above it is evident that while the learned AM rel ied upon the decision of Hon'ble Madras High Court in the case of CIT v. M.Chelladurai & Ors.

(2009) 317 ITR 370(Mad) : (2009) 176 Taxman 31, he has not taken into account the decisions of other High Courts including the jurisdictional High Court. The Hon'ble jurisdictional High Court under the identical f acts held the assessee, i.e., the retired employee, to be entitled to deduction under section 10(10C). Simil ar vie w is taken by Hon'ble Bombay as well as Karnataka High Courts. The decision of Hon'ble jurisdictional High Court is binding upon us and moreover if two vie ws are possible, while interpreting the provision, a vie w which is f avourable to the assessee has to be adopted. Hon'ble jurisdictional High Court in the above- 13

ref erred case of SAIL DSP VR Employees Association 1998 v. Union of India (supra) has also held that the provisions of section 10(10C) are to be interpreted liberally in a manner which is benef icial to retired employees in view of the above. I respectf ully following the decisions of Hon'ble jurisdictional High Court, Bombay High Court and Karnataka High Court agree with the learned JM and hold that the assessee is entitled to exemption under section 10(10C) to the extent of Rs.5 l akhs."

Respectf ully f ollowing the above decision of the Tribunal, we allo w the claim of assessee."

6. The issue in question is covered by the decision of the Hon'ble Tribunal, as reproduced above. The assessee/appellant was also employed in the State Bank of India. Respectf ully f ollo wing the said decision, the appeal is decided in f avour of the assessee."

9. In my opinion, the decision of the I.T.A.T.,

Chandigarh Bench rendered in the case of Shri Bikram Jit

Passi (supra) is squarely applicable to the facts of the present

case. Respectfully following the above order of the Tribunal,

I allow the claim of the assessee holding that the authorities

below were not justified in disallowing the amount of Rs.5

lacs under section 10(10C) of the Act. Accordingly, I allow

ground No.3 of the appeal.

10. As regards ground No.4 of the appeal, I hold that

there was no justification in making disallowance of

Rs.24,295/- out of Rs.2,14,167/- received by the assessee as

leave encashment, which was claimed as exempt under section

10(10AA) of the Act. It is apparent from the record that an 14

amount of Rs.2,14,167/- was paid to the assessee towards the

earned leave due to the assessee for 240 days. This fact

stands admitted by the Assessing Officer while completing the

assessment. However, the Assessing Officer had made the

disallowance disputing the calculation made by the employer

of the assessee. In my opinion, there was no justification in

disputing the calculation made by the employer of the

assessee, particularly when the employer had allowed the said

amount as a deduction after computing the same under the

provisions of the law, which fact also stands admitted by the

Assessing Officer. It is clear that the assessee had received

an amount of Rs.2,14,167/- as leave encashment and,

therefore, there was no justification on the part of the

Assessing Officer to dispute the calculation made by the

employer of the assessee. No clarification has been sought

from the employer Bank. In that view of the matter, I do not

see any reason for making disallowance of Rs.24,295/- out of

the amount of Rs.2,14,167/- received by the assessee on

account of leave encashment from his employer. Accordingly,

ground No.4 of the appeal is allowed.

11. Vide ground No.5 of the appeal, the assessee had

challenged the validity of re-opening of the assessment. Since

I have allowed the appeal of the assessee on merits and,

therefore, I do not think it necessary to decide this ground of

appeal and discussion on this issue would be of academic

interest and nothing else.

15

12. No other point was raised or argued before me by

either party.

13. In the result, the appeal of the assessee is allowed

in part.

Order pronounced in the open court on this 17th day

of June, 2015.

Sd/-

(H.L.KARWA) VICE PRESIDENT

Dated : 17 t h June, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh