SHRI ASIT S. SHAH, MUMBAI v. THE DY CIT 24(1), MUMBAI

ITA 1960/MUM/2008 | 2003-2004
Pronouncement Date: 30-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 196019914 RSA 2008
Assessee PAN AAHPS5687E
Bench Mumbai
Appeal Number ITA 1960/MUM/2008
Duration Of Justice 2 year(s) 1 month(s) 12 day(s)
Appellant SHRI ASIT S. SHAH, MUMBAI
Respondent THE DY CIT 24(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-04-2010
Date Of Final Hearing 15-04-2010
Next Hearing Date 15-04-2010
Assessment Year 2003-2004
Appeal Filed On 18-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI R V EASWAR SENIOR VICE PRESIDENT AND SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER I T A NO: 1960/MUM/2008 (ASSESSMENT YEAR: 2003-04) SHRI ASIT S SHAH MUMBAI APPELLANT (PAN: AAHPS5687E) VS DEPUTY COMMISSIONER OF INCOME TAX 24(1) RESPONDEN T MUMBAI APPELLANT BY: SHRI SUDHIR J MEHTA RESPONDENT BY: SHRI VIKRAM GAUR O R D E R R V EASWAR SENIOR VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSM ENT YEAR 2003-04. THE ASSESSEE IS AN INDIVIDUAL RESIDENT EA RNING SALARY INCOME AND INCOME FROM DERIVATIVE TRANSACTIONS INTEREST ETC. 2. GROUNDS TAKEN BEFORE US IN THE APPEAL ARE DIRECT ED AGAINST THE VALIDITY OF THE REOPENING OF THE ASSESSMENT AND THE ASSESSABILITY OF RS.4 73 430/- WHICH IS THE EQUIVALENT OF US$ 10000 GRANTED TO THE ASSESSEE BY HIS EMPLOYER TO MEET THE EXPENSES ON TR ANSFER AND TO SET UP A NEW HOUSE AT HONG KONG AND OTHER MISCELLANEOUS EXPENSES. 3. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARIN G TOTAL INCOME OF RS.1 45 24 933/-. IN NOTE NO.5 TO THE RETURN H E STATED AS UNDER: - 5. THE ASSESSEE HAS RECEIVED US$ 10000/- EQUIVALENT TO HK$ 77995 AS REIMBURSEMENT TO TRANSFER EXPENSES AND FOR SETTING UP NEW HOME IN HONG KONG AND OTHER MISCELLANEOUS EXPENSES. THIS BEING IN THE NATURE OF REIMBURSEMENT OF EXPENSES THE SAME IS NOT CONSIDERED AS INCOME AND ACCORDINGLY HAVE BEEN CLAIMED AS EXEMPT. 2 THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF TH E INCOME TAX ACT 1961 ON 18 TH JANUARY 2005; BUT ON 25 TH AUGUST 2005 THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 REOPENING T HE ASSESSMENT ON THE GROUND THAT THE AMOUNT OF US$ 10000 PAID TO THE ASSESSEE BY HIS EMPLOYER OUGHT TO HAVE BEEN ASSESSED AS INCOME AND THE GRANT OF THE EXEMPTION HAS RESULTED IN ESCAPEMENT OF INCOME. TH E ASSESSEE POINTED OUT THAT THE AMOUNT WAS PAID TO HIM BY CRED IT SUISSE FIRST BOSTON (HONG KONG) LTD. TO WHOM HIS SERVICES WERE S ECONDED AND THAT IT WAS PAID TO THE ASSESSEE ON HIS ARRIVAL IN HONG KONG FROM MUMBAI AS SETTLING-IN ALLOWANCE TO ASSIST HIM IN ME ETING THE EXPENSES OF SETTING UP HIS NEW HOME IN HONG KONG AND OTHER M ISCELLANEOUS EXPENSES. IT WAS THUS CONTENDED THAT THE AMOUNT WA S NOT TAXABLE AS IT WAS PAID FOR MEETING SPECIFIC EXPENSES IN CONNECTIO N WITH THE RELOCATION. THE ASSESSING OFFICER DID NOT ACCEPT T HE CONTENTION AND HIS VIEW WAS THAT THE ASSESSEE ACCEPTED EMPLOYMENT OUTSIDE INDIA OF HIS OWN CHOICE WITH BETTER TERMS AND PROSPECTS AND THE INCURRING OF SUCH EXPENSES WAS INEVITABLE WHETHER OR NOT THEY WE RE REIMBURSED. HE THEREFORE BROUGHT THE RUPEE EQUIVALENT WHICH CAME TO RS.4 73 430/- AS THE ASSESSEES INCOME. THE REASSE SSMENT ORDER WAS PASSED ON 21 ST NOVEMBER 2006. 4. ON APPEAL THE CIT(A) HELD THAT THE AMOUNT RECEI VED BY THE ASSESSEE IN HONG KONG WAS NOT REIMBURSEMENT OF ANY EXPENDITURE INCURRED BY HIM NOR WAS IT GRANTED TO MEET EXPENSES WHOLLY NECESSARILY AND EXCLUSIVELY INCURRED IN THE PERFORM ANCE OF THE DUTIES OF AN OFFICE OR EMPLOYMENT OF PROFIT. IN THE OPINION OF THE CIT(A) THE 3 AMOUNT WAS IN THE NATURE OF PERSONAL ALLOWANCE TO M EET THE PERSONAL EXPENSES WHICH CANNOT BE EXEMPTED. HE THUS CONFIR MED THE ADDITION. 5. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. IN SUPPORT OF THE CHALLENGE TO THE REOPENING OF THE AS SESSMENT IT WAS CONTENDED THAT THERE WAS NO NEW MATERIAL WHICH CAME TO THE POSSESSION OF THE ASSESSING OFFICER AFTER THE RETUR N WAS PROCESSED UNDER SECTION 143(1) AND THEREFORE THERE COULD HA VE BEEN NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPE D ASSESSMENT. OUR ATTENTION WAS DRAWN TO THE JUDGMENT OF THE SUPR EME COURT IN CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC ). THE CONTENTION OF THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE HOW EVER WAS THAT THIS JUDGMENT MUST BE READ IN CONTEXT THE CONTEXT BEING THAT IN THAT CASE THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SE CTION 143(3) WHEREAS IN THE PRESENT CASE THERE WAS NO ORIGINAL A SSESSMENT AT ALL THE RETURN HAVING ONLY BEEN PROCESSED UNDER SECTION 143(1) OF THE ACT. HE THEREFORE SUBMITTED THAT NO OPINION COULD HAVE BEEN FORMED BY THE ASSESSING OFFICER IN THE FIRST INSTANCE REGARDI NG THE TAXABILITY OF THE RECEIPT AND THEREFORE THE NOTICE OF REOPENING CAN NOT BE SAID TO HAVE BEEN PROMPTED BY A CHANGE OF OPINION. HE STRONGLY RELIED ON THE EARLIER JUDGMENT OF THE SUPREME COURT IN ACIT VS. R AJESH JHAVERI STOCK BROKERS (P) LTD. (2007) 291 ITR 500 (SC). HE POINTED OUT THAT THIS JUDGMENT GOVERNS THE PRESENT CASE BECAUSE IT W AS RENDERED IN THE CONTEXT OF THE RETURN HAVING BEEN PROCESSED UNDER S ECTION 143(1) AND THEREAFTER NOTICE UNDER SECTION 148 BEING ISSUED. 4 6. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS VIS--VIS THE VALIDITY OF THE REOPENING. IN OUR OP INION THE PRESENT CASE SEEMS TO BE COVERED BY THE EARLIER JUDGMENT OF THE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS ( P) LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAID JUDGMENT WE UPHOLD THE VALIDITY OF THE NOTICE UNDER SECTION 148 OF THE ACT. 7. AS REGARDS THE MERITS HOWEVER WE ARE OF THE VI EW THAT IT IS COMMON KNOWLEDGE THAT ON RELOCATION A PERSON MAY HA VE TO INCUR SEVERAL EXPENSES INCLUDING THE SEARCH FOR HOUSING SERVICES OF SERVANTS SCHOOLING OF CHILDREN PURCHASE OF GADGET S ETC. TO SUIT THE CHANGES IN THE CLIMATIC CONDITION AND SO ON AND SO FORTH. IT IS ALSO COMMON KNOWLEDGE THAT VERY OFTEN SUCH EXPENDITURE E XCEEDS THE ALLOWANCE OR PAYMENT MADE BY THE EMPLOYER IF THE R ELOCATION IS CAUSED BY CHANGE IN THE EMPLOYMENT OR TRANSFER UND ER THE SAME EMPLOYER FROM ONE PLACE TO ANOTHER. IT HAS ALSO T O BE BORNE IN MIND THAT THE EXPENSES TO BE INCURRED BY SUCH A PERSON W ILL BE COMMENSURATE TO THE POSITION AND STATUS HE ENJOYS I N THE COMPANY AS ALSO HIS DESIGNATION. IT WOULD THEREFORE BE FAIR IN OUR HUMBLE OPINION TO ASSUME THAT A MAJOR CHUNK OF THE AMOUNT RECEIVED BY THE ASSESSEE WOULD HAVE BEEN SPENT BY HIM IN RELOCATING TO HONG KONG FROM MUMBAI. WHATEVER IS LEFT WITH HIM AFTER MEETING SU CH EXPENSES MAY HOWEVER BE BROUGHT TO TAX AS INCOME GOING BY THE PR INCIPLES OF REAL INCOME. IN THE PRESENT CASE CONSIDERING THE POS ITION OF THE ASSESSEE IN THE COMPANY BY NAME CREDIT SUISSE F IRST BOSTON INDIA SECURITIES PVT. LTD. IN WHICH HE WAS EMPLOYED IN MU MBAI AS SEEN FROM 5 THE GROSS SALARY OF RS.1 29 41 275/- IT SEEMS TO U S THAT THE ALLOWANCE EQUIVALENT TO RS.4 73 430/- GIVEN BY THE GROUP COMP ANY IN HONG KONG TO WHOM HIS SERVICES WERE SECONDED IS QUITE REASONABLE. IT WOULD BE FAIR TO ASSUME THAT ABOUT 75% TO 80% OF TH E ALLOWANCE WOULD HAVE BEEN SPENT BY THE ASSESSEE ON RELOCATION. ACC ORDINGLY WE HOLD THAT 20% OF THE AMOUNT OF RS.4 73 430/- WHICH WOUL D HAVE BEEN LEFT WITH THE ASSESSEE AFTER INCURRING THE EXPENSES MAY BE BROUGHT TO TAX INSTEAD OF THE ENTIRE RECEIPT. WE DIRECT THE ASSES SING OFFICER TO MODIFY THE ASSESSMENT ACCORDINGLY AND ALLOW THE ASSESSEES APPEAL IN PART. ORDER PRONOUNCED ON 30 TH APRIL 2010. SD/- SD/- (J SUDHAKAR REDDY) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI DATED 30 TH APRIL 2010 SALDANHA COPY TO: 1. SHRI ASIT S SHAH B-705 SHANTIVAN-III RAHEJA TOWNSHIP MALAD (EAST) MUMBAI 400 097 2. DCIT 24(1) 3. CIT-24 4. CIT(A)-XXIV 5. DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI