2018 (3) TMI 1300 - AT - Income Tax

Assessees' Appeals Dismissed for Late Filing; Allowances Denied Despite No Fault Found

Sri. Bathisha Kalam Pasha C/o. V. Suresh, Advocate Versus The Pr. Commissioner of Income-tax, Thiruvananthapuram

The Tribunal dismissed the appeals filed by the assessees due to a delay of 128 days in filing, but proceeded to hear the case on merits after finding no ... Revision u/s 263 - deny the claim of exemption for medical allowances, conveyance allowances and sumptuary allowances etc. - CIT had held that the allowances claimed as exemption on the basis of the recommendation of Shetty Commission Report as approved by the Hon’ble Supreme Court were not exempted under the I.T.Act and hence the assessments are to be revised - Held that:- Since the Hon’ble High Court [2016 (3) TMI 1291 - KERALA HIGH COURT] had held that acceptance of the Shetty Commission Report by the Hon’ble Apex Court is not a declaration of law and since there is no provision under the Income-tax Act or the Rules, whereby Medical, Conveyance and Sumptuary allowances are exempt from taxation, we hold that CIT is justified in invoking his revisionary jurisdiction u/s 263 of the I.T.Act. - Decided against assessee Issues:Delay in filing appeals for condonation, Justification of CIT in setting aside assessment orders u/s 263, Exemption claim for medical, conveyance, and sumptuary allowances, Interpretation of Shetty Commission Report by Hon'ble Supreme Court, Application of law by Assessing Officer, Definition of sumptuary, Confirmation of judgment by Division Bench of High Court, Lack of provision for exemption under Income-tax Act.Delay in filing appeals for condonation:The appeals were filed with a delay of 128 days, and the assessees submitted petitions for condonation along with Affidavits explaining the reasons for the delay. The Tribunal found that the delay could not be attributed to any fault of the assessees and proceeded to hear the case on merits.Justification of CIT in setting aside assessment orders u/s 263:The CIT set aside the assessment orders passed u/s 143(3) of the Income-tax Act, directing the Assessing Officer to deny the exemption claimed for medical, conveyance, and sumptuary allowances. The CIT based this decision on the interpretation of the Shetty Commission Report, approved by the Hon'ble Supreme Court, which was not exempt under the Income-tax Act. The CIT held that the Assessing Officer misunderstood the Court's direction to implement the Shetty Commission Report, leading to an incorrect application of the law.Exemption claim for medical, conveyance, and sumptuary allowances:The assessees, who were District Judges, claimed exemption for sumptuary, conveyance, and medical allowances for the assessment year 2011-2012. The Assessing Officer allowed these exemptions under section 143(3) of the Income-tax Act. However, the CIT, through a notice u/s 263, held that these allowances were not exempt under the Act based on the Shetty Commission recommendations approved by the Supreme Court.Interpretation of Shetty Commission Report by Hon'ble Supreme Court:The Hon'ble Supreme Court's decision on the Shetty Commission recommendations was cited by the CIT to justify setting aside the assessment orders. The Court's direction was clear that until the Income-tax Act and relevant rules were amended to implement the recommendations, the allowances could not be considered tax-free.Application of law by Assessing Officer:The Assessing Officer's understanding of implementing the Shetty Commission recommendations as implementation per se was deemed incorrect by the CIT. The CIT held that in the absence of amendments to the Act or Rules, the exemption claims allowed by the Assessing Officer were erroneous and prejudicial to revenue.Definition of sumptuary:The Oxford English Dictionary defined sumptuary as private expenditure in the interest of the State. The sumptuary allowances paid to District Judges were part of their salary following the Shetty Commission recommendations approved by the Hon'ble Supreme Court.Confirmation of judgment by Division Bench of High Court:The High Court's Division Bench confirmed a single Judge's rejection of the plea that the acceptance of Shetty Commission Report by the Supreme Court should be considered a declaration of law. The High Court held that there was no provision under the Income-tax Act or Rules for exempting Medical, Conveyance, and Sumptuary allowances.Lack of provision for exemption under Income-tax Act:Since there was no provision under the Income-tax Act or Rules exempting Medical, Conveyance, and Sumptuary allowances, the CIT was deemed justified in invoking his revisionary jurisdiction u/s 263 of the Income-tax Act. Consequently, the appeals filed by the assessees were dismissed by the Tribunal.