TaxTMI 
TaxTMI 
2002 (2) TMI 310
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....s in the shape of medical reimbursement were claimed to be exempt with a note. 4. The Assessing Officer during the course of assessment proceedings, asked the assessee to clarify how perks allowed to the assessee in respect of medical treatment were claimed as exempt. In his reply, dated 12-4-1994, the assessee submitted as under: "Please refer to your above mentioned questionnaires dated 25-6-1993 and in this regard I have to state as under: That as per section 17(2)(vi)(1) of Income-tax Act, the travelling expenses of employee and his one attendant is not allowable expenditure and it will be treated as perquisite in the case of employee whose total income exceeds Rs. one lakh but the I.T.A.T., Jaipur Bench held that the expenses incurred for the treatment of M.D. cannot be treated as perquisite in the hands of the Managing Director. I am also enclosing R.B.I.'s permit for issuing foreign exchange and also the copy of the application submitted to the R.B.I. for the expenses incurred." 5. During the course of assessment, the assessee also produced certificate from M/s. Upper India Steel Mfg. & Engg. Co. Ltd. relating to medical expenses incurred on the assessee and tax ....
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....; -------- Foreign Exchange: 51,000 US $ Purchased 10,63,807 21,400 US $ Less returned 5,44,230 --------- 5,19,577 5,19,577 &....
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....; -------- For Upper India Steel Mfg. & Engg. Co. Limited R.K. Saigal, Secretary". 6. The Assessing Officer did not accept that the entire expenditure incurred on medical treatment of the assessee abroad as exempt. In the assessment order, the Assessing Officer referred to decision of ITAT, Jaipur Bench and held that the same related to assessment year 1984-85. He further observed that from assessment year 1992-93, section 17 of Income-tax Act was amended and it was provided that expenditure incurred by employer on medical treatment of the employee and travelling and stay of one attendant was to be treated perquisite. In the view of the Assessing Officer expenditure incurred in excess of 'limit' laid down in proviso-VI to clause (2) of section 17 is to be treated as perquisite. The following expenditure with which I am concerned in this penalty matter were brought to tax as perquisite and as income falling under section 17 of the Income-tax Act:-  ....
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.... Assessing Officer in the penalty order emphasised that even after the employer company had treated these expenses as taxable for the purposes of tax deducted at source, the assessee failed to return them as income. The Assessing Officer also referred to amendment made in sub-section (2) of section 17 under which "expenditure" incurred by employer on medical treatment of employee whose gross income exceeds Rs. one lakh was liable to be taxed as perquisite. Such expenditure are not covered by clause (vi) of section 17(2) of Income-tax Act. The Assessing Officer held that the assessee had deliberately not shown the above mentioned perquisite in the income and was liable to pay penalty under section 271(1)(c) of the Income-tax Act. The Assessing Officer imposed penalty of Rs. 60,215 which represented 100% of tax sought to be evaded. 8. The assessee impugned above levy in appeal before the CIT(A) who after examining facts and circumstances of the case, held that the assessee had acted bonafidely and, therefore, no penalty in this case was exigible even under Explanation Ito section 271(1)(c) of the Income-tax Act. The penalty imposed was accordingly cancelled. Revenue has come up in....
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....te that the expenditure incurred by the employer on medical treatment of employee outside India were exempt in the assessment year 1992-93. The following items of expenditure incurred by the employer were exempt as per clause (vi) of section 17(2):- (1) Medical treatment of the employee, or any member of the family of such employee, outside India; (2) Travel and stay abroad of the employee or any member of the family of such employee for medical treatment; (3) Travel and stay abroad of one attendant who accompanies the patient in connection with such treatment. 12. With effect from 1-4-1992, i.e., in the assessment year 1992-93 the above exemptions were subjected to the following conditions "Subject to the condition that expenditure on travel referred to in sub clauses (2) and (3) of this clause shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed one lakh rupees and subject to such further conditions and limits in relation to such expenditure as the Board may, having regard to the guidelines, if any, issued by the Reserve Bank of India in this behalf, pr....
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....see furnished all particular material for his assessment. Once claim was disallowed, the assessee gracefully accepted the order by not filing any appeal. In the above circumstances, no penalty, in my view, is exigible. No material has been brought on record to show that any attempt of concealment or furnishing of inaccurate particulars was made by the assessee. The ratio of two decisions, one of Hon'ble Supreme Court and the other of Hon'ble Allahabad High Court quoted by the CIT(A) in the impugned order are fully applicable on the facts of the case. 16. The Revenue authorities for holding that it is a fit case for levy of penalty under -section 271(1)(c) mainly relied upon the fact that the company had deducted tax at source treating the disputed items as 'perquisite'. In my considered opinion, the fact of deduction of tax at source by employer is not conclusive to establish the concealment of income or furnishing of inaccurate particulars of such income as envisaged under section 271(1)(c) of the Income-tax Act. It is a matter of common knowledge that people responsible for tax deduction at source are controlled by audit and adopt inflexible and irrational approach, where even....