Hospitality and telephone allowances to assessee being in nature of reimbursement cannot be treated as income in hands of assessee and, consequently, non-inclusion of same in assessee’s return of income could not be treated as concealment of income and penalty was not called for
IN THE ITAT CUTTACK BENCH
Soumya Prakash Pattnaik
Assistant Commissioner of Income-tax
AND GEORGE MATHAN, JUDICIAL MEMBER
IT APPEAL NO. 429 (CTK.) OF 2013
[ASSESSMENT YEAR 2005-06]
OCTOBER 22, 2014
S.N. Sahu for the Appellant. S.C. Mohanty for the Respondent.
George Mathan, Judicial Member – This is an appeal filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals), Cuttack, in I. T. Appeal No. 0141/2010-11, dated July 24, 2013, for the assessment year 2005-06 against the confirmation of levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Shri S. N. Sahu, authorised representative, represented on behalf of the assessee and Shri S. C. Mohanty, Departmental representative, represented on behalf of the Revenue.
3. At the time of hearing it was submitted by the learned authorised representative that the assessee is an individual, who is drawing salaried income. It was the submission that the assessee is a teacher, teaching in Orissa Engineering College. It was the submission that the assessee was entitled to reimburse of Rs. 5,000 per month to his hospitality allowance and Rs. 1,000 per month towards telephone allowance. It was the submission that the assessee had not included the two allowances when filing his return of income as the said allowances were in the nature of reimbursement of the expenses incurred by the assessee. It was the submission that the Assessing Officer while completing the assessment treated the said two amounts as income of the assessee. It was the submission that in the penalty proceedings, the assessee had submitted that the amounts were reimbursement and consequently was not liable to be treated as the income of the assessee. The assessee had also produced before the Assessing Officer the copy of the letter from the Orissa Engineering College, dated September 6, 2010, wherein it was specified that the said two amounts were reimbursements. It was the submission that the reply given by the assessee was not considered and penalty was levied. It was the submission that the said letter specifically clarifies that the remuneration is Rs. 15,000 per month and that the reimbursement was Rs. 5,000 per month for hospitality allowance and Rs. 1,000 per month towards telephone allowance. It was the submission that the reimbursements were not part of the income of the assessee. It was the submission that penalty levied may be deleted.
4. In reply, the learned Departmental representative vehemently supported the order of the Assessing Officer and the learned Commissioner of Income-tax (Appeals).
5. We have considered the rival submissions. A perusal of the assessment order clearly shows that the Assessing Officer has treated the amount of Rs. 5,000 per month towards hospitality allowance reimbursement and Rs.1,000 per month towards telephone allowance reimbursement as the salary income of the assessee. Admittedly the letter dated September 6, 2010, which has also been extracted by the Assessing Officer clearly shows that the amounts are only reimbursements. The amounts having been shown as reimbursement the same cannot be treated as income in the hands of the assessee especially under the head “Salary”. Consequently, non-inclusion of the same in the assessee’s return of income could not be treated as concealment of income. In any case, the assessee is not in appeal against the addition made in the assessment order, however, that would not bar the assessee from raising its plea of reasonable cause in the penalty proceedings. A perusal of the letter issued by the Orissa Engineering College clearly mentioning the same to be reimbursement, the same cannot be treated as the salaried income of the assessee, which has been concealed by the assessee. In these circumstances, we are of the view that the penalty levied by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is unsustainable and consequently deleted.
6. In the result, the appeal of the assessee is allowed