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2021 (3) TMI 1174 - HC - Income TaxReopening of assessment u/ 147 - surrender value of pension plan claimed as exempted from tax u/s 10(10D) - a s per revenue interest/bonus on premature of surrender of pension plan / annuity plan is not exempted as per the provisions of Section 80CCC(2) or under any other sections of the I.T. Act . - tangible material necessary to reopen an assessment made without scrutiny under Section 143(1) - HELD THAT - From the reasons assigned by the Revenue it is not clear as to how the basic conditions are not fulfilled so as to even prima facie suggest that the benefit of Section 10(10D) of the Act is not available to the assessee. The only thing, which seems to have weighed heavily with the Revenue, is that the assessee has not offered the amount being the excess sum received over and above the premium paid for tax. In view of this, this amount is nothing, but, bonus, which is otherwise covered under Section 10(10D) of the Act. However, for this amount to be taxable, the Revenue has to prima facie indicate as to which of the conditions of Section 10(10D) of the Act are not fulfilled. In other words, how the amount in question is not exempted under Section 10(10D) The reference to Section 80CCC(2) is thoroughly misconceived for two reasons first, Section 80CCC deals with annuity plans whereas we are concerned with life insurance policy; secondly, Section 80CCC(2) of the Act makes any sum received by the assessee from the insurer towards contract for any annuity plan, taxable provided premium paid for such plan is claimed as allowable deduction under Section 80CCC(1) of the Act. In the facts of the present case, there is no such averment or findings that the amount of premium paid has been claimed and allowed as deduction under Section 80CCC(1) of the Act. Where the original assessment is without scrutiny i.e. under Section 143(1), even in such cases tangible material is necessary to reopen the assessment.Explanation 2 to Section 147 is more elaborate and cover those cases where the assessments have been completed (called as the scrutiny cases) as well as those cases where no assessments have been completed (called as the non scrutiny cases). As per the aforesaid Explanation 2, no distinction has been made between the cases where assessment has been made after scrutiny and those cases where no assessment has been made viz. cases where assessment has been made under Section 143(1) only. From the aforesaid Circular of the CBDT, it is quite evident that no distinction under Section 147 is contemplated between the assessment under Section 143(3) called as the scrutiny assessment and the assessment accepted under Section 143(1) called as the non scrutiny assessment. Therefore, a tangible material is necessary to reopen even an assessment made without scrutiny under Section 143(1) of the Act. Even where the proceedings under Section 147 of the Act are sought to be initiated with reference to an intimation under Section 143(1), the ingredients of Section 147 are required to be fulfilled. Therefore, even in such a case there should exist reason to believe that income chargeable to tax has escaped assessment. Hence, in the absence of any tangible material in possession of the Assessing Officer, subsequent to the intimation under Section 143(1), the reopening will not be sustainable. In other words, even an assessment under Section 143(1), in the form of an intimation, cannot be reopened under Section 147 unless some new / fresh tangible material comes into possession of the Assessing Officer, subsequent to the intimation under Section 143(1) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Legality of reopening assessment under Section 148 of the Income Tax Act. 2. Applicability of Section 10(10D) of the Income Tax Act. 3. Applicability of Section 80CCC(2) of the Income Tax Act. 4. Requirement of tangible material for reopening assessment under Section 147 of the Income Tax Act. Detailed Analysis: 1. Legality of Reopening Assessment under Section 148: The primary issue was whether the Revenue was justified in issuing a notice for reopening the assessment for the A.Y. 2012-13 under Section 148. The original return was processed under Section 143(1) without scrutiny, and the reopening was beyond four years. The court examined whether there were valid reasons to believe that income had escaped assessment. 2. Applicability of Section 10(10D): The assessee argued that the amount received under the life insurance policy, including the sum allocated by way of bonus, should be exempt under Section 10(10D) unless it falls under exceptions (a) to (d). The Revenue contended that the policy was a Unit Linked Insurance Plan (ULIP) and not a plain life insurance plan, thus not covered under Section 10(10D). The court noted that the Revenue failed to indicate how the basic conditions of Section 10(10D) were not met, and the accretion amount of ?17,65,558/- should be considered as bonus, which is otherwise exempt under Section 10(10D). 3. Applicability of Section 80CCC(2): The Revenue claimed the interest or bonus received on surrender of the annuity plan is taxable under Section 80CCC(2), even if no deduction was claimed under Section 80CCC(1). The court found this argument misconceived, stating that Section 80CCC deals with annuity plans, whereas the case involved a life insurance policy. Moreover, Section 80CCC(2) applies only if deductions under Section 80CCC(1) were claimed, which was not the case here. 4. Requirement of Tangible Material for Reopening Assessment: The court emphasized that even for reopening assessments processed under Section 143(1), tangible material is necessary. The Revenue must have some new or fresh tangible material to form a reason to believe that income had escaped assessment. The court cited multiple precedents to support this requirement, including Ratna Trayi Reality Service P. Ltd. vs. ITO and CIT vs. Orient Craft Ltd. The court concluded that the Revenue lacked such tangible material in this case. Conclusion: The court allowed the writ applications, quashing the impugned notices for reopening the assessment. The court held that the Revenue failed to provide valid reasons and tangible material to justify the reopening under Section 147, and the conditions for exemption under Section 10(10D) were not adequately disproven by the Revenue. Additionally, the reference to Section 80CCC(2) was found to be inapplicable.
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