2022 (11) TMI 642 - HC - Income Tax

Reopening of assessment u/s 147 - Taxation of redemption amount of the policy prematurely surrendered - HELD THAT - Facts relating to issue on the basis of which the reopening of the assessment was sought to be acted upon were earlier called for by the Assessing Officer and all such information was supplied by the petitionerassessee. The petitioner- assessee clarified its stand with clear and convincing facts relating to the investment by him in the pension policy, source of funds applied and further pointing out that the deduction was not claimed in that regard under the relevant provisions rendering the receipt of surrender value not liable to be offered to tax. Case of the department that the petitioner had received the surrender value of policy upon its premature redemption and the same was liable to tax under Section 80CCC (2) of the Act, stands erroneous. Once it is a position obtained that the petitioner- assessee had not obtained a relief under Section 80CCC (1) of the Act, the redemption amount of the policy prematurely surrendered would not be liable to be taxed. Section 80CCC deals with the deduction in respect of contribution to certain pension funds to provide in Sub section (1) that where any individual assessee has in the previous year paid amount out of his income chargeable to tax in respect of annuity plan of Life Insurance Corporation of India, such amount shall be allowed deduction in computation of total income. Sub section (2) says that any amount standing to the credit of assessee referred in Sub section (1) which was allowed deduction along with the bonus etc. would be liable to tax upon surrender of annuity plan or as a pension received from such plan. Therefore, the condition for taxability of policy surrender value is that the amount invested was claimed as relief under Section 80CCC (1) of the Act which is not the case here. AO wanted to undertake a fishing inquiry in relation to issue, about which he had already solicited information and examined the same. The reassessment powers could not be exercised either for the purpose of reverification or to have a merry sailing for a rowing inquiry. The petition deserves to be allowed. Resultantly, notice issued by AO u/s 148 seeking to reopen the assessment in the case of the petitioner for the assessment year 2013-14 is hereby set aside. - Decided in favour of assessee.

Summary

Issues:
Challenge against notice under Section 148 of the Income Tax Act, 1961 for reopening assessment year 2013-14 and rejection of objections by Assessing Officer.

Analysis:
The petitioner filed the return of income for assessment year 2013-14, claiming deductions under various sections but not under Section 80CCC. The Assessing Officer issued a notice under Section 148 seeking to reopen the assessment, citing that income had escaped assessment due to the surrender of a pension policy with gains not offered for taxation. The petitioner objected, providing details of investments, clarifying no claim under Section 80CCC, and demonstrating the source of funds. The Assessing Officer rejected the objections, asserting that income had indeed escaped assessment.

In response, the petitioner argued that no relief was claimed under Section 80CCC (1), thus Section 80CCC (2) did not apply. The petitioner relied on legal precedents to support their argument against the reopening of the assessment. The respondent, on the other hand, maintained that the gains from the surrendered policy constituted income that had escaped assessment, justifying the reopening based on the Assessing Officer's satisfaction.

Upon thorough examination of the facts and contentions, the court found that the petitioner had provided all necessary information regarding the investments and clarified the non-claim of deductions under Section 80CCC. The court concluded that since no relief was claimed under Section 80CCC (1), the surrender value of the policy was not taxable under Section 80CCC (2). The court criticized the Assessing Officer for attempting a fishing inquiry despite having solicited and examined relevant information previously, ruling in favor of the petitioner.

Consequently, the court set aside the notice for reopening the assessment and the order rejecting the objections, allowing the petition and making the rule absolute.