2023 (4) TMI 1094 - AT - Income Tax

Reopening of assessment u/s 147 - Assessee had paid the annual premium which is much higher than the total income declared by the assessee in the return of income - information received from the insurance company in respect of premium paid by the appellant - misreporting of the insurance company - HELD THAT - As it is brought to our notice that assessee has no doubt made the insurance premium from the bank account maintained by the assessee in Punjab and Maharashtra Cooperative Bank Limited in Fort branch and HDFC, Andheri (W) branch. Subscription of insurance is concerned assessee has accepted and brought on record that assessee has in fact made the payment and not through the bank reported by the Insurance Company and it is from the branch in which assessee is maintaining bank account. Payments of premium is concerned assessee has clearly brought on record that assessee has in fact made the payment. With regard to source of funds there is no doubt on the statements and financial record submitted by the assessee that assessee has enough funds to make the above said insurance payment. Therefore, the reason for reopening of the assessment is already clarified and addressed by the assessee. However, the issue was complicated because of the misreporting of the insurance company. Therefore, the ground raised by the assessee is accordingly, allowed.

Issues:
Reopening of assessment based on discrepancy in insurance premium payment and total income declared, Addition made under section 68 of the Income-tax Act, 1961, Dismissal of appeal by Commissioner of Income Tax (Appeals) regarding the addition of insurance premium payment, Disputed levy of interest and penalty, Relief sought by the appellant.

Reopening of Assessment:
The appellant filed the return of income for A.Y. 2011-12 declaring total income of Rs. 1,60,630. The assessment was reopened under section 147 of the Act due to information received about the appellant paying an annual premium of Rs. 6,00,000, much higher than the declared income. The Assessing Officer issued notices and eventually proceeded to make an addition under section 68 of the Act as the appellant did not respond adequately. The appellant contended that the AO did not appreciate the correct nature of the transaction and proof of payments submitted, requesting a remand for verification.

Addition under Section 68:
The appellant appealed the addition of Rs. 6,00,000 made by the Assessing Officer, arguing that the payment was made from bank accounts other than the one reported by the insurance company. The appellant maintained that there were sufficient funds from other transactions to cover the premium payment. The Tribunal observed that the appellant indeed made the payment from accounts different from what the insurance company reported, and there was no doubt about the availability of funds for the payment. The issue arose due to misreporting by the insurance company, leading to the allowance of the appellant's ground.

Dismissal of Appeal by CIT(A):
The Commissioner of Income Tax (Appeals) dismissed the appellant's appeal regarding the addition of the insurance premium payment. The CIT(A) held that the declared income did not justify the large premium payment alongside other investments. The appellant's argument of payment through cheques from bank accounts was not accepted as a credible explanation for the source of income. Consequently, the addition made by the AO was confirmed, and the appeal was dismissed.

Levy of Interest and Penalty:
The appellant raised concerns about the levy of interest under sections 234A, B, C, and D, as well as the initiation of penalty under section 271(1)(c). The Tribunal dismissed the appellant's appeal on these grounds as they were consequential in nature.

Relief Sought by the Appellant:
The appellant sought various reliefs, including quashing the order passed under section 143(3) read with section 147, admitting additional evidence, deleting the addition of Rs. 6,00,000, and removing the wrongly levied interest and penalty. The Tribunal partly allowed the appeal, deleting the addition made by the Assessing Officer regarding the insurance premium payment.

This detailed analysis of the judgment covers the issues of reopening of assessment, addition under section 68, dismissal of appeal by CIT(A), disputed levy of interest and penalty, and the relief sought by the appellant. The Tribunal's decision provides clarity on the discrepancies in the premium payment, the availability of funds, and the misreporting by the insurance company, ultimately resulting in the partial allowance of the appellant's appeal.

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