2024 (2) TMI 1232 - AT - Income Tax

Revision u/s 263 - Taxability of unit linked insurance redemption units - AO had re-opened the assessment on the basis that the assessee had claimed accretion amount on surrender of policy - HELD THAT - Law is well settled that for invoking the provision of section 263, twin conditions are required to be satisfied i.e. that order should be erroneous and prejudicial to the interest of the Revenue. If AO adopts one of the plausible views, in that event, no prejudice would be caused. In the present case, the assessee redeemed units of Bajaj Alliance and claimed it to be capital gain. A specific provision has been inserted in respect of unit linked insurance in section 45 of the Act, making it amenable to capital gain tax. Therefore, looking to the facts of the present case, no prejudice is caused to Revenue. We therefore, set aside the impugned order and restore the findings of AO. The grounds raised by the assessee in this appeal are allowed.

Summary

Issues involved:
The judgment involves a challenge to the correctness of an order passed by Ld. Pr. CIT under section 263 of the Income-tax Act, 1961 for the assessment year 2016-17.

Grounds of appeal:
1. The order passed by Ld. PCIT under section 263 setting aside the assessment under section 143(3) as erroneous and prejudicial to the revenue is challenged.
2. Ld. PCIT erred in exercising jurisdiction under section 263 despite full satisfaction of the Assessing Officer during the original assessment.
3. Ld. CIT erred in passing the revision order under section 263 without meeting the mandatory conditions as required by law.
4. Ld. PCIT erred in passing the revision order even though the Assessing Officer had made inquiries and the claim was allowed based on satisfactory explanation.
5. Ld. PCIT erred in holding that the amount received from pension policies was not exempt, despite the appellant not claiming any exemption under relevant sections.
6. The appellant seeks leave to amend the grounds of appeal.

Details of the judgment:
The Assessing Officer reopened the assessment based on the accretion amount claimed by the assessee on surrender of policy for the relevant year. The AO concluded the assessment, assessing the income of the assessee. Ld. Pr. CIT issued a notice under section 263, calling for revision of the assessment order. The revision directed the AO to verify the difference in the amount and pass a fresh assessment order.

The appellant contended that the assessment order was not prejudicial to the revenue, as the AO had inquired and accepted the explanation provided by the assessee. The Revenue argued that the AO did not make further inquiries and justified the revision by Ld. Pr. CIT.

After hearing the arguments, the Tribunal held that for invoking section 263, the order must be both erroneous and prejudicial to revenue. In this case, the redemption of units and claim of capital gain did not cause prejudice to revenue. The Tribunal set aside the revision order and restored the findings of the AO, allowing the grounds raised by the assessee.

In conclusion, the appeal of the assessee was allowed, and the order was pronounced in open court on the specified date.