2023 (2) TMI 337 - AT - Income Tax

Reopening of assessment u/s 147 - income escaped amount to be reopened for reassessment - information received from DDIT, Investigation Unit-2, Rajkot that the assessee has paid an amount for Life Insurance Policy assigned to the assessee, which the assessee has not declared in her Return of Income - HELD THAT - Assessee explained that the premium amount for Life Insurance Policy was not Rs. 9,99,000/- but only Rs. 99,900/-, which is a mistake and produced a notarized declaration by the Sales Manager of Bajaj Alliance Life Insurance Company quoting that the premium amount wrongly as Rs. 9,99,000/- instead of Rs. 99,900/- which was a typing mistake. Life Insurance Premium is not Rs. 9,99,000/- but it is Rs. 99,900/- only. As per Section 149(1)(b) of the Act, which prescribes the income escaped amount is Rupees one lakh or more is to be reopened for reassessment. Thus, we find that the initiation of reassessment proceedings itself is against the provisions of 149(1)(b) of the Act and invalid in law. Therefore the same is liable to be quashed. Thus the grounds raised by the Assessee is hereby allowed. Penalty levied u/s. 272A(1)(c) - HELD THAT - Assessee s taxable income being less than the taxable limit prescribed under the Act, we have no hesitation in deleting the penalty levied u/s. 272A(1)(c) of the Act. Thus the grounds raised by the Assessee is hereby allowed.

Summary

Issues Involved:
1. Delay in filing appeal before the Ld. CIT(A)-NFAC.
2. Validity of notice issued under section 148 of the Income Tax Act, 1961.
3. Addition of Rs. 9,99,000 made on account of alleged unexplained investment in Life Insurance Policy.
4. Levy of penalty under section 272A(1)(c) for non-compliance with statutory notices.

Issue 1: Delay in filing appeal before the Ld. CIT(A)-NFAC:
The appeal was filed against the Appellate order dated 17.09.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The Assessee's main grievance was the dismissal of the appeal due to a delay of 13 days in filing the appeal. The Assessee sought condonation of the delay, citing reasons such as lack of knowledge of tax laws, misplacement of the assessment order, and subsequent efforts to rectify the situation. The Ld. CIT(A) dismissed the appeal as time-barred, despite the Assessee submitting a condonation petition and an affidavit explaining the delay. However, the ITAT Rajkot, after hearing both parties and perusing the materials, found that the Assessee had shown sufficient cause for the delay and therefore condoned the delay of 13 days in filing the appeal on the Principles of Natural Justice.

Issue 2: Validity of notice issued under section 148 of the Income Tax Act, 1961:
The assessment was reopened based on information received regarding an alleged payment of Rs. 9,99,000 towards a Life Insurance Policy, which the Assessee had not declared in her Return of Income. The Assessee clarified that the actual premium amount was Rs. 99,900, not Rs. 9,99,000, citing a typographical error in the premium amount. The ITAT Rajkot observed that as per Section 149(1)(b) of the Act, income escaped amounting to Rs. 1 lakh or more warrants reassessment. However, since the actual premium amount was below the threshold, the initiation of reassessment proceedings was deemed invalid. Consequently, the ITAT allowed the Assessee's appeal on this ground.

Issue 3: Addition of Rs. 9,99,000 made on account of alleged unexplained investment in Life Insurance Policy:
The ITAT Rajkot noted that the premium amount for the Life Insurance Policy was mistakenly recorded as Rs. 9,99,000 instead of Rs. 99,900. The Assessee provided a notarized declaration and a premium paid Challan to support this claim. Given the discrepancy in the premium amount and the invalid initiation of reassessment proceedings, the ITAT deemed the addition of Rs. 9,99,000 unjustified and ordered its deletion.

Issue 4: Levy of penalty under section 272A(1)(c) for non-compliance with statutory notices:
In another appeal concerning the levy of penalty under section 272A(1)(c) for non-compliance with statutory notices, the Assessee's appeal was dismissed due to a 13-day delay in filing. The ITAT, similar to the previous issue, condoned the delay and proceeded to delete the penalty levied under section 272A(1)(c) as the Assessee's taxable income was below the prescribed limit. Consequently, both appeals filed by the Assessee were allowed by the ITAT Rajkot.