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TMI Blog2024 (6) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(10CC) of the Act and had allowed the claim of the assessee. The enquiry made by the PCIT from the employer revealed that neither any perquisite was paid to the assessee nor the employer had made any disallowance u/s 40(a)(v) - Therefore, the claim of exemption u/s 10(10CC) of the Act made by the assessee was wrong and incorrect. Similarly, the claim for exemption u/s 10(10BB) of the Act was also allowed by the AO without making any enquiry from the employer. It is thus evident from the above facts, that the AO had not conducted proper inquiries in respect of the claims as made in the return of income and, therefore, the order was rightly treated as erroneous and pre-judicial to the interest of revenue by the Ld. PCIT. As pointed out by the Ld. CIT-DR, it was held in the case of Navnit Lal Sakar Lal [ 2000 (11) TMI 1 - SUPREME COURT] that the amount utilized by the employer for obtaining deferred annuity policy would form part of remuneration payable to the assessee and was chargeable under the head salaries . Therefore, the annuity amount of Rs. 15 lakh paid to LIC by the employer was remuneration of the assessee and taxable as salary. As the order of the AO was not in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neous, as recorded in Para 3 of the PCIT s order u/s 263 of the Act, was as under: 3. As per details of salary, the employer has shown payment under Voluntary Retirement Scheme amounting to Rs. 2180652/- and it forms part of salary u/s 17(1) in form 16. It is noticed that against this payment Rs. 2180652/-, the Assessing Officer has allowed following exemption over on basis of assessee's submission dated 08.04.2020: Rs. 15,00,000/- as amount paid by the employer directly to LIC for purchasing the annuity policy Rs. 4,50,000/ claimed u/s 10(10CC) of the Act. Rs. 4,51,900/- as Retrenchment Compensation received by Workmen u/s 10(10B) of the Act. Thus against VRS benefits of Rs. 2180652/- the assessee has claimed deductions of Rs. 24,01,900/- which A.O. has allowed without any application of mind and contrary to provisions of law. The fact that the employer has duly deducted tax on the VRS benefits, has been ignored by A.O. and not only have inadmissible exemptions been allowed but in fact more exemption has been allowed than the amount received. 3.1. The employer has treated the VRS compensation as salary income under section 17(1) of the Income Tax Act, 1961. The employer has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 24.02.2021 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dt. 29.03.2023 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. 4. The ld. Pr. CIT erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 24.02.2021 relying on the various judgments that are not subject matter of assessment. 4. Shri Rajiv Goyal, Ld. A.R. of the assessee submitted that the assessee was an employee of GE Power India Ltd. and his services were terminated by the employer. As part of the retirement benefits, the employer company had procured an Annuity policy from LIC in favour of the retiring employees. A sum of Rs. 15 lac was directly paid by the employer to LIC for the allotment of the Annuity policy in assessee s favour. However, this amount was erroneously added by the employer to the assessee s salary income. Additionally, the employer comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o two opinion in respect of this issue. He also placed reliance on the decision of the Hon ble Delhi High Court in the case of Yoshio Kubo Vs. CIT 36 taxmann.com 1 (Delhi) and the decision of coordinate bench of this tribunal in the case of Sanghi Infrastructure Ltd. in ITA No. 1285/AHD/2018. 6. We have carefully considered the submissions made by the rival parties and the materials brought on record. The moot question to be decided in this case is whether the order of the A.O. was erroneous and prejudicial to the interest of revenue and whether the assumption of jurisdiction by the Ld. PCIT u/s 263 of the Act was correct. In this context it will be relevant to examine the provisions of Section 263 of the Act, which is reproduced below: Revision of orders prejudicial to revenue. 263. (1) The 99 [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer 1 [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, then in such instance also the order will be held as erroneous and pre- judicial to the interest of revenue. We have to, therefore, examine as to whether these conditions were fulfilled in this case and whether the assumption of jurisdiction by the Ld. PCIT u/s 263 of the Act was correct. 8. There is no dispute to the fact that gross salary shown in Form No. 16 was Rs. 40,50,274/- and after allowing exemption in respect of conveyance, gratuity, leave encashment and tax on employment, the net salary as certified by the employer was Rs. 36,95,179/-. On the other hand the assessee had shown salary of Rs. 13,80,639/- only in the return of income and after adjustment of house property loss and deduction under chapter- VIA, net income of Rs. 10,914,725/- was shown in the return. It was, therefore, incumbent upon the Assessing Officer to verify the huge difference in the salary as per Form No. 16 and the salary as disclosed in the ITR. The assessee has contended that deep enquiry was conducted by the AO in the course of assessment proceeding by issue of notice u/s 142(1) on multiple occasions and that it was not a case of no enquiry . From the copy of evidences brought on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f employment. 3. A copy of the income tax computation statement showing break-up of compensation issued by the employer is enclosed is A_1. 4. You have misinterpreted the true implication and real import of the provisions of section 17(2)(v) of IT Act, 1961 corresponding to section 7(1) of IT Act 1922 and ignored the landmark verdicts of the Hon'ble Apex Court and the Hon'ble High Courts resulting in gross miscarriage of justice. The sum of Rs. 15 lac paid to LIC by the employer company and not to the assessee employee (as per the letter issued by the LIC and the Master policy constituting a contract between the employer company and the LIC) does not form part of the assessee's total income as per the verdict of the Hon'ble Apex Court in CIT v L W Russel u/s 17(2)(v) of IT Act, 1961 and is not taxable in the assessee's hands in the AY 2018-19 but in the future years on receipt of Annuity installments by the assessee from the LIC. The installments of annuity Rs. 87360 received by the assessee during the FY 2017-18 has been included in his ITR under the head Income from Salary chargeable to tax under section 17(2)(v) by the assessee as an honest law abiding tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd verifications which was required to be made before allowing the claim of the assessee and, therefore, the order of the AO was erroneous. In the absence of any follow up inquiry by the A.O., the contention of the assessee that the A.O. has applied his mind and taken one of the plausible views, cannot be accepted. 10. In the course of proceeding u/s 263 of the Act, Ld. PCIT had made inquiry from the employer M/s. GE Power India Ltd. in order to confirm the nature of payments made to the assessee. The relevant query made by the ld. PCIT and the reply of the employer as reproduced in the impugned order is found to be as under: Query 2: Vide para 3.1. Kindly clarify: Whether the LIC Annuity Policy payment and income-tax liability are both taken as perquisite in form No. 16 of these employees for tax purpose. Whether the income-tax liability in respect of LIC Annuity Policy payment has been treated as exempt u/s 10(10CC) of Income Tax Act, 1961 in the form No. 16. If so, whether disallowance u/s 40(a)(v) of the Income-tax Act, 1961 has been made by you in your return of income in respect of Income-tax liability of these employees relating to LIC Annuity Policy payment borne by you as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 10(10BB) of the Act was also allowed by the AO without making any enquiry from the employer. 12. It is thus evident from the above facts, that the AO had not conducted proper inquiries in respect of the claims as made in the return of income and, therefore, the order was rightly treated as erroneous and pre-judicial to the interest of revenue by the Ld. PCIT. As pointed out by the Ld. CIT-DR, it was held by the Hon ble Supreme Court in the case of Navnit Lal Sakar Lal (supra) that the amount utilized by the employer for obtaining deferred annuity policy would form part of remuneration payable to the assessee and was chargeable under the head salaries . Therefore, the annuity amount of Rs. 15 lakh paid to LIC by the employer was remuneration of the assessee and taxable as salary. As the order of the AO was not in accordance with the decision of the Apex Court the order of the AO was erroneous and pre-judicial to the interest of revenue for this reason as well. 13. The decisions relied upon by the Ld. AR are all found different on facts and not applicable to the peculiar facts of this case. It is a trite law and a well settled position that non application of mind or wrong assum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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