2023 (7) TMI 344 - AT - Income Tax

Claim of exempt income made for the first time to the rectification application - receipt of survival benefit received from LIC on a single premium policy - CIT(A) said that an exempt income cannot be brought on record by way of a rectification application, because such a claim of the assessee does not alter the total income returned initially - HELD THAT - Hon ble Apex Court in the case of NTPC 1996 (12) TMI 7 - SUPREME COURT held that it is open for the assessee to raise the points of law even before the appellate authorities, when consideration thereof does not necessitate any enquiry into the facts or calling for any fresh evidence. In this case, according to the assessee Form 26AS does not refer to the income received by the assessee towards survival benefit received from LIC on a single premium policy. It is not the case of the Revenue that such a receipt is not exempt income. Only point for consideration of such a plea by the assessee is that the assessee preferred the same by way of letter dated 25/06/2020. Since the plea of the assessee that such a receipt is an exempt income, is purely a question of law, and does not require calling for any fresh evidence, there is no legal impediment for the Ld. CIT(A) to consider the same. With this view of the matter, we are of the considered opinion that interest of justice demands that the plea taken by the assessee through letter dated 25/6/2020 as to the nature of receipt from LIC as survival benefit on a single premium policy, being a pure question of law, requires consideration; lest it would amount that an exempt income is brought to tax. We set aside the impugned order and rest of the issue to the file of the jurisdictional AO to verify whether the nature of the impugned receipt is received towards survival benefit received from LIC on a single premium policy. If it is so, it is an exempt income. The grounds of appeal are accordingly treated as allowed for statistical purpose.

Summary

Issues involved:
The issues involved in this case are related to the difference in income disclosed in the return of income and Form No. 26AS, addition of sums to the income of the assessee, rejection of rectification application by CPC, and the claim of exempt income made by the assessee for the first time through rectification application.

Summary:

1. Difference in Income Disclosure:
The assessee filed the return of income based on entries in Form No. 26AS, but there was a variance in the amounts mentioned in Form No. 26AS and the income disclosed in the return. The appeal pertains to a sum mentioned as other sources amounting to Rs. 2,52,352, which includes amounts added due to non-filling of schedule PTI and receipt of a survival benefit from LIC.

2. Rejection of Rectification Application:
The assessee's application for rectification, claiming exemption of Rs. 2.25 lacs and explaining the difference in another amount, was rejected by the CPC. The Ld. CIT(A) accepted part of the explanation but rejected the claim of exempt income as it was made for the first time through rectification application.

3. Legal Interpretation of Exempt Income Claim:
The assessee contended that the claim of exempt income through rectification application is permissible, citing legal precedents. The AR argued that disclosing non-taxable receipts does not alter the total income returned initially, and there is no legal obligation to disclose exempt income separately in the return form.

4. Consideration of Exempt Income Claim:
The Ld. CIT(A) rejected the claim of exempt income made through rectification application, stating it was impermissible in law. However, the Hon'ble Apex Court's decision allows raising legal points before appellate authorities without the need for new documents or facts.

5. Decision and Order:
The ITAT Hyderabad set aside the impugned order and remanded the issue to the Assessing Officer to verify if the receipt of Rs. 2.25 lacs is indeed an exempt survival benefit from LIC. The grounds of appeal were treated as allowed for statistical purposes, and the appeal of the assessee was considered allowed.

This summary provides a detailed overview of the issues involved in the legal judgment, the arguments presented by both sides, and the final decision rendered by the ITAT Hyderabad.