TMI Blog2021 (3) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled. In other words, how the amount in question is not exempted under Section 10(10D) The reference to Section 80CCC(2) is thoroughly misconceived for two reasons: first, Section 80CCC deals with annuity plans whereas we are concerned with life insurance policy; secondly, Section 80CCC(2) of the Act makes any sum received by the assessee from the insurer towards contract for any annuity plan, taxable provided premium paid for such plan is claimed as allowable deduction under Section 80CCC(1) of the Act. In the facts of the present case, there is no such averment or findings that the amount of premium paid has been claimed and allowed as deduction under Section 80CCC(1) of the Act. Where the original assessment is without scrutiny i.e. under Section 143(1), even in such cases tangible material is necessary to reopen the assessment.Explanation 2 to Section 147 is more elaborate and cover those cases where the assessments have been completed (called as the scrutiny cases) as well as those cases where no assessments have been completed (called as the non scrutiny cases). As per the aforesaid Explanation 2, no distinction has been made between the cases where assessment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned notice dated 29.03.2019 issued under section 148 of the Act for the assessment year 2012 13. b. Pending the admission, hearing and final disposal of this petition, restrain the respondent from passing the order of re assessment. c. Pass any other order(s) as this Hon'ble Court may deem fit and more appropriate in order to grant interim relief to the petitioner. d. Any other and further relief deemed just and proper be granted in the interest of justice. e. To provide for the cost of this petition. 4. This is a case of reopening of assessment for the A.Y. 2012 13 wherein the original return of income filed by the assessee was processed under Section 143(1) of the Act. The reopening is beyond the period of four years. 5. The assessee is an individual. She filed her return of income for A.Y. 2012 13 on 31st March 2013 declaring her residential status as a N.R.I. In the return of income, the assessee declared total income of ₹ 1,12,700/ under the head income from house property . The Assessing Officer received information from the DDIT (I CI), Ahmedabad, to the effect that the assessee had obtained a Life Insurance Policy on 28th June 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e standing in the credit of the fund shall be deemed to be the income of the assessee in the previous year in which such withdrawal is made and shall accordingly be chargeable to tax as income of that previous year. The interest/bonus on premature of surrender of pension plan / annuity plan is not exempted as per the provisions of Section 80CCC(2) or under any other sections of the I.T. Act. 4. In the light of information received from the DDIT(Inv.), Ahmedabad necessary inquiry/verification was also made from the return of income filed by the assessee as well as with the transactions reflected in the ITS data. From the return of income, it is seen that the assessee has not disclosed the income / receipt from LIC under any of the heads or as exempted income. 5. Thus, from the details received from the DDIT(Inv.), Ahmedabad and also from the inquiry/ verification from the return of income filed and ITS data, it is clear that the assessee has not offered amount of ₹ 17,65,558/ being accretion on account of interest and bonus on the credit of the assessee in the pension fund, though the same is taxable u/s 56 of the I.T. Act. 6. In view of the above facts, I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the exception (a) to (d) of section 10(10D) of the Act. The only claim of assessing Officer for deriving reason to believe is that interest / bonus on premature of surrender of pension plan / annuity policy is not exempted as per the provision of section 80CCC(2) of the Act. 3. For the perusal and ready reference. We are reproducing provision of section SOCCC of the Act: 8OCCC. (1) Where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee s account, if any) as does not exceed the amount of one hundred and fifty thousand rupees in the previous year. (2) Where any amount standing to the credit of the assessee in a fund, referred to in sub section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, it is submitted that the assessee has prematurely surrendered the LIC s MARKET PLUS which is unit linked plan and not life insurance plan. In view of the same, exemption claimed U/s 10(1OD) of the I.T. Act is not applicable in the case of the assessee. The relevant part of section 10(10D) of the I.T. Act is reproduced as under: Any sum received under a life insurance policy. Including the sum allocated by way of bonus on such policy, other than (a) any sum received under sub section (3) of Section 10(10D) or subsection (3) of section 8ODDA; or (b) any sum received under a Keyman insurance policy; or (c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured: or (d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured: Provided that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d deduction U/s 80CCC(1) of the I.T. Act. In this connection, it is stated that Interest or bonus received by the assessee on account of surrender of annuity plan of LIC of India or any other insurer should be taxable where no deduction claimed U/s 8OCCC(1) of the I.T. Act. Whereas any amount standing to the credit of assessee s account including interest or bonus in respect of which deduction U/s 8OCCC(1) of the Income Tax Act has been allowed should be taxable U/s 80CCC(2) r.w.s. 56 of the Income Tax Act when received on account of surrender of the annuity plan. In the case of the assessee, the assessee has stated that he has not claimed deduction U/s 8OCCC(1) of the I.T. Act, accordingly only interest and bonus amount were considered as taxable income in the case of the assessee. In view of the same, the contention of the assessee is not acceptable and is not correct. 9. The following is discernible from the aforesaid order disposing of the objections: [1] The policy was a Unit Linked Plan and not a plain Life Insurance Plan. [2] The principal premature surrender value received is not covered under Section 10(10D) of the Income Tax Act. [3] Even if no deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention canvassed on behalf of the assessee that as the surrender value of the pension plan is exempt from tax under Section 10(10D) of the Act, no TDS under Section 194DA of the Act is to be deducted, is without any merit. According to Ms. Bhatt, the amount received as interest and bonus on the balance, standing in the credit of such withdrawal is chargeable to tax as income of that previous year. According to Ms. Bhatt, the income chargeable to tax could be said to have escaped assessment, for which, no opinion is formed at the summary assessment stage and there was failure on the part of the assessee to disclose true and correct particulars of her income for the A.Y. 2012 13. 15. In such circumstances referred to above, Ms. Bhatt prays that there being no merit in both the writ applications, the same be rejected. 16. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the Revenue is justified in issuance of notice of reopening. ● UNIT LINKED INSURANCE PLAN: 17. The Unit Linked Insurance Plan is a hybrid investment option which consists of a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to sub section (3) of section 80C or the Explanation to sub section (2A) of section 88, as the case may be : Explanation .-For the purposes of this clause, Keyman insurance policy means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person. From the reading of the section as applicable for the assessment year under consideration, all that is required for an insurance policy to meet the requirements of Section 10(10D) has to be (a) it should be a life insurance policy; (b) it should be taken by the assessee on its life, and (c) for insurance policies issued after 1st April 2003, premium payable for any of the years during the term of the policy should not exceed 20% of the actual capital sum assured. Once these criteria are fulfilled, any sum received under such life insurance policy including bonus (accretions over and above the premiums paid) is exempt. 20. We may put it more elaborately as under: [1] If the policy is issued on or after 1st April 2003 but befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003 to 31st March 2012) of the sum assured and, (b) If the plan is a traditional plan like an endowment plan, money back plan, etc and the premium has been successfully paid for the first two years. (i) If it is a single traditional plan, the policy is surrendered upon completion of the first two years. (ii) If it is ULIP, then the policy is surrendered after five years. If both of the above conditions are fulfilled, then the surrendered value is exempted under Section 10(10D). ● Section 80CCC of the Act: 23. Section 80CCC of the Act reads thus: 80CCC. Deduction in respect of contribution to certain pension funds. (1) Where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India [or any other insurer] for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCC. (iv) Any amount received from the policy as a monthly pension is liable for taxation as per the prevailing rates. (v) If the policy is surrendered, the amount would also be subject to taxation. (vi) Any rebates that were available on investment in annuity plans before April 2006 are not allowed under Section 88. (vii) Any amount deposited before April 2006 is not eligible for deduction. The provisions of Section 10(23AAB) are inherently linked with Section 80CCC. It relates to the income earned from a fund that has been set up by a recognized insurer, including the LIC. The fund must have been set up before August 1996 as a pension scheme. The contributions made by the taxpayer to the policy must have been with the intention of earning pension income in the future. The conditions regarding eligibility for deductions are: (i) An individual taxpayer who has subscribed to an annuity plan which has been offered by an approved insurance company. (ii) HUF or Hindu Undivided Family is not eligible for exemption under Section 80CCC. (iii) These provisions apply to both residents as well as non residents. 25. In our opinion, the reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utiny cases). As per the aforesaid Explanation 2, no distinction has been made between the cases where assessment has been made after scrutiny and those cases where no assessment has been made viz. cases where assessment has been made under Section 143(1) only. From the aforesaid Circular of the CBDT, it is quite evident that no distinction under Section 147 is contemplated between the assessment under Section 143(3) called as the scrutiny assessment and the assessment accepted under Section 143(1) called as the non scrutiny assessment. Therefore, a tangible material is necessary to reopen even an assessment made without scrutiny under Section 143(1) of the Act. We may refer to the following legal precedents : (1) Ratna Trayi Reality Service P. Ltd. vs. ITO [2013]356 ITR 493 (Guj) : 215 Taxman 650 (Guj) In this case, previously no scrutiny assessment was framed. Subsequently, the Assessing Officer issued a notice under section 148 of the Act in order to reopen the assessment. It was held in this case that merely because an assessment was not previously framed after scrutiny, that would not give unlimited right to the Assessing Officer to reopen the assessment by merely i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intimation under Section 143(1). It reflects an arbitrary exercise of the power conferred under Section 147 of the Act. In other words, it was held that even where proceedings under Section 147 are sought to be initiated, with reference to intimation under section 143(1), the ingredients of Section 147 have to be fulfilled. Therefore, there should exist reason to believe that income chargeable to tax has escaped assessment. Accordingly, in the absence of any tangible material in possession of the Assessing Officer, subsequent to the intimation under Section 143(1), the reopening was not sustainable. (3) Inductotherm (India) P. Ltd. vs. M. Gopalan, Dy.CIT [2013] 356 ITR 481 (Guj) : [2012] 77 DTR 1 (Guj) In this case for the A.Y. 2002 03, the assessee s return was processed by the Assessing Officer by sending intimation under section 143(1). Thereafter, a notice under section 148 of the Act for the A.Y. 2002 03, was issued to the assessee. It was, inter alia, held that the power to reopen an assessment is available either in a case where a return has been accepted under Section 143(1) of the Act or a scrutiny assessment has been framed under Section 143(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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