Gujarat High Court
Ambaben Rajmal Soni vs The Income Tax Officer on 18 July, 2022
Author: N.V.Anjaria
Bench: N.V.Anjaria, Bhargav D. Karia
C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 11251 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
==========================================================
1 Whether Reporters of Local Papers may be
allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the
fair copy of the judgment ?
4 Whether this case involves a substantial
question of law as to the interpretation
of the Constitution of India or any order
made thereunder ?
==========================================================
AMBABEN RAJMAL SONI
Versus
THE INCOME TAX OFFICER
==========================================================
Appearance:
MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1
MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 18/07/2022
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Page 1 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 In the facts of the case, this Special Civil Application was taken up for final consideration with consent and request from learned advocates for the respective parties.
1.1 Rule returnable forthwith. Learned advocate Mr. Nikunt Raval waives service of Rule on behalf of respondent.
1.2 Heard learned senior advocate Mr. Tushar Hemani with learned advocate Mr.Vaibhavi Parikh for the petitioner and learned advocate for respondent authorities.
2. The petitioner has prayed to set aside notice dated 12.03.2019 issued by the Income Tax Officer under section 148 of the Income Tax Act, 1961 stating that he had reasons to believe that the income of the petitioner chargeable to tax for the assessment year 2013-14, had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961 (hereinafter referred to as the "Act").
3. The facts available from the record of the petition were inter alia that the petitioner had invested Rs.60,00,000/- in a pension policy of Bajaj Allianz. The policy was assigned to one Pragnaben Parekh for the financial year 2011-2012. The petitioner has produced a copy of the assignment letter. The policy in question was surrendered on Page 2 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 22.05.2012. Consequently, the amount of Rs. 62,04,758/- was received by said assignee Pragnaben. In support of this factum, the petitioner has produced the passbook of assignee. The bank statement of the petitioner is also produced, which revealed that petitioner had not received any sum upon surrender of the pension policy.
3.1 The petitioner filed her return of income for the assessment year 2013-14 on 20.07.2013 declaring total income of Rs. 2,40,190/-. Respondent thereafter issued notice dated 12.03.2019 under Section 148 of the Act, which is impugned notice, seeking to reopen the case of the petitioner for the year under consideration. The petitioner filed return of income in response to the notice on 01.04.2019. The petitioner requested the respondent to supply copy of reasons for reopening.
3.2 The reasons were supplied to the petitioner by letter dated 04.04.2019. The reasons showed that the reopening of the petitioner's case was broadly on the ground that Rs.62,04,758/- received upon surrender of the pension policy was taxable as income in the hands of the petitioner in view of the provisions of Section 80CCC(2) of the Act.
3.3 It was stated by the respondent that certain information was received from ADIT (I & CI) on 31.03.2018 and according to the information, the petitioner had invested Rs. 60,00,000/- in the Page 3 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 pension policy which was surrendered and the amount of Rs. 62,04,758/- was received as taxable income by the petitioner. It was alleged that the petitioner had not offered the surrender value of the policy as income in the return of income, as a result of which, the same amount of Rs. 62,04,758/- escaped assessment in the hands of the petitioner for the said assessment year. Petitioner raised objections by letter dated 11.04.2019. The objections were disposed of by the respondent authority on 30.04.2019.
4. Learned senior advocate for the petitioner submitted that resort to Section 147 of the Act for the purpose of reopening of the assessment was permissible provided there was an escapement of income chargeable to tax in the hands of the assessee. It was submitted that the petitioner had not received any amount towards the surrender value of the pension policy, therefore, there was no income received by the petitioner. It was highlighted that the surrender value of the policy was received by assignee Pragnaben and that the policy in question was assigned in the earlier financial year 2011-12.
4.1 Second submission canvassed by learned advocate for the petitioner was that the petitioner never claimed any deduction under Section 80CCC(1) of the Act in respect of pension policy. It was submitted that claiming such deduction was precondition for Page 4 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 taxing the surrender value in light of Section 80CCC(2) of the Act.
4.2 On the other hand, learned advocate for the respondent relied on contents and contentions of the affidavit-in-reply to submit that since the petitioner had accepted that the investment was made in the policy, the conclusion was drawn and further that dispute raised by the petitioner was of factual nature. It was submitted that the petitioner accepted that as a result of surrender of the policy, an amount of Rs.62,04,758/- was received.
4.3 It was contended that the ownership of the surrender value could be said to be with the petitioner. It was therefore submitted that the assessing officer was satisfied that there was a failure on the part of the petitioner and there was an escapement of tax. It was reiterated that information was received from ADIT (I & CI) Surat about the petitioner having invested the amount of Rs.60,00,000/- in Bajaj Allianz Pension Pension Policy and had received the surrender value as above.
4.4 Learned advocate for respondent contended that in the conclusion recording assessee's claim that was never claimed deduction under Section 80CCC (1) could be drawn after verifying of the relevant materials and that the assessee's case was never scrutinised under Section 143(3) or Section 147 for the earlier Page 5 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 assessment years from 2007-08 to 2013-14 except for assessment year 2011-12. It was thus contended, on the basis of such facts, the assessment was sought to be reopened due to assessee's failure to disclose truly and fully all material facts necessary for assessment year 2013-14.
5. When the reasons which weighed with the assessment officer in seeking to reopen assessment for the year 2013-14 are looked at, extracting them from the reasons supplied to the assessee, it was stated thus, "An information has been received from ADIT( I&CI), ?Surat on 31.03.2018 stating that assessee has invested in the Pension Policy of Bajaj Allianz for an amount of Rs.60,00,000/- and the said policy has been surrendered on 22.05.2012 for Rs.62,04,758/-. In view of the provisions of section 80CCC(2) of the I.T. Act, 1961, the surrender value of Rs. 62,04,75/- is required to be taxed in the year of receipt i.e. 2013-14. Further, query letters were also issued by this office on 1.1.2019 and 24.01.2019 requesting the assessee to explain as to whether the surrender value has been offered for taxation. However, the assessee has not furnished reply to the query letters.
5.1 It was further stated, "The ADIT (I&CI), Surat has reported that assessee has not furnished his source of investment or his balance sheet. Though the assessee has filed her return for the year under consideration, the surrendered policy has not offered for taxation. Thus, I have reason Page 6 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 to believe that income to the tune of Rs.62,04,758/- has excaped assessment in the hands of assessee by reason of assessee's failure to disclose fully and truly all the materials facts necessary for assessment for the year under consideration."
5.1.1 It was conveyed that assessee's case falls within Explanation 2(b) of section 147 of the Act, that is, where a return of income has been furnished by the assessee, but no assessment has been made and it is noticed by the assessing officer that the assessee has understated the income or has claimed excessive loss, deduction, etc., in the return.
5.2 Reopening of the assessment on the ground that surrender value of the policy was received by the petitioner, which amounts to escapement of income chargeable to tax was expressly unsustainable. It is undisputed that the petitioner did not receive any amount of surrender value of the policy. The policy was already assigned in the previous assessment year in favour of one Pragnaben who had received surrender value of Rs.62,04,758/-.
5.3 The sine qua non for invoking powers under section 147 of the Act is that there must by "escapement of any income chargeable to tax" and the said escapement shall be in the hands of and at the end of assessee". When no amount was received by the petitioner in the hands of the petitioner assessee, there was no question of occurrence of income in the hands of assessee. No income was received by the Page 7 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 assessee-the petitioner, which could be assessed in the hands of the petitioner.
5.4 Weighty is the aspect also that petitioner never claimed any deduction under Section 80CCC(1) of the Act in respect of pension policy in question and taxing the surrender value of the policy claiming deduction was prerequisite.
5.5 Section 80CCC reads as under, "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 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 3 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) in respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus accrued or credited to the assessee's account, if any, is received by the assessee or his nominee--
(a) on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or Page 8 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022
(b) as pension received from the annuity plan, an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.
(3) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section,--
(a) a rebate with reference to such amount shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction with reference to such amount shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006."
5.6 A plain reading of sub-section (2) of section 80CCC of the Act shows that in case wherein the assessee has claimed deduction under sub-section (1) in respect of payment or deposit in relation to pension policy and subsequently, the assignee received such sum on account of surrender of such policy, in such case, the surrender value would be taxable.
5.7 In the facts of the present case however, the petitioner had neither claimed any deduction under sub-section (1) of Section 80CCC, nor it is the case of the respondent authority that the petitioner claimed such deduction, even in any of the earlier Page 9 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 years to make the surrender value taxable.
6. In above view, neither on facts nor in eye of law, the respondent authority could establish that there was any escapement of income chargeable to tax in the hands of the petitioner on account of the transaction of surrendering of policy in question. As stated above, the policy in question was assigned to third party and said assignee had received the surrender value. Therefore, the petitioner was sought to be taxed by way of reopening, the amount, which was as such received by third party. This was clearly not permissible in law and there existed no ground to reopen assessment under section 147 of the Act.
6.1 The satisfaction of the assessing officer that he had reason to believe that the income in the hands of the petitioner-assessee had escaped assessment, was without any foundation in law. By virtue of provisions of Section 80CCC (1) read with 80CCC(2), the petitioner had never claimed any deduction in respect of amount of pension policy to render the pension policy to attract liability of taxability.
7. For all the above reasons and discussions, the petition of the petitioner is entitled to succeed. The impugned notice dated 12.03.2019 issued by the respondent to the petitioner under Section 147 of the Income Tax Act, 1961, for the assessment in respect of assessment year 2013-14 seeking to reopen the Page 10 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022 C/SCA/11251/2019 JUDGMENT DATED: 18/07/2022 assessment is hereby set aside. The petition is allowed. Rule is made absolute.
(N.V.ANJARIA, J) (BHARGAV D. KARIA, J) BIJOY B. PILLAI Page 11 of 11 Downloaded on : Sat Dec 24 21:23:15 IST 2022