Redemption Amount of Policy Prematurely Surrendered would not be Liable to be Taxed if Relief u/s 80CCC (1) is not Obtained: Gujarat High Court

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The Gujarat High Court ruled that the redemption amount of policy prematurely surrendered would not be liable to be taxed if the relief under Section 80CCC (1) of the Income Tax Act is not obtained. 

Background  

The challenge in the petition is directed against notice issued to the petitioner by the Assessing Officer under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment in respect of assessment year 2013-14. 

In the said notice it was stated by the Assessing Officer that he had reasons to believe that income in the hands of the petitioner chargeable to tax for the year under consideration had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. 

Also challenged the order passed by the respondent Assessing Officer whereby he disposed of the objections of the petitioner against reassessment, rejecting the same. 

Arguments 

Counsel for the petitioner submitted that despite the information and necessary clarification provided to the Assessing Officer, the same were not considered.

He contended that the assessee never claimed relief under Section 80CCC (1) of the Act, therefore question of applicability of Section 80CCC (2) of the Act could not arise. 

Counsel for the respondent submitted that the Assessing Officer had arrived at necessary satisfaction with reason to believe that it was fit case to be reopened. It was contended that the assessee’s case that relief was not claimed under Section 80CCC (1) was not only erroneous but was an irrelevant consideration.

Decision 

The division bench of Justice N.V. Anjaria and Justice Bhargav D. Karia noted that prior to the notice under Section 148 of the Act, the Assessing Officer had proceeded to subject the assessee to inquiry seeking information about the premature surrender of the policy of Bajaj Alliance Private Limited. 

The bench observed that it is evident that the facts relating to issue on the basis of which the reopening of the assessment was sought to be acted upon were earlier called for by the Assessing Officer and all such information was supplied by the petitioner assessee.

It was held by the court that the case of the department that the petitioner had received the surrender value of policy upon its premature redemption and the same was liable to tax under Section 80CCC (2) of the Act, stands erroneous.

It was further held that the reassessment powers could not be exercised either for the purpose of re verification or to have a merry sailing for a rowing inquiry.

The court set aside the notice issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment in the case of the petitioner for the assessment year 2013-14.

Case title: Piyush Ambalal Gandhi v/s Dy Commissioner of Income Tax  

Citation: R/Special civil application no. 17829 of 2018

Date: 11/11/2022

Click here to read the Order/Judgment 

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