Ambaben Rajmal Soni v. The Income Tax Officer ==========================================================Appearance

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 andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1Whether Reporters of Local Papers may beallowed to see the judgment ?allowed to see the judgment ? 2To be referred to the Reporter or not ? 3Whether their Lordships wish to see thefair copy of the judgment ? 4Whether this case involves a substantialquestion of law as to the interpretationof the Constitution of India or any ordermade thereunder ? ========================================================== AMBABEN RAJMAL SONI Versus THE INCOME TAX OFFICER ==========================================================Appearance: MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 18/07/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) In the facts of the case, this Special CivilApplication was taken up for final consideration withconsent and request from learned advocates for therespective parties. 1.1Rule returnable forthwith. Learned advocate Mr.Nikunt Raval waives service of Rule on behalf ofrespondent. 1.2 Heard learned senior advocate Mr. Tushar Hemaniwith learned advocate Mr.Vaibhavi Parikh for thepetitioner and learned advocate for respondentauthorities. 2.The petitioner has prayed to set aside noticedated 12.03.2019 issued by the Income Tax Officerunder section 148 of the Income Tax Act, 1961 statingthat he had reasons to believe that the income of thepetitioner chargeable to tax for the assessment year2013-14, had escaped assessment within the meaning ofsection 147 of the Income Tax Act, 1961 (hereinafterreferred to as the "Act"). 3. The facts available from the record of thepetition were inter alia that the petitioner hadinvested Rs.60,00,000/- in a pension policy of BajajAllianz. The policy was assigned to one PragnabenParekh for the financial year 2011-2012. Thepetitioner has produced a copy of the assignmentletter. The policy in question was surrendered on 22.05.2012. Consequently, the amount of Rs.62,04,758/- was received by said assignee Pragnaben.In support of this factum, the petitioner hasproduced the passbook of assignee. The bankstatement of the petitioner is also produced, whichrevealed that petitioner had not received any sumupon surrender of the pension policy. 3.1The petitioner filed her return of income forthe assessment year 2013-14 on 20.07.2013 declaringtotal income of Rs. 2,40,190/-. Respondent thereafterissued notice dated 12.03.2019 under Section 148 ofthe Act, which is impugned notice, seeking to reopenthe case of the petitioner for the year underconsideration. The petitioner filed return of incomein response to the notice on 01.04.2019. Thepetitioner requested the respondent to supply copy ofreasons for reopening. 3.2The reasons were supplied to the petitioner byletter dated 04.04.2019. The reasons showed that thereopening of the petitioner's case was broadly onthe ground that Rs.62,04,758/- received uponsurrender of the pension policy was taxable as incomein the hands of the petitioner in view of theprovisions of Section 80CCC(2) of the Act. 3.3 It was stated by the respondent that certaininformation was received from ADIT (I & CI) on31.03.2018 and according to the information, thepetitioner had invested Rs. 60,00,000/- in the 3.2The reasons were supplied to the petitioner byletter dated 04.04.2019. The reasons showed that thereopening of the petitioner's case was broadly onthe ground that Rs.62,04,758/- received uponsurrender of the pension policy was taxable as incomein the hands of the petitioner in view of theprovisions of Section 80CCC(2) of the Act. 3.3 It was stated by the respondent that certaininformation was received from ADIT (I & CI) on31.03.2018 and according to the information, thepetitioner had invested Rs. 60,00,000/- in the pension policy which was surrendered and the amountof Rs. 62,04,758/- was received as taxable income bythe petitioner. It was alleged that the petitionerhad not offered the surrender value of the policy asincome in the return of income, as a result of which,the same amount of Rs. 62,04,758/- escaped assessmentin the hands of the petitioner for the saidassessment year. Petitioner raised objections byletter dated 11.04.2019. The objections weredisposed of by the respondent authority on30.04.2019. 4.Learned senior advocate for the petitionersubmitted that resort to Section 147 of the Act forthe purpose of reopening of the assessment waspermissible provided there was an escapement ofincome chargeable to tax in the hands of theassessee. It was submitted that the petitioner hadnot received any amount towards the surrender valueof the pension policy, therefore, there was no incomereceived by the petitioner. It was highlighted thatthe surrender value of the policy was received byassignee Pragnaben and that the policy in questionwas assigned in the earlier financial year 2011-12. 4.1Second submission canvassed by learned advocatefor the petitioner was that the petitioner neverclaimed any deduction under Section 80CCC(1) of theAct in respect of pension policy. It was submittedthat claiming such deduction was precondition for taxing the surrender value in light of Section80CCC(2) of the Act. 4.2On the other hand, learned advocate for therespondent relied on contents and contentions of theaffidavit-in-reply to submit that since thepetitioner had accepted that the investment was madein the policy, the conclusion was drawn and furtherthat dispute raised by the petitioner was of factualnature. It was submitted that the petitioneraccepted 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 thesurrender value could be said to be with thepetitioner. It was therefore submitted that theassessing officer was satisfied that there was afailure on the part of the petitioner and there wasan escapement of tax. It was reiterated thatinformation was received from ADIT (I & CI) Suratabout the petitioner having invested the amount ofRs.60,00,000/- in Bajaj Allianz Pension PensionPolicy and had received the surrender value as above. 4.4 Learned advocate for respondent contended thatin the conclusion recording assessee's claim that wasnever claimed deduction under Section 80CCC (1) couldbe drawn after verifying of the relevant materialsand that the assessee's case was never scrutinisedunder Section 143(3) or Section 147 for the earlier assessment years from 2007-08 to 2013-14 except forassessment year 2011-12. It was thus contended, onthe basis of such facts, the assessment was sought tobe reopened due to assessee's failure to disclosetruly and fully all material facts necessary forassessment year 2013-14. 5.When the reasons which weighed with theassessment officer in seeking to reopen assessmentfor the year 2013-14 are looked at, extracting themfrom the reasons supplied to the assessee, it wasstated thus, assessment years from 2007-08 to 2013-14 except forassessment year 2011-12. It was thus contended, onthe basis of such facts, the assessment was sought tobe reopened due to assessee's failure to disclosetruly and fully all material facts necessary forassessment year 2013-14. 5.When the reasons which weighed with theassessment officer in seeking to reopen assessmentfor the year 2013-14 are looked at, extracting themfrom the reasons supplied to the assessee, it wasstated thus, "An information has been received fromADIT( I&CI), ?Surat on 31.03.2018 statingthat assessee has invested in the PensionPolicy of Bajaj Allianz for an amount ofRs.60,00,000/- and the said policy has beensurrenderedon22.05.2012forRs.62,04,758/-. In view of the provisionsof section 80CCC(2) of the I.T. Act, 1961,the surrender value of Rs. 62,04,75/- isrequired to be taxed in the year of receipti.e. 2013-14. Further, query letters werealso issued by this office on 1.1.2019 and24.01.2019 requesting the assessee toexplain as to whether the surrender valuehas been offered for taxation. However,the assessee has not furnished reply to thequery letters. 5.1It was further stated, "The ADIT (I&CI), Surat has reported thatassessee has not furnished his source ofinvestment or his balance sheet. Though theassessee has filed her return for the yearunder consideration, the surrendered policy hasnot offered for taxation. Thus, I have reason to believe that income to the tune ofRs.62,04,758/- has excaped assessment in thehands of assessee by reason of assessee'sfailure to disclose fully and truly all thematerials facts necessary for assessment forthe year under consideration." 5.1.1It was conveyed that assessee's case fallswithin Explanation 2(b) of section 147 of the Act,that is, where a return of income has been furnishedby the assessee, but no assessment has been made andit is noticed by the assessing officer that theassessee has understated the income or has claimedexcessive loss, deduction, etc., in the return. 5.2Reopening of the assessment on the ground thatsurrender value of the policy was received by thepetitioner, which amounts to escapement of incomechargeable to tax was expressly unsustainable. It isundisputed that the petitioner did not receive anyamount of surrender value of the policy. The policywas already assigned in the previous assessment yearin favour of one Pragnaben who had received surrendervalue of Rs.62,04,758/-. 5.3 The sine qua non for invoking powers undersection 147 of the Act is that there must by"escapement of any income chargeable to tax" and thesaid escapement shall be in the hands of and at theend of assessee". When no amount was received by thepetitioner in the hands of the petitioner assessee,there was no question of occurrence of income in thehands of assessee. No income was received by the assessee-the petitioner, which could be assessed inthe hands of the petitioner. 5.4 Weighty is the aspect also that petitioner neverclaimed any deduction under Section 80CCC(1) of theAct in respect of pension policy in question andtaxing the surrender value of the policy claimingdeduction was prerequisite. 5.5 Section 80CCC reads as under,"Deduction in respect of contribution to certainpension funds. assessee-the petitioner, which could be assessed inthe hands of the petitioner. 5.4 Weighty is the aspect also that petitioner neverclaimed any deduction under Section 80CCC(1) of theAct in respect of pension policy in question andtaxing the surrender value of the policy claimingdeduction was prerequisite. 5.5 Section 80CCC reads as under,"Deduction in respect of contribution to certainpension funds. (1) Where an assessee being an individual has inthe previous year paid or deposited any amountout of his income chargeable to tax to effect orkeep in force a contract for any annuity plan ofLife Insurance Corporation of India or any otherinsurer for receiving pension from the fundreferred to in clause (23AAB) of section 10, heshall, in accordance with, and subject to, theprovisions of this section, be allowed adeduction in the computation of his totalincome, of the whole of the amount paid ordeposited (excluding interest or bonus accruedor credited to the assessee’s account, if any)as does not exceed the amount of 3 one hundredand fifty thousand rupees in the previous year. (2) Where any amount standing to the credit ofthe assessee in a fund, referred to in sub-section (1) in respect of which a deduction hasbeen allowed under sub-section (1), togetherwith the interest or bonus accrued or creditedto the assessee’s account, if any, is receivedby the assessee or his nominee— (a) on account of the surrender of the annuityplan whether in whole or in part, in anyprevious year, or (b) as pension received from the annuity plan,an amount equal to the whole of the amountreferred to in clause (a) or clause (b) shall bedeemed to be the income of the assessee or hisnominee, as the case may be, in that previousyear in which such withdrawal is made or, as thecase may be, pension is received, and shallaccordingly be chargeable to tax as income ofthat previous year. (3) Where any amount paid or deposited by theassessee has been taken into account for thepurposes of this section,— (a) a rebate with reference to such amount shallnot be allowed under section 88 for anyassessment year ending before the 1st day ofApril, 2006; (b) a deduction with reference to such amountshall not be allowed under section 80C for anyassessment year beginning on or after the 1stday of April, 2006." 5.6 A plain reading of sub-section (2) of section80CCC of the Act shows that in case wherein theassessee has claimed deduction under sub-section (1)in respect of payment or deposit in relation topension policy and subsequently, the assigneereceived such sum on account of surrender of suchpolicy, in such case, the surrender value would betaxable. 5.7 In the facts of the present case however, thepetitioner had neither claimed any deduction undersub-section (1) of Section 80CCC, nor it is the caseof the respondent authority that the petitionerclaimed such deduction, even in any of the earlier years to make the surrender value taxable. 6.In above view, neither on facts nor in eye oflaw, the respondent authority could establish thatthere was any escapement of income chargeable to taxin the hands of the petitioner on account of thetransaction of surrendering of policy in question.As stated above, the policy in question was assignedto third party and said assignee had received thesurrender value. Therefore, the petitioner wassought to be taxed by way of reopening, the amount,which was as such received by third party. This wasclearly not permissible in law and there existed noground to reopen assessment under section 147 of theAct. years to make the surrender value taxable. 6.In above view, neither on facts nor in eye oflaw, the respondent authority could establish thatthere was any escapement of income chargeable to taxin the hands of the petitioner on account of thetransaction of surrendering of policy in question.As stated above, the policy in question was assignedto third party and said assignee had received thesurrender value. Therefore, the petitioner wassought to be taxed by way of reopening, the amount,which was as such received by third party. This wasclearly not permissible in law and there existed noground to reopen assessment under section 147 of theAct. 6.1 The satisfaction of the assessing officer thathe had reason to believe that the income in the handsof the petitioner-assessee had escaped assessment,was without any foundation in law. By virtue ofprovisions of Section 80CCC (1) read with 80CCC(2),the petitioner had never claimed any deduction inrespect of amount of pension policy to render thepension policy to attract liability of taxability. 7.For all the above reasons and discussions, thepetition of the petitioner is entitled to succeed.The impugned notice dated 12.03.2019 issued by therespondent to the petitioner under Section 147 of theIncome Tax Act, 1961, for the assessment in respectof assessment year 2013-14 seeking to reopen the assessment is hereby set aside. The petition isallowed. Rule is made absolute. (N.V.ANJARIA, J) BIJOY B. PILLAI (BHARGAV D. KARIA, J)