Andhonourable Mr. Justice Bhargav D. Karia v. Andhonourable Mr. Justice Bhargav D. Karia

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17829 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== ==========================================================PIYUSH AMBALAL GANDHI Versus DY COMMISSONER OF INCOME TAX CIRCLE 2 ==========================================================Appearance:MR KETAN H SHAH(2705) for the Petitioner(s) No. 1MR. AMAN K SHAH(9992) for the Petitioner(s) No. 1MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA andHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 11/11/2022 CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned advocate Mr.Ketan Shah for the petitioner and learned advocate Mr.Varun K. Patel for the respondent, atlength. 2.The challenge in this petition is directed against noticedated 29.3.2018 issued to the petitioner by the Assessing Officerunder Section 148 of the Income Tax Act, 1961 seeking toreopen the assessment in respect of assessment year 2013-14. Inthe said notice it was stated by the Assessing Officer that he hadreasons to believe that income in the hands of the petitionerchargeable to tax for the year under consideration had escapedassessment within the meaning of Section 147 of the Income TaxAct, 1961 (hereinafter referred to as 'the Act'). Also challengedis order dated 16.10.2018 passed by the respondent AssessingOfficer whereby he disposed of the objections of the petitioneragainst reassessment, rejecting the same. 3. Noticing the basic facts, the petitioner filed his return ofincome for the assessment year 2013-14 on 27.9.2013 showingtotal income of Rs.16,38,170/- after claiming rebate in respect oflife insurance premium, housing loan etc. restricting toRs.1,00,000/- and further claim was also made under Section80G of the Act. The petitioner stated that he did not put forthany claim under Section 80C in respect of the investment madewith Bajaj Alliance Insurance Private Limited. It was stated thatthereafter by letter dated 21.11.2017 and others, the AssessingOfficer asked the petitioner to provide clarification regardingpremature surrender of policy of Bajaj Alliance which wassurrendered on 21.11.2012. Reply was filed by the petitioner, inwhich, stated the petitioner, he furnished the source ofinvestment and other details. He further mentioned that he had never claimed any relief under Section 80CCC of the Act inrespect of the pension policy of the Bajaj Alliance PrivateLimited. 3.1It was thereafter that the notice under Section 148 dated29.3.2018 was issued to the petitioner seeking to reopen theassessment. The reasons for reassessment was supplied by letterdated 28.9.2018. The petitioner filed his objections on15.10.2018. The petitioner inter alia stated that he had not madeany claim under Section 80CCC (1). The objections of thepetitioner came to be disposed of and rejected by the AssessingOfficer as per the order dated 16.10.2018. 3.2In the reasons recorded by the Officer for reopening, it wasgiven out that the petitioner- assessee made investment ofRs.8,10,000/- each dated 28.3.2006, 5.4.2007 and 25.12.2012and Rs.24,30,000/- on 16.10.2012 totaling Rs.48,60,000/- in thepension policy of the Bajaj Alliance. The assessee surrenderedthe same, it was stated, for the value of Rs.59,89,740/- on21.11.2012 much before the maturity date of the policy, whichwas 28.3.2015. Thus the gain of Rs.11,29,740/- received by theassessee on account of premature of the policy was required tobe offered for taxation in the assessment year 2013-14 as per theprovisions of Section 80CCC (2), however in the return filed forthe year 2013-14 such amount was not offered for taxation. 3.2In the reasons recorded by the Officer for reopening, it wasgiven out that the petitioner- assessee made investment ofRs.8,10,000/- each dated 28.3.2006, 5.4.2007 and 25.12.2012and Rs.24,30,000/- on 16.10.2012 totaling Rs.48,60,000/- in thepension policy of the Bajaj Alliance. The assessee surrenderedthe same, it was stated, for the value of Rs.59,89,740/- on21.11.2012 much before the maturity date of the policy, whichwas 28.3.2015. Thus the gain of Rs.11,29,740/- received by theassessee on account of premature of the policy was required tobe offered for taxation in the assessment year 2013-14 as per theprovisions of Section 80CCC (2), however in the return filed forthe year 2013-14 such amount was not offered for taxation. 3.3 While on such basis the reassessment was sought to be actedupon, it was further stated by the Assessing Officer in thereasons recorded that as per the information received from theIncome Tax Officer, (I&CI), Bharuch. The assessee had not claimed the benefit under Chapter VI-A, the accretion value ofRs.11,29,740/- was required to be brought to tax under Section56 of the Act and further that the source of the total amount ofRs.32,40,000/- (Rs.8,10,000 + Rs.24,30,000) invested in thepolicy was required to be examined. The Assessing Officerobserved that on such facts he had reasons to believe that theincome to the extent of Rs.11,29,740/- chargeable to tax hadescaped assessment within the meaning of Section 147 of theAct. 3.4In the objections raised, the petitioner submitted thatearlier inquiries were made by the Officer through letters dated21.11.2017, 11.12.2017 and 19.12.2017 which were replied toon 18.12.2017 and 1.1.2018 and that necessary information wasfurnished. It was stated that the source of investment wasdemonstrated, whereafter no further inquiry was foundnecessary by the Officer; the chart was given depicting thedetails of investment made during various financial years, andalso was furnished letter of the Bajaj Alliance Private Limited tofurther show that no claim was made in respect of the saidinvestment in the policy, therefore, provisions of Section 80CCC(2) of the Act were not applicable, pointed out the petitioner. 3.5The Assessing Officer however did not accept theobjections and recorded that the assessee had not offered thegain of Rs.11,29,740/- earned out of premature surrender ofpolicy. According to the Assessment Officer, the income hadescaped to the said extent. 4. Learned advocate for the petitioner assailing the impugned notice and the order of rejection of objections submitted thatdespite the information and necessary clarification provided tothe Assessing Officer, the same were not considered. Whatlearned advocate for the petitioner highlighted was that theassessee never claimed relief under Section 80CCC (1) of theAct, therefore question of applicability of Section 80CCC (2) ofthe Act could not arise. 3.5The Assessing Officer however did not accept theobjections and recorded that the assessee had not offered thegain of Rs.11,29,740/- earned out of premature surrender ofpolicy. According to the Assessment Officer, the income hadescaped to the said extent. 4. Learned advocate for the petitioner assailing the impugned notice and the order of rejection of objections submitted thatdespite the information and necessary clarification provided tothe Assessing Officer, the same were not considered. Whatlearned advocate for the petitioner highlighted was that theassessee never claimed relief under Section 80CCC (1) of theAct, therefore question of applicability of Section 80CCC (2) ofthe Act could not arise. 4.1In support of his submissions, learned advocate for thepetitioner relied on the decision of Division Bench of this courtin Ami Ashish Shah Vs. Income Tax Officer [(2022) 440 ITR417 (Gujarat)] in which case the reopening notice was issuedon the ground that the amount of bonus received by the assesseeupon premature surrender of the pension plan was claimedexempt under Section 10 (10D) of the Act, was actually notexempted under Section 80CCC (2), however the reopeningnotice issued after four year was held to be unjustified since anyfresh tangible material has not come into possession of theAssessing Officer as held by the court. Learned advocate for thepetitioner relied on decision also in Swati Malove Divetia Vs.Income Tax Officer [(2018) 98 taxmann.com 447] byhighlighting that in pre notice queries, the Assessing Officerhaving asked the assessee the source of cash deposits andassessee having disclosed them, it was not open for theAssessing Officer to subsequently reopen the assessment.Reliance was placed on decision of this court in PrincipalCommissioner of Income Tax Vs. Manzil DineshkumarShah [(406) ITR 326] to submit that fishing inquiry was notpermissible and another decision in Krupesh GhanshyamThakkar Vs. Deputy Commissioner of Income Tax being [Special Civil Application No.14612 of 2016] decided on29.11.2016, to submit that mere verification could not be aground to reopen the assessment. 4.2Learned advocate for the respondent relied on theaffidavit-in-reply filed on behalf of the respondent to reassertthat the gain of Rs.11,29,740/- was the income which hadescaped the assessment and the information is received that theassessee had not claimed benefit under Chapter VI-A, theaccretion value as above was to be taxed under Section 56 of theAct. It was submitted that Assessing Officer had arrived atnecessary satisfaction with reason to believe that it was fit caseto be reopened. It was contended that the assessee's case thatrelief was not claimed under Section 80CCC (1) was not onlyerroneous but was an irrelevant consideration. 4.3In support of the stand taken, learned advocate for therespondent relied on the decision in Assistant Commissionerof Income Tax Vs. Rajesh Jhaveri Stock Brokers PrivateLimited ((2007) 291 ITR 500 (SC)] in which the phrase'reason to believe' was explained. Another decision of theSupreme Court was also relied on in Raymond Woollen MillsLimited Vs. Income Tax Officer [(1999) 236 ITR 34 (SC)] tosubmit that when there was prima facie material available, thedepartment could reopen the case. 5.Having considered the compass of the controversy and therival contentions raised, it is to be noticed that prior to theimpugned notice dated 29.3.2018 under Section 148 of the Act,the Assessing Officer had proceeded to subject the assessee to 4.3In support of the stand taken, learned advocate for therespondent relied on the decision in Assistant Commissionerof Income Tax Vs. Rajesh Jhaveri Stock Brokers PrivateLimited ((2007) 291 ITR 500 (SC)] in which the phrase'reason to believe' was explained. Another decision of theSupreme Court was also relied on in Raymond Woollen MillsLimited Vs. Income Tax Officer [(1999) 236 ITR 34 (SC)] tosubmit that when there was prima facie material available, thedepartment could reopen the case. 5.Having considered the compass of the controversy and therival contentions raised, it is to be noticed that prior to theimpugned notice dated 29.3.2018 under Section 148 of the Act,the Assessing Officer had proceeded to subject the assessee to inquiry seeking information about the premature surrender ofthe policy of Bajaj Alliance Private Limited. The details withreference to policy No.19031604 dated 23.8.2006, the premiumof Rs.48,60,000/-, the maturity date 23.8.2015 and surrenderdate 5.11.2012, the amount paid of Rs.59,89,740/- on21.11.2012, were furnished by the petitioner - assessee, as alsogiven were the details regarding source of funds utilized for thepurchase of pension policy, the attendant details includingwhether any deduction was claimed under Chapter VI of the Act.The copy of the return of the income and the statement ofincome for the financial year 2012-13 relevant to assessmentyear 2013-14 were also called for. The very details were againasked for by communication dated 11.12.2017. The petitionerreplied to furnish such details by letters dated 18.12.2017 and1.1.2018. 5.1The assessee supplied the following details during regularassessment proceedings. (i) A detail chart of premium paid and redemption amountreceived from the insurance company to show that the assesseepaid pension amount from 2006 to 2012 totaling toRs.48,60,000/- and premature redemption amount wasRs.59,89,740/-. (ii) Ledger copy of Bajaj Alliance Private Limited was submittedwhich mentioned the following details. (a) Accounting year 2005-06- Rs.8,10,000/- from Piyush Ambalal Gandhi. (b) Accountingyear 2007-08- Rs.8,10,000/- from Jasumatiben A. Gandhi. (c)Accounting year 2012-13- Rs.32,40,000/- from Piyushkumar A. Gandhi. (iii) Entries of pages from bank Development FinanceCorporation Accounts of Housing. (iv) Redemption paper from Bajaj Alliance Private Limited ofRs.59,89,740/- date 23.11.2012. (v) Copy of the bank account of the HDFC and statement ofPiyush Ambalal Gandhi. 5.2In response to further queries raised on 11.12.2017, theassessee filed computation and acknowledgement sheet for allthe assessment years to show that he had not claimed deductionunder Section 80CCC (1) of the Act for investment underChapter VI-A. Also furnished was the source of the amount paidon different occasion towards policy which were all by chequesand the details of the cheque numbers were also made available.The assessee informed the Income Tax Officer that since he hadnot claimed any deduction as expenditure or under Chapter VI-A, the amount received upon premature surrender was not liableto be offered to tax. The computation of income reflected in thereturns of income for the three different assessment years that is2013-14, 2006-07 and 2008-09 were produced, and also figuredon the record of the petition which fortified that the deductionwas not claimed by the petitioner in respect of the investment inthe insurance policy. 5.3Therefore, it is evident that the facts relating to issue onthe basis of which the reopening of the assessment was sought 5.3Therefore, it is evident that the facts relating to issue onthe basis of which the reopening of the assessment was sought to be acted upon were earlier called for by the Assessing Officerand all such information was supplied by the petitioner-assessee. The petitioner- assessee clarified its stand with clearand convincing facts relating to the investment by him in thepension policy, source of funds applied and further pointing outthat the deduction was not claimed in that regard under therelevant provisions rendering the receipt of surrender value notliable to be offered to tax. 5.4On the facts operated as above, the case of the departmentthat the petitioner had received the surrender value of policyupon its premature redemption and the same was liable to taxunder Section 80CCC (2) of the Act, stands erroneous. Once it isa position obtained that the petitioner- assessee had notobtained a relief under Section 80CCC (1) of the Act, theredemption amount of the policy prematurely surrendered wouldnot be liable to be taxed. 5.5This aspect would be clear on bare reading of Section80CCC of the Act. Section 80CCC deals with the deduction inrespect of contribution to certain pension funds to provide inSub section (1) that where any individual assessee has in theprevious year paid amount out of his income chargeable to tax inrespect of annuity plan of Life Insurance Corporation of India,such amount shall be allowed deduction in computation of totalincome. Sub section (2) says that any amount standing to thecredit of assessee referred in Sub section (1) which was alloweddeduction along with the bonus etc. would be liable to tax uponsurrender of annuity plan or as a pension received from suchplan. Therefore, the condition for taxability of policy surrender value is that the amount invested was claimed as relief underSection 80CCC (1) of the Act which is not the case here. 5.6It clearly appears that the Assessing Officer wanted toundertake a fishing inquiry in relation to issue, about which hehad already solicited information and examined the same. Thereassessment powers could not be exercised either for thepurpose of reverification or to have a merry sailing for a rowinginquiry. 6. For the aforesaid reasons and discussion, the petitiondeserves to be allowed. 7.Resultantly, notice dated 29.3.2018 issued by theAssessing Officer under Section 148 of the Income Tax Act, 1961seeking to reopen the assessment in the case of the petitionerfor the assessment year 2013-14 is hereby set aside. Also setaside is the order dated 16.10.2018 of the Assessing Officerdisposing of and rejecting the objections of the petitioner toreopening of the assessment. The petition stands allowed. Ruleis made absolute. (N.V.ANJARIA, J) Manshi (BHARGAV D. KARIA, J)