MITESH SINGHANIA,RAIPUR vs. INCOME TAX OFFICER WARD 1(2) RAIPUR, CENTRAL REVENUE BUILDING, RAIPUR

“4. SUBMISSION OF THE APPELLANT: During the appellate proceedings, the appellant has furnished online written submission. "For ready reference the brief of the facts of the case is submitted that the appellant is an individual, assessed with under /TO- Ward 1(2), Raipur (CG). The Return of Income for AY 2017-18 was filed on dt. 25.03.2018. During the year the assessee received LIC maturity proceeds of Rs.7,41,718/- from Reliance Nippon against a one time policy taken on 31.03.2011 and surrendered after 5 years. Such amount was not reported In the ITR by the assessee since it was exempt under the then provisions of section 10(10D). However, 154 return was also filed on dt. 08.03.2019 disclosing the Exempt income u/s 10(10D). It is also submitted that the cap of 10% of Assured sum as premium amount was amended through Finance Act, 2012 w.e.f. 01.04.2013. The Provision of section 80C(5) is not applicable in this case as the policy was surrendered after more than 5 years on 30.04.2016. M/s Reliance Nippon had deducted TDS u/s 194DA and based on such information in 26AS Statement, CPC made an upward adjustment while processing the Return u/s 143(1) and raised Demand, hence this Appeal Further to your specific queries reply is as under: Q1. Whether any rectification order u/s 154 against the Intimation u/s 143(1) or the subsequent order u/s 154 for the present year has been passed subsequent to filing of this appeal. If yes, the conclusion drawn therein with a copy of the order. Ans: No, neither rectification order u/s 154 against the intimation u/s 143(1), nor subsequent order u/s 154 has been passed subsequent to filing of this appeal for the year under consideration. Q2. Whether any regular assessment order u/s 143(3) has been passed for the present year subsequent to filing of this appeal. If yes, the conclusion drawn therein with a copy of the order. Ans: No, the appellant was not scrutinized under section 143(3), hence no order. Q3. Whether any intimation was given to you as per the 1st proviso to sec. 143(1)(a) before making adjustment to returned income and evidence thereof. If yes, copy of such intimation. Ans: Yes, intimation in terms of 1st proviso to sec. 143(1)(a) before making adjustment was given to the appellant on dt.21.05.2018 but the exact reasons and details as to why such addition was proposed was missing. Copy of such intimation is attached herewith as Annex-1. From the details of such communication, it can be seen that no E-mail ID has been mentioned in such Communication. Q4. If intimation as mentioned above in (3) was given to you whether you had complied to it and if yes, copy of such compliance. Ans: The appellant filed rectified returns u/s 154 but it was processed with same results and Copy of the same was not received by the appellant nor it is Downloadable form ITBA. Q5. The relevant portion of TAR and / or ITR where the facts and figures are reported on the basis of which the adjustment was made. Ans: The appellant had filed rectified return u/s 154 showing the amount under the issue as Exempt Income at Schedule El: Details of Exempt Income at S. No. 5-others at Rs. 26,68,946/-, the break- up of Items of Exempt income S. No. 5 Others has been tabulated below which includes Exempt income of Rs. 7,41,718/- in the issue. Further, the relevant extract of 154 Return and Original return has been reproduced below: Full Copies of Original return and 154 Return has also been attached as Annex-2.

The details of Exempt income as filed in Original ITR and Rectified ITR u/s 154 are as under:

Ground wise submissions are as under: 1: The DCIT, CPC, Bengaluru, erred in law and on facts by making an upward adjustment of entire LIC maturity proceeds of Rs. 7,41,718/- received on a policy taken prior-to 01.04. 2012. 1.1 As per section 10(10D) of the Act, maturity proceeds of single premium insurance policy issued before 01.04.2012 were completely exempt irrespective of the Premium paid to sum assured ratio. It may be noted that the policy was issued on 31.03.2011 and single premium of Rs.5,00,000/- was paid. 1.2 Further, the policy was surrendered on 30.04.2016, i.e., after more than 5 years. Thus, the provision of section 80C (5) was also not applicable, as per the provisions of section 80C (5), if the premium paid was deemed to be income of the assessee if the policy is cancelled within 2 years from the date of the commencement of the policy. Therefore, the appellant is not hit by the such provisions too.

1.3 CPC has exceeded in its jurisdiction and erred in making adjustments which is not within the purview of CPC as any addition involving legal interpretation and factual clarification falls beyond the scope of prima facie adjustments permissible under ub clause (0 to (vi) of section 143(1)(a). The impugned addition made by the CPC is bad in law. If at all the observation of the CPC had to be processed, the case could have been selected for scrutiny and an assessment under Section 143(3) ought to have been made to Assessee the correct income. While making such contention the appellant had relied on the Decision of Hon'ble ITAT Bench Kolkata in the case of Anita Seth Vs. DCIT, CPC, Bengaluru AY 2017-18 Pronounced on dated 18.04.2022. The ratio of the case is applicable in this case. In the decided case CPC made adjustment based on information in 26AS Statement about TDS and the Hon'ble bench decided that n issue, which raises a question of fact and can be done only on scrutiny ssessment u/s. 143(3) of the Act or by reopening of assessment u/s. 147 of the Act. 1.4 It is an established legal position that an addition made by the CPC under Section 143(1) based on Form 26AS is beyond its jurisdiction, as it required adjudication of legal provisions under Section 10(10D). CPC is only empowered to make prima facie adjustments, and any issue requiring interpretation of law or factual verification must be addressed through scrutiny assessment under Section 143(3). As the adjustment made by CPC was not a simple computational correction but required legal interpretation, it was beyond the permissible scope of Section 143(1) processing. 1.5 In view of above facts and legal provision, the upward adjustment of the LIC maturity proceeds made by the CPC is completely erroneous. It had also not reduced an amount of Rs.5.00 Lacs which was paid as premium to M/s Reliance Nippon. The maturity amount includes such Rs.5.00 Lacs paid by the appellant. Therefore, the addition made by CPC is without authority, erroneous, unjustified and liable to be deleted. 1.6 The LIC policy schedule indicating the date of issuance and Form-16A indicating the date of maturity along with maturity amount are attached for your ready reference and records. Annex- 4(A) and 4(B). 1.7 Article 265 of the Constitution lays down that no tax can be levied and collected except by authority of law. Hence the additions made by CPC is without authority of law and no tax can be collected on exempt income u/s 10(10D).

2: The CPC erred in sharing the details in the annexure to intimation under section 43(1). It failed to provide the logic and basis of upward revision made. 2.1 The CPC, Bengaluru, erroneously made an upward adjustment in the intimation under Section 143(1) without providing any explanation, computation, or legal basis in the annexure to intimation order. Any addition without a show-cause and without opportunity of being heard, without a reasoned order is in violation of principles of Natural Justice and therefore suffers from procedural defects for processing the ITR filed by the assessee- appellant. It had no opportunity to justify and contest the adjustment so made. 2.2 Since no reasoned query was given the appellant was prevented from countering the addition proposed therefore it was violation of Natural Justice. 3: The DCIT, CPC, Bengaluru, erred in law and facts of the case in relying upon the information available on 26AS statement as the insurance company wrongly deducted TDS under section 194DA in spite of the fact that whole sum was exempt under section 10(10D) and there was no element of income in the proceeds they paid. 3.1 In this case, as submitted above in the ground 1, the LIC maturity proceeds of Rs.7,41,718/- was completely exempt u/s 10(10D) as the restrictive provisions of Section 10(10D) were not applicable prior to 01.04.2012 and in the facts of the case it is not hit by Section 80C (5). M/s Reliance Nippon was not liable to deduct TDS on the LIC maturity proceeds u/s 194DA and because of their mistake the appellant cannot be Penalized. 3.2 Form 26AS merely reflects tax deducted at source (TDS) but does not determine whether an income is actually taxable. Form 26AS is only a tool for reconciliation and cannot be treated as conclusive proof of income receipt. 3.3 Thus, CPC erred in relying upon the information available on the 26AS statement that the Gross amount is taxable and ignored to verify whether it is exempt u/s.10(10D). 3.4 Therefore, the addition made is liable to be deleted.

4: Necessary direction may be made to the concerned authorities against the wrongful deduction of TDS made by the insurance company which caused hardship to the Appellant. 4.1 It is a settled principle that TDS should only be deducted where expressly mandated by law. The wrongful deduction of TDS on exempt maturity proceeds by the insurance company reflects a misinterpretation of the applicable provisions and a failure to exercise due diligence. 4.2 Additionally, relief should be granted to the Appellant, either by way of a refund or appropriate adjustment, to mitigate the financial hardship caused due to the erroneous deduction. 5: The addition made by CPC under section 143(1) is erroneous and the demand raised is liable to be deleted. 5.1 As submitted above, the LIC maturity proceeds received by the Appellant was completely exempt u/s 10(10D). Hence the addition made by CPC u/s 143(1) and demand raised on account of the same is erroneous and liable to be deleted.

6. The simple point of contention was whether exemption u/s. 10(10D) of the Act would be applicable in the present case. In this case addition has been made since single premium payable in the first year was Rs.5 lacs which is more than 20% of the actual capital sum assured and accordingly, was not allowable for exemption. However, the case here is not of payment of any premium but is a case where insurance policy has been surrendered by the assessee and in lieu of such surrender an amount has been received by the assessee.

Furthermore, in this context, it would be pertinent to extract the relevant provision of Section 10(10D) of the Act which reads as follows:

(10D) 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 80DD or sub- section (3) of section 80DDA; 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:

“14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly explains the source of cash deposit to the bank account of assessee, wherein the assessee has not only included cash receipts as salary and capital withdrawal from two partnership firms M/s Umang Beverages and M/s Mohan Oil & Cattle Feed and a cash salary from Bihar Milk Foods Pvt. Ltd. and has also reduced the amount of drawings for household expenses. The copy of return of income of wife of assessee Smt. Shalini and father of assessee Shri Kalu Mal co-jointly established that the other family members of assessee are also earning and contributing towards household expenses. Therefore, in my humble understanding the source of cash deposit during demonetization to the bank account of assesses is properly explained by the assessee by way of self speaking documentary evidence and explanation. Secondly, the AO has made addition u/s 69 of the Act which pertains to unexplained investments, whereas the assessee has not made any investment either in movable or any immovable property during the relevant period by way of using cash amount. The Ld.CIT(A) though has given credit of 25% of Impugned cash deposit confirming the remaining part of addition but there is no logic of this segregation. From the relevant operative part of first appellate order, I also note that the Ld.CIT(A) has upheld the part addition without mentioning any charging section and impliedly adopting section 69 of the Act in the line of assessment order. Therefore, respectfully following the proposition rendered by the Hon'ble Jurisdictional High Court of Allahabad in the case of Sarika Jain (supra). I have no hesitation to hold that the addition made by the AO by mentioning incorrect and irrelevant charging section is not sustainable and valid being bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition.

Similarly, in the decision of Hon’ble High Court of Allahabad in 9. the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co- ordinate Bench of Delhi (supra), the Hon’ble High Court of Allahabad held as follows:

“In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69-A of the Act. In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law. Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.”

Order pronounced in open court on 22nd day of July, 2025.