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Facts
The assessee had surrendered units of Bajaj Allianz, claiming the accretion amount of INR 13,21,114/- as capital gain in Assessment Year 2016-17. The Assessing Officer (AO) completed the assessment under Section 143(3) read with Section 147, accepting the assessee's claim after inquiry. Subsequently, the Pr. CIT invoked Section 263, holding the AO's order erroneous and prejudicial to revenue, directing a fresh assessment regarding a difference of INR 13,71,696/-.
Held
The Tribunal found that the AO had conducted inquiries and accepted a plausible view that the redemption of unit-linked insurance was amenable to capital gains tax under Section 45. Since the AO's order was based on a plausible view and not erroneous or prejudicial to the revenue, the twin conditions for invoking Section 263 were not met. Therefore, the Tribunal set aside the Pr. CIT's revisional order and upheld the original assessment.
Key Issues
Whether the Pr. CIT correctly invoked Section 263 to revise an assessment order where the AO, after inquiry, had taken a plausible view regarding the taxability of gain from redemption of unit-linked insurance as capital gain under Section 45.
Sections Cited
Section 263 of the Income-tax Act, 1961, Section 143(3) of the Income-tax Act, 1961, Section 147 of the Income-tax Act, 1961, Section 45 of the Income-tax Act, 1961, Section 10(10A) of the Income-tax Act, 1961, Section 10(10D) of the Income-tax Act, 1961
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Income Tax Appellate Tribunal, DELHI “F” BENCH: NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRADIP KUMAR KEDIA
ORDER PER KUL BHARAT, JM By way of this present appeal, the assessee has challenged the correctness of the order passed by Ld. Pr. CIT, Noida dated 29.03.2022 for the assessment year 2016-17. The assessee has raised following grounds of appeal:-
1) “That on the facts and circumstances of the case and in law, the order passed by the Ld. PCIT under section 263 of the Income-tax Act, 1961 setting aside the assessment framed under section 143(3) of the Act as erroneous and prejudicial to the interest of the revenue is without jurisdiction, bad in law and void ab-initio. (2) That on the facts and circumstances of the case and in law, the Ld. PCIT has erred in exercising jurisdiction under section 263 by setting aside the original assessment order passed under section 143(3) was passed after full satisfaction of the Ld. Assessing Officer even though the issue had been discussed and scrutinized by the Assessing Officer in detail while framing the assessment under section 143(3) of the Act. Hence, the impugned order under section 263 may kindly be quashed. 1 | P a g e
(3) That on the facts and in the circumstances of the case, the Ld. CIT has erred on facts and in law in passing the impugned Revision Order under section 263 even though the Ld. PCIT failed to appreciate twin mandatory conditions for invoking jurisdiction under section 263 (i) That the order of the Assessing Officer must be erroneous; and, (ii) It must be prejudicial to the interest of the revenue required to be met to justify the invocation of section 263 of the Act. This is absent in the appellant's case. [reference :Hon'ble Supreme Court in the case of Malabar Industrial Co Ltd v CIT 243 ITR 83 (SC)]. (4) On the facts and in the circumstances of the case, the Ld. PCIT has erred on facts and in law in passing the impugned Revision Order under section 263 even though the AO in this case had made enquiries in regard to securities/ Units of Bajaj Allianz by the AO, the appellant had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the AO on being satisfied with the explanation of the appellant. Such decision of the AO cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. (5) On the facts and in the circumstances of the case, the Ld. PCIT has erred on facts and in law in passing the revision order under section 263 by holding (see in para 2.4.) that the amount received from pre- matured pension policies are not exempt under section 10(10A) or 10(10D) even though it was not a pension policies, therefore, appellant had never claimed any exemption either under section 10(10A) or 10(10D) of the Income Tax Act, 1961 on surrender value as is evident from the computation of Income Tax Return on record. (6) The appellant craves leave to add, alter or amend or vary any of the above grounds of appeal before or at the time of hearing.”
2. The only effective ground raised by the assessee in this appeal is against the revising of assessment order by invoking the provision of section 263 of the Income tax Act, 1961 (“the Act”).
Facts in brief of the case are that in this case, the Assessing Officer (“AO”) had re-opened the assessment on the basis that the assessee had claimed accretion amount of INR 13,21,114/- on surrender of policy during the Financial Year 2015-16 relevant to Assessment Year (“AY”) 2016-17. Thereafter, the assessment u/s 143(3) r.w.s 147 of the Act, was concluded. Thereby, the AO assessed the income of the assessee at INR 5,52,970/-. The Ld. Pr. CIT after examining the record, issued a notice u/s 263 of the Act, calling upon the assessee as to why the assessment order dated 12.09.2019 for the AY 2016-17 should not be revised. In response to the notice, the assessee filed its response which was not found acceptable to the Ld. Pr.CIT and he proceeded to revise the assessment u/s 263 of the Act. Thereby, Ld. Pr. CIT directed the AO to verify the difference of the amount of INR 13,71,696/- and pass assessment order afresh.
Aggrieved against the order of Ld. Pr. CIT, the assessee preferred appeal before this Tribunal.
Ld. Counsel for the assessee submitted that Ld. Pr. CIT failed to appreciate the facts in right perspective. Ld. Pr. CIT erroneously invoked the jurisdiction conferred on him u/s 263 of the Act. He contended that for invoking the provisions of section 263 of the Act, twin conditions i.e. orders sought to revised is erroneous so far it is prejudicial to the interest of Revenue, are to be satisfied.
But in the present case even if it is presumed that assessment order is erroneous but it is not prejudicial to the interest of Revenue. He contended that the AO raised a specific query during assessment order. The query related to the transactions in question were duly replied. The AO having satisfied with the contention of the assessee, had accepted the income disclosed in the Income Tax Return. Hence, it was not a fit case for invoking the provision of section 263 of the Act as the AO had adopted one of the plausible views.
On the other hand, Ld.CIT DR for the Revenue relied on the impugned order. He took us through the assessment order and submitted that the AO merely accepted the contention of the assessee without making further inquiry. The Ld. Pr. CIT was therefore, justified in invoking the provision of section 263 of the Act.
In re-joinder, Ld. Counsel for the assessee contended that notice u/s 263 of the Act was issued on solitary issue regarding non-disclosure of accretion amount of INR 13,21,114/-. He further reiterated the submissions as made before Ld. Pr. CIT. He submitted that impugned action of Ld. Pr. CIT do not meet the requirement of law hence, deserves to be quashed.
We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. Law is well settled that for invoking the provision of section 263 of the Act, twin conditions are required to be satisfied i.e. that order should be erroneous and prejudicial to the interest of the Revenue. If AO adopts one of the plausible views, in that event, no prejudice would be caused. In the present case, the assessee redeemed units of Bajaj Alliance and claimed it to be capital gain. A specific provision has been inserted in respect of unit linked insurance in section 45 of the Act, making it amenable to capital gain tax. Therefore, looking to the facts of the present case, no prejudice is caused to Revenue. We therefore, set aside the impugned order and restore the findings of AO. The grounds raised by the assessee in this appeal are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 23rd February, 2024.