Reassessment Powers Could Not Be used For Reverification Or For A Rowing Inquiry: Gujarat High Court

The Gujarat High Court has held that the reassessment powers could not be exercised either for the purpose of reverification or to have a merry sailing for a rowing inquiry.

The division bench of Justice N.V. Anjaria and Justice Bhargav D. Karia has observed that the assessing officer wanted to undertake a fishing inquiry in relation to an issue about which he had already solicited information and examined it.

The petitioner filed his return of income, showing total income after claiming rebates in respect of life insurance premiums, housing loans, etc., and a further claim was also made under Section 80G of the Income Tax Act. The petitioner stated that he did not put forth any claim under Section 80C in respect of the investment made with Bajaj Alliance Insurance Private Limited.

The Assessing Officer asked the petitioner to provide clarification regarding the premature surrender of Bajaj Alliance's policy, which was surrendered on November 21, 2012. The petitioner replied that he had furnished the source of the investment and other details. The petitioner mentioned that he had never claimed any relief under Section 80CCC with respect to the pension policy of Bajaj Alliance Private Limited.

The notice under Section 148 was issued to the petitioner seeking to reopen the assessment. The reasons for reassessment were supplied by letter. The petitioner filed his objections. The petitioner stated that he had not made any claim under Section 80CCC (1). The objections of the petitioner were disposed of and rejected by the assessing officer.

The Assessing Officer, however, rejected the objections and noted that the assessee had not offered the gain of Rs. 11,29,740 resulting from the premature surrender of the policy. According to the assessment officer, the income had escaped to the said extent.

The Assessing Officer, however, rejected the objections and noted that the assessee had not offered the gain of Rs. 11,29,740 resulting from the premature surrender of the policy. According to the assessment officer, the income had escaped to the said extent.

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

The department contended that the gain was the income that had escaped the assessment, and given the information received that the assessee had not claimed benefits under Chapter VI-A, the accretion value was to be taxed under Section 56. It was submitted that the Assessing Officer had arrived at necessary satisfaction with reasons to believe that the case was fit 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.

The court found that the department's claim that the petitioner received the surrender value of the policy upon its premature redemption and that it was taxable under Section 80CCC (2) of the Act was incorrect.

The court noted that once it was determined that the assessee had not obtained a relief under Section 80CCC (1), the redemption amount of the policy prematurely surrendered would not be liable to be taxed.

The court quashed 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 Versus DCIT

Citation: 2022 LiveLaw (Guj) 402

Date: 11/11/2022

Counsel For Petitioner: Advocate Ketan Shah

Counsel For Respondent: Advocate Varun K. Patel

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