TaxTMI 
TaxTMI 
2009 (5) TMI 129
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....peals involve common issues, they were argued in a consolidated manner by the learned counsel for the assessee and the learned Departmental Representative. Therefore, we also think it fit to pass a consolidated order. While doing so, we will be referring to the facts of the case for asst. yr. 2003-04. 3. The assessee had filed return of income on30th Sept., 2003declaring total income of Rs. 2,07,87,560. In the course of hearing of the case, it was found that two keyman insurance policies, taken on him by Escorts Heart Institute & Research Center Ltd. ("Escorts" for short) and Escotel Mobile Communications Ltd. ("Escotel" for short), were assigned to the assessee on 4th July, 2002, in lieu of which Rs. 54,00,510 and Rs. 37,80,357, respectively were paid by him. It was further found that Escorts had been taking such policies in the name of the assessee every year. Such policies were assigned to him at an amount which was much lower than the amount paid by that company. The policies were assigned to him in the subsequent years, subsequent to the year in which such policies were taken. This pattern was consistently followed, thereby giving benefit to the assessee. It was also found ....
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....------------------------------------------------- 2003-04 113192477 2002-03 1-4-2007 3,60,03,400 54,00,510 --------------------------------------------------------------- From the contents of the table, the AO concluded that policies on which huge amounts were paid as premia were assigned in favour of assessee on payment of nominal amount in the immediately succeeding year. It was further held that this was a colourable device to pass on benefit to the assessee, which was not shown by him for the purpose of taxation. Therefore, the amount paid by the company before assignment as reduced by the amount paid by the assessee to the company for assignment was taken as income. In respect of the policy assigned by Escorts to the assessee in this year, the company had paid a sum of Rs. 3,60,03,400 as premia and the assessee had paid Rs. 54,00,510 to the company. Thus, the difference of Rs. 3,06,02,890 was held to be liable for taxation. The details in respect of policy assigned by Escotel were not furnished. The AO worked out the benefit accruing to the assessee from assignment of this policy at Rs. 2,14,22,023 on pro rata basis. Thus, an ....
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....ount of the benefit on assignment of keyman insurance policy of Rs. 5,20,24,913, and restricted the addition to Rs. 35,28,815 in respect of maturity amount received from the LIC. The AO had levied the penalty of Rs. 11,11,576 after considering the order of the Tribunal. It was submitted before him that full information, as required by the AO, was submitted in the course of hearing and the additions made by him were due to difference of opinion between him and the assessee. Thus, there was a full disclosure at the time of the filing of the return itself. The Tribunal took the view that surrender value should be assessed as the income of the assessee at the time of maturity of the policy. This itself suggests that there was no willful attempt on the part of the assessee to hide facts from the AO. In such a situation, penalty could not be levied under s. 271(1)(c) of the Act. The learned CIT(A) considered the facts of the case and the submissions made before him. It was mentioned that the factum of showing the amount received to be exempt from taxation does not absolve the assessee from levy of penalty if on verification it is found that the stated facts were wrong. The assessee had s....
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.... to the return of income stating that amounts received on maturity of policies from the LIC were not to be included in the total income under s. 10(10D). Therefore, penalty could not be levied on the amount finally upheld by the Tribunal to be includible in the total income. He also drew our attention to p. 9 of the paper book, being the disclosure made in the return to the effect that the assessee received a sum of Rs. 2,51,13,308 from the LIC, which was exempt under s. 10 of the Act. In regard to the fact that the amount received was Rs. 2.85 crores against the sum of about Rs. 2.51 crores mentioned in the return of income, it was submitted that the variation in the amounts was not material and it did not make a difference insofar as the question of levy of penalty was concerned. Our attention was also drawn to para 18 of the order of the Tribunal, in which a plea was raised that only the net amount, i.e., after excluding the amount paid by the assessee to the assigner should be considered as income for the purpose of taxation. The Tribunal mentioned that this plea was not supported by the language of the provision, which speaks of the sums received under the policy. Therefore, t....
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.... Therefore, it was held that there was no basis for coming to the conclusion that there was either concealment of income or furnishing inaccurate particulars of income. Further, he relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. H.M.A. Udyog (P) Ltd. (2007) 211 CTR (Del) 543. The question in that case was whether, expenditure incurred on extensive repairs in the premises was a revenue or capital expenditure? The Tribunal, after examining the nature of the expenditure, mentioned that the question was debatable and even if it is ultimately decided against the assessee, it could not be said that there was any attempt to conceal the particulars of income or furnishing inaccurate particulars of income. Reliance was also placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Nath Bros. Exim International (2007) 208 CTR (Del) 326 : (2007) 288 ITR 670 (Del). In that case, the assessee had disclosed all facts regarding the dividend income, which was claimed as business income, entitled for deduction under s. 80HHC. In view of the disclosure of all facts, the Tribunal came to the conclusion that levy of penalty will not be justified. TheHon'ble Co....
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....he benefit of this clarification when it filed the return, which further strengthens the impression that the disclosure in the return was only partial. However, the finding of the Tribunal in para 17 was that the benefit flowed from a keyman insurance policy was upto the date of assignment and such benefit is certainly outside the purview of s. 10(10D). Thereafter, it was held that since the amount was received in this year, the benefit accruing to the assessee was the net value after deducting surrender value paid to the assigner and premia paid subsequently. The policy was not assigned to the assessee in this year. The assessee paid surrender value to the assigner. The question in such a situation is whether the issue is debatable or not? Having considered the submissions of both the sides, it is clear that the taxation in this year is based upon the surrender value, which was paid by the assessee to the assigner in the year of assigning. If that is so, the issue whether anything was left for taxation at the time of receipt is a matter of considerable debate and discussion. In view of the decision of Hon'ble Delhi High Court in the case of H.M.A. Udyog (P) Ltd., Bacardi Martini I....