TaxTMI 
TaxTMI 
2021 (10) TMI 654
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.... In the facts and circumstances of the case, the CIT(A) erred in taking the date of assignment of policy instead of date of actual receipt of maturity claim, as engrained in the intent and content of the Law, while assessing the income of the assessee. 4. Each of the above grounds is without prejudice to one another and the appellant craves to add, delete, amended or otherwise modify one or more of the above grounds either before or at the time of hearing of this appeal. 2. The assessee raised the following objections in its cross objections: 1. The appeal of the revenue is devoid of any merit and liable to be dismissed as not maintainable. 2. The Learned CIT(A): (i). Failed to appreciate that there was no Notice u/s. 143(2) issued by the jurisdictional assessing officer i.e., the Assistant Commissioner of Income Tax (ACIT), Circle 1, Bellary, before completing the impugned assessment order and therefore, the same is void-ab initio. (ii). Failed to appreciate that the learned ITO, Ward 1(1), Belgaum, who issued the Notice u/s. 143(2) dated, 25-09-2017 had no jurisdiction over the case and therefore, the impugned assessment order passe....
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....and involves expenditure. In respect of this, A.O. proceeded to complete the assessment and while framing the assessment, A.O. observed that one firm, wherein the assessee is a partner namely Sharmeen Transport Company taken a keyman policy on 22.2.2005 by Rs. 5 crores and assigned the same to the assessee on 2.6.2009 and assessee received the maturity amount of Rs. 7.34 crores on 20.2.2015 on maturity. The A.O. observed that after insertion of explanation-1 to section 10(10D) of the Act charged Rs. 7.34 crores to tax. Again, this assessee went in appeal before CIT(A). Before Ld. CIT(A), the assessee raised the ground with regard to the legality of issue of notice u/s. 143(2) of the Act, which was decided against the assessee, however, on merit, the CIT(A) observed that matured keyman insurance amount received by the assessee not taxable on assignment that the amendment made to the Finance Act, 2013 to section 10(10D) of the Act is not retrospective as held for Bombay High Court in the case of Prashant J. Agarwal 243 Taxman 119. 4. Against deletion of the addition, revenue is in appeal before us. With regard to the issue of notice u/s. 143(2) of the Act, assessee is in appeal be....
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....x." Once there is no assignment of company/employer in favour of the individual, the character of the insurance policy changes and it gets converted into an ordinary policy. Contracting parties also change inasmuch as after the" assignment which is accepted by the insurance, the contract is now between the insurance company and the individual and not the company/employer no more remains the contracting parties. We have to bear in mind that law permits such an assignment even LIC accepted the assignment and the same is permissible. There is no prohibition as to the assignment or conversion under the Act. Once there is an assignment, it leads to conversion and the character of policy changes. The insurance company has itself clarified that on assignment, it does not remain a keyman policy and gets converted into an ordinary policy. In these circumstances, it is not open to the Revenue to still allege that the policy in question is Keyman policy and when it matures, the advantage drawn. therefrom is taxable. Once has to keep in mind on maturity, it does not the company but who is an individual getting the matured value of the insurance." The combined judgement of Delhi High C....
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.... premiums thereafter being paid by such individual, the hitherto Keyman Insurance Policy becomes an ordinary policy. In this case, on the date of maturity, the policy in question is rightly to be accepted as an ordinary insurance policy." 51. The Tribunal while giving requisite relief brought to tax the amount of surrender value at the time of assignment subject to verification by the AO. It also rejected the alternative argument of the assessee that in case the sum received on maturity was held to be taxable then deduction be allowed for the premia paid by the assessee after the assignment of the policy, which were embedded in the maturity amount and not claimed as a deduction in the tat assessments. 52. Thus, the issue depends on the question as to whether on assignment of the insurance policy to the assessee, it changes its character from Keyman insurance also to an ordinary policy. It is because of the reason that if it remains Keyman insurance policy, then the maturity value received is subjected to tax as per section 10(10D) of the Act. On the other hand, if it had become ordinary policy, the premium received under this policy, in view of the aforesaid secti....
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....tended by Revenue would be tantamount to legislation and not interpretation. 55. Accordingly, we answer the questions of law as framed in favour of the assessee and against the Revenue. As a result, the appeals of the Revenue are dismissed and those of the assesses are hereby allowed." 5. Facts being not in dispute. respectfully, following the decision of Hon'ble Delhi High Court. the Revenue's appeal is dismissed." 7. We have heard the rival submissions and perused the materials available on record. In this case, the policy has been taken by firm named Sharmeen Transport Company on 22.2.2005 for an amount of Rs. 5 crores. It was assigned to the assessee on 2.6.2009. The policy was matured on 20.2.2015 and assessee received an amount of Rs. 7.34 crores. The A.O. invoked the explanation 1 to section 10(10D) of the Act. Now we will go through the provisions of section 10(10D) of the Act and also the explanation 1 to this section. The provision of section 10D of the Act which was made it clear that any amount under the LIC policy including bonus would not be taxable. However, the aforesaid provision have certain exceptions as provided in clause (A) which p....
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.... of tax, the provision of section 10(10D) of the Act was amended to provide that Keyman Insurance Policy assigned during its term shall continue to be treated as a Keyman Insurance Policy, hence, would not be eligible for exemption under section 10(10D) of the Act. No doubt, the amendment to Explanation-1 to section 10(10D) of the Act is applicable from the assessment year 2014-15. If we apply the provisions of section 10(10D) of the Act to the facts of the present case, undisputedly, the Policy was assigned in the name of the assessee on 02.06.2009, whereas, it matured on 10.02.2015, i.e., during the previous year relevant to assessment year 2015-16. Thus, it is very much clear that at the time of maturity of the Keyman Insurance Policy, the amendment to section 10(101D) of the Act by way of Explanation-1, has already been made effective, therefore, would be applicable. That being the case, the maturity value received on the Keyman Insurance Policy would be taxable at the hands of the assessee. The decisions relied upon by the learned Authorised Representative having been rendered prior to the amendment to Explanation-1 to section 10(10D) of the Act, would not be applicable to the....
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....urthy (2020) 58 CCH 0413 (Bang Trib) 10.2. The Hon'ble Jurisdictional Tribunal in the case of F.N. Krishnamurthy (2020) 58 CCH 0413 (Bang Trib) considered an IDENTICAL issue where the Notice u/s. 143(2) was not issued by the jurisdictional assessing officer but another officer within the same range. In this relied upon case, the Notice u/s. 143(2) came to be issued by the ITO, Ward 6(2)(2), Bengaluru whereas the assessment order was passed by the ITO, Ward 6(2)(3), Bengaluru. In contrast the Notice u/s. 143(2) is issued by ITO, Ward 1(1), Belgaum, who is not even within the Range or within the Commissionerate or Chief Commissionerate in the case of the assessee. 10.3. The Hon'ble Tribunal considered the landmark decisions on this issue including the decision of the Hon'ble Supreme Court in the case of Hotel Blue Moon (2010) 321 ITR 362 (SC) and held that the jurisdiction was not vested in ITO, Ward 6(2)(2), Bengaluru and consequently, the Notice u/s. 143(2) was bad in law. It may be mentioned that the assessment order in this case was issues; under the seal & signature of ITO, Ward 6(2)(3), Bengaluru who was the jurisdictional assessing officer. The Hon'ble Tr....
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....iction at all, unlike in the also before the Hon'ble HC in Prashanth Chandra (Supra) where there was transfer of the case from one place/city to another place/city and the earlier AO issued the Notice u/s. 143(2) even after the transfer of the case by the competent authority. (c) Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC) The Hon'ble Supreme Court held that in the absence of a valid Notice u/s. 143(2), the assessment order passed u/s. 143(3) was invalid and the lack of jurisdiction is not cured by referring to section 292BB of the Act. In held that section 292BB may be pressed into service only if there is a valid Notice emanating from the Department and only the infirmities that are curable and not complete lack of jurisdiction i.e., absence of Notice. (d) Arti Securities & Services Ltd. [2021] 123 taxmann.com 395 (Lucknow - Trib.) In this case, the Notice u/s. 143(2) was issued by the DCIT-4, Kanpur and one more Notice u/s. 143(2) was also issued by the DCIT-6, Kanpur on the same day. However the case was then transferred by the DCIT, Kanpur to ITO, Kanpur on ground of monetary limit prescribed by the CBDT in its Instruction No. 172011, dated, 3001-....
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.... of ITO Ward-1 Belgaum to ITO Ward-1 Bellary. According to the Ld. D.R., there is a valid transfer in accordance with the law u/s. 127 of the Act. Now we will proceed to examine the provisions of section 127 of the Act. 13. We have carefully considered the rival submissions. Section 127 of the Act reads as follows: "Power to transfer cases". 127. (1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director General or Director Ge....
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....ate of such order or direction in respect of any year." 14. It can be seen from the provisions of Sec. 127(4) of the Act that the necessity of re-issuing any notice already issued by transferor AO by the transferee AO is not necessary but on the date on which a notice is issued the transferor AO should have held valid jurisdiction. In this case the notice u/s. 143 of the Act was issued by the transferor AO on 26.4.2016 whereas he had no jurisdiction over the Assessee. Therefore the provisions of Sec. 127(4) of the Act cannot come to the rescue of the revenue. 15. We find the facts of the present case are identical to the case already decided by the ITAT Kolkata Bench in the case of Rungta Irrigation Ltd. in ITA No. 1224/Kol/2019 dated 6.9.2019. The issue in the case before the ITAT Kolkata Bench in the case of M/s. Rungta Irrigation Ltd. Vs. ACIT in ITA No. 1224/Kol/2019 order dated 6.9.2019 was whether, non-issue of notice u/s. 143(2) by the AO who passed the assessment order will render the order of assessment void or was it a curable defect. It was the plea of the Assessee that as held by the Hon'ble Supreme Court in Hotel Blue Moon 321 ITR 362 (SC), non-issue of notic....
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....s. 143(2) dated 28.07.2016 and in that view of the matter the notice issued by the ACIT, Circle-21(1), New Delhi u/s. 143(2)was without jurisdiction and, therefore, non-est in the eyes of law. The Tribunal held that the ACIT, Central Circle-3(1), Kolkata who framed the assessment order dated 29.12.2017 pursuant to transfer of case ordered by PCIT, Central Patna dated 03.11.2017 u/s. 127 of the Act, without there being valid issuance of notice u/s. 143(2) of the Act and therefore the said order is bad in law as held by the Hon'ble Supreme Court in CIT V Hotel Blue Moon (2010) 321 ITR 362 (S.C) wherein the Hon'ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and absence of a valid notice u/s. 143(2) is not a curable defect. The Tribunal also noticed that it's view in the case of Hotel Blue Moon (supra) was reiterated by the Hon'ble Apex Court in the case of CIT Vs Laxman Das Khandelwal (417 ITR 325 (SC). The relevant observations of the Hon'ble Supreme Court were extracted and are as follows: "5. At the outset, it must be stated that out o....
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....restrict the scope and meaning of the expression "so far as may be, apply". In our view, where the assessing officer in repudiation of the return filed under Section 158-BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143." 6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:- "292BB. Notice deemed to be valid in certain circumstances.--Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was (a) Not served upon him; or (b) Not served upon him in time; or (c) Served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has....
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....no reason to take a different view in the matter." 17. In the present case, admittedly notice u/s. 143(2) of the Act dated 25.9.2017 was issued by ITO Ward-1(1) Belgaum. However, he is not the concerned assessing officer of the assessee and actual assessing officer was ITO Ward-1 Bellary/ACIT Circle-1 Bellary. Being so, the notice issued u/s. 143(2) of the Act, ITO Ward-1(1) Belgaum is without jurisdiction. Consequently, the assessment framed by ACIT Circle-1 Bellary on the basis of such notice issued u/s. 143(2) dated 25.9.2017 by ITO Ward-1(1) Belgaum cannot be sustained. In these circumstances, decision of Kolkata bench rendered in the case of Rungta Irrigation Pvt. Ltd. is applicable to the facts of present case and also judgement of coordinate bench in the case of Golf View Homes Ltd. in ITA Nos. 1037-1038/Bang/2019 dated 10.2.2021 are clearly applicable to the facts of the present case, wherein it was held as follows: "19.11 In the present case, admittedly no notice u/s. 143(2) was issued by the AO who had jurisdiction over the Assessee at all material point of time. The Assessee filed return of income on 30.9.2015, with the DCIT-Circle-11(3), Bangalore. A notice ....