TaxTMI 
TaxTMI 
2025 (6) TMI 478
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.... assignment of key man insurance policy in favour of assesse which otherwise is fully exempt u/s 10(10D) at relevant time. 3. That on the facts and in the circumstances of the case, the CIT(A) erred in confirming the addition of Rs. 3000000/- made u/s 69A by the Assessment Unit, NFAC, Delhi alleging it to be unexplained deposits in the bank account which otherwise is fully explained. 4. That the appellant craves leave to add, alter, amend and or to delete any of the grounds to this appeal on or before it is finally heard. 5. That the appellant prays for justice." 2. Briefly, stated facts of the case are that the assessee, an individual, is director of M/s. Uma Polymer ltd. The assessee filed his return of income on 26/08/2021 declaring total income at Rs. 2,35,97,540/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income Tax Act, 1961 (in short "Act") were issued and complied with. 2.1 During the course of scrutiny proceedings, the Ld. Assessing Officer observed receipt of maturity/redemption proceeds of Insurance Policy No. 72496, amounting to Rs. 59,47,714/-, which was claimed by the assessee as exempted u....
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.... eligible for exemption under Section 10(10D) of the Act. Learned counsel further invited our attention to the amendment brought to Explanation-1 of Section 10(10D) by the Finance Act, 2013, with effect from assessment year 2014-15, wherein it is clarified that the expression "Keyman Insurance Policy" includes a policy which has been assigned to any person during the term of the policy, with or without consideration. It is submitted that this amendment is prospective in nature and does not govern assignments made prior to assessment year 2014-15. In support of this contention, reliance was placed on the decision of the Coordinate Bench of the ITAT, Mumbai Bench "A", in the case of Mr. Autl Hirji Maru in ITA Nos. 2879 & 4064/Mum/2024, as well as the decision of the ITAT, Indore Bench, in the case of Smt. Harleen Kaur Bhatia vs. PCIT, reported in (2020) 114 taxmann.com 183 (Indore-Trib.). 5.1 Per contra, learned Departmental Representative(DR) submitted that the fact of assignment of the policy in favour of the assessee prior to assessment year 2014-15 is not clearly borne out from the record. He referred to page 13 of the paper book, being a communication dated 20.05.2020 issued by....
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.... explained in Boards circular no. 762, dated February 18, 1998 (supra). When the policy was assigned to him by BIL. and later on by the Keyman to his wife, it apparently got converted into ordinary life insurance policy as assignment was accepted by LIC on 30.01.2013. For this proposition we may derive support from the decision of Hon'ble Delhi High Court in C77 v. Rajan Nanda [2012] 18 taxmann.com 98/205 Taxman 138/349 ITR 8 (Delhi) wherein it was observed as under." 6.2. Further, the Co-ordinate Bench held that amendment is effective from 01/04/2014 onward. The relevant finding of the Tribunal(supra) is reproduced as under: "43. Thus the effect of amendment on the facts of the present case would be that when the first assignment was done in October 2010, the amendment by Finance Act 2013 in section 10(10D) cannot bring back the character of the policy as Keyman insurance policy as the amendment is effective from 1-04-2014. The amendment is prospective in character as pointed out above. Therefore if a policy is an ordinary policy before the amendment either by contract ab-initio or by operation of law, it will not be affected by the amendment. In other words if an assignmen....
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....d restore the matter to the file of the learned Assessing Officer for the limited purpose of conducting a factual verification. The learned Assessing Officer shall obtain confirmation from LIC as to whether the assignment was duly effected in favour of the assessee on 06.05.2011 or on any other date, and whether such assignment was supported by a formal request letter from the company and acknowledged by LIC. The assessee shall furnish a copy of such request letter, if available, along with any agreement entered into for the assignment of the policy. Further, the Assessing Officer shall verify whether the sum of Rs. 21,68,375/- claimed to be the surrender value paid by the assessee to the company was actually paid, by examining the relevant entries in the assessee's bank account. The assessee shall also be at liberty to furnish any additional documentary evidence in support of his claim, including proof of payment of premium on the said policy from 01.04.2010 up to its maturity, and the identity of the person or entity who bore the said premium payments. It is need less to mention that the assessee shall be afforded adequate opportunity of being heard. Let appropriate verification ....
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....tantial cash withdrawals of Rs. 10 lakhs and Rs. 8 lakhs on 21.01.2020 and 23.01.2020 respectively, no further withdrawals have been recorded up to 17.03.2021 - the date on which the impugned cash deposit of Rs. 30 lakhs was made. It was contended that the cash withdrawals made on 05.01.2020, 21.01.2020, and 23.01.2020 - which the assessee seeks to correlate with the cash deposit in question - were, in fact, likely utilised for meeting household expenses, as no alternate source for such expenditures has been disclosed by the assessee. The Ld. DR further submitted that, considering the assessee's residence in Mumbai - a metropolitan city with sufficient banking infrastructure and facilities - there appears to be no plausible justification for retaining such a large sum of cash in hand over an extended period. Additionally, the Ld. DR drew attention to the assessee's cash book, which purportedly reflected cash in hand of more than Rs. 28 lakhs as on 01.01.2021. Despite this, the assessee proceeded to withdraw a further Rs. 10 lakhs, for which no satisfactory explanation has been offered. The Ld. DR thus submitted that the assessee has not been able to justify the deposit of Rs. 30 la....
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.... lakhs on 23.01.2020, Rs. 10 lakhs on 05.03.2020, and Rs. 10 lakhs on 28.01.2021. The assessee further claimed that the cash was initially withdrawn to meet expenses related to his son's marriage, which was postponed due to the outbreak of the COVID-19 pandemic and related restrictions, resulting in the cash being retained at home and later deposited back into the bank. It is also observed from the records that the assessee regularly withdrew between Rs. 30,000/- to Rs. 45,000/- per month towards household expenses during the period from 01.04.2019 to 31.12.2019. However, following the large cash withdrawals totalling Rs. 38 lakhs thereafter, no corresponding withdrawals towards household expenses were recorded between 31.12.2019 and 31.03.2021. In the absence of an alternative explanation, it becomes imperative for the assessee to demonstrate how household expenditures were met during this period. Further, from the bank statements, it is evident that the deposited sum of Rs. 30 lakhs was promptly transferred to another entity. This, too, warrants consideration in evaluating the bona fides and intended use of the deposited amount. 8.5 In the totality of the facts and circumstances....