Pune ITAT Upholds Exemption Under Section 10(35); Investor Cannot Be Denied Benefit for Alleged Violations by Mutual Fund

ACIT Vs Sabitha Subhash Cipy (ITAT Pune)

Pune ITAT Upholds Exemption Under Section 10(35); Investor Cannot Be Denied Benefit for Alleged Violations by Mutual Fund

Summary: The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) deleting an addition of ₹4,05,34,683 made after denying exemption under Section 10(35) on dividend income received from JM Financial Asset Management Ltd., while the assessee’s cross objections were withdrawn. The Assessing Officer had reopened the assessment, treated the dividend as ineligible for exemption, invoked Section 68, and relied on alleged violations of SEBI regulations by the mutual fund. The CIT(A), after considering the assessee’s submissions, judicial decisions, and the order passed in the assessee’s husband’s identical case, directed deletion of the addition and held that the exemption claimed under Section 10(35) read with Section 10(23D) was allowable. The Tribunal observed that the Revenue could not controvert the findings of the CIT(A) with any new cogent material or information. It upheld the CIT(A)’s order, finding no infirmity in the conclusion that the assessee had rightly claimed exemption under Section 10(35) read with Section 10(23D), dismissed the Revenue’s appeal, and also dismissed the assessee’s cross objections as withdrawn.

The Pune ITAT upheld the order of the CIT(A) deleting an addition of ₹4.05 crore made by the Assessing Officer, holding that the assessee was entitled to exemption under section 10(35) on dividend received from a SEBI-regulated mutual fund. The Revenue had alleged that JM Financial Asset Management Ltd. had manipulated its accounting methodology by distributing dividends out of the Unit Premium Reserve in violation of SEBI regulations, and therefore the dividend was not eligible for exemption.

The Tribunal noted that the entire investment, receipt of dividend and redemption transactions were carried out through normal banking channels, and the assessee had claimed exemption strictly in accordance with section 10(35) read with section 10(23D). It observed that the allegations, if any, were directed against the mutual fund and not against the investor, and there was no evidence to suggest that the assessee had knowingly participated in any sham arrangement to reduce tax liability.

Relying on the Bombay High Court’s decision in Karan Maheshwari, the Tribunal held that mere allegations against the mutual fund cannot automatically disentitle an investor from claiming the statutory exemption, particularly when SEBI had not initiated any adverse action or held that the mutual fund had violated its regulations. The Tribunal also referred to the Supreme Court’s ruling in Kishinchand Chellaram, reiterating that a dividend does not lose its character merely because it is alleged to have been paid out of capital.

Finding no infirmity in the CIT(A)’s detailed reasoning and noting that the Revenue failed to produce any fresh material to dislodge those findings, the Tribunal dismissed the Revenue’s appeal and confirmed the deletion of the ₹4.05 crore addition. The assessee’s cross-objection was dismissed as withdrawn.

Cases Discussed

1. Karan Maheshwari vs Assistant Commissioner of Income Tax, Writ Petition (L) No. 37211/2022, Order dated 08.04.2024 (also referred to as Order dated 08.03.2024 in the supplied content)

2. Aditya Birla Private Equity Trust vs NAFC, Delhi, ITA No. 91/MUM/2024, order dated 29.02.2024

3. ACIT vs Small is Beautiful, (2013) 38 com310 (Hyderabad Trib)

4. ITO vs Gujarat Information Technology Fund, (2011) 11 com206 (Ahmedabad, Trib.)

5. DHFL Venture Capital Fund vs ITO, (2016) 66 com35 (Mumbai, Trib.)

6. Spencer and Company Limited v/s The Assistant Commissioner of Income Tax

7. Kishinchand Chellaram vs Commissioner Of Income-Tax, Central, 1963 SCR (2) 268

FULL TEXT OF THE ORDER OF ITAT PUNE

The Revenue has filed an appeal against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi passed u/sec 147 r.w.s. 143(3) and 250 of the Income Tax Act and the assessee has also filed Cross Objection and the Revenue has raised the fallowing grounds of appeal as under:-

(1) On the facts and circumstances of the case the Ld.CIT(A) erred in the allowing exemption on dividend income of Rs. 4.05 crs when in fact the dividend income received by the assessee was clearly in nature of dividend paid out of the Unit Premium Reserve.

(2) On the facts and circumstnaces of the case, the Ld.CIT(A) erred in allowing the dividend income of Rs. 4.05 crore eligible for exemption u/s. 10(35) of the Act, without giving any finding on the available surplus with the fund for distribution.

(3) On the facts and circumstances of the case, the Ld.CIT(A) erred inignoring the SEBI Circular No. SEBI/IMD/CIR No. 18/198647/2010 dated 15.102010 wherein SEBI clearly says that Unit Premium Reserve shall be treated at par with Unit Capital and cannot be utilized to declare dividends and the mutual fund houses cannot distribute dividends from Unit Premium Reserve.

2. At the time of hearing the Ld.AR of the assessee has not pressed the cross objections and made endorsement and the cross objections are treated as withdrawn and dismissed.

3. The brief facts of the case are that, the assessee has filed return of income for the A.Y. 2018-19 on 31.08.2018 disclosing a total income of Rs. 59,73,04,530/- and the assessee has claimed Rs. 4,55,58,384/- as exempted u/sec10(35) of the Act. The Income Tax Department as per the information received found that the assessee has disclosed fictitious dividend income from JM Financial Asset Management Ltd. which has been found to have indulged in issuing such dividend by flouting the rules and regulations of SEBI. Accordingly, the Assessing Officer (A.O) A.O has issued notice u/sec 148A of the Act and the assessee has filed the explanations but the A.O was not satisfied with explanation and passed the order u/sec 148A(d) on 05.04.2022 and issued notice u/sec 148 on 05.04.2022. In compliance to the notice, the assessee has submitted all the requisite details. The assessee was also issued a show cause notice to explain the reasons for claim of exemption u/sec 10(35) of the Income Tax Act.

4. The AO has considered the submissions referred at Para 3.2 of the assessment order on the claims that the assessee has received dividend income from JM Financial Asset Management Ltd. and clarifications on various issues. The AO has dealt on the various aspects for chronology of receipt on funds and distribution of surplus scheme and reasons for inferences drawn. The assessee has filed the written submissions explaining the nature of dividend and sources of the funds invested. Further, the A.O has provided video conferencing to the assessee and the modus operandi was explained by the assessee in respect of the transactions. Whereas the A.O has issued another show cause notice to make the disallowance and the assessee has filed the reply. Whereas the AO was not satisfied with the explanations and observed that the assessee has failed to establish the credit worthiness of m/s JM Financial Asset Management Ltd. and that said company has manipulated account methodology so as to artificially inflate the distributable surplus. Since the assessee has received dividend only as return of a part of the capital to reduce the tax liability, therefore, the investment in mutual funds purchased through the JM Financial Asset Management Ltd. is not allowable exemption u/sec 10(34) of the Act and was disallowed. Accordingly, the AO invoked the provisions of Section 68 of the Act and made the addition as unexplained cash credit of Rs. 4,05,34,683/- and assessed the total income of Rs.63,78,39,213/- and passed the order u/sec147 r.w.s144B of the Act dated 25.03.2024.

5. Aggrieved by the order, assessee has filed appeal before the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, statement of facts, findings of the A.O, submissions, and directed the A.O to delete addition and to allowed the assesse appeal. Aggrieved by the order of the CIT(A), the revenue has filed the appeal before the Hon’ble Tribunal.

6. At the time of hearing, the Ld. DR submitted that CIT(A) has erred in directing the AO to delete the addition overlooking the various factual aspects that the dividend income received by the assessee was clearly out of the nature of the dividend premium reserve and the assessee is not eligible to exemption u/sec 10(34) of the Act. Further, the Ld.DR mentioned that the CIT(A) has erred in ignoring the SEBI circular with respect to the premium reserve treatment and the Ld.DR prayed for allowing the appeal. Per contra, the Ld. AR relied on the order of the CIT(A), judicial decisions and factual paper book.

7. We heard the rival submissions and material on record. The sole crux of the disputed matter envisaged by the Ld.DR that the CIT(A) has erred in directing the Ld.AO to delete the addition observing that the assessee has claimed the exempt income as per the provisions of the law and within the ambit of Section 10(34) r.w.s. 10(23)(d) of the Act. Further the Ld.DR submitted that there was a inquiry conducted on M/s JM Financial Asset Management Ltd. which has been found to have indulged in issuing such dividend by flouting the rules and regulations of SEBI. We find the CIT(A) has considered the assessee’s submissions on these issues and relied on judicial decisions and directed the assessing officer to delete the addition dealt at Para 6.1 to 8 of the order read as under:

“6.1 Perpended the submission made by the appellant, impugned assessment order, case Laws as relied upon the by the appellant as well as the CIT(A)/NFAC’s favorable decision in the case of appellant’s husband on the identical issue as well as the material on record. I have carefully perused the facts and circumstances of the appellant’s case, and found that AO had mentioned SEBI circular No SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010 in the assessment order passed u/s 147 r.ws 144B of the act dated 25.03.2024. In response to the same, appellant rebutted in the submission dated 16. 12. 2024 that the M/s JM Financial Asset Management Limited is a listed mutual fund. Since JM Financial Asset Management Ltd is a listed entity and governed by the SEBI. If any. violation has been occurred by the JM Financial Asset Management Ltd in respect of the present facts of the case then the SEBI would take first charge and would investigate the matter. In the given case, no such action has been initiated/reported by the SEBI and no such penalty has been imposed by the SEBI on JM Financial Asset Management Ltd. with respect to dividend distribution, if any, violation as alleged by the AO has been taken place then SEBI should take immediate action and pass the necessary order as it may deem fit. In the present case, no such order has been passed by the SEBI Also, the said scheme is still running by the JM Financial Asset Management Ltd. Further, with regard to the contention of theLd. AO that during the course of survey, the Officer concerned of the JM Financial Asset Management Ltd has accepted the manipulation in the account to declare the dividend, however the appellant has furnished the confirmation issued by the JM Financial Asset Management Ltd dated 19-05-2023, stating that it has not violated any laws and provisions of the Act including SEBI Regulations. Further, in this regard the Hon’ble Bombay High Court (supra) has given finding that “These are allegations against JM Financial and do not implicate petitioner in any manner There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability” Furthermore the Hon’ble Supreme Court (supra) has held that “payment made as dividend by a company to its shareholders does not lose that character merely because it is paid out of capital”

6.2 The appellant has placed reliance upon the following judgements:

6.2.1 The judgement of The Hon’ble Jurisdictional Bombay High Court in the similar matter vides Writ Petition (L) No. 37211/2022 Order dt. 08-03-2024 in case of Karan Maheshwari vs Assistant Commissioner of Income Tax wherein the court has held as below: “Para 20 In the notice issued under Section 148A(b) of the Act. the Assessing Officer alleges that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss. These are allegations against JM Financial and do not implicate petitioner in any manner. There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability or to earn Gauri Gaekwad 16/17 907 WPL-37211-2022 doc dividend or book short term capital loss.”

6.2.2 From the above judgement, it is relevant to mention here that the fact of the case is identical in the said writ petilion, as a survey action u/s. 133A of the I.T. Act, 1961 in the case of M/s. JM Financial Asset Management Limited (“JM Financial”) was conducted by DDIT, Unit 3(1), Mumbai on 15.02 2021 and in the instant case in hand also the case has been reopened consequent to the findings of same survey held on 15.02.2021 therefore the facts are identical and the findings of the above case are applicable in loto. Further, in this matter the writ petition of the assessee has been disposed of by the Hon’ble jurisdictional Bombay High Court at the admission stage itself against Revenue Therefore, the ratio of the above case is squarely applicable in this case.

6.3 Further reliance has been placed upon by the appellant on the judgement of Honourable Madras High Court in the case of Spencer and Company Limited v/s The Assistant Commissioner of Income Tax, wherein it is held that:

“Therefore, the Assessing Officer is also not clear whether the assessee had booked loss or claimed dividend in the JM Balanced Fund – AnnualDividend Option Regular scheme or JM Equity Hybrid Fund- Quarterly Dividend. This also indicates non application of mind by the Assessing Officer It further is noticed that a favorable judgement has been passed by NFAC in the case of appellant’s husband, Subhash Cheralayathpanku Cipy wherein similar issues as that of the appellant were involved which is as under: –

“Therefore, keeping in view the above narrated facts & circumstances, the submissions of the Appellant and respectfully following the Judgement of Hon’ble Supreme Court in case of Kishinchand Chellaram vs Commissioner Of Income-Tax, Central 1963 SCR (2) 268 and the Hon’ble Jurisdictional Bombay High Court vide Writ Petition(L) No. 37211/2022 Order dt. 08-04-2024 and Judgement of Hon’ble various ITAT including Jurisdictional ITAT Mumbai, I am of the considered opinion that appellant has claimed the exempt income of Rs. 89,17,630/-as per the provision of law and the said claim of the appellant is within the ambit of section 10(35) rw.s. 10(23D) of the Act and therefore, the Ld. Assessing Officer is directed to delete the addition of Rs. 89, 17,630/-and accordingly ground of appeal is allowed [Paper book page no. 92-118].

6.4 The appellant has also relied upon the judgement of Hon’ble Supreme Court in case of Kishinchand Chellaram Commissioner Of Income-Tax, Central 1963 SCR (2) 268, has held that

“In any event, we are of the opinion that payment made as dividend by a company to its shareholders does not lose that character merely because it is paid out of capital. Under the Income Tax Act, liability to pay tax attaches as soon as dividend is paid, credited or distributed or is so declared. The Act does not contemplate an enquiry whether the dividend is properly paid credited or distributed before liability to pay Tax attaches thereto. The answer to the second contention for reasons already set out by us must be in the negative”

6.4.1 In the above case, fact and circumstances of the case has beencarefully perused and found that the Hon’ble Supreme Court has laid down the law that shareholder shall not be liable to pay any tax even if the dividend has been paid out of capital. Therefore, the ratio of said Judgement is squarely applicable in this case.

6.5 Most importantly and relevant to the issue in hand the appellant has placed reliance on the order dated 27.08.2024 for AY 2018-19 passed by the NFAC (vide DIN No. ITBA/NFAC//S/250/2024-25/1068013203(1)} in the case of appellant’s husband, Sh. Subhash Cheralayathpanku Cipy in his favour on IDENTICAL ISSUE by the Jurisdictional ITAT Mumbai.

*I have carefully considered the submissions & judicial pronouncement quoted by the appellant and Assessment Order It is a fact on the record that during the year under consideration, the appellant had purchased the mutual fund through JM Financial Asset Management Ltd under the Scheme “JM Equily Hybrid Fund Annual Dividend Option of Rs 2,20,00,000/- on which the appellant had received dividend of Rs. 89.17 360/ on 23.03.2018 in Kotak Mahindra Bank Account. In this regard the appellant has contended that the whole of the transaction of the appellant was carried out through proper banking channel. Also, the appellant had submitted the bank statement as well as JM Financial transaction statement before the AO as well as via his submission dated 09.08.2024. Further, the appellant has contended that as per section 10(35) of the Act, any income received in respect of mutual funds specified in section 10(23D) of the Act is exempt and JM Financial Asset Management Ltd is a SEBI recognized mutual fund and it is squarely covered within the ambit of section 10(35) r.w.s. 10(23D) of the Act. Thus, dividend income distributed by the JM Financial Asset Management Ltd is exempt in the hands of unit holders as per the provisions of the Act. Thus, the appellant had rightly claimed the exempt income of Rs. 89,17,630/- in his return of income.

All the evidences of purchase of the mutual fund, receipt of the dividend and the claim of exemption under the provisions of the Act has been submitted by the appellant before the AO as well as during the appellate proceeding vide his submission dated 09.08.2024. I have carefully considered the submission dated 09.08.2024 of the appellant and contention of the appellant is found tenable.

Further, the Ld. Assessing Officer has contended at page no 18 and 19 of the Assessment Order that as per the SEBI Circular, Unit Premium Reserve shall be treated at par with Unit Capital and cannot be utilized to declare dividend and mutual fund house cannot distribute dividend from Unit Premium Reserve.

It can distribute the dividend only from surplus generated by realizing the gains on investment or dividend received from equity markets which it had invested.

The Ld. Assessing Officer has further contended that said directions of the SEBI has not been followed by the mutual fund.

In this regard, it is relevant to mention here that JM Financial Asset Management Ltd is a listed entity & regulated by SEBI and with regard to rules/procedures given in the SEBI Circular no. SEBIVIMD/CIR NO 18/198647/2010 dated 15-03-2010 the said entity has filed confirmation that we wish to state that JM Financial Asset Management Ltd is a SEBI regulated Mutual fund and we are mandatorily required by law to follow the applicable Rules and Regulations and the same have been followed.

Further, SEBI has not taken any adverse action against the said Mutual fund as evident from information available on public domain.

In this regard the appellant has relied upon the latest judgement of the Hon’ble Jurisdictional Bombay High Court in the similar matter vide Writ Petition(L) No. 37211/2022 Order dt. 08-04-2024 in case of Karan Maheshwari vs Assistant Commissioner of Income Tax wherein the court has held as below.

“Para 20…. In the notice issued under Section 148A(b) of the Act, the Assessing Officer alleges that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the investors. in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss. These are allegations against JM Financial and do not implicate petitioner in any manner There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability or to earn Gauri Gaekwad 16/17 907 WPL-37211-2022. doc dividend or book short term capital loss.”

Further, it is relevant to mention here that the fact of the case is identical in the said writ petition, as a survey action u/s. 133A of the IT. Act, 1961 in the case of M/s. JM Financial Asset Management Limited (“JM Financial”) was conducted by DDIT, Unit 3(1), Mumbai on 15.02.2021 and in the instant case in hand also the case has been reopened consequent to the findings of same survey held on 15.02.2021 therefore the facts are identical and the findings of the above case is applicable in toto. Further, in this matter the writ petition of the assessee has been disposed by the Hon’ble jurisdictional Bombay High Court at the admission stage itself. Therefore, ratio of the above case is squarely applicable in this case.

Further, the appellant has relied upon the Hon’ble Supreme Court in case of Kishinchand Chellaram vs Commissioner Of Income-Tax, Central 1963 SCR (2) 268, has held that

——–In any event we are of the opinion that payment made as dividend by a company to its shareholders does not lose that character merely because it is paid out of capital.

Under the Income Tax Act, liability to pay tax attaches as soon as dividend is paid, credited or distributed or is so declared. The Act does not contemplate an enquiry whether the dividend is properly paid credited or distributed before liability to pay Tax attaches thereto. The answer to the second contention for reasons already set out by us must be in the negative.”

In above case, fact and circumstances of the case has been carefully perused and found that the Hon’ble Supreme Court has laid down the law that shareholder shall not be liable to pay any tax even if the dividend has been paid out of capital. Therefore, the ratio of said judgement is squarely applicable in this case.

Further, the appellant has relied upon the judgement of the Hon’ble Jurisdiction ITAT Mumbai in case of Aditya Birla Private Equity Trust vs NAFC, Delhi ITA No. 91/MUM/2024 order dt. 29-02-2024, relevant para as under:

“Para 12. Considered the rival submissions and material placed on record, Onidentical facts, the Coordinate Bench in assessee own case in ITA No. 1635/MUM/2020 dated 22.10 2020 for the A.Y. 2017-18

Para 15. Further the coordinate bench of Mumbai Tribunal in DHFL Capital Fund Vs ITO (supra) held that, so far as SEBI does not find any default of any contravention of the provisions of the SEBI Act or SEVI (VCF) Regulation 1996. then it can be inferred that the assessee-trust fulfils the laid down under these regulations. The Tribual further expressed the view that the Assessing Officer may report the matler of, if any to the SEBI and if finally, SEBI does not find any default then the view of the Assessing Officer that there is violation Cannot survive. Thus, it is the SEBI which has final authority to determine about the violation of the conditions, as it is the authority competent to deal with the same….”

Further, apart from the above, the similar view has been taken in following judgement:

1. ITO vs Gujarat information Technology Fund (2011) 11 com206(Ahmedabad, Trib.)

2. ACIT vs Small is Beautiful (2013) 38 com310 (Hyderabad Trib)

3. DHFL Venture Capital Fund vs ITO (2016) 66 com35(Mumbai, Trib.), has held as under:

“The Tribunal held that so long as SEBI does not find any default of any contravention of the provisions of the SEBI Act or SEVI (VCF) Regulation 1996 then it can be inferred that the assessee-trust fulfils the conditions laid down under these regulations. The Tribunal further expressed the view that the Assessing Officer may report the matter of violations, if any, to the SEBI and if finally SEBI does not find any default, then the view of the Assessing Officer that there is violation cannot survive. Thus, it is the SEBI, which has final say to determine about the violation of the conditions, as it is the authority competent to deal with the same [Para 9]”

In above case, fact and circumstances of the case has been carefully perused and found that the Hon’ble ITAT including the jurisdiction ITAT Mumbai has held that the Assessing Officer may report the matter of violations, if any, to the SEBI and if finally SEBI does not find any default, then the view of the Assessing Officer that there is violation cannot survive. Thus, it is the SEBI, which has final say to determine about the violation of the conditions, as it is the authority competent to deal with the same.

In the instant case, fact and circumstances of case has been carefully perused and found that AO had mentioned SEBI circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010 in the assessment order passed u/s 147 r.ws 1448 of the act dated 27 02 2024 in response to the same, appellant rebutted in the submission dated 09.08.2024 that the M/s JM Financial Asset Management Limited is a listed mutual fund. Since JM Financial AssetManagement Ltd is a listed entity and governed by the SEBI If any, violation has been occurred by the JM Financial Asset Management Ltd, then the SEBI would take first charge and would investigate the matter. In the given case, till date, no such action has been initiated by the SEBI and no such penalty has been imposed by the SEBI on JM Financial Asset Management Ltd With respect to dividend distribution, if any, violation as alleged by the AO has been taken place. then SEBI should take immediate action and pass the necessary order as it may deem fit. In the present case, no such order has been passed by the SEBI Also, the said scheme is still running by the JM Financial Asset Management Ltd. Further, with regard to the contention of the Ld. AO that during the course of survey, the Officer concerned of the JM Financial Asset Management Ltd has accepted the manipulation in the account to declare the dividend, however the appellant has furnished the confirmation issued by the JM Financial Assel Management Lid dated 25-03-2023 stating that it has not violated any laws and provisions of the Act including SEBI Regulations. Further in this regard the Hon’ble Bombay High Court(supra) has given finding that “These are allegations against JM Financial and do not implicate petitioner in any manner There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability” Furthermore, the Hon’ble Supreme Court (supra) has held that “payment made as dividend by a company to its shareholders does not lose that character merely because it is paid out of capital” Therefore, the contention of the Ld Assessing Officer is not found tenable.

Therefore, keeping in view the above narrated facts & circumstances, the submissions of the Appellant and respectfully following the Judgement of Hon’ble Supreme Court in case of Kishinchand Chellaram vs Commissioner Of Income-Tax, Central 1963 SCR (2) 268 and the Hon’ble Jurisdictional Bombay High Court vide Writ Petition(L) No. 37211/2022 Order dt. 08-04-2024 and Judgement of Hon’ble various ITAT including Jurisdictional ITAT Mumbai, I am of the considered opinion that appellant has claimed the exempt income of Rs. 89,17,630/- as per the provision of law and the said claim of the appellant is within the ambit of section 10(35) r.w.s. 10(23D) of the Act and therefore, the Ld. Assessing Officer is directed to delete the addition of Rs. 89,17,630/- and accordingly ground of appeal is allowed.

Ground no 1 2 and 3:-

In this regard, since the relief has already been allowed in ground no. 4 on the basis of merit of the case therefore, the technical grounds of appeal raised by the appellant with regard to reopening etc. becomes academic and infructuous in nature hence no separate adjudication of the same is being done.

Ground no. 5

This ground is consequential in nature, therefore no separate adjudication is required.

6 in the result, the appeal of the appellant is allowed.”

7. Therefore, keeping in view the above narrated facts & circumstances. the submissions of the Appellant and respectfully following the judgement of Hon’ble Supreme Court in case of Kishinchand Chellaram vs. Commissioner of Income-Tax, Central 1963 SCR (2) 268, the Hon’ble Jurisdictional Bombay High Court vide Writ Petition (L) No. 37211/2022 Order dt. 08.04.2024, the judgment of Hon’ble Madras High Court in the case of Spencer & Co. Ltd v/s The Assistant Commissioner of Income Tax, the Order dated 27.08.2024 passed by the NFAC (Supra) (vide DIN No. ITBA/NFAC//S/250/2024-25/1068013203(1)) in the case of appellant’s husband for A.Y 2018-19, Subhash Cheralayathpank Cipy in his favour on identical issue andthe judgement of various ITAT including Jurisdictional ITAT Mumbai, I am of the considered opinion that appellant has rightly claimed the exempt income of Rs. 4,05,34,683/- as per the provisions of law and the said claim of the appellant is within the ambit of section 10(35) r.w.s.10(23D) of the Act and therefore, the Ld. Assessing Officer is directed to delete the addition of Rs. 4,05,34,683/- and accordingly. ground of appeal No.4 is allowed.

7.1 Ground Nos. 1, 2 and 3:-

In this regard, since the relief has already been allowed in ground no.4 on the basis of merit of the case, therefore, the technical grounds of appeal raised by the appellant with regard to reopening etc. becomes academic and infructuous in nature, hence no separate adjudication of the same is being done.

7.2 Ground No. 5:-

This ground is consequential in nature, therefore, no separate adjudication is required.

8. In the result, the appeal of the appellant is allowed.

8. The Ld.AR referred to the submissions filed in the paper book and relied on the judicial decisions We have considered the facts, circumstances, submissions and ratio of the judicial decisions dealt by the CIT(A) and passed a reasonable order. The Ld. DR could not controvert the findings of the CIT(A) on the disputed issue with any new cogent material or information to take different view. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.

9. In the result, the appeal filed by the revenue and the cross objections filed by the assessee are dismissed.

Order pronounced in the open Court on 03.07.2026.