Kamal Binani Vs ITO (ITAT Mumbai)
ITAT Mumbai held that addition under section 68 of the Income Tax Act on the basis of mis-reporting of insurance company is unsustainable in law.
Facts- Notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. The reasons recorded for reopening the assessment are “The information was received from the DDIT(Inv.) Unit 7(3), Mumbai that the assessee had paid the annual premium of ₹.6,00,000/- which is much higher than the total income declared by the assessee i.e., ₹.1,60,630/- in the return of income.
AO on a perusal of the details submitted by the assessee, he observed that there is no bank entries of ₹.6,00,000/- paid in two installments by the assessee from HDFC bank. To verify the claim Assessing Officer issued notice to the insurance company STAR UNION DAI-ICHI LIFE INSURANCE COMPANY LIMITED for confirmation of payment of ₹.6,00,000/-.
A show-cause notice u/s 142(1) was issued to the assessee to submit the details of the statement of account maintained with Bank of India, Andheri branch that there are no entries pertaining to the payment made to the insurance company as per details provided by the insurance company. Further he observed from the AIR, it is seen that assessee has deposited ₹.5,00,000/- with Shriram Transport Finance Limited. Further, he directed the assessee to provide details of share transaction amounting to ₹.29,45,122/- whether Capital Gain/Loss, if any, on the share transaction are offered to tax. Since, assessee did not respond to the above said notices based on the information available on record, AO proceeded to make the addition u/s. 68 of the Act.
Conclusion- We observe that insurance company has reported that assessee has made a subscription of ₹.6,00,000/- from Bank of India, Andheri Branch. However, it is brought to our notice that assessee has no doubt made the insurance premium from the bank account maintained by the assessee in Punjab and Maharashtra Cooperative Bank Limited in Fort branch and HDFC, Andheri (W) branch. We observe that as far as subscription of insurance is concerned assessee has accepted and brought on record that assessee has in fact made the payment and not through the bank reported by the Insurance Company and it is from the branch in which assessee is maintaining bank account. As far as the payments of premium is concerned assessee has clearly brought on record that assessee has in fact made the payment. With regard to source of funds there is no doubt on the statements and financial record submitted by the assessee that assessee has enough funds to make the above said insurance payment. Therefore, the reason for reopening of the assessment is already clarified and addressed by the assessee.
However, the issue was complicated because of the misreporting of the insurance company. Therefore, the ground raised by the assessee is accordingly, allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 11.11.2022 for the A.Y.2012-13.
2. Brief facts of the case are, assessee filed its return of income for the A.Y. 2011-12 on 20.11.2012 declaring total income of ₹.1,60,630/-. There was no scrutiny assessment selected in this case and subsequently, this case was reopened u/s 147 of Income-tax Act, 1961 (in short “Act”), after recording the reasons. Accordingly, notice u/s.148 of the Act was issued on 31.03.2019 and served on the assessee. In response assessee filed the return of income on 02.04.2019 and declared return of income as per original return of income.
3. Subsequently notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. The reasons recorded for reopening the assessment are “The information was received from the DDIT(Inv.) Unit 7(3), Mumbai that the assessee had paid the annual premium o f ₹.6,00,000/- which is much higher than the total income declared by the assessee i.e., ₹.1,60,630/- in the return of income.
4. The Assessing Officer on a perusal of the details submitted by the assessee, he observed that there is no bank entries of ₹.6,00,000/- paid in two installments by the assessee from HDFC bank. To verify the claim Assessing Officer issued notice to the insurance company STAR UNION DAI-ICHI LIFE INSURANCE COMPANY LIMITED for confirmation of payment of ₹.6,00,000/-. In reply the insurance company submitted as under: –
