By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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New Page 1Part A: Reported
Decisions
34 (2010) 127 ITD 116
(Delhi)
Rajan Nanda v. Dy. CIT,
Central Cir. 3,
New Delhi
A.Ys. : 2003-04, 2004-05.
Dated : 15-5-2009
S. 271(1)(c) r.w. S. 2(24)
and S. 10(10D) — Taxability of assignment of Keyman Insurance Policy based on
surrender value was highly debatable as to the year of taxability and also as to
the amount of taxability, so it was held that penalty is not leviable
u/s.271(1)(c).
Facts :
1. Keyman Insurance Policy
taken on the assessee by the employer company was assigned to him in the year
subsequent to the year of the policy at a much lower value.
2. However the value was
paid by the assessee in a different year and the policy was assigned to him in a
different year. The case of assessee subsequently went to the Tribunal so as to
decide the year of taxability and amount of taxable benefits.
3. The Tribunal held that
the surrender value of the policy less value paid by the assignee to the
assignor and less subsequent premium paid will be the benefits accruing to the
assessee. The decision of the Tribunal was, in a way, against the assessee.
4. The AO subsequently
initiated penalty proceedings u/s.271(1)(c) for concealment of income.
5. Also in A.Y. 2004-05 the
assessee received Rs.2.85 crore on maturity, which he claimed as exempt
u/s.10(10D) for an amount equal to 2.51 crore. The AO disallowed the exemption
and also initiated penalty proceedings for entering wrong amount and also for
concealment of income.
6. The above actions of the
AO was upheld by the learned CIT(A).
Held :
1. The assessee had
disclosed complete facts to the Department during the course of hearing and the
addition was entirely due the difference of opinion between the assessee and the
AO.
2. Since the year in which
the amount paid by the assessee to the assignor was different from the year in
which the policy was assigned to him, the issue was a matter of considerable
debate and discussion.
3. It was held that the
explanation tendered by the assessee was bona fide notwithstanding the fact that
sketchy disclosure was made in the return of income and the whole issue of
taxation of the amount was highly debatable.
4. Also for the A.Y. 2004-05
the issue of taxability of sum received on maturity of erstwhile Keyman
Insurance Policy, from the LIC was highly debatable.
5. Hence penalty
u/s.271(1)(c) was not leviable.
