The Supreme Court on Monday issued a notice in the revenue department’s plea on exemption pertaining to LIC policies’ surrender value.

The department challenged the Gujarat High Court judgment which set aside the revision notice issued under Section 263.

The section deals with revision of orders prejudicial to revenue.

The Gujarat HC had confirmed the order of the assessing officer (AO) holding the assessee to be eligible for exemption under Section 10(10D) on surrender value of annuity towards LIC policies.

It had further held that reference to Section 80CCC was misconceived as the assessee did not claim the amount of premium under Section 80CCC(1). 

The Supreme Court also condoned the delay of 365 days in filing the present case. 

The matter is before the Division Bench of the Supreme Court, comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra.

In this case, an Indian citizen in the UK challenged the reopening of a ?1.42 crore tax assessment under Section 148 related to a pension plan's surrender value.

The petitioner's wife argued the surrender value was exempt under Section 10(10D) since no deductions under Section 80CCC(1) were claimed.

The revenue department justified the reopening due to lack of scrutiny in the original assessment and alleged income escapement.

The HC said that reopening under Section 148 was invalidated, as mere absence of scrutiny doesn't justify reopening without tangible material.

The court also quashed the Section 263 notice to the petitioner's wife, affirming the Section 10(10D) exemption if no deductions under Section 80CCC(1) were availed.

Now the apex court has issued a notice in revenue's SLP, seeking clarifications on LIC policy surrender values.

Amit Maheshwari, tax partner, AKM Global, said the high court had held that if the AO conducted proper inquiries and came to legal conclusions which are plausible, the commissioner would not be justified in invoking revisional jurisdiction directing further inquiries or taking a different view.

“However, had it been the case that the assessing officer conducts no inquiry or proper inquiries or does not adhere to the legal issues arising out of the material on record, the revisional powers would be available. This constitutes an important check on the revisionary powers of the commissioner. In this case, if the Hon'ble Supreme Court upholds the revenue department's appeal of the high court's verdict and decides in favour of the revenue department, this could set an important precedent,” he said.