ITAT Deletes ₹4.97 Lakh Income Tax Addition as ‘Unexplained Money’ on Surrendered ICICI Life Insurance Policy [Read Order]

The assessee, Hiren Rameshbhai Patel had filed his return of income for Assessment Year (AY) 2016–17. During assessment, the Assessing Officer (AO) observed that the assessee had received ₹4,97,543 from ICICI Prudential Life Insurance Company after surrendering a life insurance policy.

As the assessee failed to produce the insurance policy document, the AO held the amount as unexplained and added it under Section 68 of the Act.

The assessee contended that the payment had been made in earlier years towards the policy, and the amount was received as an insurance refund on surrender of the same.

However, the assessee was not in possession of the original policy document and had requested the issuing company for a photocopy. It was further submitted that the amount was received through routine banking channels and was duly accounted for.

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The AO argued that if proof was provided, the amount would not be taxable as exempt income under Section 10(10D) read with Section 80CCC(2)(a), but still proceeded to make the addition due to the absence of documentary evidence.

The assessee reiterated that the details of the refund amount and earlier premium payments were submitted to both the AO and the Commissioner of Income Tax (Appeals) ( CIT (A) ). The Tribunal after considering the records, observed that the relevant details of the amount received from surrendering the policy as well as the earlier payment made to the Insurance Company, were submitted to both the Revenue authorities

The Bench comprising Dr. BRR Kumar (Vice President) and Suchitra Kamble (Judicial Member) concluded that the sum of ₹4,97,543 could not be treated as unexplained under Section 68 of the Act as it represented a genuine insurance refund and was explained by the assessee. The addition was therefore deleted.

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The assessee was represented by Biren Shah, while B.P. Srivastava represented the revenue.

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