Amount Received From Surrender of LIC Cannot be Treated as Unexplained Income u/s 68

Addition was made u/s. 68 of the Act for Rs. 4,97,543/-. The assessee made a payment to ICICI Prudential Life Insurance Company in previous years towards life insurance cover, which has been received by the assessee as an insurance refund from ICICI Prudential Life Insurance Company as the policy has been surrendered. Since the assessee is not in possession of that policy document, the assessee could not submit the same to the Assessing Officer.

The assessee has submitted that the receipt and the money received through the routine banking channel, and therefore the money received was duly accounted for, and that cannot be the criteria for making an addition u/s. 68 of the Act. The ld. A.R. has taken an alternate contention that the provisions of section 68 are not applicable in his case, then the gross receipt should be taxed u/s. 10(10D) r.w.s. section 80CCC(2)(a) of the Act.

As regards to addition u/s. 68, the Assessing Officer has categorically mentioned that if the assessee will submit the proof/documents in relation to refund of Rs. 4,97,543/- which was received after surrendering the life insurance policy from ICICI Prudential, then same will not be as exempt income because the said amount received should be taxed under the head income from other sources as per provisions of section 80CCC(2)(a) of the Act. But since the assessee has not given any details, the Assessing Officer has rightly made an addition.

ITAT Observations:

It is pertinent to note that the amount of Rs. 4,97,543/- was received by the assessee as a refund for surrender of Life Insurance Policy by ICICI Prudential Life Insurance Company towards Life Insurance Cover.

Since the assessee is not in possession of that policy due to surrender, the said document was not submitted to the Assessing Officer, but the relevant details of amount received from surrendering the policy as well as the earlier payment made to Insurance Company was submitted to both the Revenue authorities as well as CIT(A).

Hence, the assessee explained the amount of Rs. 4,97,543/-, which is an insurance refund and claimed as exempt income. Thus, this cannot be treated as unexplained money under Section 68 of the Act.