M/s Ramesh Steels, Ludhiana V. ACIT, Ludhiana

ITA 462/CHANDI/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8423 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Difference of opinion; Assessment record; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.462/CHD/2011 ( ASSESSMENT YEAR : 2006-07) M/S RAMESH STEELS, VS. THE A.C.I.T., B-XXX-2185/C-203/1, CIRCLE-1, PHASE-VI, FOCAL POINT, LUDHIANA. LUDHIANA. PAN: AADFR6048Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANOJ MISHRA, CIT DR DATE OF HEARING : 20.01.2016 DATE OF PRONOUNCEMENT : 10.03.2016 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX-I, LUDHIANA DATED 15.03.2011, PASSED UNDER S ECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AS ON 31.10.200 6 DECLARING TOTAL INCOME OF RS.9,75,150/. THE ASSESSMENT UNDER SECTION 143(3) WAS MADE AT A TOTAL 2 INCOME OF RS.21,22,862/. THE CIT ISSUED A NOTICE UNDER SECTION 263 TO THE ASSESSEE AS ON 18.02.2011, WHICH READS AS UNDER: '(1) THE PERUSAL OF ASSESSMENT RECORD HAS REVEALED THAT YOU HAVE CLAIMED AN EXPENDITURE OF RS.14,99,998/- INCURRED A S INSURANCE CHARGES ON THE LIVES OF PARTNERS SH. SACHIN SINGAL AND SH. RAKESH GUPTA AT RS.7,49,999/- EACH AS KEYMAN INSURANCE POLICY THOUG H THE COPIES OF RELEVANT INSURANCE POLICIES AVAILABLE ON RECORD NOW HERE INDICATES THE TYPE OF POLICY. NOT BEING KEYMAN INSURANCE, NO DEDU CTION OF RS.14,99,998/- IS ADMISSIBLE IN LAW. (2) WITHOUT PREJUDICE TO THE PARA (1) ABOVE, IT MAY BE POINTED OUT THAT AS PER THE COPIES OF BOTH THE INSURANCE POLICI ES UNDER REFERENCE, POLICY ON THE LIFE OF SH. SACHIN SINGAL COMMENCED O N 26.02.2004 WHILE POLICY ON THE LIFE OF SH. RAKESH GUPTA COMMENCED ON 11.03.2004. THEREFORE, IN VIEW OF THE ACCRUAL SYSTEM OF ACCOUNT ANCY BEING FOLLOWED BY YOU, EXPENDITURE OF RS.1,10,959/- ONLY WAS REQ UIRED TO BE ALLOWED RELATABLE TO THE YEAR UNDER REFERENCE WHILE BALANCE AMOUNT OF EXPENDITURE OF RS.13,89,039/- WAS REQUIRED TO BE DI SALLOWED AND ADDED BACK BEING INADMISSIBLE. (3) IN THE LIGHT OF AFORESAID FACTS, IT IS CONSIDER ED THAT ORDER PASSED U/S 143(3) ON 26.08.2008 BY ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-I, LUDHIANA IS PRIMA FACIE ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE, THEREFORE, RE QUESTED TO SHOW CAUSE AS TO WHY THE AFORESAID ASSESSMENT ORDER DATED 26.0 8.2008 PASSED U/S 143(3) SHOULD NOT BE CANCELLED OR MODIFIED OR ENHANCED AS THE CIRCUMSTANCES OF THE CASE JUSTIFY.' 3. THE ASSESSEE IN REPLY TO THE ABOVE NOTICE SUBMITTED THAT A QUERY REGARDING THE KEYMAN INSURAN CE POLICY WAS RAISED BY THE ASSESSING OFFICER DURING T HE ASSESSMENT PROCEEDINGS AS ON 25.8.2008,WHICH WAS DU LY REPLIED BY THE ASSESSEE. IN ADDITION TO THAT THE AS SESSEE 3 SUBMITTED THAT THE COVER NOTE OF THE INSURANCE POLI CY CLEARLY MENTIONED THAT THE POLICY HAS BEEN TAKEN BY THE FIRM ON ITS PARTNERS. A COPY OF THE CERTIFICATE FRO M THE ICICI BANK IN SUPPORT OF THE FACT THAT THE POLICY T AKEN BY THE ASSESSEE IS A KEY MAN INSURANCE POLICY WAS ALSO FILED BEFORE THE ASSESSING OFFICER. IN ADDITION TO ALL TH IS IT WAS ALSO STATED BEFORE THE CIT THAT IN HIS ORDER FOR TH E EARLIER ASSESSMENT YEAR, DATED 30.3.2010 PASSED UNDER SECTI ON 263 OF THE ACT HE HAS ACCEPTED THE FACT THAT THE PO LICY IS ACTUALLY A KEYMAN INSURANCE POLICY AND PROCEEDINGS UNDER SECTION 263 WERE DROPPED ON THIS ACCOUNT. 4. AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE THE CIT DID NOT FIND FAVOUR WITH THE SAME AND STATED THAT THE FACTS OF THE CASE FOR ASSESSMENT YE AR 200506 ARE DIFFERENT FROM THE ASSESSMENT YEAR 2006 07. HE REFERRED TO THE TWO CIRCULARS ISSUED BY IRDA DAT ED 27.04.2005 AND 30.01.2006. REFERRING TO THESE CIRC ULARS HE STATED THAT THE INSURANCE AUTHORITY IRDA HAD CATEGORICALLY MENTIONED THAT AN EMPLOYER BUYING KEY MAN INSURANCE POLICY FOR HIS OWN BENEFIT CANNOT HAVE IN SURABLE INTEREST BEYOND A CERTAIN COVER PROTECTING AGAINST DEATH OF A KEY EMPLOYEE AND HAD ADVISED THE INSURERS THAT WH ERE THE PREMIUM FOR INSURANCE ON THE LIFE OF AN EMPLOYE E IS PAID BY HIM, THE SCOPE OF COVER IS NOT WIDER THAN T HE TERM INSURANCE. IN VIEW OF THIS, HE HELD THAT ANY CONTRI BUTION TO KEY MAN INSURANCE POLICY, WHICH IS BEYOND THE SC OPE OF 4 THE IRDA INSTRUCTIONS WILL NOT QUALIFY DEDUCTION BE CAUSE THEY DO NOT SATISFY THE CONDITION OF A KEY MAN INSU RANCE POLICY. IN THIS VIEW HE HELD THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. IN ADDITION TO ALL THIS HE ALSO HELD THAT THE CONTENTION OF THE ASSESSEE THAT THE ISSUE WAS DISCU SSED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS IS ALSO OF NO RELEVANCE. 5. AGGRIEVED BY THIS THE ASSESSEE HAS COME IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX-L, LUDHI ANA HAS ERRED IN ASSUMING THE JURISDICTION U/S 263 OF THE INCOME TAX ACT, 1961 AND THEREBY HAS ERRED IN SETTING ASIDE THE ASSESSMENT O RDER AS EARLIER PASSED BY THE ASSESSING OFFICER. 2. THAT THE LEARNED CIT-1, LUDHIANA HAS ERRED IN PASSI NG THE ORDER U/S 263 DESPITE THE FACT THAT ON SAME ISSUE, THE PROCEE DINGS U/S 263 WERE DROPPED BY THE EARLIER CIT. 3. THAT THE ORDER U/S 263 IS BAD IN LAW BEING BASED ON CHANGE OF OPINION. 4. WITHOUT PREJUDICE TO GROUND NOS.1, 2 AND 3 ABOVE, T HE LEARNED CIT-1, LUDHIANA HAS ERRED IN HOLDING THAT THE PREMIUM PAID BY THE APPELLANT IS NOT IN RESPECT OF KEYMAN INSURANCE POLICY, WHICH IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT THE FINDINGS OF THE LEARNED CIT-1, LUDHIANA IN HIS ORDER IN PARAS 2.6 AND 2.7 ARE BASED ON ASSUMPTIONS AND A GAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THAT THE LEARNED CIT-I, LUDHIANA HAS ERRED IN CONCL UDING THAT THE ALLOWING OF DEDUCTION ON ACCOUNT OF PREMIUM PAID FO R KEYMAN INSURANCE POLICY BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF INCOME. 5 7. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOS ED OFF. 6. THE COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS WHICH WERE RAISED BEFORE THE LOWER AUTHORITIES. FIRST LIMB OF HIS ARGUMENTS WAS THAT A SPECIFIC QUERY WAS RAISED BY THE AO DURING ASSESSME NT PROCEEDINGS WHICH WAS DULY REPLIED BY IT. FOR THIS OUR ATTENTION WAS INVITED TO THE COPY OF THE QUERIES AS NOTED BY THE ASSESSEE DURING THE FIRST HEARING, PLACED AT PAPER BOOK PAGE 26. IN RESPONSE TO THIS THE ASSESSEE FILE D A LETTER DATED 25.08.2008 WHERE THE REPLY WAS GIVEN A T POINT NO. 1 IN WHICH THE ASSESSEE HAD STATED THAT NO KEY MAN INSURANCE POLICY WAS MATURED DURING THE YEAR. THE CERTIFICATES FROM THE ICICI PRUDENTIAL WITH REGARD TO THE KEYMAN INSURANCE POLICY WERE FILED ALONG WITH THIS LETTER. A COPY OF ORDER SHEET WAS ALSO PLACED BEFORE US WHE REBY VIDE ORDER SHEET NOTING DATED 21.07.2008 A SPECIFIC QUERY HAS BEEN RAISED BY THE ASSESSING OFFICER AND ASSESS EE WAS ALSO ASKED TO FILE THE COPY OF KEYMAN INSURANCE TOG ETHER WITH JUSTIFICATION OF ITS CLAIM. 7. AS REGARDS THE MERITS OF THE CASE THE COUNSEL O F THE ASSESSEE DREW OUR ATTENTION TO THE COPIES OF PR EMIUM RECEIPTS FILED WITH THE PAPER BOOK WHEREBY IT WAS C LEARLY MENTIONED THAT THE LIFE ASSURED WAS THAT OF THE PAR TNERS OF THE FIRM, PAYMENT WAS BEING MADE BY THE FIRM AND THEREFORE IT WAS A KEYMAN INSURANCE POLICY. FURTHER IT WAS 6 ALSO ARGUED THAT ONLY ON THE BASIS OF CIRCULARS ISS UED BY THE INSURANCE REGULATORY AUTHORITY, THE CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. 8. LD. DR RELIED ON THE ORDER OF THE CIT AND FURTH ER STATED THAT SINCE THE INSURANCE POLICIES WERE IN CONTRAVENTION OF THE TERMS AS DECLARED BY THE CIRCU LAR OF THE IRDA, THE INSURANCE PREMIUM PAID IN PURSUANCE O F SUCH POLICIES CANNOT BE ALLOWED TO THE ASSESSEE. 9. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE SHOW CAUSE NOTICE ISSUED BY THE CIT WE SEE THAT THERE WERE TWO ISSUES IN HIS MIND WHILE ISSUIN G THE NOTICE. FIRST WAS THAT HE WAS APPREHENSIVE OF THE F ACT THAT THE POLICIES WERE ACTUALLY NOT KEYMAN INSURANCE POL ICIES. SECONDLY HE WANTED TO ALLOW THE PAYMENT OF PREMIUM OF KEYMAN INSURANCE POLICY ONLY ON ACCRUAL BASIS. HOWE VER FROM THE PERUSAL OF THE ORDER OF THE CIT MADE UNDER SECTION 263, WE SEE THAT HE HAS DIRECTED THE AO TO DISALLOW THE TOTAL AMOUNT OF RS. 14, 99, 998/ CLAI MED BY THE ASSESSEE AS CONTRIBUTION TO THE KEYMAN INSURANC E PREMIUM, HOLDING THE ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THIS ACT OF THE CIT IS BASED ON TWO CIRCULARS ISSUED BY THE IRDA. THE CIT HAS REPRODUCED THE CONTENTS OF THESE 7 CIRCULARS IN HIS ORDER. ON PERUSAL OF THESE CIRCULA RS WE OBSERVE THAT THE INSURANCE REGULATORY AUTHORITY BEI NG APPREHENSIVE OF CERTAIN ABERRATIONS IN THE MATTER O F SALE OF KEYMAN INSURANCE POLICIES BY THE INSURER HAS ISS UED CERTAIN GUIDELINES AS TO WHAT CAN BE CONSIDERED AS A PROPER KEYMAN INSURANCE POLICY AND WHAT CANNOT BE. ONE OF THE GUIDELINES ARE THAT THE KEYMAN INSURANCE POL ICY ARE SUPPOSED TO BE ONLY OF TERM INSURANCE. ANY UNIT LIN KED INSURANCE PRODUCT IS NOT COVERABLE UNDER THE GUIDEL INES OF THE IRDA. ON THIS BASIS, THE CIT HELD THAT THE INSU RANCE PREMIUM PAID BY THE ASSESSEE ON THE KEYMAN INSURANC E POLICIES ARE OUTSIDE THE SCOPE OF THE IRDA INSTRUCT IONS AND THEREFORE DO NOT QUALIFY DEDUCTION AS PER CIRCU LAR NO. 762 DATED 18/02/1998 BECAUSE THEY NO MORE SATISFIE D THE CONDITION OF A KEY MAN INSURANCE POLICY. 10. FOR THIS WE WOULD LIKE TO REFER TO THE AMENDME NT MADE BY THE FINANCE (NO. 2) ACT 1996, IN SECTION 10 (10D) OF THE ACT. THIS SECTION RELATES TO THE SUM RECEIV ED UNDER THE KEYMAN INSURANCE POLICY AT THE TIME OF RETIREME NT ETC BY THE EMPLOYER. THE CIRCULAR NO. 762 DATED 18.02.1 998 REFERRED TO BY THE CIT, IN REGARD TO THE KEYMAN INS URANCE POLICY READS AS UNDER : 14.1 A KEYMAN INSURANCE POLICY, OF THE LIFE INSURANCE CORPORATION OF INDIA, ETC. PROVIDES FOR AN INSURANCE P OLICY TAKEN BY A BUSINESS ORGANISATION OR A PROFESSIONAL ORGANISATION ON THE LIFE OF AN EMPLOYEE, IN ORDER TO P ROTECT THE BUSINESS AGAINST THE FINANCIAL LOSS, WHICH MAY OCCUR FROM THE EMPLOYEE'S PREMATURE DEATH. THE 'KEYMAN' IS AN 8 EMPLOYEE OR A DIRECTOR, WHOSE SERVICES ARE PERCEIVED T O HAVE A SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE BUSI NESS. THE PREMIUM IS PAID BY THE EMPLOYER. 14.2 THERE WERE SOME DOUBTS ON THE TAXABILITY OF THE INCOME INCLUDING BONUS, ETC, FROM SUCH POLICY AND ALS O REGARDING THE TREATMENT OF THE PREMIUM PAIDWHETHER IT SHOULD BE ALLOWED AS A CAPITAL EXPENDITURE OR AS A R EVENUE EXPENDITURE. THE ACT, THEREFORE, LAYS DOWN THE TAX T REATMENT OF THE KEYMAN INSURANCE POLICY. 14.3 CLAUSE (10D) OF SECTION 10 OF THE INCOME-TAX ACT, EXEMPTS CERTAIN INCOME FROM TAX. THE ACT AMENDS THE CLAUSE (10D) OF SECTION 10 MAY EXCLUDE ANY SUM RECEIVED UND ER A KEYMAN INSURANCE POLICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY FOR THIS PURPOSE. 14.4 THE ACT ALSO LAYS DOWN THAT THE SUMS RECEIVED BY TH E SAID ORGANISATION ON SUCH POLICIES, BE TAXED AS BUSI NESS PROFIT; THE SURRENDER VALUE OF THE POLICY, ENDORSED IN FAVOUR OF THE EMPLOYEE (KEYMAN), OR THE SUM RECEIVED BY HIM AT THE TIME OF RETIREMENT BE TAKEN AS 'PROFITS IN LIEU OF SA LARY' FOR TAX PURPOSES; AND IN CASE OF OTHER PERSONS HAVING NO EMPLOYER-EMPLOYEE RELATIONSHIP, THE SURRENDER VALUE OF THE POLICY OR THE SUM RECEIVED UNDER THE POLICY BE TAKEN A S INCOME FROM OTHER SOURCES AND TAXED ACCORDINGLY. THE PREMIUM PAID ON THE KEYMAN INSURANCE POLICY IS ALLOWED AS BUSINESS EXPENDITURE. 14.5 THE AMENDMENTS TAKE EFFECT FROM THE 1ST DAY OF OCTOBER, 1996. 11. FROM THE PERUSAL OF THE ABOVE WE ARE VERY CLEA R THAT FOR AN EXPENSE ON ACCOUNT OF PREMIUM PAID ON T HE KEYMAN INSURANCE POLICY TO QUALIFY AS BUSINESS EXPENDITURE, NO FURTHER CONDITIONS ARE IMPOSED BY T HE ACT. THIS AMENDMENT WAS BROUGHT JUST IN ORDER TO EXPLAIN THE 9 TAXABILITY OF THE INCOME RECEIVED AT THE TIME OF SU RRENDER OR MATURITY OF SUCH INSURANCE POLICIES INCLUDING BO NUS ETC AND ALSO WITH REGARD TO THE TREATMENT OF THIS PREMI UM PAID WHETHER IT SHOULD BE ALLOWED AS A CAPITAL EXPENDITURE OR A REVENUE EXPENDITURE. THE CIRCULAR CLARIFIES THAT THE PREMIUM PAID ON KEYMAN INSURANCE POLICY IS A BUSINESS EXPENDITURE I.E. A REVENUE EXPENDITURE ALLOWABLE TO AN ASSESSEE. THE CONTENTIO N OF THE CIT THAT THE KEYMAN INSURANCE POLICY TAKEN BY T HE ASSESSEE ON ITS PARTNERS IS IN CONTRAVENTION OF TH E PROVISIONS OF THE IRDA, IN OUR VIEW CANNOT BE THE B ASIS FOR DISALLOWING THE PREMIUM PAID BY THE ASSESSEE. THERE IS NO DOUBT TO THE FACT THAT KEYMAN INSURANCE POLICY PREM IUM PAID BY AN EMPLOYER IS AN ALLOWABLE EXPENDITURE IN THE HANDS OF THE EMPLOYER. THIS IS ALSO BEEN CLARIFIED BY THE ABOVE SAID CIRCULAR. WHETHER THE INSURANCE POLICY T AKEN BY THE ASSESSEE ON THE LIFE OF ITS PARTNERS IS A VA LID POLICY OR NOT CANNOT BE A MATTER TO BE DECIDED BY THE CIT. THE INCOME TAX ACT IS AN INDEPENDENT ACT AND A CODE IN ITSELF. THE ALLOWABILITY OF ANY EXPENDITURE DEPENDS ON THE PROVISIONS OF THE ACT IN THIS REGARD. IF THE ACT PR OVIDES CERTAIN CONDITIONS, NON FULFILLMENT OF THE SAME MAY LEAD TO DISALLOWANCE OF THE EXPENDITURE. DISALLOWANCE CA N BE DONE ONLY ON THAT BASIS. THE REVENUE CANNOT GO TO ACTS, REGULATIONS OR RULES OTHER THAN THE INCOME TAX ACT TO DISALLOW A CERTAIN EXPENDITURE. OTHERWISE ALSO WE DO NOT UND ERSTAND HOW THE CIT ON THE BASIS OF CIRCULARS ISSUED BY THE IRDA INFERS THAT THE POLICIES TAKEN BY THE ASSESSEE ARE NOT KEYMAN 10 INSURANCE POLICIES. ON THE PERUSAL OF THE COVER NOT E ISSUED BY THE INSURERS IT IS VERY CLEAR THAT THE PO LICIES ARE KEYMAN INSURANCE POLICIES, WHETHER THESE ARE TERM POLICIES OR NOT IS NOT A QUESTION TO BE DECIDED BY ANY OF THE REVENUE AUTHORITIES. IF THERE IS SOMETHING ILLE GAL IN ISSUING SUCH POLICIES, THE CONSEQUENTIAL ACTION HAS TO BE TAKEN BY THE INSURANCE AUTHORITIES. WE ARE IN TOTA L DISAGREEMENT WITH THE CIT IN HOLDING THAT THE PREMI UM PAID BY THE ASSESSEE ON THE KEYMAN INSURANCE POLICI ES ARE NOT ALLOWABLE IN VIEW OF THE FACT THAT THE POLICIES ARE NOT THE VALID POLICIES. THE POLICIES ARE ISSUED BY THE INSURER AND PREMIUMS ARE BEING PAID AS PER THE POLICY TERMS AND CONDITIONS. THERE IS NO CONDITION OF THE INCOME TAX ACT WHICH HAS BEEN NOT COMPLIED WITH WHILE MAKING PAYME NT OF THESE PREMIUMS. THEREFORE THE PREMIUM PAID BY TH E ASSESSEE ON THE LIFE INSURANCE OF ITS KEY MAN BEING THE PARTNER OF THE FIRM ARE THEREFORE ALLOWABLE EXPENDI TURE. 12. SINCE THE ISSUE OF ALLOWABILITY OF PREMIUM ON ACCRUAL BASIS HAS NOT BEEN DEALT WITH BY THE CIT IN HIS ORDER, WE DO NOT FIND ANY NEED TO ADJUDICATE THE SA ME. OTHERWISE ALSO WE SEE THAT IN THE ORIGINAL ASSESSME NT THE ASSESSING OFFICER HAS PLACED A SPECIFIC QUERY REGAR DING THE KEYMAN INSURANCE POLICY PREMIUM PAID BY THE ASSESSE E VIDE ITS NOTE SHEET ENTRY AND A DETAILED REPLY HAS BEEN FILED BY THE ASSESSEE TOGETHER WITH THE RELEVANT EV IDENCES. IN VIEW OF THIS WE SEE THAT THE ASSESSING OFFICER H AS MADE ENQUIRY REGARDING THE KEYMAN INSURANCE WHICH HAD BE EN 11 DULY REPLIED BY THE ASSESSEE. THE AO WAS OPEN TO TH E ISSUE OF KEYMAN INSURANCE AND HAS APPLIED HIS MIND WHILE ALLOWING THIS EXPENDITURE TO THE ASSESSEE. THIS IS NOT A CASE WHERE NO ENQUIRY HAS BEEN MADE BY THE AO. THIS IS ALSO NOT A CASE OF ANY INADEQUATE ENQUIRY AS WE DO NOT FIND ANY SUCH ALLEGATION IN THE ORDER OF THE CIT. I N SUCH A SCENARIO WE OBSERVE THAT THE INITIATION OF PROCEEDI NGS UNDER SECTION 263 OF THE ACT IS ALSO NOT. 13. IN VIEW OF THE ABOVE, WE HOLD THAT THE ORDER PASSED BY THE CIT UNDER SECTION 263 OF THE ACT IS N OT AS PER LAW AND HEREBY QUASH THE SAME. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF MARCH, 2016. SD/- SD/- (BHAVENESH SIANI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 12