2019 (8) TMI 409 - HC - Income Tax

Reopening of assessment u/s 147 - based on Revenue audit objection - CIT(A) quashed reassessment, can revenue will be permitted to argue on merit without challenging reassessment? - HELD THAT:- ITAT has in the impugned order noted that for AY 2004-2005 there was no material in possession of the AO other than the observation of the Revenue audit to proceed against the Assessee u/s 147 - CIT (A) noted that the case fell squarely within the realm of ‘change of opinion’ which was impermissible as a basis for re-opening of assessments after a lapse of four years. The CIT (A) expressly annulled the re-assessment proceedings ITAT noted that this was not challenged by the Revenue. It only challenged the deletion of the addition on merits. In the absence of any challenge to the quashing of the re-assessment proceedings by the Revenue, the ITAT found no ground to interfere.

Revenue sought to contend that the ITAT adopted the technical view in precluding the Revenue from urging the merits of the issue only because it had not challenged the order of the CIT (A) annulling the re-assessment proceedings. In the considered view of the Court, this is not a mere ‘technical approach’. The fact of the matter is that there was no basis for the re-opening of the assessment except the presumptive observation of the Revenue audit which itself was not based on any tangible material.

Revised computation of income u/s 44 r.w. First Schedule to the Act - whether it could have been permitted at the stage of the appeal before the CIT (A)? - computation of Profit and Gains from life insurance business - HELD THAT:- As rightly observed by the ITAT, it is not in dispute that the Respondent carried on the business of life insurance. It is obliged to maintain its books of accounts and prepare its financial statements under the Insurance Act, 1938. Section 44 of the Act read with First Schedule thereof deals exclusively with the computation of Profit and Gains from life insurance business. These provisions, which begin with non-obstante clauses, override other provisions of the Act. There was no option but to compute income for insurance business in terms thereof. Therefore, the Respondent was justified in filing the revised computation u/s 44 and claiming this as an additional ground before the CIT (A). In the circumstances, the direction given by the CIT (A) to the AO to compute income in terms of Section 44 was justified.

The Court is unable to find any error having been committed in the ITAT in this regard. No substantial question of law arises on this issue as well.

Penalty u/s 271(1) (c) - Defective notice - ITAT followed the decision of CIT v. Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA’s Emerald Meadows [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] the appeal against which was dismissed by the Supreme Court of India [2016 (8) TMI 1145 - SC ORDER] - No substantial question of law arises.