TMI Blog2015 (9) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... ide belief that the assessee had wrongly adopted the value of negative reserves at 'zero'. It was therefore not a case of change of opinion. The case law cited by the assessee is, thus, not applicable to the present facts and circumstances of the case. We therefore, do not find any infirmity in the order of the Ld. CIT(A) so far the issue of reopening of the assessment is concerned. - Decided against the assessee. Addition of negative reserves to the actuarial surplus for determining the profit from business of Life Insurance - Held that:- Issue restored the matter to the file of the AO for fresh adjudication considering the decision of the Tribunal in the cases of "ICICI Prudential Co. Ltd." (2012 (11) TMI 13 - ITAT MUMBAI ) and "LIC" [1963 (12) TMI 5 - SUPREME Court] wherein held the Surplus has to be determined as per the report of the appointed Actuary as per the provisions of the Insurance Act. The AO has no power to make any adjustment against Actuarial surplus determined as per Insurance Act while making computation of total income - Decided in favour of assessee for statistical purposes. Applicability of provisions of section 14A while determining the income of the Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (2010-328 ITR 81). Ground No.1: 3. The assessee through this ground of appeal has agitated the reopening of the assessment under section 147 of the Act. The brief facts of the case are that the return declaring total loss of ₹ 16,42,82,820/- was filed by the assessee on 26.10.2004 and the assessment was completed under section 143(3) of the Act on 20.11.2006. Subsequently, the Assessing Officer (hereinafter referred to as the AO), during the scrutiny assessment u/s. 143(3) for the A.Y. 2006-07, noticed that the assessee was not offering the incremental negative reserves as a part of surplus arrived as per actuarial valuation for the purpose of computing income from life insurance business. This has resulted in under- assessment of income within the meaning of section 147 of the Act. 4. The assessee agitated the reopening of the assessment as well as the additions made in the reassessment order passed under section 147 of the Act before the Ld. CIT(A). It was contended before the Ld. CIT(A) that all the facts and relevant details were already there before the AO at the time of original scrutiny assessment proceedings under section 143(3) of the Act. The details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the escapement of income because of the assessee offering negative reserves at 'zero', had not come into the knowledge of the AO and no discussion had taken place in this respect. The AO was under bonafide belief that the assessee had wrongly adopted the value of negative reserves at 'zero'. It was therefore not a case of change of opinion. The case law cited by the assessee is, thus, not applicable to the present facts and circumstances of the case. We therefore, do not find any infirmity in the order of the Ld. CIT(A) so far the issue of reopening of the assessment is concerned. Ground No.1 is therefore decided against the assessee. Ground No.2 7. Vide ground No.2, the assessee has agitated the confirmation of addition of negative reserves amounting to ₹ 8,28,69,000/- to the actuarial surplus for determining the profit from business of Life Insurance. The above said term 'negative reserves' has been explained by the Tribunal in the case of Life Insurance Corporation of India ITA No.6221/M/2012 Others decided vide order dated 03.04.2012 as under: 4.3.1. We are of the opinion that treatment given to negative reserves by actuary cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Life Insurance Corporation of India vs. CIT 51 ITR 0773 and observed that as per the law laid down by the Hon'ble Supreme Court, the Surplus has to be determined as per the report of the appointed Actuary as per the provisions of the Insurance Act. The AO has no power to make any adjustment against Actuarial surplus determined as per Insurance Act while making computation of total income. He, however, observed that but in a case where Actuary has erred in applying Insurance Act correctly and properly, which results in understatement of taxable surplus, the AO can point out the defects in non compliance of Insurance Act and determine the actual taxable surplus. He further observed that the as per the Regulations of the Insurance Regulatory and Development Authority (IRDA) the value of negative reserves is to be taken at 'zero' only in specific situations and not in general for all purposes. While observing so, he relied upon section 35 of the Insurance Act which is related to amalgamation and transfer of insurance business, in which case it has been provided that the mathematical reserves should be taken without any modifications. He therefore held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. Respectfully, following the decision of the Tribunal in the own case of the assessee for subsequent assessment year, this issue is accordingly decided in favour of the assessee. ITA No.1684/M/2012 for A.Y. 2005-06 12. In this appeal, the assessee has taken two grounds of appeal. The first ground is relating to the reopening of the assessment under section 147 of the Act. In view of our observations made above while adjudicating the identical issue in relation to A.Y. 2004-05, this issue is accordingly decided against the assessee. 13. The second ground taken by the assessee is relating to the addition of negative reserves in Actuarial surplus for determining the profit from business of insurance. We have already dealt with this issue while adjudicating ground No.2 of assessee's appeal for A.Y. 2004-05 and have restored the matter to the file of the AO in terms of the order of the Tribunal passed in the own case of the assessee for subsequent assessment year 2006-07. This issue for the year under consideration is also accordingly restored the file of the AO for adjudication afresh in terms of the order of the Tribunal dated 23.05.2014 for A.Y. 2006-07 (supra). 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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