DCIT 1(3), MUMBAI V. SBI LIFE INSURANCE COMPANY LTD, MUMBAI

ITA 8/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0110 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2003-2004
• Appeal Filed On: 01-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Assessee Lawyers: F V IRANI WITH MS AMRUTA LELA
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 8/MUM/2014 (ASSESSMENT YEAR- 2003-04) DCIT-1(3), R NO. 564, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. VS. M/S SBI LIFE INSURANCE COMPANY LTD. NATRAJ, 5 TH FLOOR, M.V. ROAD & WESTERN EXPRESS HIGH WAY JUNCTION, ANDHERI (E), MUMBAI-400069. PAN: AAFCS2503P (APPELLANT) (RESPONDENT) REVENUE BY : DR. A.K. NAYAK (DR) ASSESSEE BY : SH.F.V.IRANI WITH MS. AMRUTA LELA (AR) DATE OF HEARING : 19.06.2017 DATE OF PRONOUNCEMENT : 23.06.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE U/S. 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2 [THE CIT(A)], MUMBAI DATED 28.03.2013 FOR THE ASSESSMENT YEAR 200 3-04. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE A.O. HAS NOT BROUGHT ANY TANGIBLE MATERIALS ON RECORD TO INDICATE THAT THERE WAS AN OMISSION OR FAILURE O N THE PART OF THE ASSESSEE COMPANY TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR THE ASSESSMENT RELYING ON THE DECISION OF HON'BLE S.C. IN THE CASE OF KALVINATOR INDIA [320 ITR 561]. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE PROCEEDINGS INITIATED U/S 147 OF THE I.T. ACT ARE NOT VALID HOLDING THAT THE REOPENING OF ASSESSMENT WAS MERELY BASED ON CHANGE OF ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 2 OPINION RELYING UPON THE DECISION OF THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. AS ALL THE RELEVANT FACTS IN RES PECT OF 'NEGATIVE RESERVE' FORMS ACTUARIAL REPORT IN FORM 1 WERE BEFORE THE A. O. AND AFTER EXAMINING THE ACTUARIAL REPORT ORIGINAL ASSESSMENT PROCEEDING COM PLETED AFTER THE ADDITION OF RS. 81,000/- ON ACCOUNT OF ACTUARIAL SURPLUS'. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 1,55,05,0 00/- ON ACCOUNT OF 'NEGATIVE RESERVE' MADE BY A.O. HOLDING THAT IN THE ASSESSEE' S OWN CASE FOR A. Y. 2006- 07 ALLOWED THE APPEAL OF THE ASSESSEE ON THIS SAME ISSUE'. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY IS ENGAGED IN THE BUSINESS OF LIFE INSURANCE, FILED ITS RETURN OF INCOME FOR RELE VANT ASSESSMENT YEAR (AY) ON 24.11.2013 SHOWING LOSS OF RS. 7,46,63,411/-. THE A SSESSMENT WAS COMPLETED ON 21.03.2006 DETERMINING THE TOTAL INCOME OF RS. 81,0 00/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER (AO), THE ASSESSEE FILED APPEA L BEFORE THE LD. CIT (A) WHEREIN THE ASSESSEE WAS GRANTED PARTIAL RELIEF. SU BSEQUENTLY, THE ASSESSEE WAS SERVED WITH NOTICE UNDER SECTION 148 DATED 26.03.20 10, WAS SERVED ON 27.03.2010. IN RESPONSE TO THE NOTICE U/S 148, THE ASSESSEE FUR NISHED ITS REPLY DATED 22.04.2010. IN THE REPLY, THE ASSESSEE CONTENDED THAT THE RE-OP ENING CAN ONLY BE MADE WHEN THE INCOME CHARGEABLE TO TAX HAS ESCAPED FROM ASSESSMEN T. IT WAS FURTHER CONTENDED THAT THE ASSESSEE FURNISHED CORRECT INCOME/LOSS CHA RGEABLE TO TAX AND FILED ALL THE NECESSARY INFORMATION AT THE TIME OF FILING THE RET URN OF INCOME. THE ASSESSEE ATTACHED COMPUTATION OF TAXABLE INCOME, COPY OF ANN UAL ACCOUNT AND AUDITED REPORT. HENCE, THERE IS NO FAILURE ON THE PART OF A SSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. THE ASSESSEE REQUESTED TO DROP THE PROCEEDING U/S 147 OF THE ACT. THE ASSESSE E ALSO CONTENDED THAT THE RETURN OF INCOME FILED ON 24.11.2003 BE TREATED AS RETURN FILED U/S 148 OF THE ACT. THE FOLLOWING REASONS WERE RECORDED AND SUPPLIED TO THE ASSESSEE: ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 3 DURING THE A.Y. 03-04, THE ASSESSEE HAS NEGATIVE R ESERVES OF RS. 1,55,05,500/- . THIS NEGATIVE RESERVE HAS NOT FORMED PART OF THE ACTUARIAL SURPLUS WHICH IS NOT IN ORDER. TO THAT EXTENT, THE ACTUARIAL SURPLUS HAS BEEN UNDERSTATED. THE ASSESSEE NOT OFFERING THE INCREMENTAL NEGATIVE RESE RVES AS A PART OF SURPLUS ARRIVED AT AS PER ACTUARIAL VALUATION, FOR THE PURP OSE OF COMPUTING INCOME FROM LIFE INSURANCE BUSINESS, HAS RESULTED IN INCOME ESC APING ASSESSMENT TO THE TUNE OF RS. 1,55,05,000/- WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. THIS IS BECAUSE OF THE FAILURE OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AS STATED ABOVE NECESSARY FOR ITS AS SESSMENT FOR A.Y. 03-04. 3. THE ASSESSEE FURTHER VIDE REPLY DATED 12.05.2010 CONTENDED THAT THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS COMPLETED ON 21.03 .2006 AND NO ACTION CAN BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EAR FROM THE END OF RELEVANT AY, UNLESS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT BY THE REASONS OF FAILURE ON THE PART OF ASSESSEE TO MAKE A RETURN U/ S 139 OR IN RESPONSE TO THE NOTICE UNDER SUB-SECTION (1) OF SECTION 142 OR 148 TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE CONTENTION OF A SSESSEE WAS NOT ACCEPTED BY THE AO HOLDING THAT THERE IS TANGIBLE MATERIAL TO HAVE REASON TO BELIEVE THAT THE ASSESSEE HAD NEGATIVE RESERVE OF RS. 1,55,05,000/-. THE NEGATIVE RESERVE DOES NOT FORM PART OF THE ACTUARIAL SURPLUS WHICH IS NOT IN ORDER. THE ASSESSEE NOT OFFERED THE INCREMENTAL NEGATIVE RESERVE AS A PART OF SURPL US ARRIVED AS PER ACTUARIAL REPORT FOR THE PURPOSE OF COMPUTING INCOME FROM LIFE INSUR ANCE BUSINESS. THUS, THE INCOME ESCAPED FROM ASSESSMENT WITHIN THE MEANING O F SECTION 147 OF THE ACT. THUS, THE INCOME OF ASSESSEE WAS REVISED TO THE TUN E OF RS. 1,55,05,000/- BY AO IN ITS ASSESSMENT ORDER DATED 26.11.2010 PASSED U/S 143(3) R.W.S. 147. AGGRIEVED, BY THE ORDER OF AO THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AND SUCCEEDED THEREIN. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A) , THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 4 4. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) FOR ASSESSEE AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUPPORTED THE OR DER AO AND ARGUED THAT THOUGH THE RE-OPENING WAS MADE AFTER FOUR YEAR FROM THE END OF AY AS THERE WAS TANGIBLE MATERIAL FOR REASON TO BELIEVE THAT NEGATI VE RESERVE OF ASSESSEE ESCAPED ASSESSMENT, AS THERE WAS NO FULL DISCLOSURE ON THE PART OF ASSESSEE. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE ARGUED THAT HE HAS TWO FOLD ARGUMENTS I.E. ONE ON JURISDICTIONAL ISSUE AND OTHER ON MERIT. ON THE JUR ISDICTIONAL ISSUE, IT WAS ARGUED THAT THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPL ETED ON 21.03.2006 AND NOTICE U/S 148, DATED 26.03.2010 WAS SERVED ON 27.03.2010, ADMITTEDLY AFTER FOUR YEARS OF END OF AY. THERE WAS NO FAILURE ON THE PART OF ASSE SSEE TO DISCLOSE FULLY AND TRULY WHILE FILING THE RETURN OF INCOME. THE ASSESSEE FUR NISHED COMPLETE DETAILS AND INFORMATION AT THE TIME OF FURNISHING RETURN OF INC OME. THE AO MADE COMPLETE/DETAILED ENQUIRY AND AFTER SATISFACTION AL LOWED THE NEGATIVE RESERVE. THE ASSESSEE FURNISHED ACTUARIAL REPORT FORM-I DURING T HE ASSESSMENT PROCEEDING WHICH DULY REFLECTED THE NEGATIVE RESERVE. THE AO MADE TH E ADDITION OF RS. 81,000/- DURING THE ORIGINAL ASSESSMENT PROCEEDING ON ACCOUN T OF ACTUARIAL SURPLUS. THE NEGATIVE RESERVE WAS A PART OF THE DOCUMENTS FURNIS HED DURING THE ASSESSMENT, THUS, IT CANNOT BE SAID THAT THERE WAS NON-DISCLOSU RE OF MATERIAL FACT RELEVANT FOR ASSESSMENT. THE LD. AR OF THE ASSESSEE FURTHER ARGU ED THAT WHILE PASSING THE ASSESSMENT ORDER, THE AO REFERRED THE ACTUARIAL REP ORT AS ON 31.03.2003, FURNISHED BY ASSESSEE ( PARA-2 OF ASSESSMENT ORDER DATED 21.0 3.2006 PAGE NO. 101 TO 103 OF PB). THE LD. AR OF THE ASSESSEE FURTHER HAS SHOWN U S THE REPORT UNDER FORM-I ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 5 (ACTUARIAL REPORT) SHOWING THE NEGATIVE RESERVE (PA GE 96 OF PB). IT WAS ARGUED THAT RE-OPENING WAS BASED ON THE BASIS OF CHANGE OF OPINION. ON MERIT IT WAS ARGUED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASS ESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT V. ICICI PRUDENTIAL LIFE INSURANCE CO. (ITA NO. 711OF 2011 DATED 20JULY 2015. IT WAS ARGUED THAT SIMILAR ISSUE AROSE IN AY 2005-06 AND THE ASSESSEE FILED APPEAL BEFORE TRIBUNAL. THE TRIBUNAL ON THE BASIS OF ORDER OF HIGH COURT IN ICICI PRUDENTIAL LIFE INSURANCE CO (SUPRA) REMANDED THE ISSUE TO THE FILE OF AO VIDE ORDER DATED 23.05.2014. THE AO IN PURSUANCE OF ORDE R OF TRIBUNAL DELETED THE ADDITIONS ON ACCOUNT OF NEGATIVE RESERVE ITS ORDER 30.11.2016 . ON THE BASIS OF ORDER FOR AY 2005- 06 THE SIMILAR RELIEF WAS GRANTED TO THE ASSESSEE FOR AY 2010-11 BY TRIBUNAL ON THE APPEAL OF REVENUE IN ITA NO. 2576/M/2014 DATED 23.1 2.2016. IT WAS FURTHER ARGUED THAT ON MERIT THE GROUNDS OF APPEALS ALSO COVERED BY THE DECISIONS OF TRIBUNAL IN DCIT VS LIFE INSURANCE CORPORATION OF INDIA IN ITA NO 4875 /M/2014, WHEREIN THE TRIBUNAL FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HI GH COURT IN THAT ASSESSEES CASE FOR AY 2002-03 TO 206-07, WHICH IN TURN WAS BASED ON TH E DECISION IN ICICI PRUDENTIAL INSURANCE (ITA NO.7765/M/2005-06). IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISION: SR.NO. NAME OF THE CASE LAW CITATION 1 BHOGWATI SAHAKARI SAHAR KARKHANA LTD. V. DTY. CIT 269 ITR 186 2 BHOR INDUSTRIES LTD. V. ASSTT. CIT 267 ITR 161 3 BOMBAY STOCK EXCHANGE V. DTY. DIRECTOR OF INCOME-TAX WRIT PETN. NO. 2468 OF 2011 4 CIT V. CORPORATION BANK LTD. 254 ITR 791 5 GKN SINTER METALS LTD. V/S. RAMAPRIYA RAGHAVAN WRIT PETN. NO. 2639 OF 2007 6 GODREJ INDUSTRIES LTD. V/S. ASSTT. CIT 2007 7 HINDUSTAN LEVER LTD. VS. R. B WADKAR 268 ITR 332 8 CIT V. ICICI PRUDENTIAL LIFE INSURANCE CO. ITA NO S. 711 & 688 OF 2013 9 IDEA CELLULAR LTD. V. DTY. CIT 301 ITR 407 ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 6 10 KANSAI NEROLAC PAINTS LTD. VS. DTY. CIT ITA NO. 1030 OF 2011 11 CIT V. KELVINATOR OF INDIA LTD. 256 ITR 1 12 CIT V. KELVINATOR OF INDIA LTD. 320 ITR 561 13 CIT VS LIC OF INDIA ITA NOS. 1759, 2162 OF 2013 & 116 OF 2014 14 TITANOR COMPONENTS LTD. VS. ASSTT. CIT & ORS. W RIT PETN. NO. 71 OF 2005[343 ITR 183] THE LD. AR OF THE ASSESSEE MADE MORE EMPHASIS IN TH E CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR (SUPRA) AND TITANOR COMPONENTS LTD. VS. ASSTT. CIT & ORS (SUPRA) ON JURISDICTION ISSUE AND IN THE CASE OF IC ICI PRUDENTIAL CASE (SUPRA) ON MERIT OF THE CASE. IT WAS ARGUED THAT THE REOPENING IS INVALID EVEN OTHERWISE THE GROUND OF APPEAL RAISED BY REVENUE IS COVERED IN FA VOUR OF ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SEEN THAT DURI NG THE ASSESSMENT PROCEEDINGS THE ASSESSEE FURNISHED ACTUARIAL REPORT FORM-I, WHI CH SHOWS THE NEGATIVE RESERVE. THE AO MADE THE ADDITION OF RS. 81,000/- DURING THE ORIGINAL ASSESSMENT PROCEEDING ON ACCOUNT OF ACTUARIAL SURPLUS. THE NEG ATIVE RESERVE WAS A PART OF THE DOCUMENTS FURNISHED DURING THE ASSESSMENT. THUS, IT CANNOT BE SAID THAT THERE WAS NON-DISCLOSURE OF MATERIAL FACT RELEVANT FOR ASSESS MENT. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER, THE AO REFERRED THE ACTUARIAL REPORT AS ON 31.03.2003, AS REFLECTED IN PARA-2 OF ASSESSMENT O RDER DATED 21.03.2006 PASSED UNDER SECTION 143(3) (PAGE NO. 101 TO 103 OF PB). THUS, IT IS NOT THE CASE WHERE THE ASSESSING OFFICER HAS NOT MADE INQUIRY IN RESPE CT OF NEGATIVE RESERVE, WHICH HAS BEEN SHOWN IN REPORT UNDER FORM-I (ACTUARIAL RE PORT) (PAGE 96 OF PB). THE ASSESSING OFFICER AFTER EXAMINING THE ACTUARIAL REP ORT MADE THE ADDITION OF RS.81,000/-, WHILE PASSING THE ORDER OF ASSESSMENT. THE ASSESSMENT ORDER WAS ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 7 PASSED WITH DUE APPLICATION OF MIND. THE ASSESSING OFFICER HAS NOT BROUGHT ANY TANGIBLE MATERIAL ON RECORD TO SHOW THAT THERE WAS ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL O N RECORD NECESSARY FOR ASSESSMENT. AS PER OUR CONSIDERED VIEW, IT WAS MERELY A CHANGE OF OPINION OF ASSESSING OFFICER. SIMILAR, VIEW WAS EXPRESSED BY HONBLE BOM BAY HIGH COURT IN HINDUSTAN LEVER LTD VS R.B. WADKAR (SUPRA). IN VIEW OF THE AB OVE DISCUSSION WE ACCEPT THE SUBMISSION OF THE LEARNED AR FOR THE ASSESSEE THAT THE REOPENING IS NOT VALID. 6. WE HAVE FURTHER EXAMINED THE GROUND OF APPEAL ON ME RIT OF THE CASE. ON MERIT WE HAVE SEEN THAT SIMILAR ISSUE AROSE IN AY 2005-06 AND THE ASSESSEE FILED APPEAL BEFORE TRIBUNAL. THE TRIBUNAL ON THE BASIS OF ORDER OF HIG H COURT IN ICICI PRUDENTIAL LIFE INSURANCE CO (SUPRA) REMANDED THE ISSUE TO THE FILE OF AO VIDE ORDER DATED 23.05.2014. THE AO IN PURSUANCE OF ORDER OF TRIBUNAL DELETED TH E ADDITIONS ON ACCOUNT OF NEGATIVE RESERVE ITS ORDER 30.11.2016. ON THE BASIS OF ORDE R FOR AY 2005-06 THE SIMILAR RELIEF WAS GRANTED BY THE TRIBUNAL TO THE ASSESSEE FOR AY 2010 -11 ON THE APPEAL OF REVENUE IN ITA NO. 2576/M/2014 DATED 23.12.2016. HENCE, THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT V. ICICI PRUDENTIAL LIFE INSURANCE CO. (ITA NO.711OF 2011 DATED 20 JULY 2015 AND IN ASSESSEES OWN CASE FOR AY 2005-06 AND 2010-11. SIMILAR VIEW WAS ADOPTED BY TH E TRIBUNAL IN DCIT VS LIFE INSURANCE CORPORATION OF INDIA IN ITA NO 4875 /M/20 14 DATED 24.02.2016, WHEREIN THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN T HAT ASSESSEES CASE FOR AY 2002-03 TO 206-07 WAS FOLLOWED, WHICH IN TURN WAS BASED ON THE DECISION IN ICICI PRUDENTIAL INSURANCE (ITA NO.7765/M/2005-06). THUS, THE APPE AL OF THE REVENUE ALSO FAILED ON MERIT. THUS, WE ACCEPT THE SUBMISSIONS OF AR FOR ASSESS EE ON THE JURISDICTIONAL ITA NO.8/M/2014- M/S S BI LIFE INSURANCE COMPANY LTD. 8 ISSUE AS WELL AS ON MERIT OF THE CASE. HENCE, THE G ROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DAY OF JUNE 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 26/06/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/