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2019 (8) TMI 409 - HC - Income TaxReopening 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.
Issues:
- Exemption application in ITA cases - Delay condonation in re-filing appeals - Appeals by Revenue against ITAT order - Computation of income under Section 44 of the Act - Justification for revised computation under Section 44 - Challenge against penalty imposed under Section 271(1)(c) of the Act Exemption Application in ITA Cases: The Court allowed the exemption application in various ITA cases subject to all just exceptions. The delay of 30 days in re-filing the appeal was condoned for reasons stated in the applications. Appeals by Revenue Against ITAT Order: The Revenue filed four appeals against a common order passed by the ITAT for different Assessment Years. The central issue raised by the Revenue was whether ITAT was correct in upholding the CIT(A)'s decision accepting the Respondent's revised computation of income under Section 44 of the Act. Computation of Income Under Section 44 of the Act: The Respondent, engaged in life insurance business, filed revised computations under Section 44 of the Act for various Assessment Years. The CIT(A) accepted these computations, directing the AO to compute income accordingly. The ITAT upheld these decisions, emphasizing the exclusivity of Section 44 for life insurance business income computation. Justification for Revised Computation Under Section 44: The Court agreed with the ITAT's observation that the Respondent was justified in filing revised computations under Section 44 of the Act for life insurance business income. The provisions of Section 44, overriding other Act provisions, mandated such computation, justifying the Respondent's actions and CIT(A)'s directions. Challenge Against Penalty Imposed Under Section 271(1)(c) of the Act: The ITAT accepted the Respondent's challenge against the penalty imposed under Section 271(1)(c) of the Act. Following precedents, the ITAT ruled the notice for penalty proceedings must specify the grounds, echoing the Karnataka High Court's decisions. The Court found no errors in the ITAT's decisions on this issue. In conclusion, the Court dismissed the appeals, finding no substantial questions of law arising from the issues discussed, including exemption applications, delay condonation, computation under Section 44, and challenges against penalties imposed under the Act.
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