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2022 (12) TMI 677 - AT - Income TaxRevision u/s 263 by CIT - Taxation of income from shareholders account - main plea of the assessee is that only for presentation purposes, the assessee prepares policyholders account and shareholders account and that shareholders account cannot be treated as other regular business carried out by the assessee so as to make it liable for taxation @30% - whether the income from shareholders account is to be treated as part of life insurance business and get taxed @12.5% prescribed u/s.115B of the Act or not? - HELD THAT - This issue is no longer res integra in view of the decision of ICICI Prudential Insurance Co. Ltd 2015 (7) TMI 1259 - BOMBAY HIGH COURT Also we find that the AO had made adequate enquiries in this regard during the course of assessment proceedings in response to the notice issued u/s.142(1) - assessee had indeed made detailed submissions. Hence, the ld. PCIT seeking to invoke revision jurisdiction u/s.263 of the Act on the ground that no enquiries were made by the ld. AO by applying Explanation 2 to Section 263 of the Act is grossly incorrect and is hereby quashed. In any case, the issue sought to be revised by the ld. PCIT u/s.263 of the Act is also covered in favour of the assessee by the decision of the Hon ble Jurisdictional High Court on merits. Appeal of the assessee is allowed.
Issues Involved:
1. Initiation of revision proceedings under section 263 of the Income Tax Act. 2. Revision of the Assessment Order. Issue-Wise Detailed Analysis: 1. Initiation of Revision Proceedings under Section 263 of the Income Tax Act Ground No. 1: The Principal Commissioner of Income Tax (CIT) initiated revision proceedings under section 263 of the Income Tax Act, 1961, against the assessee, a life insurance company. The CIT considered the original assessment order dated 26 December 2019, issued under section 143(3) of the Act, as erroneous and prejudicial to the interest of the revenue. The CIT concluded that the Assessing Officer (AO) had made no inquiry regarding the taxability of the income earned by the assessee from life insurance business and other activities. Sub-Issues: - 1.1. The CIT disregarded the submission that the twin conditions of section 263 were not fulfilled before initiating proceedings. - 1.2. The CIT treated the assessment order as erroneous and prejudicial to the interest of the revenue. - 1.3. The CIT concluded that the AO made no inquiry regarding the taxability of the income. - 1.4. The CIT disregarded the submissions of the assessee and did not follow the jurisdictional High Court's order. Findings: The Tribunal found that the AO had made adequate inquiries during the assessment proceedings. The assessee had provided detailed submissions and documentary evidence in response to the AO's notices under sections 143(2) and 142(1). The Tribunal noted that the issue of whether the income from shareholders' accounts should be treated as part of the life insurance business and taxed at 12.5% under section 115B was already settled by the jurisdictional High Court in favor of the assessee. Therefore, the CIT's initiation of revision proceedings under section 263 was unjustified. 2. Revision of the Assessment Order Ground No. 2: The CIT proposed to revise the assessment order to compute tax payable on life insurance business at the rate of 12.5% under section 115B and tax on other than life insurance business (surplus in shareholders' funds) at the rate of 30%. Sub-Issues: - 2.1. The CIT did not appreciate that the assessee, being a life insurance company regulated by the Insurance Regulatory and Development Authority of India (IRDA), can undertake only life insurance business. - 2.2. The CIT ignored the provisions of section 44 of the Act read with Rule 2 of the Income-tax Rules, 1962, and applied an incorrect tax rate. Findings: The Tribunal found that the entire income of the assessee was from life insurance business and should be taxed at 12.5% as per section 115B. The Tribunal referred to the jurisdictional High Court's decision, which held that income from shareholders' accounts should be considered as arising out of life insurance business and taxed accordingly. The Tribunal also noted that the AO had made adequate inquiries and that the CIT's proposal to revise the assessment order was based on an incorrect interpretation of the law. Conclusion: The Tribunal quashed the revision order passed by the CIT under section 263, holding that the AO had made adequate inquiries and that the issue was already settled in favor of the assessee by the jurisdictional High Court. The appeal of the assessee was allowed. Order Pronouncement: The order was pronounced on 31/10/2022 by way of proper mentioning on the notice board.
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