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TMI Blog2020 (2) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... nd IBNER report for the year ended 31st March 2014 duly certified by the appointed actuary and copy of which was again furnished to the ld. PCIT. The ld. PCIT has not commented on the detailed reply furnished by assessee. Assessee while making submission has vehemently submitted that issue is debatable and when two views are possible, the revision of assessment order is not permissible. The Hon'ble Supreme Court in Max India Ltd.'s case 2007 (11) TMI 12 - SUPREME COURT ] held that when two views are inherently possible, the provision of section 263 would not attract. Order passed by ld. PCIT under section 263 is set-aside. - Decided in favour of assessee. - ITA No.3371 And 3372/Mum/2019 - - - Dated:- 5-2-2020 - Shri Pawan Singh, Judicial Member And Shri G. Manjunatha, Accountant Member For the Assessee : Sh. F.V.Irani Senior Advocate with Miss Pratiksha Advocate Sh Ashish Thakar CA For the Revenue : Sh. Manjunatha Swamy CIT-DR And Sh Micheal Jarald Sr DR ORDER PER PAWAN SINGH(JM): 1. These two appeals filed by the assessee are directed against the separate orders of the Principal Commissioner of Income Tax (PCIT) 28, Mumbai, passed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of ₹ 263.53 crores. The case was selected for scrutiny. The assessing officer (Ld. AO), after serving notice u/s 143(2) and 142(1) along with detailed questionary and considering the reply thereon completed assessment u/s 143(3) on 22/12/2016. The Ld. AO, while passing the assessment made certain additions/ disallowances. The assessment was revised by learned Principal Commissioner of Income Tax (ld. PCIT) vide order dated 30/03/2019. The Ld. PCIT directed the AO to re-examine the expenditure claimed for incurred but not reported (IBNR) and incurred but not enough reported (IBNER) provisions in the light of decision of Chennai Tribunal in Cholamandalam Finance General Insurance Company ( 1999 taxmann.com 302). 4. Before revising the assessment order the Ld. PCIT issued show-cause notice, dated 15/03/2019. The copy of contents of notice is extracted by Ld. PCIT in Para 3 of his order. In the show-cause notice, the Ld. PCIT identified the issue that the assessee has debited certain amount was provisions for claims incurred but not reported (IBNR) and claims incurred but not enough reported (IBNER). The assessee created provision in anticipation of settlement of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Insurance Act and Insurance Regulatory and Development Authority Act 1999 (IRDA Act). The Insurance Regulatory and Development Authority (IRDA) is the governing body of insurance companies in India had notified Insurance Regulatory and Development Authority Regulations 2002 to be followed by insurance companies while preparing its financial statements. The said regulations provides for recognizing the IBNR and IBNER and the manner of quantifying the amount. The liability to settle the claims arises on the occurrence of loss which is subject matter of insurance coverage. The Insurance companies are required to account for claims accrued during the year through, which such claim could be at various stage of processing. The accounting of claims is thus done in accordance with IRDAI regulations and in line with establishes general accounting practice. The settlement of insurance claim may not happen in the year in which loss has been incurred by the insured and may get deferred due to various reasons. The assessee has required to account for the claim in the year in which it has been incurred and such outstanding claim would be utilized, when the amount of claim is crystallized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revisional powers. The Ld. AR of the assessee submits that the assessee placed before the Ld. AO a specific reply pursuant to his queries, the assessee furnish the claim of IBNR and IBNER as reported in schedule -16 of profit and loss account for year ended 31/03/2014. Further, in Auditor s report the liability for claims IBNR and IBNER are duly certified by the Auditors. The copy of Auditor s report is at page No.34 and relevant Schedule-16 of statement of accounts is filed at page No.27 of paper book. The AO considered a statement/report of auditor and pass the assessment order, merely because there is no elaborate discussion, the order cannot be said to be erroneous. The Ld. AR of the assesee also invited our attention on IRDAI regulations and schedule-II-B, which deals with violation of liabilities (general insurance) defining the IBNR and IBNER. The Ld.AR, further submits that the issue involved in the present appeal is in fact directly covered by the decision of Mumbai Tribunal in DCIT vs Export Credit Guarantee Corporation of India [ITA No. 7657/Mum/2014] and Kolkata Tribunal in DCIT vs National Insurance Company in ITA No. 674/Kol/2012 (A.Y. 2005-06) reported vide (2016) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of Hon ble Supreme Court in Denial Merchants P. Ltd. vs. ITO in SLP No. 23976/2017 dated 29.11.2017, wherein the Hon ble Apex Court held when Assessing Officer did not made any proper enquiry and accepted the explanation of assessee related to the share application money. The ld. Commissioner of Income-tax had, after setting aside the order of Assessing Officer, simply directed the Assessing Officer to carry out detailed enquiry in the order passed under section 263 which was upheld by the High Court, the Hon ble Supreme Court find no reason to interfere with the High Court order. 13. The decision of Hon ble Bombay High Court in CIT vs. Ballarpur Industries Ltd. (2017) 85 taxmann.com 10 (Mum) on the ratio that where the Assessing Officer allowed claim for deduction under section 80HHC without examining the said claim with reference to unabsorbed deprecation and investment allowance as referred to in section 32 32A respectively, the Commissioner was justified in invoking revision under section 263. 14. The decision of Mumbai Tribunal in Arvee International vs. ACIT (ITA No. 3543/Mum/2003 dated 13.01.2016 on the ratio that order passed by on the ratio became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be followed by insurance companies while preparing its financial statements. The said regulations provides for recognizing the IBNR and IBNER and the manner of quantifying the amount. 17. In reply to the show-cause issued under section 263, the assessee further contended that IRDA Regulation provides that IBNR and IBNER provision shall be determined using actuarial principles. The provisions made by assessee for IBNR and INBER in its books of account are as per actuarial valuation and IRDAI Regulation. We have also noted that in the reply to the show cause notice under section 263, the assessee referred the decision of Kolkata Tribunal in DCIT vs. National Insurance Co. Ltd. (supra) and decision of Mumbai Tribunal in DCIT vs. Export Credit Guarantee Corporation of India Ltd. (supra), favoring the assessee. However, the ld. PCIT after referring the decision of Chennai Tribunal in Cholamandalam MS General Insurance Co. Ltd (supra) directed the AO to examine the expenditure claimed for provisions of IBNR and IBNER and passed the assessment order afresh. 18. We have noted that against the decision of Kolkata Tribunal in DCIT vs. National Insurance Co. Ltd. (supra) the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue is not helpful to the revenue as the facts of those cases are different. In Denial Merchants P. Ltd. vs. ITO (supra) AO accepted the explanation of assessee related to the share application money and in CIT vs. Ballarpur Industries Ltd (supra) the AO did not made any enquiry about the deduction of 80HHC and without examining the said claim with reference to unabsorbed deprecation and investment allowance allowed it in favour of assessee. In Arvee International vs. ACIT (supra) order passed by Assessing Officer is stereo type order which simply accept what the assessee has stated in its return of income. Further in Horizon Investment Company vs. CIT (supra) there was no enquiry on account of deduction of expenditure and the revision order held as justified. However, the facts of the present case is that the AO required details on the issues but not discussed and allowed, though there is elaborate discussions on other issues. 23. In view of the aforesaid discussions, the order passed by ld. PCIT under section 263 dated 30.03.2019 is set-aside. 24. In the result, the appeal for A.Y. 2014-15 is allowed. ITA No. 3371/Mum/2019 for A.Y. 2013-14 25. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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