IN HIGH COURT OF DELHI AT NEW DELHI ITA 475/2019 PR. COMMISSIONER OF INCOME TAX, Appellant Through Mr. Sagar Suri, Standing counsel and Ms. Lakshmi Gurung, Advocates versus M/S SAHARA INDIA LIFE INSURANCE COMPANY, LTD Respondent Through Mr. Aniket D. Agrawal, Advocate ITA 426/2019 PR. COMMISSIONER OF INCOME TAX, (CENTRAL-1) Appellant Through Mr. Sagar Suri, Standing counsel and Ms. Lakshmi Gurung, Advocates versus M/S SAHARA INDIA LIFE INSURANCE COMPANY, LTD Respondent Through Mr. Aniket D. Agrawal, Advocate ITA 427/2019 PR. COMMISSIONER OF INCOME TAX .Appellant Through Mr. Sagar Suri, Standing counsel and Ms. Lakshmi Gurung, Advocates versus M/S SAHARA INDIA LIFE INSURANCE COMPANY, LTD Respondent Through Mr. Aniket D. Agrawal, Advocate ITA 429/2019 PR. COMMISSIONER OF INCOME TAX, (CENTRAL-1) Appellant Through Mr. Sagar Suri, Standing counsel and ITA 475/2019 & other connected matters Page 1 of 8 Ms. Lakshmi Gurung, Advocates versus M/S SAHARA INDIA LIFE INSURANCE COMPANY, LTD ..... Respondent Through Mr. Aniket D. Agrawal, Advocate CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH ORDER % 02.08.2019 CM Appl. No. 19863/2019 (Exemption) in ITA No. 426/2019 CM Appl. No. 19865/2019 (Exemption) in ITA No. 427/2019 CM Appl. No. 19869/2019 (Exemption) in ITA No. 429/2019 1. Exemption allowed, subject to all just exceptions. CM Appl. No. 19862/2019 (delay) in ITA No. 426/2019 CM Appl. No. 19864/2019 (delay) in ITA No. 427/2019 CM Appl. No. 19868/2019 (delay) in ITA No. 429/2019 2. For reasons stated in applications, delay of 30 days in re-filing appeal is condoned and application is disposed of. ITA Nos. 475/2019, 426/2019, 427/2019 and 429/2019 3. These are four appeals by Revenue against common impugned order dated 31st October, 2018 passed by Income Tax Appellate Tribunal ( ITAT ). 4. ITA No. 475/2019 is directed against order passed by ITAT in ITA No. 6243/Del/2013 for Assessment Year (AY) 2005-2006; ITA No. 426/2019 is directed against order passed by ITAT in ITA No. 1347/Del/2013 for AY 2008-2009, ITA No. 427/2019 is directed against order passed by ITAT in ITA No. 6246/Del/2013 for AY 2010-2011 and ITA 475/2019 & other connected matters Page 2 of 8 ITA No. 429/2019 is directed against order passed by ITAT in ITA No. 3509/Del/2013 for AY 2004-2005 respectively. 5. One common issue sought to be urged by Revenue in all these appeals is whether ITAT was justified in upholding order of Commissioner of Income Tax (Appeals) [ CIT (A) ] accepting Respondent/Assessee s revised computation of income in terms of Section 44 read with First Schedule to Act? There are certain other incidental questions urged which will be discussed hereafter. 6. facts as far as AY 2004-2005 is concerned, are that Respondent, which is carrying on life insurance business, filed its return of income which was picked up for scrutiny. Initially assessment was completed by Assessing Officer (AO) under Section 143 (3) of Act on 30th November, 2006. Subsequently, after expiry of four years thereafter, notice dated 28th March, 2012 was issued under Section 148 of Act for initiating re- assessment proceedings. 7. In response to notice under Section 147, Respondent filed return of income, this time computing income in terms of Section 44 of Act. However, AO in re-assessment order added difference between interest as per balance sheet (which included interest paid at time of purchase of securities) and interest as per Profit and Loss Account to income of Respondent whereas original assessment was computed at taxable income of Rs.2,89,55,200/-, re-assessment, after ITA 475/2019 & other connected matters Page 3 of 8 making addition of Rs.2,10,65,809/- led to computation of total income of Rs. 5,00,21,010/-. 8. In appeal before CIT (A), re-opening of assessment by AO was annulled. On merits also, CIT (A) held in favour of Respondent observing that it had followed Accounting Standard 13 issued by Institute of Chartered Accountants of India (ICAI) with pre- acquisition interest paid and post acquisition interest income. addition of Rs.2,10,65,809/- made by AO was deleted. 9. facts relevant to AY 2005-2006 are that Respondent filed its return of income on 24th December, 2007 declaring loss of Rs.9,67,15,218/-. return was picked up for scrutiny and statutory notices were issued by AO to Respondent. After making some additions and disallowances under Sections 28 and 43B of Income Tax Act, 1961 (hereafter Act ), AO computed income under head Business at assessed loss of Rs.5,48,20,431/-. 10. Subsequently, AO claimed to have noted that Respondent had claimed excessive deductions/allowances. In its appeal against this assessment order before CIT (A), Respondent raised additional ground that its income from insurance business had to be computed in terms of Section 44 of Act which was applicable exclusively to income derived from such insurance business. Accordingly, it also furnished revised computation of loss at Rs.7,47,31,918/-. This was accepted by ITA 475/2019 & other connected matters Page 4 of 8 CIT (A) and direction was issued to AO to compute income accordingly. 11. During this second computation, AO took note of fact that Respondent, which had got license to commence business on 6 th February, 2004, had commenced its insurance business activity on 30th October, 2004. AO held that sum of Rs.2,62,04,000/- had been claimed by Respondent as amortization charges of investment . This was held to be capital expenditure and therefore was disallowed and added to Respondent s total income. AO also initiated penalty proceedings under Section 271 (1) (c) of Act. This was done by order dated 24 th December, 2007 under Section 143(3) of Act. 12. For second time around, Respondent filed appeal before CIT (A) where one of main grounds taken was that AO was not justified in refusing to compute total income of Respondent in terms of Section 44 of Act read with First Schedule. CIT (A) by order dated 10th June, 2014 accepted this plea and deleted disallowances. 13. facts for AY 2006-2007 were identical to AY 2005-2006 in so far as Respondent had initially filed return of income as per Sections 28 to 43 of Act but later filed revised computation under Section 44 of Act before CIT (A). Likewise, for AY 2010-2011 also, where CIT (A) directed AO to determine income in terms of Section 44 of Act. ITA 475/2019 & other connected matters Page 5 of 8 14. Revenue filed appeals for above AYs before ITAT. One appeal of Respondent pertaining to AY 2007-2008 was dismissed by CIT (A) who upheld imposition of penalty upon Assessee under Section 271 (1) (c) of Act. Against this, Respondent filed appeal before ITAT. 15. ITAT has in impugned order noted that for AY 2004-2005 there was no material in possession of AO other than observation of Revenue audit to proceed against Assessee under Section 147 of Act. CIT (A) noted that case fell squarely within realm of change of opinion which was impermissible as basis for re-opening of assessments after lapse of four years. CIT (A) expressly annulled re-assessment proceedings. ITAT noted that this was not challenged by Revenue. It only challenged deletion of addition on merits. In absence of any challenge to quashing of re-assessment proceedings by Revenue, ITAT found no ground to interfere. 16. Learned counsel for Revenue sought to contend that ITAT adopted technical view in precluding Revenue from urging merits of issue only because it had not challenged order of CIT (A) annulling re-assessment proceedings. In considered view of Court, this is not mere technical approach . fact of matter is that there was no basis for re-opening of assessment except presumptive observation of Revenue audit which itself was not based on any tangible material. ITA 475/2019 & other connected matters Page 6 of 8 17. Consequently, as far as AY 2004-2005 in is concerned, Court finds no reason to interfere with order of ITAT and no substantial question of law arises. 18. As far as other appeals are concerned, central issue is whether income of Respondent ought to have been permitted to be computed under Section 44 of Act? Further, for some AYs, whether it could have been permitted at stage of appeal before CIT (A)? 19. As rightly observed by ITAT, it is not in dispute that Respondent carried on business of life insurance. It is obliged to maintain its books of accounts and prepare its financial statements under Insurance Act, 1938. Section 44 of Act read with First Schedule thereof deals exclusively with computation of Profit and Gains from life insurance business. These provisions, which begin with non-obstante clauses, override other provisions of Act. There was no option but to compute income for insurance business in terms thereof. Therefore, Respondent was justified in filing revised computation under Section 44 of Act and claiming this as additional ground before CIT (A). In circumstances, direction given by CIT (A) to AO to compute income in terms of Section 44 of Act was justified. 20. Court is unable to find any error having been committed in ITAT in this regard. No substantial question of law arises on this issue as well. ITA 475/2019 & other connected matters Page 7 of 8 21. Respondent had challenged upholding of penalty imposed under Section 271(1) (c) of Act, which was accepted by ITAT. It followed decision of Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that notice issued by AO would be bad in law if it did not specify which limb of Section 271(1) (c) penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Karnataka High Court had followed above judgment in subsequent order in Commissioner of Income Tax v. SSA s Emerald Meadows (2016) 73 Taxman.com 241 (Kar), appeal against which was dismissed by Supreme Court of India in SLP No.11485 of 2016 by order dated 5th August, 2016. 22. On this issue again this Court is unable to find any error having been committed by ITAT. No substantial question of law arises. 23. appeals are accordingly dismissed. S. MURALIDHAR, J. TALWANT SINGH, J. AUGUST 02, 2019 mw ITA 475/2019 & other connected matters Page 8 of 8 Pr. Commissioner of Income-tax v. Sahara India Life Insurance Company Ltd