Principal Commissioner Of Income Tax, Jaipur-Ii, At New Centralrevenue Building Statue Circle, Jaipur (Raj.) v. M/S Shriram General Insurance Company Limited, E-8, Epipriico Industrial Area, Sitapura Jaipur(Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 59/2024 Principal Commissioner Of Income Tax, Jaipur-Ii, At New CentralRevenue Building Statue Circle, Jaipur (Raj.)-302005. ----Appellant Versus M/s Shriram General Insurance Company Limited, E-8, EPIPRIICO Industrial Area, Sitapura Jaipur(Rajasthan). ----Respondent For Appellant(s) : Ms. Jaya P. Pathak Advocate with Mr. Sandeep Pathak Advocate. For Respondent(s): Mr. Javed Khan Advocate. HON'BLE THE CHIEF JUSTICE MR. K.R. SHRIRAM HON'BLE MR. JUSTICE MANEESH SHARMA Judgment REPORTABLE 26/08/2025 1.This appeal has been filed under Section 260A of the IncomeTax Act, 1961 (hereinafter referred to ‘the Act’). 2.Following four substantial questions of law have been proposed in appeal: (1) Whether in the facts and circumstances of the case andin law, Ld. ITAT was justified in setting aside the orderdated 30.03.2023 passed by Ld. PCIT under Section 263 ofthe Act of 1961 by which it was held that the order passedby AO was erroneous and so far as prejudicial to theinterest of revenue? (2) Whether in the facts and circumstances of the case andin law, Ld. ITAT was justified to hold that Section 14A of theAct of 1961 is not applicable on insurance companies? (3) Whether in the facts and circumstances of the case andin law, Ld. ITAT was justified in ignoring that Section 44 ofthe Act of 1961, which deals with computation of income ofInsurance Companies, does not exclude the application ofSection 14A of the Act of 1961? (4) Whether in the facts and circumstances of the case andin law, Ld. ITAT was justified in ignoring the fact that whilecomputing income as per Section 44 of the Act of 1961, the income has to be computed as per First Schedule of the Actof 1961, which means that expenses claimed under Section30 to 43B of the Act of 1961 have to pass the test ofadmissibility under Section 37 and disallowance underSection 14A of the Act of 1961? 3.The assessee, who is respondent in this appeal, is engagedin the business of General Insurance and filed return of income on 28[th]September2018,declaringtotalincomeofRs.5,33,11,66,150/- and assessment order dated 01[st] March 2021under Section 143(3) came to be passed accepting return ofincome of Rs.5,33,11,66,150/-. 4. After examining the assessment order passed, the PrincipalCommissioner of Income Tax (hereinafter referred to ‘the PCIT’)issued a notice dated 15[th] February 2022 under Section 263 of theAct stating that assessment order was erroneous and prejudicialto the interest of the Revenue. He found problem with four issuesand after following due process, an order dated 30[th] March 2023was passed. The PCIT held that assessment order dated 01[st]March 2021 was liable to be revised under clause (a), (b) and (c)of Explanation (2) to Section 263 of the Act and after setting asidethe assessment order, the Assessing Officer was directed toexamine the issue and pass suitable order after affordingopportunity of being heard to the assessee. The assesseechallenged this order before the Income Tax Appellate Tribunal,Jaipur (hereinafter referred to ‘the ITAT’), which by an orderpronounced on 28[th] June 2023, set aside the order of PCIT. It isthat order of the ITAT that is in question before us. 5.In the assessment order dated 01[st] March 2021, the Assessing Officer raised following three issues: (i) Claim of Any Other Amount Allowable as Deduction inSchedule BP (ii) ICDS Compliance and Adjustment (iii) Expenses Incurred for Earning Exempt Income” Thereafter, assessment order also mentions that notices were issued by the department and assessee furnishedinformation as called for. The Assessing Officer further says thatinformation furnished in respect to the above issue has beenexamined and no addition is warranted. 5.In the assessment order dated 01[st] March 2021, the Assessing Officer raised following three issues: (i) Claim of Any Other Amount Allowable as Deduction inSchedule BP (ii) ICDS Compliance and Adjustment (iii) Expenses Incurred for Earning Exempt Income” Thereafter, assessment order also mentions that notices were issued by the department and assessee furnishedinformation as called for. The Assessing Officer further says thatinformation furnished in respect to the above issue has beenexamined and no addition is warranted. 6.There is no discussion in the assessment order regardingthese three issues mentioned therein. 7.Therefore, the PCIT exercising its power under Section 263of the Act, apart from the three issues raised, a fourth issue wasraised regarding dis-allowance under Section 14A of the Act. Theassessee-respondent gave explanation in response to the noticeunder Section 263 of the Act and the PCIT, in its order dated 30[th]March 2023, accepted the explanation of the assessee with regardto three issues, which were raised by the Assessing Officer but onthe issue of Section 14A of the Act, remanded it for de-novoconsideration. 8.The ITAT in its order impugned dated 28[th] June 2023, hasgiven a factual finding and that is not disputed before us also, that(i) during course of assessment proceedings, the Assessing Officerhad raised queries with regard to Section 14A of the Act; (ii)Question No.7 of notice dated 23[rd] November 2020 under Section142(1) of the Act required the assessee to furnish the details ofinvestigation, details of exempt income earned during the yearunder consideration, details of expenses incurred for earningexempt income and computation as per Rule 8D read with Section14A of the Act; (iii) Assessee in its reply dated 07.12.2020 had submitted that Section 14A of the Act was not applicable, asassessee was a General Insurance Company and, therefore, as perSection 44 of the Act, it provides that income of insurancebusiness is required to be computed in accordance with FirstSchedule of the Act. 9.Admittedly, assessee has also given further explanation as tothe non-applicability of Section 14A of the Act. 10.Assessing Officer was satisfied with the explanation andhence, did not even consider it necessary to mention it as an issuein the assessment order. 11.A Division Bench of Bombay High Court inAroniCommercials Ltd. Versus Deputy Commissioner of Income- Tax and Another[1] has held that once a query is raised during theassessment proceedings and assessee has replied to it, it followsthat the query raised was a subject of consideration of theAssessing Officer while completing the assessment and it is notnecessary that an assessment order should contain referenceand/or discussion to disclose its satisfaction in respect of the query raised. Para 14 of the judgment reads as under: 10.Assessing Officer was satisfied with the explanation andhence, did not even consider it necessary to mention it as an issuein the assessment order. 11.A Division Bench of Bombay High Court inAroniCommercials Ltd. Versus Deputy Commissioner of Income- Tax and Another[1] has held that once a query is raised during theassessment proceedings and assessee has replied to it, it followsthat the query raised was a subject of consideration of theAssessing Officer while completing the assessment and it is notnecessary that an assessment order should contain referenceand/or discussion to disclose its satisfaction in respect of the query raised. Para 14 of the judgment reads as under: “14. We find that during the assessment proceedings thepetitioner had by a letter dated July 9, 2010, pointed outthat they were engaged in the business of financing, tradingand investment in shares and securities. Further, by a letterdated September 8, 2010, during the course of theassessment proceedings on a specific query made by theAssessing Officer, the petitioner has disclosed in detail as towhy its profit on sale of investments should not be taxed asbusiness profits but charged to tax under the head. “Capitalgains”. In support of its contention the petitioner had alsorelied upon the Central Board of Direct Taxes Circular No.4 of2007, dated June 15, 2007 (The reasons for reopeningfurnished by the Assessing Officer also places reliance uponCentral Board of Direct Taxes Circular dated June 15, 2007).It would, therefore, be noticed that the very ground on whichthe notice dated March 28, 2013, seeks to reopen theassessment for the assessment year 2008-09 was consideredby the Assessing Officer while originally passing thepetitioner had by a letter dated July 9, 2010, pointed outthat they were engaged in the business of financing, tradingand investment in shares and securities. Further, by a letterdated September 8, 2010, during the course of theassessment proceedings on a specific query made by theAssessing Officer, the petitioner has disclosed in detail as towhy its profit on sale of investments should not be taxed asbusiness profits but charged to tax under the head. “Capitalgains”. In support of its contention the petitioner had alsorelied upon the Central Board of Direct Taxes Circular No.4 of2007, dated June 15, 2007 (The reasons for reopeningfurnished by the Assessing Officer also places reliance uponCentral Board of Direct Taxes Circular dated June 15, 2007).It would, therefore, be noticed that the very ground on whichthe notice dated March 28, 2013, seeks to reopen theassessment for the assessment year 2008-09 was consideredby the Assessing Officer while originally passing the assessment order dated October 12, 2010. This by itselfdemonstrates the fact that notice dated March 28, 2013,under Section 148 of the Act seeking to reopen theassessment for the assessment year 2008-09 is based onmere change of opinion. However, according to Mr.Chhotaray, learned Counsel for the revenue, the aforesaidissue now raised has not been considered earlier as the sameis not referred to in the assessment order dated October 12,2010, passed for the assessment year 2008-09. We are ofthe view that once a query is raised during the assessmentproceedings and the assessee has replied to it, it follows thatthe query raised was a subject of consideration of theAssessing Officer while completing the assessment. It is notnecessary that an assessment order should contain referenceand/or discussion to disclose its satisfaction in respect of thequery raised. If an Assessing Officer has to record theconsideration bestowed by him on all issues raised by himduring the assessment proceeding even where he is satisfiedthen it would be impossible for the Assessing Officer tocomplete all the assessments which are required to bescrutinized by him under Section 143(3) of the Act.Moreover, one must not forget that the manner in which anassessment order is to be drafted is the sole domain of theAssessing Officer and it is not open to an assessee to insistthat the assessment order must record all the questionsraised and the satisfaction in respect thereof of the AssessingOfficer. The only requirement is that the Assessing Officerought to have considered the objection now raised in thegrounds for issuing notice under Section 148 of the Act,during the original assessment proceedings. There can be nodoubt in the present facts as evidenced by a letter datedSeptember 8, 2012, the very issue of taxability of sale ofshares under the head “Capital gains” or the head “Profitsand gains from business” was a subject matter ofconsideration by the Assessing Officer during the originalassessment proceedings leading to an order dated October12, 2010. It would, therefore, follow that the reopening ofthe assessment by impugned notice dated March 28, 2013,is merely on the basis of change of opinion of the AssessingOfficer from that held earlier during the course ofassessment proceeding leading to the order dated October12, 2010. This change of opinion does not constitutejustification and/or reasons to believe that incomechargeable to tax has escaped assessment.” The law is settled inasmuch as once a query has been raisedduring the assessment proceedings and the assessee hasanswered the query, it would mean that the issue was inconsideration of the Assessing Officer during the assessmentproceedings even if it does not find mention in the assessmentorder. 12.Therefore, the ITAT came to a finding that the AssessingOfficer has taken a view and there was no need to remand the matter to him for de novo consideration. In fact, the ITAT has alsoconsidered the matter on merits and came to a finding thatSection 14A of the Act was not applicable to the facts andcircumstances of the case. 13.In the circumstances, we see no reason to interfere and inour view, no substantial questions of law arises. 14.Appeal dismissed. (MANEESH SHARMA),J (K.R. SHRIRAM),CJ SANJAY KUMAWAT/17