ITAT Quashes Revision Order u/s 263 against TATA AIG for want of Jurisdiction [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) held that the Commissioner of Income Tax (CIT) is not the right in exercising revisionary powers under Section 263 of the Income Tax Act, 1961, as the error envisaged by Section is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law.

The assessee, TATA AIG, was incorporated in August, 2000 as a joint venture between Tata Sons Ltd and American International Group. The assessee is an Indian insurance company in terms of Section 2(7A) of the Insurance Act, 1938 and is carrying on the business of life insurance. The assessee has obtained license from Insurance Regulatory & Development Authority (IRDA) to carry on business in India on 25th February, 2001 and started operations on 1st April, 2001.

For the assessment year 2003-04, the assessee filed return of income on 28/11/2003 declaring a loss of Rs.42,88,54,156/-. The assessee filed the return of income for the assessment year 2004-05 on 30/10/2004 declaring a loss of Rs.58,09,01,041/-. The returns were selected for scrutiny and the assessments were completed under Section 143(3) of Income Tax Act, where the Assessing Officer (AO) had made disallowance.

The assessee preferred appeals against the aforesaid order of assessment before the CIT(A). The assessment for AY 2004-05 was also reopened for the same reason. In response, the assessee filed letter with the AO objecting to the jurisdiction to reopen the assessment and also made submissions on merits.

The AO completed the re-assessment proceedings and passed order under section 143(3) read with section 147 wherein he has assessed the income based on the surplus declared as per actuary report and also made addition towards deficit from Pension Schemes.

Further, the assessee preferred an appeal before the CIT(A) against the order of the AO passed under Section 143(3) read with Section 147 of the Income Tax Act. The CIT(A) gave partial relief to the assessee wherein he directed the Assessing Officer to adjust the amount of capital contribution transferred from shareholders’ account to policy holders’ account against the surplus as per the actuary report. The department preferred further appeal against the order of CIT(A) before the ITAT, in which the ITAT, through common order passed for AYs 2002-03 to 2008-09 had allowed the issue in favour of the assessee.

The Commissioner of IncomeTax  issued a notice dated 02/08/2010 under Section 263 of the Income-tax Act proposing to set aside the order passed under Section 143(3) read with section 147 for the reason that the Assessing Officer while passing the re-assessment order did not incorporate the additions made by the Assessing Officer in the original assessment order passed under Section 143(3) of the Income Tax Act.

After hearing both the parties, the tribunaldecided that there is no dispute that under Section263 of the Income Tax Act. The CIT does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary and the assessment order is prejudicial to the interests of the Revenue.

However, in doing so, the CIT must have some material which would enable to form a prima facie opinion that the order passed by the AO is erroneous, insofar as it is prejudicial to the interests of the Revenue, observed the bench.

The two-member bench consisting of Kuldip Singh (Judicial member) and Padmavathy S (Accountant member) held that the CIT is not justified in setting aside the re-assessment order of the assessing officer for AY 2003-04 and 2004-15 and accordingly we hold that the order of the CIT under section. 263 is without jurisdiction and liable to be quashed. Thus, the appeal was allowed.

To Read the full text of the Order CLICK HERE

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