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Facts
The assessee, Life Insurance Corporation of India, filed its return for AY 2014-15, which was processed under Section 143(1). Subsequently, it was selected for scrutiny, and the AO completed the assessment by making additions. The CIT(A) granted partial relief, and an appeal was preferred to the Tribunal. The AO later reopened the assessment under Section 147 and issued a notice under Section 148.
Held
The Tribunal noted a typographical error in the CIT(A)'s order regarding the tax rate. It held that the special rate of 12.5% accepted by the CIT(A) is applicable, and any additions should also be taxed at this rate, not 30%. The AO is directed to compute the tax accordingly.
Key Issues
The primary issue was the applicability of the tax rate (12.5% vs. 30%) on certain income in the re-assessed computation, especially after the CIT(A) had directed adjustments.
Sections Cited
143(1), 142(1), 143(3), 147, 148, 151, 156, 144B, 115B, 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 29/03/2025 passed by NFAC, Delhi for assessment year 2014-15 on following grounds of appeal:
1. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre ["CIT(A)"] has erred, both in law and in fact, in directing the A.Y. 2014-15 2 Life Insurance Corporation of India Learned Assessing Officer ["AO"] to recompute the tax liability on assessed income. by specifying normal tax rates on additions made under section 143(3) of the Income Tax Act 1961 ["Act'] which is in contravention with the tax rates specifically prescribed for life insurance business under Section 115B of the Income-tax Act, 1961.” Brief facts of the case are as under: 2. The assessee is a Corporation established under the Life Insurance Corporation Act, 1956, filed its return of income for the year under consideration on 27.11.2014, declaring total income of Rs. 25,036,12,03,246/-. The return was processed u/s. 143(1) of the Act, accepting the returned income at Rs.25,036,12,03,246/-. 2.1. Subsequently, it was selected for scrutiny and statutory notices were issued u/s. 142(1) and 143(2) of the Act. In response to the notice, the assessee filed requisite details as called for. The ld. AO then completed assessment by making addition in the hands of the assessee and determining total income at Rs.60,361,96,74,260/- Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before CIT(A).
3. The CIT(A) disposed of the appeal vide order dated 02.05.2022, by granting partial relief to assessee. Aggrieved by the order of Ld. CIT(A), the assessee preferred appeal before this Tribunal in and 1715/Mum/2022.
This Tribunal vide order dated 27.09.2022 further granted some relief to the assessee. This Tribunal set aside one issue of Interim Bonus of Rs 1503.70 crores back to the file of the Ld. AO with a direction to examine the actual matrix/utilization of the A.Y. 2014-15 3 Life Insurance Corporation of India surplus and decide the issue in accordance with law, after providing an opportunity of hearing to the assessee to substantiate its claim. 4.1. Be that as it may, during the pendency of the appeal before the Ld. CIT(A), the Ld. AO reopened the assessment u/s. 147 of the Act by way of issuing a notice u/s 148 of the Act dated 31.03.2021, after obtaining necessary approval of the specified authority u/s. 151 of the Act. In response thereto, the assessee filed its return of income on 31.05.2021, declaring a total Income of Rs.25,036,12,03,250/-, being the total income declared in its original return of income filed on 27.11.2014. 4.2. After having considered the same, the Ld. AO issued the statutory notices u/s. 143(2) and 142(1) of the Act, calling for various details and documentary evidence regarding amount received from M/s. Shri Renuka Mata Multi State Urban Co- operative Credit Society Limited of Rs.67,55,734/-. 4.3. In response thereto, the assessee submitted requisite details and documentary evidence and, after having examining the same, the Ld. AO completed the assessment without making any additions to the total income computed u/s. 143(3) during original assessment proceeding at Rs.60,361,96,74,260/-. The Ld. AO also recorded his satisfaction that, on the basis of the details and documents submitted by the assessee, there is no need to make any additions or disallowances, as the case may be, vis-à-vis the total income assessed earlier u/s. 143(3) of the Act. 4.3. However, while the demand notice u/s. 156 of the Act dated 30.03.2022, was issued, the Ld. AO raised demand of Rs.34,794,08,46,570/-, which is more than the demand raised A.Y. 2014-15 4 Life Insurance Corporation of India u/s. 143(3) of the Act of Rs.4,422,68,00,000/-. The Ld. AO adopted the total income of the assessee at Rs.85,398,08,77,510/- consisting of (i) Income chargeable to tax at normal rate of Rs.60,361,96,74,260/-; and (ii) Income chargeable to tax at special rate of Rs.25,036,12,03,250/-. Accordingly, the Ld. AO levied tax not only on the total income assessed u/s. 143(3) of the Act of Rs.60,361,96,74,260/- @30%+ applicable surcharge & educational cess but also on the returned income of Rs.25,036,12,03,250/- @12.5% by invoking the provisions of section 115B of the Act. Aggrieved by the order of Ld. AO, the assessee preferred appeal before the ld. CIT(A).
The Ld. CIT(A) while considering the issue observed and held as under: “7.7 In view of the above, after considering the factual matrix of the case, I am of the considered opinion that the AO is not justified in issuing the impugned demand notice u/s. 156 of the Act dated 30.03.2022, raising a demand of Rs.34,794,08,46,570/-, without there being any additions/disallowances made to the total income while passing the impugned order u/s. 147 r.w.s. 144B of the Act dated 30.03.2022. Accordingly, the AO is directed to adopt the total income assessed u/s. 147 r.w.s. 144B of the Act at Rs.60,361,96,74,260/- for the purpose of computing tax, consisting of returned income of Rs.25,036,12,03,250/- taxable at the special rate of 12.5% u/s. 115B of the Act and Rs.35,325,84,71,010/-, being the additions made u/s, 143(3) of the Act taxable at normal rate of 30% applicable surcharge & educational cess. The AO is further directed to allow full credit for prepaid taxes regular assessment taxes and refund adjustments and arrive at the balance demand payable, if any, or refund payable to the assessee, as the case may be. Thus, the grounds of appeal
raised by the assessee on this issue are treated as partly allowed. 7.8 At this juncture, it is pertinent to note that, though the assessee has raised two legal grounds challenging (i) the reopening of the assessment u/s. 147 of the Act on the ground that conditions specified under first proviso to section 147 of the Act are not fulfilled A.Y. 2014-15
5. Life Insurance Corporation of India and notice u/s. 148 of the Act was issued based on borrowed satisfaction; and (ii) the validity of the impugned assessment order passed u/s. 147 r.w.s. 144B of the Act on the ground that the same was passed without providing an opportunity of being heard to the assessee, since the main grounds raised by the assessee against the issuance of demand notice u/s. 156 of the Act dated 30.03.2022, raising a demand of Rs.34,794,08,46,570/-, have already been allowed in favour of the assessee, directing the AO to recompute the tax payable by the assessee, I am of the considered opinion that adjudication of the legal grounds would be a mere academic exercise. In view of this, at this juncture, I do not want to venture into adjudication of the aforementioned two legal grounds raised by the assessee.” Aggrieved by the order of ld. CIT(A), assessee is in appeal before this Tribunal.
6. The Ld. AR submitted that the limited issue for consideration is regarding applicability of normal rate of tax @30% as against 12.5%. 6.1. It is submitted that, assessee had made rectification petition u/s. 154 of the Act on 22/04/2022, in which no action is yet taken by the Ld. AO. In the meanwhile, order giving effect was passed by the Ld. AO against the order passed by this Tribunal in and 1715/Mum/2022, vide order dated 27.09.2022. The Ld. AR thus submitted that, the quantum of addition has further reduced and thus, since no addition was made u/s. 147 by the Ld. AO, the rate of tax applicable on the taxable income in the hands of the assessee would be 12.5%. The Ld. AR submitted that, on principle the ld. CIT(A) accepted the A.Y. 2014-15 6 Life Insurance Corporation of India special rate of 12.5% being applicable to the present facts of the case in para 7.7, however, inadvertently mentioned 30% in the last part of paragraph 7.7. 6.3. The ld. DR on the contrary relied on orders passed by the authorities below. We have perused the submissions advanced by both sides in the light of record placed before us.
7. It is noted that, there is typographical error in para 7.7 of the impugned order. After considering the facts in the present case in totality, the ld. CIT(A) accepted special rate of 12.5% (+) applicable surcharge and educational cess, applicable to the assessee. Under said circumstances, for any addition that survives out of the proceedings u/s. 143(3) of the Act would also have to be taxed at 12.5% only with applicable surcharge and educational cess. To that extent, para 7.7 of the impugned order deserves to be modified. 7.1. The Ld. AO is directed to compute the tax in the hands of the assessee @12.5% (+) applicable surcharge and educational cess on the outstanding demand after giving effect to the order passed by this Tribunal dated 27/09/2022.