TaxTMI 
TaxTMI 
2020 (2) TMI 931
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 of the Act; * Treating the order dated 22 December 2016 issued under section 143(3) of the Act by the Assistant Commissioner of Income-tax, Range - 8(3)(1), Mumbai (hereinafter referred to as the learned AO') [hereinafter referred to as the 'Assessment Order)] for AY 2014-15 as erroneous and prejudicial to the interest of the revenue; and * setting aside the aforesaid Assessment Order with directions to the learned AO to re-examine and redo the assessment by examining the provision claimed towards claims incurred but not reported (IBNR) and claims incurred but not enough reported (IBNER), in light of the decision of the Hon'ble Chennai Income-tax Appellate Tribunal (ITAT) in the case of Deputy Commissioner of Income-tan vs. Cholamandalam MS General Insurance Co.Ltd.(Chola) 2. The learned CIT has erred in law in concluding that the claim of expenditure towards IBNR and IBNER is unascertainable and being a provision, should not be allowed. 3. The learned CIT has erred in solely following the view against the Appellant held by the Hon'ble Chennai ITAT in the case of Chola (supra) and in not considering the favorable jurisdictional ITAT decision in the case of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade available to establish the allowability of expenditure. It needs to be ascertain, when the actual compensation of loss were quantified by the insurance company. The year in which actual loss or compensation was quantified is the year in which assessee is liable to make the payment and the expenditure accrued to the assesee. Until, it is contingent liability and therefore cannot be subject to the deduction under the mercantile system of accounting. The claim incurred, but not reported or incurred, but not enough reported, the year in which the actual damage or loss were determined and crystallized is the year in which the assesee is liable to claim the damage. The Ld. PCIT, on the above issues took the view that the AO made no enquiry on these issues and allowed the provisions towards IBNR and IBNER in toto, thus the order is erroneous insofar as, it is prejudicial to the interest of the revenue. 5. The assessee filed its reply to the show cause notice under section 263; vide its reply dated 25/03/2019. In the reply the assessee stated that assessee is a general insurance company restored with Insurance Regulatory and Development Authority of India (IRDAI). The computation of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Export Credit Guarantee Corporation in ITA No.7657/Mum/2014 and DCIT vs National Insurance Company Ltd. 2016 72 taxmann.com 116 (Kolkata Trib.) 7. The reply furnished by the assessee was not accepted by Ld. PCIT. The Ld.CIT concluded that that query raised by him remain unanswered. The AO had accepted the accounts, which are subject to tax audit and accepted the account without raising proper queries and that on identical issue, Chennai Tribunal in Cholamandalam Finance and General Insurance Company (supra) as taken other view. The Assessing Officer should have called for details and examined the matter because only ascertained expenditure and not provisions are to be allowed. If the Assessing Officer examined the matter and raised appropriate queries, the Assessing Officer could have disallowed and assessed the income correctly. The allowance of an item of expenditure which is provisional and unascertainable was an act which is erroneous as well as prejudicial to the interest of revenue. The ld. PCIT, directed the Assessing Officer for examining the provisions for expenditure claimed for IBNR and IBNER in the light of decision of Chennai Tribunal in case of Cholamandalam Finance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame is inadmissible in terms of explanation given below Section 115JB of the said Act?" During the hearing of appeal before Hon'ble High Court, it was disclosed that the department has accepted claim of assessee on the aforesaid issue in A.Ys. 2000-01 to 2004-05 and 2006-07. The Hon'ble High Court held that revenue could not show exceptional reason for departure of their stand in the present Assessment Year (2005-06) and dismissed the appeal of revenue. The ld. AR of the assessee thus submitted that the order of Kolkata Tribunal in National Insurance Company (supra) has been approved by Hon'ble Calcutta High Court. The ld. AR of the assessee also filed the decision of Calcutta High Court in ITA No. 76 of 2019. The ld. AR for the assessee further submits that decision of jurisdictional tribunal is binding on the lower authority. 10. In support of his other submissions the ld AR for the assessee also relied on the following decisions; * Bank of Baroda Vs H.C. Shrivastava[2002] 256ITR 385 (Bom), * Union of India Vs Kamalaxmi Finance Corporation Ltd AIR 1992 SC 711, * CIT Vs Gabriel India [2003] 203 ITR 108 (Bom). 11. On the other hand the ld. DR for the revenue supported the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he genuineness of claim which is called for in the circumstances of this case. The decision of Hon'ble Bombay High Court in Horizon Investment Company vs. CIT in ITA No. 1593/Mum/2013 dated 27.06.2014, on the ratio that in absence of enquiry on account of deduction of expenditure, the revision order was justified. 15. We have considered the rival submissions of both the parties and have gone through the assessment order and the order impugned before us. Perusal of assessment order shows that the issue on which ld. PCIT revised the assessment order has not been discussed by Assessing Officer. We have noted that during the scrutiny assessment, the assessee furnish the details of provisions of IBNR and IBNER as reported in schedule -16 of profit and loss account for year ended 31/03/2014 in pursuance to the quarries of the AO. 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 also filed at page No.34 and relevant Schedule-16 of statement of accounts is also filed at page No.27 of paper book. Thus, once the AO required the details, he may have considered report of auditor and pass the assessment ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is erroneous and it is prejudicial to the interest of revenue must be fulfilled together. If anyone of them is absent- the recourse cannot be had to section 263. Further, if the Assessing Officer has adopted one of the courses permissible under the law and pass the assessment order, the same cannot be branded as erroneous unless the order passed by Assessing Officer is unsustainable in law. Thus, the twin conditions of section 263 are not fulfilled in the present case. 20. We may reiterate here that though there is no reference in the assessment order about the examination of issues related with provisions for IBNR and IBNER. The assessee during the assessment furnished the relevant extract of IBNR and 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. 21. The ld. AR of the 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 [2008] 166 Taxman....