Rajasthan High Court – Jaipur
Principal Commissioner Of Income Tax vs M/S Shriram General Insurance Company … on 26 August, 2025
[2025:RJ-JP:33859-DB]
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 Central
Revenue Building Statue Circle, Jaipur (Raj.)-302005.
----Appellant
Versus
M/s Shriram General Insurance Company Limited, E-8, EPIP
RIICO 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 Income
Tax 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 and
in law, Ld. ITAT was justified in setting aside the order
dated 30.03.2023 passed by Ld. PCIT under Section 263 of
the Act of 1961 by which it was held that the order passed
by AO was erroneous and so far as prejudicial to the
interest of revenue?
(2) Whether in the facts and circumstances of the case and
in law, Ld. ITAT was justified to hold that Section 14A of the
Act of 1961 is not applicable on insurance companies?
(3) Whether in the facts and circumstances of the case and
in law, Ld. ITAT was justified in ignoring that Section 44 of
the Act of 1961, which deals with computation of income of
Insurance Companies, does not exclude the application of
Section 14A of the Act of 1961?
(4) Whether in the facts and circumstances of the case and
in law, Ld. ITAT was justified in ignoring the fact that while
computing income as per Section 44 of the Act of 1961, the(Downloaded on 28/08/2025 at 10:09:18 PM)
[2025:RJ-JP:33859-DB] (2 of 6) [ITA-59/2024]income has to be computed as per First Schedule of the Act
of 1961, which means that expenses claimed under Section
30 to 43B of the Act of 1961 have to pass the test of
admissibility under Section 37 and disallowance under
Section 14A of the Act of 1961?
3. The assessee, who is respondent in this appeal, is engaged
in the business of General Insurance and filed return of income on
28th September 2018, declaring total income of
Rs.5,33,11,66,150/- and assessment order dated 01 st March 2021
under Section 143(3) came to be passed accepting return of
income of Rs.5,33,11,66,150/-.
4. After examining the assessment order passed, the Principal
Commissioner of Income Tax (hereinafter referred to ‘the PCIT’)
issued a notice dated 15 th February 2022 under Section 263 of the
Act stating that assessment order was erroneous and prejudicial
to the interest of the Revenue. He found problem with four issues
and after following due process, an order dated 30 th March 2023
was 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 aside
the assessment order, the Assessing Officer was directed to
examine the issue and pass suitable order after affording
opportunity of being heard to the assessee. The assessee
challenged this order before the Income Tax Appellate Tribunal,
Jaipur (hereinafter referred to ‘the ITAT’), which by an order
pronounced on 28th June 2023, set aside the order of PCIT. It is
that order of the ITAT that is in question before us.
5. In the assessment order dated 01st March 2021, the
Assessing Officer raised following three issues:
(i) Claim of Any Other Amount Allowable as Deduction in
Schedule BP(Downloaded on 28/08/2025 at 10:09:18 PM)
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(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 furnished
information as called for. The Assessing Officer further says that
information furnished in respect to the above issue has been
examined and no addition is warranted.
6. There is no discussion in the assessment order regarding
these three issues mentioned therein.
7. Therefore, the PCIT exercising its power under Section 263
of the Act, apart from the three issues raised, a fourth issue was
raised regarding dis-allowance under Section 14A of the Act. The
assessee-respondent gave explanation in response to the notice
under Section 263 of the Act and the PCIT, in its order dated 30 th
March 2023, accepted the explanation of the assessee with regard
to three issues, which were raised by the Assessing Officer but on
the issue of Section 14A of the Act, remanded it for de-novo
consideration.
8. The ITAT in its order impugned dated 28th June 2023, has
given a factual finding and that is not disputed before us also, that
(i) during course of assessment proceedings, the Assessing Officer
had raised queries with regard to Section 14A of the Act; (ii)
Question No.7 of notice dated 23rd November 2020 under Section
142(1) of the Act required the assessee to furnish the details of
investigation, details of exempt income earned during the year
under consideration, details of expenses incurred for earning
exempt income and computation as per Rule 8D read with Section
14A of the Act; (iii) Assessee in its reply dated 07.12.2020 had
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submitted that Section 14A of the Act was not applicable, as
assessee was a General Insurance Company and, therefore, as per
Section 44 of the Act, it provides that income of insurance
business is required to be computed in accordance with First
Schedule of the Act.
9. Admittedly, assessee has also given further explanation as to
the non-applicability of Section 14A of the Act.
10. Assessing Officer was satisfied with the explanation and
hence, did not even consider it necessary to mention it as an issue
in the assessment order.
11. A Division Bench of Bombay High Court in Aroni
Commercials Ltd. Versus Deputy Commissioner of Income-
Tax and Another1 has held that once a query is raised during the
assessment proceedings and assessee has replied to it, it follows
that the query raised was a subject of consideration of the
Assessing Officer while completing the assessment and it is not
necessary that an assessment order should contain reference
and/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 the
petitioner had by a letter dated July 9, 2010, pointed out
that they were engaged in the business of financing, trading
and investment in shares and securities. Further, by a letter
dated September 8, 2010, during the course of the
assessment proceedings on a specific query made by the
Assessing Officer, the petitioner has disclosed in detail as to
why its profit on sale of investments should not be taxed as
business profits but charged to tax under the head. “Capital
gains”. In support of its contention the petitioner had also
relied upon the Central Board of Direct Taxes Circular No.4 of
2007, dated June 15, 2007 (The reasons for reopening
furnished by the Assessing Officer also places reliance upon
Central Board of Direct Taxes Circular dated June 15, 2007).
It would, therefore, be noticed that the very ground on which
the notice dated March 28, 2013, seeks to reopen the
assessment for the assessment year 2008-09 was considered
by the Assessing Officer while originally passing the1 [2014] 362 ITR 403 (Bom)
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[2025:RJ-JP:33859-DB] (5 of 6) [ITA-59/2024]assessment order dated October 12, 2010. This by itself
demonstrates the fact that notice dated March 28, 2013,
under Section 148 of the Act seeking to reopen the
assessment for the assessment year 2008-09 is based on
mere change of opinion. However, according to Mr.
Chhotaray, learned Counsel for the revenue, the aforesaid
issue now raised has not been considered earlier as the same
is not referred to in the assessment order dated October 12,
2010, passed for the assessment year 2008-09. We are of
the view that once a query is raised during the assessment
proceedings and the assessee has replied to it, it follows that
the query raised was a subject of consideration of the
Assessing Officer while completing the assessment. It is not
necessary that an assessment order should contain reference
and/or discussion to disclose its satisfaction in respect of the
query raised. If an Assessing Officer has to record the
consideration bestowed by him on all issues raised by him
during the assessment proceeding even where he is satisfied
then it would be impossible for the Assessing Officer to
complete all the assessments which are required to be
scrutinized by him under Section 143(3) of the Act.
Moreover, one must not forget that the manner in which an
assessment order is to be drafted is the sole domain of the
Assessing Officer and it is not open to an assessee to insist
that the assessment order must record all the questions
raised and the satisfaction in respect thereof of the Assessing
Officer. The only requirement is that the Assessing Officer
ought to have considered the objection now raised in the
grounds for issuing notice under Section 148 of the Act,
during the original assessment proceedings. There can be no
doubt in the present facts as evidenced by a letter dated
September 8, 2012, the very issue of taxability of sale of
shares under the head “Capital gains” or the head “Profits
and gains from business” was a subject matter of
consideration by the Assessing Officer during the original
assessment proceedings leading to an order dated October
12, 2010. It would, therefore, follow that the reopening of
the assessment by impugned notice dated March 28, 2013,
is merely on the basis of change of opinion of the Assessing
Officer from that held earlier during the course of
assessment proceeding leading to the order dated October
12, 2010. This change of opinion does not constitute
justification and/or reasons to believe that income
chargeable to tax has escaped assessment.”
The law is settled inasmuch as once a query has been raised
during the assessment proceedings and the assessee has
answered the query, it would mean that the issue was in
consideration of the Assessing Officer during the assessment
proceedings even if it does not find mention in the assessment
order.
12. Therefore, the ITAT came to a finding that the Assessing
Officer has taken a view and there was no need to remand the
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matter to him for de novo consideration. In fact, the ITAT has also
considered the matter on merits and came to a finding that
Section 14A of the Act was not applicable to the facts and
circumstances of the case.
13. In the circumstances, we see no reason to interfere and in
our view, no substantial questions of law arises.
14. Appeal dismissed.
(MANEESH SHARMA),J (K.R. SHRIRAM),CJ
SANJAY KUMAWAT/17
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