Vibhu Bakhru JUDGMENT
Vibhu Bakhru, J.
1. This appeal under Section 260A of the Income Tax Act, 1961 (hereafter the 'Act'), has been filed by the Oriental Insurance Company (hereafter the 'Assessee') impugning an order dated 22nd July, 2011 passed by the Income Tax Appellate Tribunal (hereafter the 'Tribunal') in ITA No. 3910/Del/2007. The said appeal was filed by the Assessee challenging an order dated 16th August, 2007 passed by the Commissioner of Income Tax (Appeals) [hereafter 'CIT(A) '] in Appeal no. 170/2006-07 whereby the appeal filed by the Assessee against the assessment order dated 25th January, 2007 passed by the Assessing Officer (hereafter 'the AO') for the assessment year 2004-05, was dismissed.
2. By an order dated 10th July, 2013, this Court admitted this appeal and framed the following questions of law for consideration:-
(1) Whether the Income Tax Appellate Tribunal was correct in law in upholding the addition on account of income arising on sale of investments in spite of the fact that no addition on account of grounds mentioned in the reasons to believe has been sustained?
(2) Whether the Income Tax Appellate Tribunal was correct in law in holding that the income earned on sale/redemption of investment is chargeable to tax?"
At the outset, the learned Senior Counsel appearing for the Revenue submitted that the present appeal also raises the issue whether the AO's decision to tax income arising on sale of investments was the result of change in opinion and whether the same is permissible.
It is not disputed that the above issue arise from the impugned order passed by the Income Tax Appellate Tribunal and, accordingly, the following question of law is framed as the third question:-
"(3) Whether the AO had assumed jurisdiction under Section 147 of the Act on account of change in opinion as to the taxability of the income arising on sale of investments and whether the Income Tax Appellate Tribunal was correct in law in upholding the assumption of jurisdiction under Section 147 of the Act"
Background
3. The relevant facts necessary to address the aforesaid issues are briefly stated as under:-
3.1. The Appellant Company is a subsidiary of General Insurance Corporation of India and is engaged in the business of General Insurance comprising of Fire, Marine and Miscellaneous Insurance Business. According to the Assessee, it invests its policy holder's funds as per the statutory guidelines provided under The Insurance Act, 1938 and IRDA (Investment) Regulations, 2000.
3.2. The AO computed the assessable income at ` 35,87,12,674 but since the adjusted book profits were higher at ` 3,91,45,35,826, the AO passed an assessment order dated 30th January, 2006 for the Assessment year 2004-05 assessing the tax payable at ` 30,09,30,018 under section 115JB of the Act.
3.3. The Assessee claimed that the profits on sale/redemption of investments amounting to ` 505.33 crores for the year ending 31.03.2004, were exempt from tax in view of the omission of clause (b) of Rule 5 of the First Schedule of Income Tax Act w.e.f. 01.04.1989 and in terms of the CBDT Circular No. 528 dated 16th December, 1988, providing explanatory notes to Finance Act, 1988. The Assessee also claimed deduction of........