Law:

Section:

Section 44, read with section 147 and First Schedule, of the Income-tax Act, 1961 - Insurance business (Reassessment) - Assessee-company was engaged in business of general insurance comprising of fire, marine and miscellaneous insurance business - Assessee filed its return wherein profit from sale of investment was claimed as exempt from tax in view of omission of clause (b) of rule 5 of First Schedule of Income-tax Act with effect from 1-04-1989 - Assessing Officer allowed assessee's claim - Subsequently, Assessing Officer issued a notice under section 148 as he was of view that income from sale/redemption of investments had escaped assessment - Thereupon, Assessing Officer passed reassessment order wherein income from sale of investment was brought to tax - Tribunal upheld validity of reassessment proceedings as well as addition on merits - It was noted that at time of reopening assessment, Assessing Officer had recorded reason that assessee was carrying on two streams of business whereas in reality assessee carried on only general insurance business - Moreover, another assumption of Assessing Officer that assessee had not credited profits in question to Profit and Loss Account was also found factually incorrect - Whether since very assumptions on basis of which Assessing Officer formed a belief that assessee's income had escaped assessment were found to be erroneous, impugned reassessment proceedings were liable to be quashed as being without jurisdiction - Held, yes - Whether, even otherwise, since reopening of assessment was based on mere change of opinion, impugned reassessment proceedings deserved to be set aside - Held, yes [Paras 11, 12, 14 and 24] [In favour of assessee] FACTS â–  The assessee-company was engaged in the business of General Insurance comprising of Fire, Marine and Miscellaneous Insurance Business. â–  In view of the omission of clause (b) of rule 5 of the First Schedule of Income-tax Act with effect from 1-04-1989 and in terms of the CBDT Circular No. 528, dated 16-12-1988, providing explanatory notes to Finance Act, 1988. The assessee filed its return wherein profit on sale of investment was claimed exempt from tax.…