2012 (11) TMI 510 - AT - Income Tax

Shipping business of non-residents - occasional shipping business or regular shipping business - CIT(A) held the order passed u/s 172(4) is null and void - income from 40 voyages - Held that - Tax effect in a case means overall tax effect in respect of disputed issues in a particular assessment year in the case of the assessee himself. Tested on the aforesaid basis, tax effect in respect of disputed issues in the assessment year under appeal in the case of respondent-company is more than ₹ 3 lakhs and hence all the 40 appeals filed by the Department are held to be maintainable. Looking to the magnitude of the voyages undertaken by the freight beneficiary and the fact that the respondent-company has been, as observed by the CIT(A), regularly filing its return of income at Mumbai and being assessed to tax at Mumbai, the finding of the CIT(A) that the freight beneficiary is not engaged in occasional shipping business but in regular shipping business and hence would be outside the scope of section 172 cannot be said to be untenable on facts and in law. His finding in this behalf is therefore confirmed. Similarly, the Department has not placed any material on record to rebut the finding recorded by the CIT(A) that the respondent-company has already filed its return of income at Mumbai. That being the position, the provisions of section 172(7) would apply to the respondent-company. Besides, as rightly observed by the CIT(A), the Income-tax Act does not permit multiple assessments in the hands of the same taxable entity and that too in respect of income from the same business. On these facts, unable to disturb the finding recorded by the CIT(A) that the respondent-company is liable to be assessed on the basis of return filed u/s 139(1) for its entire income is therefore confirmed. His further order quashing the order passed by the AO u/s 172(4) is also resultantly confirmed. Perusal of the order passed by the CIT(A) shows that he has taken a view that the case of the respondent falls u/s 172(7) and not u/s 172(4). The respondent-company has also accepted the liability to be dealt with u/s 172(7). The jurisdictional AO may therefore verify the position and take such action as may be warranted in law in terms of section 172(7) to ensure that the income of the assessee from the aforesaid 40 voyages does not escape assessment as per the normal provisions of the I-T Act - in favour of assessee.

Summary

Issues Involved:
1. Validity of the composite order passed by the AO under Section 172(4) of the Income-tax Act.
2. Applicability of Section 172(7) and the regular assessment provisions.
3. Maintainability of 30 out of 40 appeals based on the tax effect being less than Rs. 3 lakhs.
4. Jurisdictional AO's authority to tax the income from cargo transportation business as per normal provisions.

Detailed Analysis:

1. Validity of the Composite Order Passed by the AO under Section 172(4):
The AO passed a composite order under Section 172(4) for 40 voyages, assessing the taxable income at Rs. 2,09,67,176/- (7.5% of Rs. 27,95,62,354/-). The CIT(A) quashed this order, stating that the respondent-company is engaged in regular shipping business, not occasional shipping business, and had filed returns under Section 139(1). The CIT(A) held that the composite order under Section 172(4) is null and void as the respondent opted for assessment under Section 172(7).

2. Applicability of Section 172(7) and the Regular Assessment Provisions:
The CIT(A) found that the respondent-company, acting as an agent for a freight beneficiary, was engaged in regular shipping business and had filed returns under Section 139(1). Therefore, the provisions of Section 172(4) were inapplicable, and the respondent should be assessed under normal provisions, including Section 44B. The CIT(A) emphasized that the Income-tax Act does not permit multiple assessments for the same income. The Tribunal upheld this view, confirming that the respondent's filing under Section 139(1) established its engagement in regular shipping business, thus falling under Section 172(7).

3. Maintainability of 30 Out of 40 Appeals Based on the Tax Effect Being Less Than Rs. 3 Lakhs:
The respondent's representative raised a preliminary objection, citing CBDT Instruction No. 3/2011, which prohibits appeals where the tax effect is less than Rs. 3 lakhs. The Tribunal examined Paragraphs 2-5 of the instruction and concluded that tax effect in a "case" means the overall tax effect in respect of disputed issues in a particular assessment year. Since the tax effect in the assessment year exceeded Rs. 3 lakhs, all 40 appeals were deemed maintainable.

4. Jurisdictional AO's Authority to Tax the Income from Cargo Transportation Business as per Normal Provisions:
The CIT-DR argued that the CIT(A) did not verify whether the respondent included the income from the 40 voyages in its return filed under Section 139(1). The Tribunal noted that the CIT(A) found the respondent had filed returns at Mumbai, indicating regular shipping business. The Tribunal directed the jurisdictional AO to verify and ensure that the income from the 40 voyages is assessed under normal provisions as per Section 172(7).

Conclusion:
The Tribunal dismissed all 40 appeals filed by the Revenue, confirming the CIT(A)'s order that the respondent should be assessed under normal provisions due to its regular shipping business and filing under Section 139(1). The Tribunal also directed the jurisdictional AO to verify and assess the income from the 40 voyages under normal provisions.