2019 (1) TMI 544 - HC - Income Tax

Reopening of assessment - benefit of Tonnage Tax Scheme - scope of business activities carried out by the assessee - Department found that the assessee was not handling the cargo shipping business or movement of cargo and that the activities carried out by the company were merely incidental activities and in absence of the core business activities, the assessee was not entitled to the benefits under chapter XII-G - Held that - The assessee s nature of activities was fully disclosed during the assessment proceedings. There was no failure on the part of the assessee to disclose any of the material facts. Infact from the note on assessee s nature of business one could gather the precise nature of the activities carried on by the company. There was these clear disclosure on the part of the assessee and the reopening of assessment beyond the period of four years from the end of relevant assessment year could not have been done. Also we must strike down the notice of reopening as assessee s claim of benefits under the chapter XIIG of the Act as is clear from the material on record came up for pointed attention of the Assessing Officer during the original assessment proceedings. It was in this context that the Assessing Officer had raised certain queries including asking the assessee to give full details of its business activities. Thus, the question of the assessee being qualified for the benefits under Chapter XIIG of the Act was scrutinized issue. Without there being any additional material, any attempt on the part of the AO to reopen the assessment would be based on mere change of opinion. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice of reopening of assessment based on failure to disclose material facts and change of opinion.

Analysis:
1. The petitioner, a limited company engaged in offshore support services, filed a return of income for the assessment year 2011-12, declaring total income. The Assessing Officer accepted the declared income after scrutiny assessment.
2. The Assessing Officer issued a notice of reopening of assessment based on information received that the petitioner was not eligible for the Tonnage Tax Scheme and that its activities were incidental without core business activity, leading to an alleged escape of income chargeable to tax.
3. The petitioner objected to the notice, arguing that all material facts were disclosed during the original assessment proceedings. The Assessing Officer's reasons for reopening the assessment were primarily based on the lack of core business activities and ineligibility for certain tax benefits.
4. The petitioner provided a comprehensive note detailing its business activities, including owning and operating offshore vessels on charter for various marine-related tasks. The Assessing Officer did not make any disallowance based on this information during the original assessment.
5. The High Court found that the notice of reopening was issued beyond the statutory period of four years and that the petitioner had fully disclosed its activities during the assessment. Therefore, there was no failure to disclose material facts justifying the reopening of assessment.
6. Additionally, the Court noted that the question of the petitioner's eligibility for tax benefits under Chapter XIIG was already scrutinized during the original assessment, making any attempt to reopen the assessment a mere change of opinion without new material.
7. Consequently, the High Court set aside the notice of reopening dated 27th March 2018, allowing the petition and disposing of the matter in favor of the petitioner.