2019 (12) TMI 818 - AT - Income Tax

Validity of the re-assessment framed u/s 147 - as argued initiated on the same set of documents which were available during the original assessment proceedings u/s143(3) - HELD THAT - AO during the original assessment proceeding has questioned about the different components of core shipping activities and the turnover vide notice dated 1st September, 2008 under section 142(1) Assessee furnished the details of the excess provisions written back vide letter dated 10th October 2008 along with the submission that it is engaged fully in the business of shipping and no other business activity is carried on by it. The income has been offered to tax under tonnage scheme except the income from dividend and interest on deposits which was suo-moto treated as income from other sources. The copy of the letter is enclosed on pages 143 to 148 of the paper book. The assessee further vide letter dated 27th October, 2008 has also furnished the details of turnover for core shipping including the excess provision written back of ₹ 23.94 crores, sundry receipts of core shipping of ₹ 1111 lacs and sundry balance written back of ₹ 47 lacs. The copy of the letter is enclosed on pages 150 to 161 of the paper book. AO in the original assessment proceedings under section 143(3) of the Act has conducted enquiries about the items as mentioned in the reasons recorded issued under section 148 of the Act. Therefore, the reopening under section 147 of the Act based on the same set of documents examined during the original proceedings is not sustainable. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment under Section 147 of the Income Tax Act.
2. Taxability of prior period income.
3. Taxability of sundry receipts and related deductions.
4. Interest levied under Section 234D.

Issue-wise Detailed Analysis:

1. Validity of Reassessment under Section 147 of the Income Tax Act:
The assessee challenged the reassessment under Section 147, arguing it was initiated based on the same documents available during the original assessment under Section 143(3). The reasons for reassessment included the non-inclusion of ?23.94 crores of provision written back and certain incomes derived before the tonnage tax scheme. The Tribunal found that the original assessment had already considered these items, and thus, the reassessment was based on a change of opinion, which is not permissible. The Tribunal referenced various case laws, including the Hon’ble Supreme Court in CIT versus Kelvinator India Ltd and Hon’ble Bombay High Court in Idea Cellular Ltd. v/s DCIT, concluding that the reassessment was invalid.

2. Taxability of Prior Period Income:
The assessee argued that prior period income of ?30,75,08,600 and ?41,188 should not be taxed under the Act as it constituted profits from core activities. The Tribunal noted that the AO had already considered these items during the original assessment. The Tribunal cited its own previous judgment in the assessee's case for AY 2007-08, holding that such income should be considered as part of core activities and not taxed separately under normal provisions.

3. Taxability of Sundry Receipts and Related Deductions:
The CIT(A) had held that sundry receipts of ?10.51 crore were not from core activities and thus not covered under the Tonnage Tax scheme. The assessee contended that expenses related to these receipts, such as rent, insurance claims, and employee post-retirement medical schemes, should be deductible. The Tribunal found that these items were duly disclosed and considered in the original assessment. It reiterated that such income should be treated as part of core activities and not taxed separately, referencing its previous judgment and the legislative intent behind the Tonnage Tax scheme.

4. Interest Levied under Section 234D:
The assessee contested the interest levied under Section 234D. Given that the reassessment was quashed, the Tribunal did not find it necessary to address this issue on merits, as the underlying assessment itself was invalidated.

Conclusion:
The Tribunal quashed the reassessment under Section 147, holding it invalid due to being based on a change of opinion. Consequently, the related grounds of appeal by the assessee were allowed, and the appeal by the Revenue was dismissed as infructuous. The Tribunal emphasized that the income from core activities under the Tonnage Tax scheme should not be taxed under normal provisions, aligning with its previous judgments and legislative intent.