9911796707
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Issues:
- Validity of reassessment under section 147(b) of the Income-tax Act, 1961. - Application of rule 10 of the Income-tax Rules in determining income for non-resident shipping companies. - Consideration of Board's instructions in assessment of non-resident shipping companies. - Justification for reopening assessment based on new information. - Interpretation of Supreme Court decisions in CIT v. Simon Carves Ltd. and Indian & Eastern Newspaper Society v. CIT. - Authority of the audit party in pronouncing on the correct interpretation of law. The judgment pertains to an appeal by the department challenging the order of the AAC canceling the reassessment made under section 147(b) of the Income-tax Act, 1961. The case involves a non-resident shipping company engaged in freight earnings on the carriage of goods for the assessment year 1971-72. The original assessment allowed a substantial depreciation, leading to a reassessment due to a review by the Government on the method of assessing foreign shipping companies. The reassessment resulted in a lower loss being determined compared to the original assessment. The AAC, relying on the Supreme Court decision in CIT v. Simon Carves Ltd., held the reassessment invalid as the ITO had chosen one of the options under rule 10 in the original assessment. However, the department contended that the original assessment did not consider the Board's instructions on the assessment of non-resident shipping companies, leading to a valid reason for reopening the assessment under section 147(b. The department argued that the ITO in the original assessment failed to apply a proper determination of income for the non-resident shipping company. They highlighted the provisions of section 9 of the Act and rule 10 of the Income-tax Rules, emphasizing the Board's instructions on the assessment of non-resident shipping companies. The department's stance was that the ITO's failure to consider these instructions provided valid grounds for reopening the assessment under section 147(b). On the other hand, the assessee contended that the reassessment was based on a mere change of opinion regarding the assessment basis, which did not justify reopening. The department's argument was supported by the fact that the ITO did not consider the methods prescribed in rule 10 and the Board's binding instructions in the original assessment, making the reassessment valid. The Tribunal found merit in the department's objection, noting that the AAC's reliance on the Simon Carves Ltd. decision was misplaced. The original assessment did not show any application of the ITO's mind to rule 10 or the Board's instructions, indicating a lack of consideration for the correct assessment method. The Tribunal also clarified that the decision in Indian & Eastern Newspaper Society's case did not support the assessee's contention, emphasizing that the ITO's awareness of the law, as communicated by subsequent information, justified the reassessment under section 147(b). The Tribunal set aside the AAC's order, restoring the appeal for fresh disposal on the merits of the assessment, allowing the assessee to present all claims in accordance with the law. In conclusion, the Tribunal allowed the department's appeal, ruling in favor of the validity of the reassessment under section 147(b) of the Income-tax Act, 1961. The decision emphasized the importance of considering the prescribed methods under rule 10 and the Board's instructions in assessing non-resident shipping companies, highlighting that subsequent information justifying reassessment can be a valid reason for reopening assessments.
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