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TMI Blog2012 (2) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... -2012 - DR. D.Y.CHANDRACHUD M.S.SANKLECHA, JJ. Mr.F.V.Irani with Mr.Jitendra Jain, Mr.Atul K. Jasani, Mr.P.C.Tripathi, for the Petitioner. Mr.Suresh Kumar, for the Respondents. ORAL JUDGMENT (Per Dr.D.Y.Chandrachud, J.): 1 Rule; with the consent of Counsel for the parties returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2 An assessment in the present case for Assessment Year 200607 is sought to be reopened by a notice dated 28 March 2011. The Assessee is before this Court in proceedings under Article 226 of the Constitution. 3 The Petitioner is a wholly owned subsidiary of a non resident shipping line. Under an agreement dated 1 April 1993, the Petitioner is under a contractual obligation to render services to its foreign principal including interalia in relation to vessel operations and towards collection and remittance of freight. The Petitioner collects Container Detention Charges (CDCs) which are levied upon importers on behalf of the foreign principal. Under the agreement, the Petitioner was entitled to a commission for services rendered to its foreign principal. The Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company. 5 In the report filed by the statutory auditors together with the return, the following note was placed on record: 4. We draw attention to Note 20 to the financial statements. As more fully explained in the note, the Company has not allocated for its local use, certain Container Detention Charges as per the RBI circular. The Company s management believes that this does not have an impact on the financial statements. 6 The Assessing Officer passed an order of assessment on 23 December 2009 under Section 143(3). 7 During the course of assessment proceedings, the Petitioner had addressed a letter dated 18 November 2009 which was submitted, as stated therein, together with the details as requested by the Assessing Officer. The letter inter alia contained the following disclosure: As the company is the shipping agent of Nippon Yusen Kaisha, it collects freight, detention and terminal handling charges on behalf of its principal. These are kept in a separate bank account matched by a corresponding liability to the principal. Currently, credit balances in debtors account and unpaid brokerage account are only outstanding with the principal. 5. At the outset please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission income. These amounts belong to the principal which is retained by company as an agent, and can under no circumstances be considered as income of the company. As the principal continues to retain the ownership of the income these sums cannot be treated as the income of the company. In view thereof, it is respectfully submitted that no addition be made on account of the same. 8 The order of assessement contained a specific discussion on items in respect of which the Assessing Officer made a disallowance. However, as regards the submission of the Petitioner on an amount representing US $ 1.5 of the container detention charges, the Assessing Officer did not make any specific observation. 9 The reasons which have been furnished to the Petitioner for reopening the assessement are as follows: The assessee is a wholly owned subsidiary of a Japanese company, NYK Ltd. It handles with freight booking and collection for the Principal. Apart from that, it also takes care of the management of the containers, collecting container rent, paying the ports and other agents for container on behalf of the Principal. The assessee company doesn t charge anything for these services and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a case where income chargeable to tax has escaped assessment. In the present case, it was urged that the reopening has taken place within a period of four years. The Assessing Officer had not discussed in the course of his order, whether, the amount representing US $ 1.5 per container represented the income of the Petitioner. Consequently, it was urged that the Assessing Officer is within his jurisdiction in seeking to reopen the assessment. 12 The reopening of the assessment in the present case has taken place within a period of four years of the end of the relevant assessment year. The power of the Assessing Officer to reopen an assessment within a period of four years of the relevant assessment year is undoubtedly wider than where a period of four years has elapsed. Once a period of four years has elapsed, the proviso to Section 147 stipulates that there must be a failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment as a result of which income chargeable to tax has escaped assessement. But, that is not to say that within a period of four years, the power of the Assessing Officer to reopen an assessment is untrammelled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion on the ground that it would vest arbitrary powers in the Assessing Officer. ...... 14 Now, undoubtedly an order of assessment which has been passed for a subsequent assessment year may furnish a foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of assessment. Otherwise, a mere change of opinion on the part of the Assessing Officer in the course of assessment for a subsequent assessment year would not by itself legitimise the reopening of an assessment for an earlier year. 15 In Raymond Woollen Mills Ltd. v/s Income Tax Officer [1999] 236 ITR 34 (SC), the case of the Revenue was that the Assessee was charging to its profit and loss account, fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals etc.. However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included by the Assessee. This resulted in undervaluation of inventories and understatement of profits. This information, as the Supreme Court emphasized, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The statutory auditors had also included a note in the report. During the course of assessment proceedings, the Assessee addressed a comprehensive letter dated 18 November 2009 making a full disclosure of facts. Now it is in this background that the order of assessment under Section 143(3) must be considered. The Assessing Officer specifically discussed in the course of the assessment order the matters in respect of which he has made a disallowance either fully or in part. Since the Assessing Officer did not find any justification to reject the claim of the Assessee in respect of the issue of container detention charges, there was no specific discussion in the course of order. In this regard the following observations of a Division Bench of this Court in Idea Cellular Ltd. v/s Deputy Commissioner of Income Tax [2008] 301 ITR 407 (Bom) have relevance: 9. It was also sought to be contended that since the Assessing Officer had not expressed any opinion regarding this matter in his original assessment order, it could not be said that there was any change of opinion in this case. In our view, once all the material was before the Assessing Officer and he chose not to deal with the sev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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