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TMI Blog2016 (9) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee vide pages 77 to 83 of paper book that major port trusts in India had given confirmation to the assessee port trust that they are being assessed only as a ‘local authority’ and not in the status of a ‘company’ under the Income Tax Act and the same has been accepted by the Income Tax Department - Assessment u/s 147 quashed for want of jurisdiction - Decided in favor of assessee. - I.T.A Nos. 2628 to 2630/Kol/2013, I.T.A Nos.2868 to 2870/Kol/2013 - - - Dated:- 8-7-2016 - Shri N. V. Vasudevan, JM And Shri M. Balaganesh, AM For the Assessee: Shri N. K. Poddar, Sr. Counsel For the Revenue: Shri Niraj Kumar, CIT, DR ORDER Per Bench These cross appeals by assessee and revenue are arising out of separate orders of CIT(A)-XX, Kolkata vide appeal Nos. 254-256/CIT(A)-XX/Cir-35/2010-11/Kol dated 27.09.2013. Assessments were framed by ACIT, Circle-35, Kolkata u/s. 147/143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AYs 2003-04 to 2005-06 vide his separate orders all dated 30.12.2010. 2. The only issue to be decided in the appeals of the revenue is that whether the assessee port trust could be assessed in the status of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Local Authority, as considered by the assessee. The assessee also is in cross appeal before us on the following grounds:- 1. That the learned Commissioner of Income Tax (Appeals) erred in not adjudicating the grounds taken by the Appellant Port Trust in regard to the invalidity of the initiation of reassessment proceedings in the instant case in respect of the assessment year 2003- 04. 2. That the learned Commissioner of Income Tax (Appeals) should have also held that the initiation of the impugned reassessment proceedings by the Assessing Officer, in the instant case, based upon the reasons recorded, as communicated to the Appellant Port Trust vide his letter dated 18th May, 2010, was wholly without jurisdiction, illegal, invalid and void ab-initio; and consequently all proceedings taken in pursuant to the impugned Notice dated 22nd March, 2010 purportedly issued under section 148/ 147 of the Income Tax Act, 1961, including in particular the impugned Reassessment Order dated 30th December, 2010 purportedly passed under section 147 / 143(3) of the said Act, were also illegal, invalid and nullity in law. 3. That the learned Commissioner of Income Tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of original assessment proceedings for three years (pages 66 to 67 of PB) ; copy of reply addressed by assessee to the ld AO in response to his letter dated 26.5.2009 (pages 68 to 76 of PB); copy of letter addressed by Chennai Port Trust to the assessee intimating that the Chennai Port Trust is also assessed to income tax as a local authority (page 77 of PB) ; copy of letter addressed by Mormugao Port Trust to the assessee intimating that the Mormugao Port Trust is also assessed to income tax as a local authority (page 78 of PB) ; copy of letter addressed by Mumbai Port Trust to the assessee intimating that the Mumbai Port Trust is also assessed to income tax as a local authority (page 79 of PB) ; copy of letter addressed by New Mangalore Port Trust to the assessee intimating that the New Mangalore Port Trust is also assessed to income tax as a local authority (page 80 of PB) ; copy of letter addressed by Cochin Port Trust to the assessee intimating that the Cochin Port Trust is also assessed to income tax as a local authority (page 81 of PB) ; copy of letter addressed by Visakhapatnam Port Trust to the assessee intimating that the Visakhapatnam Port Trust is also assessed to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny exemption u/s 10(20) of the Act and hence the newly inserted explanation supra cannot be made applicable to the assessee port trust. Infact from the returns and the assessments framed in original scrutiny assessment proceedings for the Asst Years 2003-04 , 2004-05 2005-06, we find that the ld AO had accepted the status of the assessee as a local authority and assessee is paying taxes on its income, if any. From the perusal of the scrutiny assessment orders passed for the Asst Years 2003-04 to 2005-06 u/s 143(3) of the Act, we find that the assessee had not claimed any exemption u/s 10(20) of the Act so as to warrant the applicability of newly inserted Explanation in section 10(20) of the Act. 6.4. We hold that the meaning of the expression local authority as inserted in the Explanation to section 10(20) of the Act with effect from Asst year 2003-04 is not applicable for determining the status in which the assessee should be assessed nor it is relevant for deciding the rate of tax applicable. Up to assessment year 2002-03, KOPT was exempted from payment of tax under section 10(20) of the Act as it existed up to assessment year 2002-03. As per section 3(31) of General Claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of income of the assessee or particulars of income of the assessee. This is more relevant as the reopening was made beyond 4 years from the end of the relevant assessment year. He argued that no material evidence has been brought on record by the ld. AO to prove that there was failure on the part of the assessee from making the full and true disclosure of its income warranting reopening beyond 4 years. We find from page 30 of the paper book that the ld AO had recorded the following reasons for reopening the assessment:- Sub.: Reasons for re-opening under section 148 of the I. T. Act for A.Y. 2003-04. Ref.: Your letter No. Fin/08/Tax dated 29/04/2010 received by this officer on 03/05/2010. Please refer to the above. Reasons recorded for re-opening for A.Y. 2003-04 in your case stand as under: The Supreme Court In the case of Adityapur Industrial Area Development Authority v. Union of India [2006] 283 ITR 97 has held that income of an authority, even constituted by a notification under an Act enacted by the Legislature, is not the income of the Government and the Authority cannot claim exemption from Union taxation. The Prime Minister's Council on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that income of an Authority even though constituted by a notification under an Act enacted by the State legislature, is not income of the State Government and the Authority cannot claim exemption from Union Taxation. Reply - It is submitted that the fact of that case is totally different from that of the assessee. The assessee has not claimed exemption from Union Taxation on the ground of it being 'Government' KoPT is a local authority under the General Clauses Act but its exemption under section 10(20) of the Income Tax Act has been withdrawn. It filed its return of income for the assessment year in question offering its income for tax. In the case cited by you the assessee sought to claim exemption under section 10(20) which is not in the case of KoPT. (ii) In the reason for reopening provided by you, you have also stated that the Prime Minister's Council on trade and industry in its recommendation on Ports has recommended that to ensure that Port Trusts start operating along more commercial lines, it is necessary to corporatise them. You have also commented that steps have already been taken for corporatisation of JNPT, New Mangalore and Tuticorin Port Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income Tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or (iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company: Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration. Thus, KoPT is not covered by this definition of company as per the Income Tax Act. (vi) Similarly, section 10(26) of the Act gives the definition of 'Indian Company' which is as under --- Indian Company means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes --- (i) a company formed and registered under any law relating to companies formerly in force in any part of India (ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of companies. Further, section 5 of the Major Port Trust Act, 1963 not only provides every Board under this Act to be a Body corporate but also common seal with power, subject to the provision of this Act to acquire; hold or dispose of property and may by name by which it is constituted, sue or be sued. Further section 2(17)(i) of the Income tax Act states that Company also means any Indian company and when read with section 2(26)(ia) which states that Indian Company means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes a corporation established by or under a Central, State or Provincial Act. The Kolkata Port Trust also comes under the Major Port Trust Act, 1963. In fact the commissioners of the port were responsible for the port till January 1975, after which the responsibility is on Major port Trust Act, 1963 which came into force then. Therefore, the assessee fulfills all the criteria of a company but has been assessed at a lower rate as a Local Authority and not as a company. On examination of the assessment records, it emerged that the above facts was not considered during assessment u/s 143(3) of the income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tus to be assessed as a local authority and its income was exempt u/s 10(20) of the Act was accepted by the Income Tax Department upto Asst Year 2002-03. Only pursuant to an amendment made in section 10(20) of the Act with effect from Asst Year 2003-04, the situation has undergone change wherein the activities of the assessee port trust would not fall under the definition of the expression local authority . At the cost of repetition, we state that the said definition inserted in section 10(20) is only applicable for the purpose of section 10(20) of the Act and for assessee s claiming exemption under that section. It is not in dispute that the assessee had not claimed any exemption u/s 10(20) of the Act for the impugned assessment years under appeal before us. Hence the amendment in section 10(20) is not at all applicable to the assessee port trust. We also find from the paper book filed by the assessee vide pages 77 to 83 of paper book that major port trusts in India had given confirmation to the assessee port trust that they are being assessed only as a local authority and not in the status of a company under the Income Tax Act and the same has been accepted by the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal authority for the purposes of Payment of Bonus Act, 1965, which Act also did not contain any definition of the expression Local Authority . Especially in page 312 para 5, the Hon ble Supreme Court noted that Delhi Development Authority was constituted by the Central Government under section 3 of the Delhi Development Act, 1957. The said Act inter alia provided that the Delhi Development Authority shall be a body corporate having perpetual succession and a common seal, with the usual corporate attributes. CIT vs U.P.Forest Corporation reported in (1998) 230 ITR 945 at 951 (SC) The Hon ble Supreme Court in the absence of any definition of the expression Local Authority in the Income Tax Act, 1961, adopted and applied the definition of that expression as contained in section 3(31) of the General Clauses Act, 1897 for the purposes of examining whether U.P.Forest Corporation was or was not a Local Authority under the Income Tax Act, 1961. CIT vs Agricultural Marketing Produce Committee reported in (2001) 250 ITR 369 (Del) The Hon ble Delhi High Court after reiterating the aforesaid decisions of the Hon ble Apex Court quoted inter alia the following three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trusts such as Chennai Port Trust, Mormugao Port Trust, Mumbai Port Trust, New Mangalore Port Trust, Cochin Port Trust and Visakhapatnam Port Trust were being assessed to income tax as Local Authority . 6.13. We find that the assessments completed u/s 143(3) of the Act for the Asst Years 2003-04 to 2005-06 were reopened without any tangible material brought on record by the ld AO. We also hold that the reassessment is done only due to change of opinion and the above facts and various correspondences addressed by the Ministry of Shipping (under which assessee trust is primarily administered and controlled) ; various correspondences of Ministry of Finance, Income Tax Department, Government of India ; from the reasons recorded for re-opening the assessments for the three assessment years, we hold that the reassessment made for all the three assessment years deserves to be quashed and declared void ab initio. We also place reliance on the decision of the Hon ble Supreme Court in the case of CIT vs Kelvinator of India Ltd reported in (2010) 320 ITR 561 (SC) in this regard, wherein it was held that : After the amendment, the AO has to have reason to believe that income has escape ..... 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