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TMI Blog2019 (12) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA Nos.2551 & 2129/MUM/2012 - - - Dated:- 29-11-2019 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER For the Applicant : Shri Nitesh Joshi For the Respondent : Shri R. Manjunatha Swamy, CIT ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned cross appeals have been filed one by the assessee and one by the Revenue against the orders of the Learned Commissioner of Income Tax (Appeals)-24, Mumbai dated 06/01/2012 (in short Ld.CIT(A) ) arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234D. Your appellant crave leave to add, amend, alter, modify, cancel, withdraw any of the ground/s of appeal before final hearing of appeal. 3. The assessee in the first ground of appeal has challenged the validity of the re-assessment framed under section 147 of the Act on the ground that it was initiated on the same set of documents which were available during the original assessment proceedings under section 143(3) of the Act. 4. Before we embark an enquiry whether the proceedings under section 147 of the Act were initiated based on the same set of documents which were available during the original assessment proceedings under section 143(3) of the Act, it is pertinent to refer the reasons recorded for initiating the proceedings under section 147 of the Act. The reasons recorded reads as under: The return of income was filed on 28/11/2006 declaring total income of ₹ 194,71,41,186/-. This was the second year of assessee under the tonnage tax scheme u/s 11 5V of the I. T. Act, 1961. The return was processed U/s 143(1) and notice u/s 143(2) was served within the stipulated time period Order u/s 143(3) dated 05/12/2008 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year under consideration. The details of the items stand as under: a. Prior Period income of ₹ 572 lacs b. Sundry credit balances written back of ₹ 47 lacs c. Sundry income received/ written back of ₹ 1111 lacs. 6. The above income has been derived by the assessee prior to the tonnage tax scheme, therefore the same should have been offered to tax under the normal provisions of the Act. But the assessee has not done so which resulted in the escapement of income. 7. At the outset, the ld. AR for the assessee before us claimed that the proceedings for re-assessment under section 147 of the Act were based on the change of opinion on the same set of documents which were available during the original assessment proceedings under section 143(3) of the Act. 8. The learned AR before us filed a paper book running from pages 1 to 288 and submitted, regarding the provision written back of ₹ 23.94 crores (including the amount of ₹ 5.18 crores representing the handling expenses of stuffed containers transshipment handling expenses container), before us that the impugned issue was duly verified dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 195) iii- CIT v/s Jet Speed Audio Pvt. Ltd. (BOM HC) (372 ITR 762) iv- State Bank of India (Mumbai) v/s ACIT writ petition no. 271 of 2018 10.4 The learned AR also claimed that the tribunal in the own case of the assessee involving identical facts and circumstances has decided the issue in favour of the assessee in ITA No. 145/MUM/2011 for the assessment year 2007-08 vide order dated 29th of July 2011. 11. On the other hand, the learned DR before us submitted the 1st year involving the identical issue in the own case of the assessee is AY 2005-06 but the learned AR for the assessee is intentionally taking up the matter for the assessment year 2006-07 in order to get the undue benefit. 11.1 The learned DR also claimed that the reopening was made in accordance to the 1st proviso to section 147 of the Act. 11.2 The learned DR before us submitted that the AO has not applied his mind during the original proceedings framed under section 143(3) of the Act for the items of income discussed in the reasons recorded which has resulted the escapement of income. The learned DR in support of his contention relied on the Judgments as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.3 The ld. DR also submitted that the assessee is enjoying double benefit by writing back the items discussed in the reasons recorded. As such, the assessee on the earlier occasion has claimed the deduction under normal computation of income and for the same items of income written back in the year under consideration, it is paying the tax on presumption basis. 12. The learned AR in his rejoinder submitted that the 1st proviso to section 147 of the Act is not applicable in the case on hand. The learned AR also claimed that all the necessary facts about the items of income recorded in the reasons to believe were available before the AO during the original assessment proceedings which is implied that the AO has applied his mind. 12.1 The learned AR also claimed that there were many more issues in the assessment year 2005-06 whereas the case on hand involves less complexity. Therefore, he prayed to take up the matter 1st for the year under consideration. 12.2 The learned AR also submitted that the issue of double benefit has already been considered by this tribunal in the own case of the assessee in ITA No. 145/Mum/2011 and decided in its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 54 TOTAL 2,394 1,505 SCHEDULE 19 OTHER INCOME 2005-06 Rupees In lakhs 2004-05 Rupees In lakhs Sundry Receipt - Crore shipping activities 1,111 1,175 - Incidental activities 354 578 1,465 1,753 Profit on sale of Fixed Assets (other than Ships) 29 2 Dividend on trade Investments 201 372 Sundry Credit Balances written back Core shipping activities 47 1,237 TOTAL 1,742 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res, Repairs Maintenance 84 (-)586 Insurance P I 5 24 Hire of Chartered Steamer 465 44 Establishment Expenses (-)19 169 Sundry Steamer Charges 44 Nil Expenses on Post Retirement Medical Scheme Nil 19 Shore Staff Salary and other expenses 6 Nil Others 13 78 TOTAL 1631 (-)322 16. In the present case the assessment was framed under section 143(3) of the Act vide order dated 5th December 2008. The income of the assessee was chargeable to tax under Chapter XII-G of the tonnage tax sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot be equated with the business of operating ships. The former fall into a different domain which cannot be linked with core activities within the definition of Section 115VI(2) of the Income-tax Act. As regards Excess Provisions Sundry Credit balances written back, these consist of such items as provision for bad and doubtful debts, provision for foreign tax, provision for repairs etc. which, by their very definition, cannot form part of core shipping activities. The same is the case with Sundry Receipts comprising income from commission on disbursements, rent on furniture, rental income on ownership flats etc. So far as reimbursement of overhead from managed vessels is concerned, this basically constitutes recovery of cost incurred by the assessee which has been shown separately instead of netting off with expenses. As such, this is not income per se cannot form part of income from core activities . It may be mentioned that during the course of assessment proceedings, the assessee was asked to give year-wise break-up of the different components forming part of excess provision written back. The idea was to ascertain whether any of the corresponding expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me consultancy charges; ii) income from loading or unloading of cargo; iii) ship management fees or remuneration received for managed vessels; and iv) maritime education or recruitment fees. 19. Similarly, the assessee also 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. 20. 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. 21. In view of the above, it is transpired that the AO in the ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific queries on several occasions and all the queries were answered. Once all the material was before the Assessing Officer and he chose not to deal with the several contentions raised by the petitioner in his final assessment order, it could not be said that he had not applied his mind. Hon ble Bombay High Court in the case of Asian Paints Ltd. v/s DCIT reported in 308 ITR 195 wherein it was held as under; 8. In the order rejecting the objection filed by the petitioner to the notice under section 148, respondent No. 1 has observed verification of assessment record reveals that the said details were called for but inadvertently the same were not taken into account while framing the assessment and, therefore, it cannot be said that there is a change of opinion. According to respondent No. 1, thus, the relevant material was available on record, but he failed to apply his mind to that material in making the assessment order. The question is, can respondent No. 1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case CIT v. Kelvinator of India Ltd. [2002] 123 Taxman 433 (Delhi) (FB) that the concept of 'change of opinion' brought in so as to have in built test to check abuse of power. In view of the above, we find no substance in the submissions raised by Mr. Chhotaray. 22. We also draw support and guidance from the judgment of Hon ble Bombay High Court in the case of State Bank of India (Mumbai) v/s ACIT writ petition no. 271 of 2018 wherein it was held as under wherein it was held as under; 5. As against the above, it is the case of the Revenue that the re-opening notices should not be interdicted at this stage and the petitioners should be directed to contest the same before the Authorities under the Act. It is submitted that in this case, the Assessing Officer while passing the regular assessment orders had overlooked and/or ignored this particular claim. It is submitted that it is not a case of change of opinion neither the assessment order referred to allowing of this claim nor the assessment order was preceded by any queries with regard to the subject claim of the petitioners. Thus, there was no formation of opinion on the issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erating qualifying ships shall be considered as a separate business distinct from all other activities or business carried on by the company. The mode of computation of tonnage income is given under section 115VG. The term relevant shipping income has been defined in section 115VI. It is basically classified into two categories i.e., profits from core activities referred to in sub-section 2 and profits from incidental activity referred to in sub-section 5. The issue is, whether the income by way of right back of provisions of sundry credit balances and prior period expenses can be considered as income from core activities of a tonnage tax company. In our opinion, write back of these items is to be considered as income from core activity. In a going concern, such write backs and making of supplementary provisions takes place. The Assessing Officer as well as the Commissioner (Appeals) have treated the very same income which is taxable under section 41(1) differently. The first being expenditure claimed in pre-tonnage tax scheme assessment years and the second being expenditure claimed in post tonnage tax scheme assessment years. Such a segregation is not permissible under the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 25. The argument of the ld. DR for the Revenue that the assessee is getting double benefit has been duly considered by the Tribunal as discussed above. 26. We also note that the ld. DR has referred to certain Judgments as discussed above but we do not find any reason to recapitulate all of them but suffice to say that these are based on different proposition and do not apply in the present facts of the cases. 27. Thus, in view of the above we hold that the reopening of the impugned case under section 147 of the Act in itself is invalid and against the laws settled by the Hon ble Supreme Court/ High Courts in the cases cited above. 28. The learned DR at the time of hearing has not brought anything on record contrary to the arguments advanced by the ld. AR for the assessee. Therefore, we do not find any reason to uphold in the finding of the learned CIT (A). Accordingly, we quashed the assessment framed under section 147 of the Act. As the assessment framed under section 147 of the Act has been quashed, we are not inclined to decide the issue on merits. In view of the above, the ground of appeal filed by the assessee, on tech ..... 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