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TMI Blog2020 (4) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT] reopening on the basis of change of opinion is not permissible under the law. Hence, allow this ground of the appeal of the assessee and quash the order passed by the AO holding that the AO has initiated the proceedings u/s 147 r.w.s. 148 on the basis of change of opinion. - Decided in favour of assessee. - ITA No. 2548/MUM/2012 And ITA No. 2128/MUM/2012 - - - Dated:- 22-1-2020 - Shri Rajesh Kumar (AM) And Shri Ram Lal Negi (JM) For the Assessee : Shri Nitesh Joshi (AR) For the Revenue : Shri R. Manjunatha Swamy (CIT) ORDER PER RAM LAL NEGI, JM These are the cross appeals filed by the assessee and the revenue against the order dated 06.01.2012 passed by the Commissioner of Income Tax (Appeals)-24 (for short the CIT (A) ), Mumbai, for the assessment year 2005-06, whereby the Ld. CIT (A) has partly allowed the appeal filed by the assessee against the assessment order passed u/s 143 (3) r.w.s. 147 of the Income Tax Act, 1961 (for short the Act ). ITA No. 2548/MUM/2012 (Assessment Year: 2005-06) Brief facts of the case are that the assessee engaged in the business of merchant shipping, filed its return of income for the assessment year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment U/s 147 The Commissioner of Income Tax (Appeals) (Hereafter referred to as CIT (A) failed to appreciate that the jurisdictional pre-conditions necessary for invoking the jurisdiction under section 147 to 151 of the Income Tax Act, had not been fulfilled in the present case and therefore the re assessment order passed by the Assessing Officer (hereafter referred to as A.O.) was illegal and bad in law. Ground No. 2: Income under the head Prior Period Adjustments: The CIT (A) erred in upholding the action of the A.O. in assessing the prior period income of ₹ 19.30 crore. He failed to appreciate that the prior period income constituted profits from core activities and therefore could not be brought to tax under the Act. Ground No. 3: Additions under Sundry Receipts 3.1 the CIT (A) has erred in holding that sundry receipts of ₹ 11.75 crore were not arising out of the core activities of operation of qualifying ships and the provisions of Tonnage Tax scheme was not applicable to these receipts. 3.2 In the alternative and without prejudice to the above since the sundry receipts are assessed to tax as business income. The CIT (A) ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 17380 lacs (profit on sale of ships) and 1176 lacs (sundry receipts) in its turnover for the purpose of computing the income under tonnage tax scheme is concerned, the provisions of chapter XII G of the Act are applicable to a qualifying company from the business of operating ships and the assessee company is a qualifying company as per section 115VC of the Act and all its ships whether owned or operated within the meaning of section 115VB of the Act. Section 115 (1) of the Act includes profit from core activities and from incidental activities. As per the proviso to section 115VI (1) incidental income in excess of 1/4th per cent of the turnover from core activities is taxable under the Act. The assessee has complied with the aforesaid provisions. The Ld. counsel invited our attention to pages 103 to 109 of the paper book which is the copy of revised computation of income under tonnage tax regime pertaining to the assessment year under consideration. The Ld. counsel further pointed out that all the relevant facts and details were available with the AO at the time of original assessment proceedings and after going through the same, the AO passed the assessment order, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities below. We have also gone through the cases relied upon by the Ld. counsel for the assessee. The assessee has challenged the action of the Ld. CIT (A) on legal ground as well as on merits. The legal ground raised by the assessee is that the AO has reopened the assessment merely on the basis of change of opinion as the entire facts , details and explanations were available with him during the assessment proceedings u/s 143(3) of the Act. Hence, in view of the contention of the assesse we see the contents of reasons recorded for reopening of the assessment, the relevant paras of which read as under:- 2. It is seen from the records that assessee has included ₹ 2229 lakhs (reimbursement of overhead expenses), ₹ 17380 lakhs (profit on sale of ships) and ₹ 1176 lakhs (sundry receipts) in its turnover for the purpose of computing the income under tonnage tax scheme. However, as per section 115VI, the assessee was liable to reduce these receipts from its turnover. Thus, assessee failed to discloses these facts in its return of income and also during the assessment proceedings u/s 143 (2). 3. Further, it is seen that before A.Y. 2005-06, assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. In order to substantiate its contention, the Ld. counsel invited our attention to the provisions of Chapter XI-G of the Act and further referred to page 103 to 109 of the paper book. As pointed out by the Ld. counsel, the assessee has submitted the profit and loss account showing receipt which formed part of the operating earnings schedule of operating earnings at page 63 of the paper book where the said amount has been included as a part of income from managed vessels. In the scheduled to the computation, the assessee has included remuneration for managed vessels as well as reimbursement of overheads for managed vessels. The remuneration has been reflected as income from incidental activity and reimbursement of overheads has been shown as shipping income. In response to the notice dated 23.11.2007 the assessee has explained the nature of receipt. 8. Further, as pointed out by the Ld. counsel, the assessee has treated the income on sale of vessels as part of the relevant shipping income. During the assessment proceedings, the AO vide notice dated 08.10.2007 asked the assessee to explain as to why such profit should not be treated as capital gain. In response thereof th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case the Tribunal was justified in cancelling the reassessment order passed u/s 147 and holding the same as bad in law (b) whether on the facts and circumstances of the case the Tribunal was justified in holding that it was a case of change of opinion as the AO had not expressed any opinion during the regular assessment proceedings. The Hon ble Court decided both the questions in favour of the assessee and against the revenue. The observations of the Hon ble Court read as under:- 11. The decisions cited by Mr. Chhotaray, learned counsel on behalf of the Revenue, in support of his submissions that oversight in passing the assessment order will give the Assessing Officer jurisdiction to issue notice placed heavy reliance upon the case Kalyanji Mavji and Co. (supra). However, on the above aspect it has been held to be no longer good law by the subsequent decision of the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC) wherein the Supreme Court has observed thus (page 1004): Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of section 9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings are sought to be initiated, came to the notice of the Income Tax Officer subsequent and formed an opinion on the said material in the original assessment itself then he would be powerless to start the proceedings for reassessment. Where, however, the Income Tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147 (b) of the Act. 13. The decision of the Delhi High Court in the case New Light Trading Co. (supra) does not indicate what reasons were recorded for issuing notice of reopening therein. In the present case, the reasons as recorded by the Assessing Officer and reproduced hereinabove clearly indicate that there was no tangible material adverting to the reasons recorded for issuing reopening notice. Similarly, the decision of this court in the case Dr. Amin s Pathology Laboratory (supra), it has been observed that if any item has escaped from assessment which otherwise is includible within the assessment and the Assessing Officer notices it subsequently by his own investigation or by reasons of some information received by him, one cannot say th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -06) The revenue has preferred the present appeal by raising the following effective grounds: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not deleting the addition made by the A.O. u/s 41 (1) of the I.T. Act and allowing the tonnage tax provisions to the assessee on sundry credits written back to the extent of ₹ 12,36,82,541/- pertaining to pre tonnage tax period, without appreciating the fact that the income arising from sundry credits written back does not fall into core activity of qualifying ship. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of ₹ 12,04,22,721/- made u/s 41(1) of the I.T. Act on account of excess provisions written back, without appreciating the fact that the income arising out of excess provisions written back does not fall into the core activity of qualifying ship. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of ₹ 2,66,83,268/- made by the A.O by denying tonnage tax provisions to the prior period income under normal provisions. 4. One the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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