2012 (11) TMI 510 - AT - Income Tax

Revenue's 40 appeals dismissed, respondent assessed under normal provisions for shipping business

The Tribunal dismissed all 40 appeals filed by the Revenue, confirming that the respondent should be assessed under normal provisions due to its regular ... Tax effect - CBDT Instruction No. 3/2011 - monetary limit for filing departmental appeals - summary assessment under section 172 - option under section 172(7) to be assessed under the normal provisions - occasional shipping business versus regular shipping business - prohibition of multiple assessments in respect of same income - inapplicability of section 172 summary procedure where DTAA relief is claimedTax effect - CBDT Instruction No. 3/2011 - monetary limit for filing departmental appeals - Maintainability of departmental appeals where tax effect per voyage-return was less than Rs. 3 lakhs - HELD THAT: - Instruction No. 3/2011 requires the Assessing Officer to compute 'tax effect' separately for every assessment year in respect of the disputed issues in the case of every assessee, and appeals may be filed only if the tax effect in the relevant assessment year for that assessee exceeds the prescribed monetary limit. The Tribunal held that 'case' for the purpose of the Instruction means the overall disputed-issue tax effect in a particular assessment year in the case of the assessee (not artificially by each voyage-return), and having tested the matter on that basis found that the tax effect in the assessment year under appeal in the case of the respondent-company exceeds Rs. 3 lakhs. Consequently all 40 departmental appeals were held maintainable. [Paras 11]All 40 appeals filed by the Revenue are maintainable under CBDT Instruction No. 3/2011.Summary assessment under section 172 - option under section 172(7) to be assessed under the normal provisions - occasional shipping business versus regular shipping business - prohibition of multiple assessments in respect of same income - inapplicability of section 172 summary procedure where DTAA relief is claimed - Validity of composite order passed by AO under section 172(4) and whether assessment should be under normal provisions following exercise of option under section 172(7) - HELD THAT: - Section 172 provides a summary procedure for taxing profits of non-residents from occasional shipping business at a prescribed rate on freight paid/payable, while section 172(7) permits the owner/charterer to opt to be assessed under the normal provisions by filing a return under section 139(1). The Tribunal accepted the CIT(A)'s factual finding that the freight beneficiary was engaged in regular shipping business and that the respondent had filed returns under section 139(1) (thereby invoking the option under section 172(7)), and observed that the AO in summary proceedings under section 172(4) has no jurisdictional mandate to adjudicate claims under DTAA or to allow deductions which require regular assessment procedure. Multiple assessments of the same income (summary under section 172(4) and regular under section 139) are not permissible. On these facts the Tribunal confirmed the CIT(A)'s quashing of the AO's composite section 172(4) order and held that the assessee is to be assessed on the basis of the return filed under section 139(1) in accordance with normal provisions. [Paras 15, 17, 18, 19]The CIT(A)'s order quashing the AO's composite assessment under section 172(4) is confirmed; the respondent is to be assessed under the normal provisions in view of the option under section 172(7) and its factual finding of regular shipping business.Option under section 172(7) to be assessed under the normal provisions - prohibition of multiple assessments in respect of same income - Direction as to further proceedings by the jurisdictional Assessing Officer in consequence of quashing of section 172(4) order - HELD THAT: - The CIT(A) found that the respondent had exercised the option under section 172(7) and returned its income under section 139(1). The Tribunal observed that, since the respondent accepts liability to be assessed under section 172(7), the jurisdictional Assessing Officer may verify whether the income taxed by the summary 172(4) order has been included in the return filed under section 139 and, as warranted by such verification, take action in accordance with law to ensure the income does not escape assessment under normal provisions. This leaves factual verification and consequential assessment to the AO in terms of section 172(7). [Paras 20]The jurisdictional Assessing Officer is directed to verify the position and take such action as may be warranted in law under section 172(7) to ensure the income from the voyages is assessed under the normal provisions.Final Conclusion: The Tribunal dismissed all 40 departmental appeals. It held the appeals maintainable under CBDT Instruction No. 3/2011, affirmed the CIT(A)'s quashing of the AO's composite summary assessments under section 172(4) on the ground that the freight beneficiary is in regular shipping business and had exercised the option under section 172(7) to be assessed under the normal provisions, and directed the jurisdictional Assessing Officer to verify and proceed under section 172(7) so that the voyage income is not left unassessed. Issues Involved:1. Validity of the composite order passed by the AO under Section 172(4) of the Income-tax Act.2. Applicability of Section 172(7) and the regular assessment provisions.3. Maintainability of 30 out of 40 appeals based on the tax effect being less than Rs. 3 lakhs.4. Jurisdictional AO's authority to tax the income from cargo transportation business as per normal provisions.Detailed Analysis:1. Validity of the Composite Order Passed by the AO under Section 172(4):The AO passed a composite order under Section 172(4) for 40 voyages, assessing the taxable income at Rs. 2,09,67,176/- (7.5% of Rs. 27,95,62,354/-). The CIT(A) quashed this order, stating that the respondent-company is engaged in regular shipping business, not occasional shipping business, and had filed returns under Section 139(1). The CIT(A) held that the composite order under Section 172(4) is null and void as the respondent opted for assessment under Section 172(7).2. Applicability of Section 172(7) and the Regular Assessment Provisions:The CIT(A) found that the respondent-company, acting as an agent for a freight beneficiary, was engaged in regular shipping business and had filed returns under Section 139(1). Therefore, the provisions of Section 172(4) were inapplicable, and the respondent should be assessed under normal provisions, including Section 44B. The CIT(A) emphasized that the Income-tax Act does not permit multiple assessments for the same income. The Tribunal upheld this view, confirming that the respondent's filing under Section 139(1) established its engagement in regular shipping business, thus falling under Section 172(7).3. Maintainability of 30 Out of 40 Appeals Based on the Tax Effect Being Less Than Rs. 3 Lakhs:The respondent's representative raised a preliminary objection, citing CBDT Instruction No. 3/2011, which prohibits appeals where the tax effect is less than Rs. 3 lakhs. The Tribunal examined Paragraphs 2-5 of the instruction and concluded that tax effect in a 'case' means the overall tax effect in respect of disputed issues in a particular assessment year. Since the tax effect in the assessment year exceeded Rs. 3 lakhs, all 40 appeals were deemed maintainable.4. Jurisdictional AO's Authority to Tax the Income from Cargo Transportation Business as per Normal Provisions:The CIT-DR argued that the CIT(A) did not verify whether the respondent included the income from the 40 voyages in its return filed under Section 139(1). The Tribunal noted that the CIT(A) found the respondent had filed returns at Mumbai, indicating regular shipping business. The Tribunal directed the jurisdictional AO to verify and ensure that the income from the 40 voyages is assessed under normal provisions as per Section 172(7).Conclusion:The Tribunal dismissed all 40 appeals filed by the Revenue, confirming the CIT(A)'s order that the respondent should be assessed under normal provisions due to its regular shipping business and filing under Section 139(1). The Tribunal also directed the jurisdictional AO to verify and assess the income from the 40 voyages under normal provisions.