TaxTMI 
TaxTMI 
2025 (8) TMI 1492
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....ted on the basis of mere change of opinion, without any new tangible material/ information coming to the possession of the assessing officer subsequent to completion of assessment under section 143(3) of the Income Tax Act, 1961 ('the Act'). GROUND NO. 2 The CIT(A) has erred in not treating reimbursement of overheads for managed vessels as profit from core activities. 3.0 GROUND NO. 3 The CIT(A) has erred in law and on facts in directing the assessing officer to make addition towards mark-up calculated @ 2.50% on reimbursement of overheads for managed vessels. The appellant craves leave to add and/or to amend and /or to delete any ground out of the foregoing grounds of appeal, at any time before the hearing or during the course of hearing." 4. The grievance of the revenue reads as under:- "1. Whether on the facts of the case and in law, Ld. CIT(A) was justified in deleting the mark-up on reimbursement of overheads for managed vessels form the total income of the appellant? 2. Whether on the facts of the case and in law, Ld. CIT(A) was justified in deleting the foreign fluctuation gain from the total income of....
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....ter No : ITBA/AST/F/17/2021-22/1037026532(1) Sir/ Madam/ M/s, Subject: Communication of reasons of reopening u/s 147 for A.Y -2016-17 in the case of THE SHIPPING CORPORATION OF INDIA LIMITED reg. The assessee had filed e-return on 29.11.2016 declaring total income of Rs. 179,14,88,584/- under normal provision of the Act and Book Profit of Rs. 165,32,24,597/- u/s 115JB of the Income tax Act. The case was selected for scrutiny and assessment for A.Y. 2016-17 was completed on 11.12.2018 after scrutiny assessed income of Rs. 223,10,90,360/- under normal provision of the Income tax Act and computed Book Profit of Rs. 188,11,20,919/- u/s 115JB of the Income tax Act. 2. Subsequently on perusal of the records it was observed that the assessee had opted tonnage tax scheme i.e presumptive tax Chapter XII G and approved by the competent authority under section 115VP of the IT Act. Thus the income was offered from Core activity, Incidental Activity under tonnage tax and Income from Other source in their computation. The Assessee had offered Net gain on foreign currency transaction of Rs. 13.24 crore and Income from Rescindment of contracts of Rs.....
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....new material on record to establish that income has escaped assessment. The objections raised by the assessee read as under:- Ref: ITBA/AST/F/17/2021-22/1037026532(1) To Deputy Commissioner of Income Tax Circle 3(4), Mumbai Kind Attention: Shri DEEPAK SHUKLA Dear Sir, Sub: The Shipping Corporation of India Limited. PAN: AAACT1524F. Assessment Year: 2016-17 The assessee refers to the captioned notice dt. 27th March 2021 issued u/s 148 of the Act. The assessee further refers to its reply dt. 19th April 2021 filed in response to the said notice and reasons for reopening dt. 17th November 2021 received by the assessee on 18th November 2021. In this regard, the assessee would like to submit its objections to issuance of notice u/s 148 as under: A. Background A.1 The return of income for AY 2016-17 was filed by the assessee on 29 November 2016 declaring total income of Rs. 179,14,88,584/- under normal provisions of the Act and book profit of Rs. 165,32,24,597/-. The return was selected for scrutiny and the assessment order was passed on 11th December 2018 assessing total income at Rs. 223,10,90,360/- unde....
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....come from incidental activity and excluded from the core activity turnover in paral 1.3 (page 1 of 33) of the assessment order. As the income was excluded from the Core activity turnover, the said income should have been considered as Income from Incidental Activity while computing the income under the head incidental activity under tonnage tax. However, it was observed that during assessment the same had considered as income under the head Incidental Activity under tonnage tax, even it was excluded from the turnover of Core Activity. This has resulted in under assessment of income amounting to Rs. 35,79,48,794/-. 2.3 Therefore I am of the view that income to the extent of amount of Rs. 35,79,48,794/-, as explained above, has escaped assessment. "... B. In the instant case, Reopening is invalid absence of any new material on record to establish that income has escaped assessment i. The reasons recorded in the instant case clearly reveal that there was no new information on record to support the reopening. It is respectfully submitted that the reasons recorded are merely re-appreciation of the material already available on record. ii. The....
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.... the evidence collected, was required to be provided only in the further assessment proceedings. The said order overlooks the fact that the reasons for reopening do not mention as to what fact or information was not disclosed by the Petitioner. This is very vital and in fact goes to the root of the matter. 15. The assessment proceedings, especially those under Section 143(3) of the Act, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well settled that a mere conjecture or surmise is not sufficient. There have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. 18. Thus, the Petitioner cannot be said to have failed to disclose fully and truly all the material facts. This being a jurisdictional issue, the assumption of jurisdiction under Sections 147 and 148 of the Act was erroneous " In view of the above, it is respectfully submitted that in the instant case, in the absence of any new tangible material available with the Ld. AO, the reassessment proceedings cannot be invoked. C. Assessee's duty does not extend beyond fully and truly disclos....
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....each month are recorded at the closing exchange rate of the second last Friday of the preceding month published on xe.com website. b) The foreign currency balances other than in US Dollars appearing in the books of account at the period end are translated into US Dollars at the closing exchange rate of the second last Friday of preceding month published on xe.com website. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at SBI Mean Rate prevailing at the period end. c) Exchange difference arising on repayment of liabilities and conversion of foreign currency closing balances pertaining to long term loans for acquiring ships / containers / other depreciable assets and asset under construction is adjusted in the carrying cost of respective assets. d) The exchange differences arising on translation of other monetary assets and liabilities are recognised in the Statement of profit and loss. In this regard, the assessee places reliance on the decision of the Hon'ble ITAT, Mumbai in Tag Offshore Ltd, Mumbai vs Department Of Income Tax on 8 August, 2014 has observed that "If ....
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....('the Rules') provide that income from the following specified four activities (i) Maritime consultancy charges (ii) Income from loading or unloading of cargo (iii) Ship management fees or remuneration received for managed vessels (iv) Maritime education or recruitment fees are to treated as income from incidental activities. It is submitted that only the aforesaid four activities have been specifically prescribed as incidental activities. As such, it implies that all activities, other than incidental activities, should be considered as core activities. It is humbly submitted that reimbursement of management overhead expenses should be treated as part of turnover from core activities and not be taxed as Income from Incidental activity. It is to be noted that the AO in his Assessment order dated 12th December 2018, has excluded the reimbursement of managed vessel overhead expenses from Core activities for calculating the 0.25% of Turnover from core activities, as required u/s 115VI of the Act. It is respectfully submitted that the assessment order is issued to arrive at the incidental income in excess of 0.25% for core ac....
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....ed to the Petitioner only on 19th March, 2015 and the Petitioner had filed the objections to the same on 25th March, 2015. This passing of the draft Assessment order without having disposed of the objections is in defiance of the Supreme Court's decision in GKN Driveshafts (India) Ltd. (supra). Thus, the draft Assessment order dated 30th March, 2015 is not sustainable being without jurisdiction. This for the reason that it has been passed without disposing of the objections filed by the Petitioner to the reasons recorded in support of their impugned notice. Accordingly, we set aside the draft Assessment order dated 30th March, 2015. We are not dealing the validity of the reasons in support of the impugned notice in the present facts as the time limit to pass the Assessment order as provided under 4th Proviso to sub-section (2) of Section 153 of the Act has already expired when the petition was filed. 13. In the case of KSS Petron Private Limited vs. ACIT in Income Tax Appeal No. 224 of 2014, the Hon'ble Bombay High Court was seized with the following substantial question of law:- " Whether on the facts and circumstances of the case and in law, the Tribunal was justi....
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....nd of the financial year in which the order under Section 254 of the Act, was passed by the Tribunal and received by the Commissioner of Income Tax. 10 The Director of the appellant has filed an affidavit dated 19th September, 2006. In the affidavit, it is stated that consequent to the impugned order of the Tribunal dated 14th August, 2013, the Assessing Officer has not passed any order of reassessment. Time was granted on the last occasion to enable the Respondent to respond to the affidavit dated 19th September, 2006 of the Director of the Appellant Company. The Respondent is unable to dispute the facts stated in the affidavit dated 19th September, 2016 filed by the Director of the Appellant Company. The time to pass a order on the notice dated 28th March, 2008, even consequent to the impugned order of the Tribunal, has lapsed. 11 Therefore, on the above facts and law, the substantial question of law is answered in the negative i.e. in favour of the Appellant Assessee and against the Respondent Revenue." 14. In yet another case of Fomento Resorts & Hotels Ltd. vs. ACIT, in Tax Appeal No. 63 of 2007, the Hon'ble High Court of Bombay was seized with the followi....
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....Year 1997-98. However, the Assessing Officer, without proceeding to dispose of the objections raised by the Appellants by passing a speaking order, straight away proceeded to make the assessment order dated 26th March, 2004, bringing to charge taxable expenditure on Rs.10,22,73,987/-. The assessment order dated 26th March, 2004, no doubt, deals with the objections raised by the Appellant and purports to dispose of the same. Ms. Linhares contends that this is a sufficient compliance with the procedure set out in GKN Driveshafts (India) 10 txa63-07 dt. 30-08-19 Ltd. (supra), assuming that the same is at all applicable to the proceedings under the said Act. Mr. Dada, however, submits that such disposal in the assessment order itself does not constitute the compliance with the mandatory conditions prescribed by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra). In support, as noted earlier, Mr. Dada relies upon Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra). 14. The contention of Ms. Linhares that the decisions relied upon by Mr. Dada relate to the provisions of the Income Tax Act and, therefore, are not applicable to the proceeding....
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....ry for the Assessing Officer to have first disposed of the Appellant's objections by passing a speaking order and only upon communication of the same to the Appellants, proceeded to reopen the assessment for the Assessment Year 1997-98. 19. Virtually, an identical issue arose in the cases of Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) before the Division Benches of our High Court at Bombay. 20. In Bayer Material Science (P) Ltd. (supra), by a notice dated 6/2/2013, the Revenue sought to reopen the assessment in the year 2007-08. The Assessee filed a revised return of income and sought for reasons recorded in support of the notice dated 6.2.2013. The reasons were furnished only on 19.3.2015. The Assessee lodged objections to the reasons on 25th March, 2015. The Assessing Officer, without disposing of the Petitioner's objections, made a draft assessment order dated 30th March, 2015, since this was a matter involving transfer pricing. In such circumstances, the Division Bench of this Court, set aside the assessment order by observing that the Court was unable to understand how the Assessing Officer could, at all, exercise the jurisdict....
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....permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters." 24. According to us, the rulings in Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) afford a complete answer to the contentions raised by Ms. Linhares in defence of the impugned order. 25. Since, in the present case, the Assessing Officer has purported to assume the jurisdiction for reopening of the assessment, without having first disposed of the Assessee's objections to the reasons by passing a speaking order, following the law laid down in GKN Driveshafts (India) Ltd. (supra), Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra), we are constrained to hold that such assumption of jurisdiction by the Assessing Officer was ultra vires Section 11 of the said Act. The first substantial....