CHENNAI CONTAINER TERMINAL PVT. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2 (1) (1) AND 4 OTHERS

Rule. Rule is made returnable forthwith. Heard parties by consent.

Petitioner has assailed notice dated 23rd March 2021 under Section 148 of the Income Tax Act, 1961 (“Act”) issued by Respondent No.1-Assistant Commissioner of Income-tax proposing to reassess the income for Assessment Year (“AY”) 2013-14; order dated 14th February 2022 rejecting the objections of Petitioner and show- cause notice/draft assessment order dated 16th March 2022 issued by Respondents.

Assessment order under consideration is of AY 2013-14. Petitioner is a 100% subsidiary of P & O Ports (Chennai) Limited, Mauritius which in turn is now held by D.P. World Limited, Dubai. The business income of Petitioner comprises only of income from port facility and thus, deduction is claimed and allowed in respect of the entire business income.

A ship operated by one Mercantile Lines damaged a wharf of Petitioner during the previous year, relevant to AY 2011-12. Petitioner received compensation from Mercantile Lines during AY 2011-12 and AY 2012-13 partly on capital account and the balance on revenue Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Petitioner filed its return of income for AY 2013-14 on 29th November 2013 claiming a deduction of its entire business income of Rs.34,09,31,179/- under Section 80-IA of the Act. Notice dated 4th September 2014 initiating a scrutiny assessment under Section 143(2) of the Act was issued by Respondent. The Assessing Officer (“AO”) specifically asked for statutory reports and also asked Petitioner to provide information with respect to past assessments in addition to a direction to submit Form 10CCB and information relating to income qualifying for deduction. Petitioner has furnished all the required information. Assessment order dated 17th March 2016 was passed upon consideration of all the relevant information disclosed by Petitioner. Its claim for deduction under Section 80-IA of the Act was also accepted.

Respondent issued notice dated 13th May 2021 under Section 148 of the Act for reopening assessment for AY 2013-14. The reasons set out for reopening indicated that the financial statements of Petitioner revealed that Petitioner had credited its Profit & Loss Account by an amount of Rs.1.54 Crores being compensation Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

By letter dated 28th June 2021, Petitioner submitted detailed objections to the notice dated 13th May 2021. Respondent No.1, by an order dated 14th February 2022, rejected the objections of Petitioner. On 16th March 2022, draft assessment order was passed. The notice under Section 148 of the Act together with the order rejecting objections and the draft assessment that are assailed in the present petition.

Mr. Nitesh Joshi, learned counsel for Petitioner, assails the order on the following grounds: i. As the notice has been issued under Section 148 after the expiry of 4 years from the end of the relevant AY, assessment can be reopened only if income chargeable to tax has escaped assessment on account of failure of assessee to disclose fully and truly all material facts necessary for its assessment for that AY. The four years expired on 31st March 2018 in respect of AY 2013-14. Notice dated 23rd March 2021 is thus beyond limitation. ii. Petitioner’s claim for deduction under Section 80-IA of the Act is correctly allowed as compensation for loss of profit and damages to the wharf qualifies as profits derived from business of developing, maintaining and operating the port facility and Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Mr. Nitesh Joshi draws our attention to the documents and information submitted by Petitioner including the financial statements of Petitioner. The financial statements of the relevant year under the head “3.15-Other Income” shows compensation income for loss of profit and damages to wharf to be Rs.15.43 Millions (Rs.1.54 Crores). Furthermore, the AO, in the reasons to believe escapement of Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Mr. Joshi therefore is correct in submitting that reopening of assessment is on the basis of verified facts on record and there is no failure to disclose by Petitioner.

Moreover, the Apex Court in Gemini Leather Stores v. Income- tax Officer1 held that once the AO has in his possession all the primary facts, it is for him to make necessary inquiries and draw proper inference. If the AO fails to do so, it is plainly a case of oversight and cannot be said that income chargeable to tax for the relevant AY has escaped assessment by reason of omission or failure 1 [1975] 100 ITR 1 (SC) Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Mr. Joshi, however, rebuts the contention of Mr. Suresh Kumar pertaining to audit objections by saying that they were never part of the reasons to believe notice. Moreover, the decision to reopen the 2 [2021] 131 taxmann.com 52 (Bombay) Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Having heard the parties and gone through the documents, we did not go into the merits of the rival contentions of the parties pertaining to the transactions and the financial statements as insisted by Mr. Suresh Kumar. Mr. Suresh Kumar made an attempt to go into the merits of the admissibility of the claim of deduction and applicability of Section 80-IA of the Act. We limited our examination to ascertain whether the jurisdictional conditions for reopening assessment are satisfied in the present case. Admittedly, the financial statements relating to the relevant AY mentions the amount received by Petitioner as compensation towards damages to its wharf. The reasons to believe escapement of income reveals that the reopening of assessment is based on the examination of financial statements furnished by Petitioner. There is nothing on record to indicate that Petitioner has failed to discharge its duty of disclosure. In fact, the reasons themselves are based on disclosure by Petitioner. In Ananta 3 Writ Petition No.1180 of 2022 decided on April 05,2022. (Unreported) Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

It is settled law that where the assessment is sought to be reopened after the expiry of a period of four years from the end of the relevant year, the proviso to section 147 stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary. Since in the case at hand, the assessment is sought to be reopened after a period of four years, the proviso to section 147 is applicable. It is also settled law that the Assessing Officer has no power to review an assessment which has been concluded. If a period of four years has lapsed from the end of the relevant year, the Assessing Officer has to mention what was the tangible material to come to the conclusion that there is an escapement of income from assessment and that there has been a failure to fully and truly disclose material fact. After a period of four years even if the Assessing Officer has some tangible material to come to the conclusion that there is an escapement of income from assessment, he cannot exercise the power to reopen unless he discloses what was the material fact which was not truly and fully disclosed by the assessee...........In Indian & Eastern Newspaper Society v. CIT [1979] 2 Taxman 197/119 ITR 996 (SC), also relied upon by Mr. Pardiwalla, the Court held that in every case, the Income Tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has come to his notice he can reasonably believe that income had escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. Therefore, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income tax Officer.”

A Division Bench of this Court in the case of Sesa Goa Limited v. Joint CIT 4 has held as follows: "The power to reopen an assessment is not unbridled or unrestricted. The power is subject to the proviso embodied in the section itself. The proviso prescribes restrictions on the power of reopening the assessment by limiting the time period to four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee..... to disclose fully and truly all material facts necessary for the assessment of the income for that 4 [2008] 168 Taxman 281 Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

This Court in Voltas Limited (Supra) referring to a number of decisions of this Court and the Supreme Court, has, in paragraph 13 quoted as follows: “..........It is well settled through series of judgments that the decision to reopen the assessment must be on the basis of the belief found by the Assessing Officer. It Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Thus, considering the facts in the present matter, it is evident that the AO had within his possession all the primary facts and it was for him to make necessary inquiry and draw proper inferences. The AO has not discharged his duty and in fact has relied upon financial statements and other documents furnished by Petitioner itself for his reason to believe escapement of income. It cannot be said that income chargeable to tax for the AY under consideration has escaped assessment by reason of the omission or failure on the part of Petitioner to disclose fully and truly all material facts. Thus, it can safely be held that the reopening of assessment of income is clearly on the basis of change of opinion without availability of any tangible new information.

Consequently, notice dated 23rd March 2021 under Section 148 of the Act, order dated 14th February 2022 rejecting the objections of Petitioner to the reasons to believe notice and the draft assessment order dated 16th March 2022 are quashed. Petition is thus allowed in terms of prayer clause (A), which reads thus: Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36

Rule is made absolute accordingly. There will be no order as to costs. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Shivgan Uploaded on - 19/01/2024 Downloaded on - 31/10/2026 00:56:36 Powered by TCPDF (www.tcpdf.org)