ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE- 3(4) MUMBAI, MUMBAI vs. THE SHIPPING CORPORATION OF INDIA LIMITED, MUMBAI

ITA 1970/MUM/2024Status: DisposedITAT Mumbai09 January 2025AY 2016-201719 pages
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What did the Tribunal hold?

The Tribunal first addressed the additional ground raised by the assessee regarding the invalidity of reassessment proceedings due to the AO's failure to dispose of objections. Citing the Supreme Court's decision in K.N. Driveshafts (India) Ltd. and subsequent High Court judgments in Bayer Material Science (P) Ltd. and KSS Petron Private Ltd., the Tribunal held that the AO assumed jurisdiction for reopening the assessment without first disposing of the assessee's objections by passing a speaking order. This was considered an exercise in excess of jurisdiction and ultra vires Section 147 of the Act. Consequently, the reassessment notice under section 148 and the consequent assessment order were set aside. As the reassessment proceedings were quashed on this preliminary ground, the Tribunal found no necessity to delve into the merits of the case, specifically the issues concerning the mark-up on reimbursement of overheads and foreign fluctuation gain. The additional ground raised by the assessee was allowed. The principle established is that reassessment proceedings initiated without disposing of the assessee's objections to the reasons for reopening are invalid.

What were the facts?

The assessee, The Shipping Corporation of India Limited, filed its return for AY 2016-17. The original assessment under section 143(3) was completed on 11/12/2018. Subsequently, the Assessing Officer (AO) issued a notice under section 148 on 27/03/2021, proposing to re-assess income. The AO cited reasons for reopening, including alleged under-assessment of foreign currency transactions (Rs. 13.24 crore) and reimbursement of overheads for managed vessels (Rs. 35,79,48,794/-). The assessee objected to the reopening, contending it was based on a change of opinion without new material and that the AO failed to dispose of objections before issuing the reassessment notice. The assessee also filed an additional ground of appeal challenging the validity of reassessment proceedings for non-disposal of objections, citing the Supreme Court's decision in K.N. Driveshafts (India) Ltd. The appeals before the ITAT were cross-appeals against the order of the National Faceless Assessment Centre (NFAC), Delhi.

What were the issues?

1. Whether the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961, are valid, considering the AO allegedly acted on a change of opinion without new material and failed to dispose of the assessee's objections to the reasons for reopening by passing a speaking order, as mandated by the Supreme Court in K.N. Driveshafts (India) Ltd. (Assessee's contention)? 2. Whether the Commissioner (Appeals) was justified in deleting the mark-up on reimbursement of overheads for managed vessels from the total income of the appellant (Revenue's contention)? 3. Whether the Commissioner (Appeals) was justified in deleting the foreign fluctuation gain from the total income of the appellant (Revenue's contention)? Assessee's arguments: The reassessment proceedings are invalid and bad in law due to the AO's failure to dispose of objections before issuing the reassessment notice, violating the procedure laid down in K.N. Driveshafts (India) Ltd. The reassessment was based on a mere change of opinion without new tangible material. The reimbursement of overheads for managed vessels should be treated as profit from core activities, and the direction to add a mark-up is erroneous. Revenue's arguments: The Commissioner (Appeals) erred in deleting the mark-up on reimbursement of overheads and the foreign fluctuation gain from the total income.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 148,Section 147,Section 115JB,Section 115VP,Section 115V-1(2),Section 115V-1(5),Section 144B

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SUNIL KUMAR SINGH, HONBLE

For Appellant: Shri Nitesh Joshi & Neha Vikam, A/Rs

Heard together (2 matters)

I.T.A. No. 1752/Mum/2024
I.T.A. No. 1970/Mum/2024

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PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 1752/Mum/2024 & I.T.A. No. 1970/Mum/2024, are cross-appeals by th

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