Wp/3336/2018 Of Samson Maritime Limited v. Deputy Commissioner Of Income-Tax Circle-8(1)(2) And 3 Ors

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3336 OF 2018 Samson Maritime Limited… Petitioner V/s. Deputy Commissioner of Income-tax and ors. … Respondents --- Mr.V.Sridharan, Senior counsel with Mr.B.V.Jhaveri with Mr.Mayank Thosar for the Petitioner.Mr.Sigmund Gracias with Ms.Pallavi Supekar i/by Mr.CharanjeetChanderpal for the Respondents. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : JANUARY 03, 2019. P.C.:- 1.With the consent of learned Advocates for the parties, the petition is taken up for final disposal at this stage. 2.Petitioner has challenged a notice of reopening of assessment dated 27[th] March, 2018. 3.Brief facts are as under: Petitioner is a limited company and is engaged in providing Priya Soparkar 213 wp 3336-18-o offshore support services. For the assessment year 2011-12, thepetitioner had filed a return of income on 29[th] September, 2011declaring total income of Rs.8,67,55,710/- . The Assessing Officerpassed a scrutiny assessment order under section 143(3) of theIncome Tax Act (“the Act” for short) on 7[th] October, 2013accepting the petitioner's declared income. 4.To reopen such assessment the Assessing Officer issued theimpugned notice. In order to do so he had recorded reasons. Therelevant portion of which reads as under:impugned notice. In order to do so he had recorded reasons. Therelevant portion of which reads as under: “1.Brief details of the Assessee: In the instantcase, the assessee has filed return of income forthe A.Y.2011-12 on 29.09.2011 declaring totalincome of Rs.8,67,55,710/-. The same wasprocessed u/s.143(1) of the Act. Further,assessment u/s 143(3) of the Act was completedon 07.10.2013 assessing total income atRs.8,67,55,710/-. The assessee company isengaged in the business of shipping operations. 2.Briefdetailsofinformationcollected/received by the AO: This office has received information from theDDIT (Investigation), Unit-3(3), Mumbai videletter No.DDIT (Inv.)/Unit 3(3)/Information-SML/2017-18 dated 20.03.2017 that the searchaction was conducted on the assessee on23.11.2017. It has been informed that the assesseecompany M/s Samson Maritime Ltd. is claimingbenefit of Tonnage Tax Scheme without being eligible for it. It was further mentioned that thecompany is not handling the cargo shippingbusiness or movement of cargo. So, it can be seenthat all the activities carried out by the companyis incidental activities in the absence of corebusiness activity. 3.Analysis of information collected/received: On the basis of information received asmentioned in para 2 above, it can be seen that asall the activities carried out by the company isincidental activities in the absence of core businessactivity so it disentitles the company from theirclaim of Tonnage Tax Scheme and the companyshould be taxed as per normal provisions of the Actand Chapter XIIG will not be applicable to the caseof the company. If the benefits of Tonnage TaxScheme is denied to the assessee than the bookprofit for MAT calculation will beRs.45,31,89,258/- against the MAT profit ofRs.8,75,59,796/- declared by the assessee for theyear under consideration. In view of the totality of the facts anddocuments on record coupled with the informationgathered, I have reason to believe that the amountof Rs.36,56,29,462/- (as per MAT provisions)chargeable to tax for F.Y. 2010-11 relevant toA.Y. 2011-12 has escaped assessment, as theassessee has failed to disclose truly all materialfacts necessary for its correct assessment, the factsdisclosed by the assessee are distorted and as perits convenience. 4.Enquiries made by the AO as sequel toinformation collected/ received: In view of the totality of the facts anddocuments on record coupled with the informationgathered, I have reason to believe that the amountof Rs.36,56,29,462/- (as per MAT provisions)chargeable to tax for F.Y. 2010-11 relevant toA.Y. 2011-12 has escaped assessment, as theassessee has failed to disclose truly all materialfacts necessary for its correct assessment, the factsdisclosed by the assessee are distorted and as perits convenience. 4.Enquiries made by the AO as sequel toinformation collected/ received: From perusal of paragraph 2 & 3 above, thematerial evidence gathered and discussed givesenough insights that income has escapedassessment. It is only during the course ofproceedings u/s. 148 of the Act that the assessee'sexplanation will be examined vis-a-vis the Priya Soparkar findings enumerated in paragraph 2 & 3 above. 5.The petitioner raised detailed objection to the notice ofreopening under a communication dated 15[th] October, 2018.Such objections were however, rejected by the Assessing Officerby order dated 31[st] October, 2018. Hence, this petition. 6.Having heard learned counsel for the parties and havingperused the documents on record what emerges is that theimpugned notice is issued beyond the period of four years fromthe end of relevant assessment year. The requirement of section147 of the Act, therefore, that the income chargeable to tax hadescaped assessment due to the failure on part of the assessee todisclose truly and fully all material facts, must be satisfied.Additionally, as is well settled law, in case of the scrutinyassessment, the Assessing Officer would not be permitted re-openassessment which is based on mere change of opinion. Both theseaspects we may examine from the documents on record. 7.The reasons recorded by the Assessing Officer for reopening Priya Soparkar 513 wp 3336-18-o the asssessment would show that according to the informationreceived by the Assessing Officer from the Investigation Wing ofthe Department it was found that the assessee was not handlingthe cargo shipping business or movement of cargo and that theactivities carried out by the company were merely incidentalactivities and in absence of the core business activities, theassessee was not entitled to the benefits under chapter XIIG of theAct and the company should be treated as a normal company andall applicable provisions of the Act should be applied. 8.From the record we notice that the Assessing Officer hadduring the assessment proceedings raised multiple queries one ofwhich was with respect to the business activities carried out bythe assessee in response to which, the assessee had filed acomprehensive note on business activities carried out during theyear of consideration. This note read as under:- “ANNEXURE “A” :- NOTE OF NATURE OFBUSINSESS The company is owning and operating varioustypes of offshore supply vessels, Tugs and AnchorHandling vessels. The vessels owned by the company are given oncharter for offshore activities of the clients. Thecharter period for short duration of 5-10 daysare termed as spot Charter. The vessels are alsogiven on short term charter ranging from 1 monthto 3 months and long term charter ranging from 3months and above. Most of the company's vessels chartered out toclients (Public sector & Limited Companies) areof long term in nature. The said vessels aredeployed by client for movement of man &material from shore to its offshore marine relatedactivities. The vessels are also deployed by theclient for towing its barges and equipments tooffshore fields. Our vessels are also chartered byclients at time for assisting vessels in distress inthe high seas and also for salvage of vessels. In addition to the above, company is in thebusiness of operating and maintenance of thirdparty SPM (Single Point Mooring) buoy andvessels. Most of the company's vessels chartered out toclients (Public sector & Limited Companies) areof long term in nature. The said vessels aredeployed by client for movement of man &material from shore to its offshore marine relatedactivities. The vessels are also deployed by theclient for towing its barges and equipments tooffshore fields. Our vessels are also chartered byclients at time for assisting vessels in distress inthe high seas and also for salvage of vessels. In addition to the above, company is in thebusiness of operating and maintenance of thirdparty SPM (Single Point Mooring) buoy andvessels. The business of operating and maintenance ofSPM involves the following activities. SPM involves the following activities. 1.Maintenance of third party vessels. 2.Maintenance of the underwater pipeline. 3.Maintenance and operation ofSPM i.e. a floating equipment whichis around 8 to 10 nautical mile awayfrom the port and the same isconnected to underwater pipelinefor transportation of crude andfinished oil products which aredischarged by oil tankers at the SPMlocation.” 9.From this note one can gather that the assessee-companyhad given full details of its activities pointing out that thecompany owns and operates various types of offshore supplyvessels, Tugs and Anchor Handling vessels. These vessels aregiven on charter for offshore activities to the client on long termbasis. Such vessels are deployed by the client for movement ofman and material from shore to its offshore marine relatedactivities. The vessels are also deployed for towing its barges andequipments to offshore fields. In the final order of assessmentthe Assessing Officer did not make any disallowance, but acceptedthe assessee's declared income. 10.Two things emerge from the discussion recorded so far.Firstly, that the assessee's nature of activities was fully disclosedduring the assessment proceedings. There was no failure on thepart of the assessee to disclose any of the material facts. Infactfrom the note on assessee's nature of business one could gatherthe precise nature of the activities carried on by the company. 813 wp 3336-18-o There was these clear disclosure on the part of the assessee andthe reopening of assessment beyond the period of four yearsfrom the end of relevant assessment year could not have beendone. 11.There is yet another additional and independent reasonwhy we must strike down the notice of reopening. The assessee'sclaim of benefits under the chapter XIIG of the Act as is clearfrom the material on record came up for pointed attention of theAssessing Officer during the original assessment proceedings. Itwas in this context that the Assessing Officer had raised certainqueries including asking the assessee to give full details of itsbusiness activities. Thus, the question of the assessee beingqualified for the benefits under Chapter XIIG of the Act wasscrutinized issue. Without there being any additional material,any attempt on the part of the Assessing Officer to reopen theassessment would be based on mere change of opinion. 12.On both grounds, therefore, the petition succeeds.Impugned notice dated 27[th] March, 2018 is set aside. Petition allowed and disposed of accordingly. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) ….