DOLPHIN DRILLING PTE LIMITED V. DEPUTY DIRECTOR OF INCOME TAX and OTHERS

WPMS/200/2011

AI Insights

Dolphin Drilling Pte Limited filed a writ petition challenging the re-assessment order and notice issued by the Deputy Director of Income Tax for the Assessment Year 2005-06. The reassessment was based on two grounds: the alleged non-ownership of the Belford Dolphin by the assessee and the non-inclusion of a substantial sum in the Profit & Loss Account, which was claimed to have been credited with T.D.S without offering the income for taxation. The court examined the previous assessments and appellate decisions, which had consistently ruled in favor of the assessee on these issues. The court concluded that reopening these settled issues through reassessment was not permissible.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 747615 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 03-04-2015
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: H M BHATIA
• Assessee Lawyers: P R MULLICK
• Keywords: Depreciation claim; Income escaping assessment; Re-assessment; T.D.S credit; Ownership of drillship
• Section: 147; 148; 143(3); 92E; 199

Judgement Text

" IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL WRIT PETITION No. 200 of 2011 (M/S) Dolphin Drilling Pte Limited ---Petitioner Vs. Deputy Director of Income Tax & others --Respondents Present : Mr. P.R. Mullick, Advocate, for the petitioner. Mr. H.M. Bhatia, Advocate for respondents. Hon’ble Alok Singh, J. (Oral) Petitioner assessee has filed present petition, challenging the re-assessment order/ notice under Section 147 read with Section 148 of the Income Tax Act, 1961 dated 31.03.2010, Annexure no. 4 to the writ petition as well as reasons for reassessment dated 31.03.2010. The Revenue has decided to have reassessment done under Section 147 read with Section 148 of the Income Tax Act, 1961 for the Assessment Year 2005-06, on the two grounds firstly assessee, Dolphin Drilling PTE Limited is not the owner of Belford Dolphin, in view of the document dated 04.05.2003 and secondly that, it has come to the notice that assessee while filing return of the income tax has not included the sum of Rs. 29,15,76,689/- in the receipt in P&L Account, therefore, assessee, in violation of provision, contained in Section 199 of the Income Tax Act, has claimed credit of T.D.S without offering the income for taxation. Section 147 of the Income Tax Act, 1961 reads as under: “Income escaping assessment. - If the [Assessing Officer] [has reason to believe] that any 2 income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. [Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:] [Provided also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] 3 Explanation 1 : Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2 : For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely : (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; [(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;] (c) where an assessment has been made, but – (i) income chargeable to tax has been under-assessed ; or 4 (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. [(d) where a person is found to have any asset (including financial interest in any entity) located outside India.] [Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.] [Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended, by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.]” As per second proviso of Section 147 of the Act, Assessing Officer may assess or reassess such income, other than income which was the subject matter of any appeal, reference or revision, which was chargeable to tax and had escaped assessment. In other words, such income can be said having been escaped, which was not the subject matter of appeal, revision or reference before the higher 5 authorities, after having assessment finalized by the Assessment Officer. Undisputedly, assessment was finalized for the Assessment Year 2005-06 vide Assessment Order dated 26.12.2008, which was assailed before the Commissioner of Income Tax (Appeal)-1, Dehradun in Appeal No. 314, as per Section 45 of the Income Tax Act. Appeal was decided by the Commissioner of Income Tax (Appeal)-1 vide judgment dated 16.02.2010, Annexure No.3 to the writ petition. The perusal of the order passed by the Appellate Authority would reveal that assessee has claimed depreciation of Rs. 3,05,73,40,212/- and declared loss of Rs. 99,30,56,370/-, during the course of the assessment proceedings of Assessment Year 2004-05, which was accepted by the Appellate Authority. Order further reveals that A.O. has estimated the cost of drillship at 130 million dollars instead of 260 million dollars, as on 09.10.2003, that is the day, when drillship was sold in India and depreciation has been computed as per Annexure No. “A” of the assessment order. Appellate Authority has further held that the actual cost of the drillship to the assessee is what has been claimed by it before A.O. The assessee has duly furnished form 3CEB which is a report under Section 92E of the Income Tax Act, alongwith its return of income before the A.O. Accordingly, we do not find any infirmity in the order of C.I.T. (A) for allowing the claim of depreciation. Respectfully, following the above decision of Hon’ble I.T.A.T for earlier Assessment Year 2004-2005, I also hold that appellant has rightly declared the cost of acquisition of the drillship at U.S. $ 270 million as on 09.10.1993 and accordingly the depreciation should be allowed for the instant year. 6 Order passed by the appellate authority would further reveal that AO has not drawn any adverse inference about the declaration of such revenues in P&L Account vis-à-vis the TDS certificates claimed in the return of income. Judgment further reveals that both these points were assailed before the Appellate Authority i.e. Commissioner of Income Tax (Appeal)-1 by the Revenue. Further contention of Revenue was repealed and was not accepted by the Appellate Authority. The judgment of Appellate Authority dated 16.02.2010 was assailed before I.T.A.T., however, same was also decided in favour of the assessee. Since, question of ownership and depreciation thereon was accepted twice by the C.I.T (A) in Assessment Year 2004-05 and 2005-06, therefore, same cannot be allowed to be reopened in the garb of reassessment. Likewise second ground of opinion was also subject matter of the appeal before C.I.T. (A), therefore, same is also not permitted to be reopened in the name of reassessment. Consequently, writ petition succeeds and is hereby allowed. Impugned notices for re-assessment are hereby quashed. (Alok Singh, J.) 03.04.2015 JM/Deepak "