ACIT, Circle-2(2), Hyd, Hyderabad V. Transport Corporation of India Ltd., Sec'bad, Secunderabad

ITA 1080/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5989 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 19-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Keywords: Reopening of assessment; Depreciation; Audit objection; Question of law; Difference of opinion; Scheme of amalgamation; Assessment record; Tax effect; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1080/HYD/2015 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 2(2), HYDERABAD. VS. TRANSPORT CORPORATION OF INDIA LTD., SECUNDERABAD. PAN AAACT 7966 R APPELLANT RESPONDENT REVENUE BY: SRI B. KURMI NAIDU ASSESSEE BY: SRI Y. RATNAKAR DATE OF HEARING: 16/02/2016 DATE OF PRONOUNCEMENT: 16/03/2016 O R D E R PER S. RIFAUR RAHMAN, AM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT(A) - 2, HYDERABAD DATED 5/07/2 015 FOR ASSESSMENT YEAR 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE COMPANY IS IN THE BUSINESS OF TRANSPORT OF GOODS, LOGISTICS SERVICES, TRADING OF PETROL AND DIESEL AND GENERATION OF ENER GY. FOR AY 2007-08, IT FILED ITS E-RETURN OF INCOME ON 31/10/2 007 DECLARING TAXABLE INCOME AT RS. 24,65,12,479/- AND LATER FILE D REVISED RETURN OF INCOME ON 26/09/08 ADMITTING TAXABLE INCO ME OF RS. 24,81,19,840/-. THE BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB WAS SHOWN AT RS. 32,84,54,663/-. THE TAX PAYA BLE UNDER REGULAR PROVISIONS OF THE IT ACT IS HIGHER TH AN THE MAT PAYABLE U/S 115JB OF THE ACT. THEREAFTER, THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSIN G OFFICER I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 2 PASSED THE ORDER U/S 143(3) ASSESSING THE INCOME OF ASSESSEE AT RS. 25,21,05,920/-. SUBSEQUENTLY, THE CASE WAS R EOPENED U/S 147 OF THE ACT AND NOTICE U/S 148 DATED 28/03/1 2 WAS ISSUED AND SERVED ON THE ASSESSEE ON 29/03/12. THE REASONS FOR INITIATING REASSESSMENT PROCEEDINGS FOR THE AY UNDER CONSIDERATION GIVEN BELOW: 'I. A) IT WAS NOTICED FROM THE ASSESSMENT RECORD THAT THE ASSESSEE COMPANY REDUCED AN AMOUNT OF RS.8,60,92,032/- BEING THE PROFIT OF M/S. SEAWAYS DIVISION. THE COMPANY VIZ., M/S.TCI SEAWAYS LTD., GOT AMALGAMATED W.E.F.1.04.2005 WITH THE ASSESSEE COMPANY I.E., M/S. TRANSPORT CORPORATION OF INDIA LTD. FURTHER, THE SAID COMPANY I.E. TCI SEAWAYS LTD., W AS ACCORDED PERMISSION TO CLAIM THE BENEFITS. OF SCHE ME FALLING UNDER CHAPTER XII G-' SPECIAL PROVISIONS R ELATING TO INCOME OF SHIPPING COMPANIES WHICH IS OTHERWISE CALLED 'TONNAGE TAX SCHEME'. B) ON AMALGAMATION OF M/S.TCI SEAWAYS LTD., INTO M/S. TCI LTD., ON 01.04.2005 IT LOST ITS SANCTITY. THE AMALGAMATED COMPANY I.E. M/S. TCI WAS ENTITLED TO CLAIM 'TONNAGE TAX SCHEME' SUBJECT TO THE 'FIRST PR OVISO UNDER SECTION 115VY - AMALGAMATION - I.E. WHERE THE AMALGAMATED COMPANY [IN THIS INSTANT CASE M/S TCI LTD) IS NOT A TONNAGE TAX COMPANY, IT SHALL EXERCI SE AN OPTION FOR TONNAGE TAX SCHEME U/S.5(1) OF SEC.115VP WITHIN THREE MONTHS FROM THE DATE OF APPROVAL OF SC HEME AMALGAMATION. C). IN THE INSTANT CASE, THE DATE OF APPROVAL OF AMALGAMATION WAS 01.04.2005. THE OPTION FOR CLAIM OF THE SCHEME SHALL BE EXERCISABLE UP TO 30.06.2005 [THREE MONTHS FROM THE. DATE OF APPROVAL OF THE SC HEME OF AMALGAMATION). D) HOWEVER, IT WAS NOTICED FROM THE ASSESSMENT REC ORD THAT I.E. M/S TCI LTD., HAS APPLIED FOR TONNAGE TA X SCHEME IN THE MONTH OF NOVEMBER, 2006 AND THE APPROVAL WAS GRANTED ON 04.12.2006 VIDE F.NO.ADDL.CIT/R-2/115VP/2006-07, DATED 04.12.2006. THE ASSESSEE COMPANY HAD APPLIED AFTER THE EXPIRY 'OF THE AVAILABLE TIME PERIOD I.E. 30.06.2005 AS PER THE FIRST PROVISO OF SEC. 115VY. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 3 FURTHER, IT IS IMPORTANT TO NOTE THAT THE I.T. AC T DOES NOT SPECIFY THE APPROVAL AUTHORITY OR STAGE. GOING BY THE ACTUAL FACTS OF THE CASE I.E., TAKING OF EFFECT OF THE AMALGAMATION I.E. 01.04.2005, THE ASSESSEE OUGHT T O HAVE APPLIED BEFORE JUNE,2005 AS TCIL BECAME A QUALIFYING COMPANY ON 01.04.2005 ON ACCOUNT OF THI S MERCER, IT HAS FAILED TO DO SO. FURTHER, THE THEN RANGE HEAD CONCERNED HAD GIVEN APPROVAL U/S. 115VP(3) ON 04.12.2006 FOR A.Y. 2006-07 WHICH IS AN INSTANCE O F RETROSPECTIVE APPROVAL FOR WHICH THERE IS NO SPECI FIC PROVISION I.E. EVEN FOR THE INITIAL PERIOD OF BENE FIT A QUALIFYING COMPANY HAD TO EXERCISE OPTION BY JANUA RY, 2005 I.E. WITHIN THE CURRENCY OF THE ACCOUNTING PE RIOD 2004-05. FURTHER, THE ASSESSEE, THOUGH INCORPORATE D BEFORE THE INITIAL PERIOD WITHIN THE MEANING OF SEC.115VP, BECAME A QUALIFYING COMPANY ON 01.04.05 IN CONSEQUENCE OF AMALGAMATION. AS AMALGAMATED COMPANY, THE ASSESSEE CAME TO ACQUIRE NEW STATUS. HENCE, GOING BY THE PROVISO TO SEC.115VP(1), IT WA S INCUMBENT UPON THE ASSESSEE TO MAKE AN APPLICATION WITHIN 3 MONTHS OF THE DATE ON WHICH IT BECAME A QUALIFYING COMPANY I.E. BY JUNE, 2005. THE APPROVAL GIVEN AT CHENNAI U/S.115VP(1) TO THE TRANSFEROR COMPANY I.E. TCI SEAWAYS LTD FOR AY 200 5- 06 MAY NOT HAVE RELEVANCE AS IT CEASED TO EXIST WITH EFFECT FROM 01.04.2005. E) HENCE HAVING APPLIED BEYOND THE DATE OF AVAILAB LE TIME FOR CONTINUING THE SCHEME OF 'TONNAGE TAX SCH EME', THE YOUR COMPANY'S CLAIM OF 'TONNAGE TAX SCHEME' N EEDS TO BE DISALLOWED. THE TAXABLE INCOME SHOULD HAVE B EEN COMPUTED AS PER NORMAL PROVISIONS OF I.T. ACT. F) IT IS ALSO TO NOTE THAT, THE PROVISION FALLING UNDER CHAPTER XII G DOES NOT PROVIDE FOR ANY CONDONATION IN FILING THE LETTER FOR CLAIM OF BENEFITS FALLING IN THE CHAPTER. ALL THE PROVISIONS ARE SELF CONTAINED AND APPLIED AS SUCH. G) IN VIEW OF THE ABOVE STATED PROVISIONS AND FACT S, THE. PROFIT OF RS. 8,60,92,032/- OF M/S SEAWAYS DIVISI ON AND THE DEPRECIATION AS PER BOOKS OF MIS. SEAWAYS DIVI SION OF RS.3,14,82,578/- TOTALLING TO RS.11,75,74,610/- NEEDS TO BE ADDED BACK IN THE COMPUTATION OF INCOME. H) THE NET TAXABLE INCOME WHICH ESCAPED ASSESSMENT WORKS OUT TO RS.5,30,62,159/- [RS.11,75,74,610(-) RS. 6,45,12.,417] WITH A CONSEQUENTIAL TAX EFFECT OF I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 4 RS. 1,78,60,732/- INCLUDING SURCHARGE, EDUCATION B UT EXCLUDING INTEREST CHARGEABLE U/S.234B. II. ALSO, I FIND THAT THE TRANSFEROR/AMALGAMATING COMPANY I.E. TCI SEAWAYS LTD IS PRIMARILY ENGAGED IN COAST AL SHIPPING WITH A FLEET OF 4 SHIPS (VIDE PAGE 15&17) OF PRINTED ANNUAL REPORT FOR 2005-06) WHICH RUN SCHED ULED SERVICES I.E. CARRYING COASTAL CARGO/CONTAINERS/BR EAK BULK CARGO IN THE COASTAL SECTORS OF CHENNAI-ANDAM AN- VIZAG AND PORTBLAIR-YANGOON-KOLKOTA-VIZAG. SEC.115 VD SAYS THAT QUALIFYING SHIP DOES NOT INCLUDE VESSEL WHICH IS USED FOR PROVIDING GOODS OR SERVICES OF A KIND NORMALLY PROVIDED ON LAND. THERE WAS NO PROOF ON R ECORD TO SAY THAT THESE VESSELS/SHIPS ARE NOT USED FOR PROVIDING GOODS OR SERVICES OF A KIND NORMALLY PRO VIDED ON LAND. MOREOVER, TO DECIDE TO ASCERTAIN SUCH CRI TERIA, THE OPERATION ROOTS OF SHIPS AND PURPOSES HAVE TO BE ASCERTAINED WITH ORIGINAL EVIDENCE WITH ORIGINAL E VIDENCE WHICH WAS NOT AVAILABLE ON RECORD. 2.1 BY ITS REPLY DATED 12 TH APRIL, 2012, THE ASSESSEE STATED THAT IT HAD DISCLOSED FULLY AND TRULY ALL INCOME IN THE RETURN FOR AY 2007-08 AND NO PART OF ITS INCOME HAS ESCAPED ASSESSMENT. IT FURTHER STATED THAT THERE HAS BEEN N O FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 2.2 REJECTING THE ASSESSEES SUBMISSIONS, THE ASSES SING OFFICER DISALLOWED THE PROFIT OF RS. 8,60,92,032/- OF M/S SEAWAYS DIVISION AND THE DEPRECIATION AS PER BOOKS OF M/S SEAWAYS DIVISION OF RS. 3,14,82,578/- TOTALLING TO RS. 11,75,74,410 AND ADDED BACK TO THE INCOME OF ASSESS EE. 3. ON AN APPEAL, BEFORE THE CIT(A) THE ASSESSEE MAD E WRITTEN SUBMISSIONS, WHICH WERE EXTRACTED BY THE CI T(A) AT PAGES 5 TO 15 OF HIS ORDER. 4. THE CIT(A) CALLED FOR ASSESSMENT RECORDS OF ASSE SSEE AND AFTER EXAMINING THE SAME, HE NOTICED AS UNDER: I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 5 A) THE APPELLANT'S CASE WAS COMPLETED U/S 143( 3) O N 29- 12-2009 BY THE AO I.E., THE ADDL.CIT,RANGE-2, HYDERABAD. THE MATTER WAS ADJUDICATED BY THE CIT(A) -III, HYDERABAD AND LATER THE HON'BLE ITAT, HYDERABAD VID E ORDER DATED 18-04-2012. B) THE AUDIT RAISED AN OBJECTION VIDE NOTE 28-10-20 10 AND THE AO I.E. ACIT-CIRCLE-2(3), HYDERABAD VIDE LE TTER DATED 2-11-2010 HAS REPLIED TO THE AUDIT STATING 'T HE OBJECTION RAISED BY RAP WILL BE LOOKED INTO AND AFT ER VERIFICATION FINAL REPLY WILL BE SUBMITTED'. C) VIDE LETTER DATED 15-6-2011 ADDRESSED TO THE CIT - II, HYDERABAD THE AO I.E. ACIT -CIRCLE 2(3) STATED AS F OLLOWS: 'IN THIS CASE RAP RAISED OBJECTION STATING THAT 'IT WAS NOTICED FROM THE ASSESSMENT RECORD THAT THE ASSESSE E COMPANY REDUCED AN AMOUNT OF RS. 8,60,92,032/- IN T HE COMPUTATION OF TAXABLE INCOME WHICH WAS THE PROFIT OF M/S SEAWAYS DIVISION. THE COMPANY NAMELY M/S TCI SEAWAYS LTD GOT AMALGAMATED W.E.F 01.04.2005 WITH T HE ASSESSEE COMPANY I.E., M/S TRANSPORT CORPORATION OF INDIA LTD. FURTHER, THE SAID COMPANY I.E., M/S TCI SEAWAYS LTD WAS ACCORDED PERMISSION TO CLAIM THE BENEFITS OF SCHEME FALLING UNDER CHAPTER XII G - SP ECIAL PROVISIONS RELATING TO INCOME OF SHIPPING COMPANIES WHICH IS OTHERWISE CALLED 'TONNAGE TAX SCHEME' ON AMALGAMATION OF M/S TCI SEAWAYS LTD. INTO M/S TC I LTD. ON 01/04/2005 IT LOST ITS ENTITY. THE AMALGAMA TED COMPANY I.E. M/S TCI LTD. WAS ENTITLED TO CLAIM 'T ONNAGE TAX SCHEME' SUBJECT TO THE 'FIRST PROVISO UNDER SEC TION 115VY - AMALGAMATION' I.E., WHERE THE AMALGAMATED COMPANY [IN THIS INSTANT CASE M/S TCI LTD] IS NOT A TONNAGE TAX COMPANY, IT SHALL EXERCISE AN OPTION FO R TONNAGE TAX SCHEME U/S 5(1) OF SEC. 115VP WITHIN TH REE MONTHS FROM THE DATE OF APPROVAL OF SCHEME OF AMALGAMATION. THE OBJECTION OF RAP IS NOT ACCEPTED WITH THE REMAR KS THAT THE HON'BLE HIGH COURT HAS APPROVED THE SCHEME OF AMALGAMATION VIDE ITS ORDER DATED 18-08-2006. AS PE R THE FIRST PROVISO TO SECTION 115VY 'IF THE AMALGAMATED COMPANY IS NOT A TONNAGE TAX COMPANY IT SHALL EXERC ISE FOR TONNAGE TAX SCHEME UNDER SUB SECTION (1) OF SEC TION 115VP WITHIN THREE MONTHS FROM THE DATE OF APPROVAL OF THE SCHEME OF AMALGAMATION'. IN THE PRESENT-CASE TH E DATE OF APPROVAL OF SCHEME OF AMALGAMATION IS 18-08 - I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 6 2006 AND THE ASSESSEE HAS APPLIED FOR TONNAGE TAX SCHEME VIDE LETTER DATED 24-10-2006 (COPY ENCLOSED) FILED BEFORE THE DEPARTMENT ON 03-11-2006 (I.E. WIT HIN 3 MONTHS FROM THE DATE OF APPROVAL). THE APPROVAL FOR THE SAME WAS GRANTED BY THE ADD/. CIT, RANGE-Z, HYDERAB AD VIDE LETTER IN F. NO. ADDL. CIT/ R-2/115VP/2006-07 DATED 04-12-2006. IN VIEW OF THE ABOVE THE OBJECTION RAISED BY AUDIT IS NOT ACCEPTABLE. IN THIS CONNECTION, IT IS REQUESTED THA T THE AO MAY PLEASE BE COMMUNICATED ACCORDINGLY AND TO TREAT THE OBJECTION AS DROPPED. ' D) THE CIT - II, HYDERABAD VIDE LETTER DATED 26/03/ 2012 ADDRESSED TO THE ACIT-CIRCLE 2(3) WHILE GOING INTO THE AUDIT OBJECTION STATES IN (6) ON PAGE 3 THAT 'THE A SSESSEE HAD HOODWINKED THE AO ..... ' AND DIRECTED THE AO T O CONSIDER REMEDIAL ACTION BY 147 AFTER RECORDING REA SONS. THIS INDICATES THAT IT WAS A CASE OF CHANGE OF OPIN ION. IT IS NOTED THAT THE REASONS RECORDED ARE LARGELY BASE D ON THE CIT'S VIEWS AND ARE IN THE NATURE OF DIRECTIONS TO THE AO TO REOPEN THE ASSESSMENT. THE AO HAD NOT INDEPENDENTLY SHOWN DUE APPLICATION OF MIND AS REQU IRED BY. A QUASI-JUDICIAL AUTHORITY. IN THIS CONTEXT IT IS BROUGHT TO NOTE THAT THE HON'BLE APEX COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (320 ITR 561) HELD AS UNDER : ' ..... ONE NEEDS TO GIVE SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, WE ARE AFR AID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSE SSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON T O RE- OPEN. WE MUST KEEP IN MIND THE CONCEPTUAL DIFFERENC E BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE-ASSE SS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF C ERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPIN ION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASSESSMENT, REVIEW WO ULD TAKE PLACE HENCE, AFTER 01 APRIL 1989, THE ASSESSIN G OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TAN GIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. E) SUBSEQUENTLY VIDE ORDER DATED 28-03-2013 COMPLET ED THE ORDER U/S.143(3) READ WITH 147 THE AO COMPLETED THE ASSESSMENT. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 7 F) VIDE LETTER DATED 8-4-2014, THE ADDL CIT, RANGE- 2, HYDERABAD HAS WRITTEN TO THE CIT-II, HYDERABAD ABOU T THE AUDIT OBJECTION WHICH WAS AGAIN RAISED SUBSEQUENT T O THE REASSESSMENT PROCEEDINGS AS FOLLOWS : THE AUDIT OBJECTION IS INCORRECT ON FACTS AND IN LAW FOR THE FOLLOWING REASONS 1) THE FIRST OBJECTION OF THE AUDIT IS THAT THE ASS ESSEE COMPANY DID NOT EXERCISE OPTION FOR TONNAGE TAX SCH EME WITHIN 3 MONTHS I.E. BEFORE 30.06.2005 FROM THE DAT E OF AMALGAMATION OF M/S TCI SEAWAYS LIMITED WITH THE ASSESSEE COMPANY. ACCORDINGLY TO AUDIT THE OPTION W AS NOT EXERCISED WITHIN 3 MONTHS, THE ASSESSEE WAS NOT ENTITLED TO CLAIM BENEFIT OF TONNAGE TAX SCHEME AND THEREFORE THE BENEFIT SHALL BE DISALLOWED. THIS OBJ ECTION IS RAISED BY THE AUDIT FOR BOTH AYS 2006-07 AND 2007-0 8. 2) THE OBJECTION IS INCORRECT NOT ACCEPTABLE. THOUG H THE APPOINTED DATE FOR AMALGAMATION OF M/S TCI SEA WAY LIMITED WITH THE ASSESSEE WAS 01-04-2005, THE ORDER OF THE HON'BLE AP HIGH COURT ACCORDING APPROVAL OF THE MERGED SCHEME WAS PASSED ONLY ON 18.8.2006. THEREFO RE THE ASSESSEE HAD NO CHOICE OTHER THAN SEEKING APPRO VAL WITHIN THREE MONTHS FROM THE DATE OF THE ORDER BECA USE PRIOR TO THE DATE THE ASSESSEE COULD NOT HAVE EXERC ISED THE OPTION. THE ASSESSEE FILED APPLICATION FOR APPR OVAL ON 3.11.2006 WHICH WAS WELL WITHIN 3 MONTHS FROM THE D ATE OF THE ORDER OF HIGH COURT ON 18.8.2006 AND DUE APP ROVAL WAS GRANTED BY THE THEN RANGE HEAD. 3) HOWEVER, FOLLOWING DIRECTIONS OF BOARD REMEDIAL ACTION WAS TAKEN THOUGH THE AUDIT OBJECTION IS INCORRECT. THEREFORE, THE PROPOSAL TO CONVERT THE OBJECTION IN TO DRAFT PARA IS NOT ACCEPTABLE FOR THE REASONS MENTIONED AB OVE AND THE MATTER MAY KINDLY BE TAKEN UP WITH AG(AUDIT ) FOR DROPPING OF THE OBJECTION. 4) THE SECOND OBJECTION OF AUDIT IS THAT THERE IS E RROR IN ADDING BACK DEPRECIATION OF INCOME TO THE EXTENT OF RS.3,11,91,105/-. THIS OBJECTION IS ALSO ARISES BEC AUSE OF APPLICATION OF TONNAGE TAX SCHEME. ONCE TONNAGE TAX SCHEME IS TAKEN IS APPLIED TO THE ABOVE, ONLY DEPRE CIATION RELATED TO NON TONNAGE TAX PORTION OF BUSINESS HAS TO BE ADDED BACK. THOUGH REMEDIAL ACTION IS TAKEN FOLLOWI NG INSTRUCTION OF THE BOARD BY WAY OF REASSESSMENT U/S .147, THIS OBJECTION IS ALSO NOT ACCEPTABLE. THE ASSESSEE IS ELIGIBLE FOR TONNAGE TAX BENEFITS. THEREFORE ON THI S ISSUE ALSO, THE MATTER MAY BE TAKEN UP WITH THE AG(AUDIT) FOR DROPPING THE OF THE OBJECTION. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 8 4.1 IN VIEW OF THE ABOVE FINDINGS AND EXAMINING THE ISSUE WITH VARIOUS CASE LAW, THE CIT(A) HELD THAT CONSIDERING THE FACTUAL AND LEGAL ISSUES WHICH HAVE BEEN BROUGHT OU T IN THIS ORDER WITH RESPECT TO THE REASSESSMENT AND KEEPING IN VIEW THE VIEWPOINTS EXPRESSED IN THE ASSESSMENT RECORDS, THE SUBMISSIONS OF THE ASSESSEE AND RESPECTFULLY ABIDIN G THE PRINCIPLES OF JUDICIAL DISCIPLINE THE REASSESSMENT IS HELD AS VOID AB INITIO AND IS QUASHED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: 1. THE APPELLATE ORDER OF THE LEARNED CIT(A) IS ERR ONEOUS BOTH ON FACTS AND LAW. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SES, THE CIT(A) IS CORRECT IN DECIDING THE CASE WITHOUT CONSIDERING THE MERITS OF THE ISSUES INVOLVED? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SES, THE LEARNED CIT (A) IS CORRECT IN QUASHING THE REOP ENED ASSESSMENT HOLDING THAT REOPENING WAS DONE ON THE B ASIS OF AUDIT OBJECTION WHILE THE ASSESSEE DID NOT RAISE THIS GROUND BEFORE THE CIT(A)? 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SES, THE LEARNED CIT (A) IS CORRECT IN QUASHING THE REOP ENED ASSESSMENT IGNORING THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF P.V.S. BEEDIS PRIVATE LIMITED 237 ITR 13 IN WHICH IT WAS HELD THAT REOPEN ING OF THE CASE ON THE BASIS OF FACTUAL INFORMATION GIVEN BY THE AUDIT PARTY IS VALID IN LAW? 6. LEARNED DEPARTMENTAL REPRESENTATIVE RELYING ON T HE ORDER OF ASSESSING OFFICER SUBMITTED THAT THE LEARN ED CIT (A) IS NOT CORRECT IN QUASHING THE REOPENED ASSESSMENT HOLDING THAT REOPENING WAS DONE ON THE BASIS OF AUDIT OBJEC TION WHILE THE ASSESSEE DID NOT RAISE THIS GROUND BEFORE THE C IT(A). I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 9 7. THE LD. AR FILED WRITTEN SUBMISSIONS BEFORE US W HEREIN IT WAS STATED THAT THE REOPENING OF ASSESSMENT IS I LLEGAL FOR THE FOLLOWING REASONS: (I) THE INITIAL ASSESSMENT MADE APPLYING CHAPTER X II-G WAS A CONSCIOUS DECISION. ALL DETAILS WERE AVAILAB LE ON RECORD. (II) THE REOPENING OF ASSESSMENT IN PRESENT CASE AMOUNTS TO REVIEW WHICH IS NOT PERMITTED IN LAW. H ENCE NOTICE IS ILLEGAL. (III) THE NOTICE U/S.L48 DOES NOT SET OUT REASONS. HENCE THE SAME IS ILLEGAL WITHIN THE MEANING OF THE JUDG MENT OF JURISDICTIONAL HIGH COURT. (IV) THE GROUND RELATING TO THE IMPERMISSIBILITY O F REOPENING THE ASSESSMENT BASED ON AUDIT OBJECTION AND THAT THE ASSESSMENT WAS REOPENED DUE TO DIRECTIONS OF HIGHER AUTHORITIES WAS RAISED AT THE TIME OF HEARI NG BEFORE CIT(A) WHEN THE RECORD WAS PRODUCED. 7.1 ON THE MERITS OF RE-ASSESSMENT, IT WAS CONTEND ED THAT CHAPTER-XII-G IS APPLICABLE AND THE INCOME FROM SHI PPING INITIALLY ASSESSED AT RS.7,05,490/ IS CORRECT AND NO INTERFERENCE IS REQUIRED. 7.2 REGARDING APPLICABILITY OF CHAPTER-XII-G, IT W AS STATED AS FOLLOWS: A) CHAPTER-XII-G PROVIDES FOR COMPUTING OF SHIPPIN G INCOME UNDER TONNAGE TAX SCHEME. B) UNDER SECTION 115VP A QUALIFYING COMPANY MAY OP T FOR BEING TAXED UNDER TONNAGE TAX SCHEME. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 10 C) UPON OPTING FOR TONNAGE TAX SCHEME, U/S.115VQ S UCH OPTION WILL REMAIN IN FORCE FOR A PERIOD 10 YEARS UNLESS THE OPTION IS WITHDRAWN BY THE QUALIFYING COMPANY D) UPON EXERCISING THE OPTION THE COMPUTATION SHAL L BE MADE IN ACCORDANCE WITH SEC.115VG UNDER CHAPTER-XI I- G. E) THE OPTION BECOMES APPLICABLE ONLY IF SEPARATE BOOKS OF ACCOUNTS OF SHIPPING BUSINESS ARE MAINTAINED AN D A REPORT OF CHARTERED ACCOUNTANT IS FURNISHED AS PER SECTION 115VW.THE SAID REPORT SHOULD BE IN FORM NO .66. 7.3 REGARDING AMALGAMATION OF TCI SEAWAYS WITH TCI LTD., IT WAS STATED AS UNDER: A) TCI SEAWAYS LTD. CHENNAI WAS A QUALIFYING COMPA NY AND IS APPROVED UNDER TONNAGE TAX SCHEME U/S.115VP (3) OF THE ACT VIDE ORDER OF ADDL.CIT COMPANY RANG E-3, CHENNAI, DT.20-12-2004 COMMENCING FROM ASST. YEAR 2005-06 ONWARDS. (PAGE 1 OF PAPER BOOK) B) A SCHEME WAS PRESENTED BEFORE THE HON'BLE A.P.H IGH COURT FOR AMALGAMATION OF TCI SEAWAYS LTD. (AMALGAMATING COMPANY) WITH TRANSPORT CORPN. OF INDIA LTD. (APPELLANT COMPANY/ AMALGAMATED COMPANY ). C) THE HON'BLE A.P. HIGH COURT BY ITS JUDGEMENT IN CP NO.78 & 79 OF 2006 DT.18TH AUGUST, 2006 APPROVED THE SCHEME OF AMALGAMATION W.E.F. APPOINTED DATE VIZ. 15 TH APRIL, 2005. D) THEREFORE IN TERMS OF THE MAIN LIMB AND ALSO TH E SECOND PROVISO TO SECTION 115VY, THE TONNAGE TAX SCHEME BECOMES AUTOMATICALLY APPLICABLE TO THE AMALGAMATED COMPANY AS THE AMALGAMATING COMPANY IS A TONNAGE TAX COMPANY. E) EVEN SO, AS A MEASURE OF ABUNDANT PRECAUTION AN APPLICATION WAS MADE BY THE ASSESSEE COMPANY (AMALGAMATED COMPANY) FOR APPROVAL AS TONNAGE TAX I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 11 COMPANY ON 03/11/2006. (WITHIN 3 MONTHS PERIOD FRO M THE DATE OF APPROVAL) F) THE SAID APPROVAL WAS GRANTED ON 4-12-2006 BY T HE ADDL.CIT, RANGE -2, HYDERABAD (PAGE-2 OF PAPER BOO K). ON THE BASIS OF THE ABOVE INFORMATION ON RECORD AT THE TIME OF THE INITIAL ASSESSMENT PROCEEDINGS INCOME WAS ASSESSED VIDE ASST. ORDER DT.29-12-2009 U/S.143(3) APPLYING THE PROVISIONS OF TONNAGE TAX SCHEME UNDE R CHAPTER -XII-G OF THE I.T. ACT FOR ASST. YEAR 2007 -08 7.4 THE LD. AR SUBMITTED THAT ASSESSMENT WAS REOPEN ED PURSUANT TO REVENUE AUDIT PARTY OBJECTIONS AND THE FOLLOWING FACTS EMERGE FROM THE COMPANY'S ASSESSMENT RECORD: A) AUDIT PARTY RAISED OBJECTION VIDE NOTE DT.28/10 /2010 REGARDING APPLICABILITY OF CHAPTER-XII-G. B) ON 2-11-2010 THE ASSESSING OFFICER REPLIED THAT THE OBJECTION WILL BE LOOKED INTO. C) ON 15/6/2011 THE ASSESSING OFFICER ADDRESSED A LETTER TO THE CIT-II. THE ASSESSING OFFICER REJECTED THE OBJECTION AS NOT ACCEPTABLE AND THAT THE COMPUTAT ION OF INCOME UNDER TONNAGE TAX SCHEME BY APPLYING CHAPTER XII-G WAS CORRECTLY DONE. D) THE CIT BY HIS LETTER DT.26/3/2012 ADDRESSED TO ASSESSING OFFICER, DID NOT AGREE WITH AO AND DIREC TED HIM TO REOPEN THE ASSESSMENT. E) AS A CONSEQUENCE THE ASSESSMENT WAS REOPENED B Y ISSUE OF A NOTICE U/S 148 DATED 28/03/12. 7.6 LD. AR MADE THE FOLLOWING SUBMISSIONS ON MERITS OF REASSESSMENT: 1. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) IN HIS ORDER DT.5-6-2015 HELD THAT THE REOPENING OF I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 12 ASSESSMENT ITSELF IS ILLEGAL AND VOID ABINITIO. HE NCE, HE DID NOT GO INTO THE OTHER GROUNDS IN THE GROUNDS O F APPEAL WHICH RELATE TO THE COMPUTATION OF INCOME. 2. THE APPELLANT SUBMITS THAT THE ONLY ADJUSTMENT MADE IN THE REASSESSMENT ORDER IS THE COMPUTATION OF IN COME FROM SHIPPING BUSINESS. IT IS RESPECTFULLY SUBMITT ED THAT EVEN ON MERITS THE ASSESSEE CONTENDS THAT ITS INCO ME IS TO BE COMPUTED U/S L15YY OF THE I.T ACT IN VIEW OF THE FACT THAT THE AMALGAMATING COMPANY IS A TONNAGE TA X COMPANY. THE APPELLANT BEING AN AMALGAMATED COMPANY WILL AUTOMATICALLY BE ENTITLED TO THE APPL ICATION OF CHAPTER XII -G OF THE I. T ACT UNDER THE MAIN L IMB AND ALSO THE SECOND PROVISO TO SECTION IL5VY OF THE I. T ACT. 3. EVEN OTHERWISE AS A PRECAUTIONARY MEASURE THE ASSESSEE COMPANY HAS COMPLIED WITH THE FIRST PROVI SO TO SECTION 115VY OF THE I.T ACT BY APPLYING WITHIN TH REE MONTHS FROM THE DATE OF APPROVAL. THEREFORE, THE ASSESSING OFFICER WAS IN ERROR IN DENYING TO THE ASSESSEE COMPANY THE BENEFIT OF PROVISIONS OF CHAP TER XII -G OF THE I.T. ACT. 4. HENCE THE SHIPPING INCOME DECLARED AT RS.7,05,4 20/- IS CORRECT. THE QUANTIFICATION OF INCOME IN THE REASSESSMENT ORDER AT RS.5,30,62,59/- (PAGE 110 OF PAPER BOOK) IS INCORRECT. THE SAID INCOME SHOULD B E SUBSTITUTED WITH RS.7,05,420/-. 7.7 LD. AR SUBMITTED THAT AN ASSESSMENT CANNOT BE REOPENED FOR A REVIEW OF THE ASSESSMENT MADE. THERE CANNOT BE A REAPPRAISAL OF THE FACTS ALREADY ON RECORD. RE FERENCE IS INVITED TO THE FOLLOWING DECISIONS. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 13 1. CIT VS. DINESH CHANDRA H. SHAH (SC) 82 ITR 367 371 2. ITO VS. NAWAB MIR BARKAT ALI KHAN (SC) 97 ITR 2 39 245 3. JINDAL PHOTO FILMS LTD.VS. DCIT DELHI 234 ITR 1 70 177 &179 4. TECHSPAN INDIA (P) LTD.VS.ITO DELHI 283 ITR 212 223 5. CIT VS.KELVINATOR OF INDIA LTD. SC 320 ITR 561 564 6. TURNER BROADCASTING SYSTEMS ASIA PACIFIC INC VS. DDIT DELHI 380 ITR 412 420 & 421 7.8 LD. AR SUBMITTED THAT AN ASSESSMENT CANNOT BE R EOPENED BASED ON AUDIT OBJECTION. SUCH OBJECTION DOES NOT C ONSTITUTE INFORMATION FOR REOPENING. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS. 1.CIT VS.LUCAS TVS LTD.(MAD) 234 ITR 296 297 2. CIT VS.LUCAS TVS LTD. (SC) 249 ITR 306 3. INDIAN & EASTERN NEWSPAPER SOCIETY VS.CIT(SC) 1 19 ITR 996 4. CIT VS. LEE PHARMA PVT. LTD. (AP) 20 ITR (T) 49 9 7.9 HE SUBMITTED THAT THE REOPENING OF ASSESSMENT B ASED ON THE DIRECTIONS OF HIGHER AUTHORITIES VITIATES THE R EOPENING AS SUCH AND ALSO ALL CONSEQUENTIAL PROCEEDINGS. FOR TH IS, HE RELIED ON THE FOLLOWING DECISIONS: 1. YESWANT TALKIES VS.CIT (MP) 157 ITR 109 2. SHEO NARAIN JAISWAL & OTHERS VS.ITO (MP) 176 IT R 352 368 3. CIT VS. GREEN WORLD CORP.(SC) 314 ITR 81 110 & 111 7.9 FINALLY, HE SUBMITTED THAT WHENEVER ANY ASSESSM ENT IS REOPENED, THE REASONS FOR REOPENING SHOULD BE REFLE CTED IN THE NOTICE ITSELF. OTHERWISE THE NOTICE U/S 148 FOR REO PENING STANDS VITIATED. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 14 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED MATERIAL FACTS ON RECORD AS WELL AS THE DECISIONS CITED ABOVE, LET US EVALUATE THE GROUNDS RAISED BY THE REVENUE AS UNDER: 8.1 THE FIRST GROUND BEING GENERAL, NO ADJUDICATION IS REQUIRED. 8.2 THE SECOND AND THIRD GROUNDS ARE RAISED BY THE REVENUE QUESTIONING THE JURISDICTION OF THE CIT(A) THAT - CAN CIT(A) DECIDE THE CASE WITHOUT GOING INTO MER ITS OF THE ISSUES INVOLVED. - CAN CIT(A) QUASH THE REOPENED ASSESSMENT HOLDING THAT THE SAME WAS DONE ON AUDIT OBJECTIONS, WHILE THE SAME W AS NOT RAISED BY THE ASSESSEE IN FIRST PLACE. 8.3 BOTH THESE GROUNDS ARE INTER-CONNECTED, WHICH D EALS WITH THE JURISDICTION AND POWERS OF THE CIT(A). THE POWER TO ADJUDICATE APPEALS ARE GIVEN IN SECTION 251 OF THE ACT. FOR CONVENIENCE, WE REPRODUCE THE SAME BELOW: 251. (1) IN DISPOSING OF AN APPEAL, THE 29 [* * *] 30 [COMMISSIONER (APPEALS)] SHALL HAVE THE FOLLOWING POWERS (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT, H E MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT 33 34 [* * *]; 35 [(AA) IN AN APPEAL AGAINST THE ORDER OF ASSESSMENT IN RESPECT OF WHICH THE PROCEEDING BEFORE THE SETTLEMENT COMMISSI ON ABATES UNDER SECTION 245HA , HE MAY, AFTER TAKING INTO CONSIDERATION ALL THE MATERIAL AND OTHER INFORMATION PRODUCED BY THE ASSESSEE BEFORE, OR THE RESULTS OF THE INQUIRY HELD OR EVIDE NCE RECORDED BY, THE SETTLEMENT COMMISSION, IN THE COURSE OF THE PRO CEEDING BEFORE IT AND SUCH OTHER MATERIAL AS MAY BE BROUGHT ON HIS RECORD, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT;] (B) IN AN APPEAL AGAINST AN ORDER IMPOSING A PENAL TY, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHE R TO ENHANCE OR TO REDUCE THE PENALTY; (C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN THE APPEAL AS HE THINKS FIT. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 15 (2) THE 36 [* * *] 37 [COMMISSIONER (APPEALS)] SHALL NOT ENHANCE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REF UND UNLESS THE APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF S HOWING CAUSE AGAINST SUCH ENHANCEMENT OR REDUCTION. EXPLANATION.IN DISPOSING OF AN APPEAL, THE 36 [* * *] 37 [COMMISSIONER (APPEALS)] MAY CONSIDER AND DECIDE AN Y MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THAT SUCH MATTE R WAS NOT RAISED BEFORE THE 36 [* * *] 37 [COMMISSIONER (APPEALS)] BY THE APPELLANT. 8.4 CIT(A) GETS VIDE POWER FROM SECTION 251(1) AND IN PARTICULAR 251(1)(C). IN BRIEF, CIT(A) IN ANY APPEA L AGAINST ASSESSMENT ORDER, MAY CONFIRM/ REDUCE/ ENHANCE OR A NNUL. IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS AS HE THINK S FIT. AT THE SAME TIME, EXPLANATION TO SECTION 251, SAYS, I N DISPOSING OF ANY APPEAL, THE CIT(A) MAY CONSIDER AND DECIDE A NY MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER A PPEALED AGAINST WAS PASSED, EVEN SUCH MATTER WAS NOT RAISED BEFORE CIT(A) BY THE APPELLANT. THE ABOVE EXPLANATION AND SUB- SECTIONS 1(A) & 1(C) GIVE ADEQUATE POWERS TO CIT(A) TO ADJUDICATE THE MATTER BEFORE HIM IN A MANNER WHICH HE MAY CONSIDER IT APPROPRIATE. FROM THE PLAIN READING OF THE EXPLANATION TO SECTION 251, IT IS CLEAR THAT HE CAN DECIDE THE APPEAL EVEN THOUGH THE MATTER WAS NOT RAISED BEFOR E HIM BY THE ASSESSEE. IN OUR CONSIDERED VIEW, CIT(A) HAS WI DE POWERS TO DECIDE MATTER ACCORDING TO THE CRITICALITY OR APPROPRIATENESS OF THE SITUATION OR MATTER ON HAND EVEN WITHOUT GOING INTO THE MERITS OF THE CASE OR EVEN T HOUGH THE SAME WAS NOT RAISED BEFORE HIM BY THE ASSESSEE. 8.5 AS HELD IN THE CASE OF CIT VS. HARDUTROY MOTILA L CHAMARIA (RAI BAHADUR), [1967] 66 ITR 443 (SC) THAT IN DISPOSING OF AN APPEAL BEFORE CIT(A), THE APPELLATE AUTHORITY CAN TRAVEL OVER WHOLE RANGE OF THE ASSESSMENT ORDER . HE CAN BRING IN FOR ASSESSMENT SOURCES WHICH HAVE BEEN CON SIDERED I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 16 OR PROCESSED BY THE ASSESSING OFFICER EVEN THOUGH T HE OFFICER MAY HAVE FAILED TO BRING THEM TO TAX. IN OTHER WORD S, THE POWERS, OF THE APPELLATE AUTHORITY IN DISPOSING OF AN APPEAL ARE VERY WIDE AND PLENARY, WIDER THAN THAT OF THE T RIBUNAL. IT IS OPEN TO HIM TO CONSIDER EVERY ASPECT OF THE ASSESSM ENT ORDER AND GIVE APPROPRIATE RELIEFS OR DIRECTIONS. 8.6 THERE IS NO LIMITATION FOR EXERCISE OF POWERS O F THE CIT(A) IN APPEAL PROCEEDINGS. SINCE THE POWER TO ENHANCEMENT IS SPECIFICALLY CONFERRED ON CIT(A), TH E CIT(A) CAN SUO MOTTO DEAL WITH THE ISSUES WHICH WERE NOT T HE SUBJECT MATTER OF APPEAL (CIT VS. KASHI NATH CHANDIWALA [20 06] 280 ITR 318 (ALL.) 8.7 COMING TO THE FOURTH GROUND, CIT(A) HAD QUASHED THE REOPENED ASSESSMENT IGNORING THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF PVS BEEDIS PVT. LTD., 237 ITR 13 IN WHICH IT WAS HELD THAT REOPENING OF THE CASE ON THE BASIS OF FACTUAL INFORMATION GIVEN BY THE AUDIT PARTY IS VALID IN LAW. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE THE RATIO OF THE JUDGMENT BELOW: 3. WE ARE OF THE VIEW THAT BOTH THE TRIBUNAL AND THE HIGH COURT WERE IN ERROR IN HOLDING THAT THE INFORMATION GIVEN BY T HE INTERNAL AUDIT PARTY COULD NOT BE TREATED AS INFORMATION WITHIN TH E MEANING OF S. 147(B) OF THE IT ACT. THE AUDIT PARTY HAS MERELY PO INTED OUT A FACT WHICH HAS BEEN OVERLOOKED BY THE ITO IN THE ASSESSM ENT. THE FACT THAT THE RECOGNITION GRANTED TO THIS CHARITABLE TRU ST HAD EXPIRED ON 22ND SEPT., 1972, WAS NOT NOTICED BY THE ITO. THIS IS NOT A CASE OF INFORMATION ON A QUESTION OF LAW. THE DISPUTE AS TO WHETHER REOPENING IS PERMISSIBLE AFTER THE AUDIT PARTY EXPR ESSES AN OPINION ON A QUESTION OF LAW IS NOW BEING CONSIDERED BY A L ARGER BENCH OF THIS COURT. THERE CAN BE NO DISPUTE THAT THE AUDIT PARTY IS ENTITLED TO POINT OUT A FACTUAL ERROR OR OMISSION IN THE ASSESS MENT. REOPENING OF THE CASE ON THE BASIS OF A FACTUAL ERROR POINTED OU T BY THE AUDIT PARTY IS PERMISSIBLE UNDER LAW. IN VIEW OF THAT WE HOLD T HAT REOPENING OF THE CASE UNDER S. 147(B) IN THE FACTS OF THIS CASE WAS ON THE BASIS OF FACTUAL INFORMATION GIVEN BY THE INTERNAL AUDIT PAR TY AND WAS VALID IN LAW. THE JUDGMENT UNDER APPEAL IS SET ASIDE TO THIS EXTENT. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 17 8.8 FROM THE ABOVE JUDGMENT, THERE CAN BE NO DISPUT E THAT THE AUDIT PARTY IS ENTITLED TO POINT OUT A FACTUAL ERROR OR OMISSION IN THE ASSESSMENT. REOPENING OF THE CASE O N THE BASIS OF FACTUAL ERROR POINTED BY THE AUDIT PARTY I S PERMISSIBLE UNDER LAW PROVIDED ASSESSING OFFICER SHOULD APPLY H IS MIND AND GET HIMSELF SATISFIED THAT THE INCOME HAS ESCAP ED ASSESSMENT DUE TO SUCH AN ERROR. IN THIS CASE, THOU GH THE ASSESSING OFFICER WAS SATISFIED THAT THE AUDIT OBJE CTION IS NOT CORRECT, HE REOPENED THE ASSESSMENT ONLY ON THE DIR ECTION OF CIT-II, HYDERABAD WHICH CLEARLY MAKES THE REOPENING OF ASSESSMENT IS VOID AB-INITIO. EVEN ON FACTS, WE FIN D THAT THE ALLEGED FACTUAL ERROR POINTED OUT BY THE AUDIT PART Y IS FACTUALLY INCORRECT. AS PER THE PROVISIONS OF SECTION 115VY, THE AMALGAMATED COMPANY HAD TO GET PERMISSION FROM THE AUTHORITIES TO RETAIN THE BENEFIT OF TONNAGE TAX S CHEME WITHIN THREE MONTHS FROM THE DATE OF AMALGAMATION. M/S TC I SEAWAYS LTD. AMALGAMATED WITH M/S TCI LTD. WITH EFF ECT FROM 01/04/2005. SINCE M/S TCI LTD. WAS GRANTED PERMISSI ON ONLY ON 04/12/2006, ACCORDING TO THE AUDIT PARTY, IT LOO SES THE BENEFIT UNDER CHAPTER XII G. BUT, THE FACT IN T HIS PROPOSITION ITSELF IS FACTUALLY INCORRECT. THE CORR ECT FACTS ARE THAT THE HONBLE AP HIGH COURT HAS APPROVED THE SCH EME OF AMALGAMATION VIDE ITS ORDER ONLY ON 18/08/2006 WITH THE EFFECTIVE DATE OF AMALGAMATION BEING 01/04/2005. TH E COMPANY HAS PROMPTLY APPLIED ON 03/11/2006 (WITHIN THREE MONTHS) AND GOT APPROVAL FROM DEPARTMENT ON 04/12/2 006. 8.9 CONSIDERING THE ABOVE FACTUAL POSITION, CIT(A) IS RIGHT IN NOT CONSIDERING THE ABOVE JUDGMENT IN THE PRESENT C ASE AND DISPOSING OF THE APPEAL AS HE DEEMS FIT. I.T.A. NO. 1080/HYD/2015 TRANSPORT CORPORATION OF INDIA LTD. 18 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 16 TH MARCH, 2016 KV COPY FORWARDED TO: 1. ACIT, CIRCLE 2(2), 8 TH FLOOR, B BLOCK, ROOM NO. 824, IT TOWERS, AC GUARDS, HYDERABAD 500 004. 2. M/S TRANSPORT CORPORATION OF INDIA LTD., 306 & 3 07, 3 RD FLOOR, ASHOK BHOOPAL CHAMBERS, SP ROAD, SECUNDERABAD. 3. CIT(A) - 2, HYDERABAD 4 PR. CIT - 2, HYDERABAD 5 THE DR, ITAT, HYDERABAD