DOCKENDALE SHIPPING COMPANY LTD, MUMBAI V. ASST DIT (IT) 1(2), MUMBAI

ITA 2603/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9719 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 21-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJGURU M V
• Keywords: Principle of natural justice; Permanent establishment; Reassessment proceedings
• Section: 133A; 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI [BEFORE S/SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER] ITA NO S . 2603/M/2014, 2604/M/2014, 2605/M/2014, 3327/M/2014 &7524/M/2014 ( / ASSESSMENT YEAR ) : 2005 - 06 , 2006 - 07,2007 - 08,2010 - 11 & 2011 - 12 DOCKENDALE SHIPPING COMPANY LTD. LIAISON OFFICE C/O, PARAG MARKET, A - 501 SAHAYADRI, UPPER GOVIND NAGAR MALAD(E) MUMBAI PIN 400097 / VS. ASST DIT(IT) 1(2) SCINID A HOUSE MUMBAI ./ ./ PAN/GIR NO. : AACCD 2212 J ( / APPELLANT ) .. ( / RESPONDENT ) SHRI GIRISH DAVE APPELLANT BY SHRI RAJGURU M.V. SR. DR RESPONDENT BY / DATE OF HEARING: 07.09.2017 / DATE OF PRONOUNCEMENT:. 11.09. 201 7 O R D E R PER: AMARJIT SINGH: JM THE ABOVE MENTIONED APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29.11.2013 FOR THE AYS. 200 5 - 06,2006 - 07, 2007 - 08 AND AGAINST THE ORDER DATED 05 .02.2014 FOR THE ASSESSMENT YEAR 2010 - 11 AND AGAINST THE ORDER DATED 19 .09 .201 4 FOR THE ASSESSMENT YEAR 2011 - 12 P ASSED BY THE CIT(A) - 30 MUMBAI [HEREI NAFTER REFERRED TO AS CIT(A)] . ITA. NO . 2603 /M/201 4 2 2. THE ASSESSEE HAS FILED THE PRESENT APPEAL AG AINST THE ORDER DATED 29.11.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 30 , MUMBAI RELEVANT TO THE AY. 200 5 - 06 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE ORDER PASSED BY LEARNED CIT(A) UPHOLDING ADDITION OF RS. 3,34,17,555 MADE BY THE ASSESSING OFFICER ('AO') AS A GAINST NIL INCOME RETURNED BY THE APPELLANT IS ERRONEOUS, CONTRARY TO THE PROVISIONS OF THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND IS NON - SPEAKING AND WITHOUT GIVING ANY BASIS AND THEREFORE, REQUIRES TO BE SUITABLY MODIFIED. 2 THE LEARNED CIT(A) ERRE D IN HOLDING THAT REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT INITIATED BY THE AO IS JUSTIFIED AND THEREBY REJECTED APPELLANT'S CONTENTION THAT REASSESSMENT PROCEEDING IS WITHOUT JURISDICTION AND THEREFORE NOT VALID. THE LEARNED CIT(A) ERRED IN L AW AS WELL AS ON FACTS IN HOLDING THAT THE AO IS JUSTIFIED IN BRINGING THE APPELLANT'S INCOME TO TAX UNDER SECTION 9 OF THE ACT AND THEREBY REJECTED CONTENTION OF THE APPELLANT THAT NO INCOME CHARGEABLE TO TAX HAS ACCRUED OR ARISEN OR DEEMED TO HAVE ACCRUE D OR ARISEN IN INDIA UNDER SECTION 9(1)(I) OF THE ACT. 4 THE LEARNED CIT(A) ERRED IN HOLDING THAT LIAISON OFFICE IN INDIA SUBSTANTIALLY CONTRIBUTED IN THE BUSINESS ACTIVITY OF THE APPELLANT WITHOUT APPRECIATING THAT (A) ACTIVITY OF INDIA LO IS PREPARATORY AND AUXILIARY IN NATURE; (B) INDIA LO PERFORMS LIMITED ROLE OF CO - ORDINATION OF CREW RECRUITMENT PROCESS; (C) ACTIVITY OF INDIA LO IS NOT AN INCOME GENERATING ACTIVITY. THE LEARNED CIT(A) ERRED IN UPHOLDING ACTION OF THE AO MERELY BY RELYING ON AO'S ORDER WITHOUT PROVIDING ANY FINDINGS WHATSOEVER ON SUBMISSIONS BASED ON FACTS, CASE LAWS AND DOCUMENTARY EVIDENCES MADE BEFORE HIM. THE LEARNED CIT(A) ERRED IN TREATING VARIOUS GROUNDS OF APPEALS RAISED BY THE APPELLANT WITHOUT PREJUDICE TO PRINCIPAL GROUNDS, AS INFRUCTUOUS AND DISMISSED THE SAME WITHOUT ANY FINDINGS. 6.1 WITHOUT PREJUDICE, THE LEARNED CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE AO HAS BASED THE ESTIMATE OF INCOME ON TOTALLY INCOMPARABLE CASE AND THAT ONLY SO MUCH INCOME IS CHARGEABLE TO TAX I N INDIA AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA BY THE LO AS REQUIRED BY EXPLANATION 1(A) TO SECTION 9(1)(I) OF THE ACT. 3 6.2 WITHOUT PREJUDICE, THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN COMPLETELY DISREGARDING ANALYSIS OF ACTIVITIES UNDERTAKEN BY LIAISON OFFICE WITH REFERENCE TO TOTAL ACTIVITIES OF THE APPELLANT. 6.3 WITHOUT PREJUDICE, THE LD. CIT(A) ERRED IN DISREGARDING APP ELLANTS CONTENTION THAT INCOME ATTRIBUTED TO INDIA LO SHOULD BE RESTRICTED TO NET COST PLUS MARKUP OF 4.20% AS PER THE DETAILED ANALYSIS UNDERTAKEN AND SUBMITTED BY THE APPELLANT WHICH IS IN CONSONANCE WITH EXPLANATION 1(A) OF SECTION 9(1)(I) OF THE ACT. 7. THE LD. ASSESSING OFFICER / CIT(A) ERRED IN LAW AND ON FACTS IN LEVYING INTEREST UNDER SECTION 234B, 234C AND 234D OF THE ACT. 3 . THE BRIEF FACTS OF THE CASE , ARE THAT THE PRINCIPAL COMPANY DOCKENDALE SHIPPING CO. LTD. IS A COMPANY BASED IN NAS SUA, BAHAMAS AND IT IS IN THE BUSINESS OF SHIP MANAG E MENT . THE ASSESSEE HAS AN OFFICE IN THE INDIA WHICH IS TERMED AS LIAISON OFFICE. THE ASSESSEE DID NOT FILE THE RETURNS OF INCOME ON THE GROUND OF THAT THE ACTIVITY OF THE LIAISON OFFICE NEITHER GENERATE ANY INCOME NOR CAN BE SAID TO BE BUSINESS CONNECTION IN INDIA OF THE ASSESSEE. ON 31.01.2006 A SURVEY U/S 133A OF THE I.T. ACT, 1961 WAS CARRIED OUT AND IT WAS REVEALED THAT SAID LIAISON OFFICE WAS CARRYING OUT ACTIVITIES WHICH AMOUNT ED TO BEING PERMANENT ESTABLISHMENT/BUSINESS CONNECTION IN INDIA. ACCORDINGLY, NOTICE U/S 148 OF THE I.T. ACT, 1961 , WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE, TO THIS NOTICE , THE ASSESSEE FILED IT S RETURN OF INCOME AND RAISED THE QUESTION ABOUT THE ISSUE OF NOTICE. THE ASSESSEE WAS ASKED TO STATE WHY THE ACTIVITIES LIAISON OFFICE SHOULD NOT BE CONSTITUTED A S PE (PERMANENT ESTABLISHMENT) OF ASSESSEE IN INDIA. THEREAFTER, NOTICE U/S 143(2) & 143 (1) WERE IS SUED AND SERVED UPON THE ASSESSEE, T HEREAFTER, THE ASSESSEE FI LED THE DETAILED REPLY WHICH IS MENTIONED IN THE ASSESSMENT ORDER, DATED 21.02.2011. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, ASSESSING OFFICER ARRIVED AT TH IS CONCLUSION THAT THE ASSESSEE OFFICE WAS HAVING THE BUSINESS CON NECTION FROM WHICH THE INCOME ACCRUES TO THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER TOOK INTO CONSIDERATION THE INCOME OF M/S FREEDOM S HIP PING C OMPANY L TD. (FSCL) AND ASSESSED THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.3,34,17,555/ - FOR 4 THE ASSESSMENT YEAR OF 2005 - 06. F EELING AGGRIEVED BY THE SAID ASSESSMENT ORDER, ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) WHO CONFIRM THE ORDER OF ASSESSING OFFICER T HEREFORE, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. ISSUE NO.2 4. UNDER THIS ISSUE THE ASSESSEE HAS RAISED THE VALIDITY OF THE NOTICE U/S 147 &148 OF THE I.T. ACT 1961. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE COMPANY IS A COMPANY BASED IN NASSAU, BAHAMAS AND IS IN THE BUSINESS OF SHIP MANAGEMENT AND THE ASSESSEE COMPANY HAS OPENED THE LI AISON OFF ICE IN INDIA LOCATED AT UNIT NO.5/113 TECHNOPOLIS KNOWLEDGE PARK, MAHAKALI, CAVES ROAD, CHAKALA, ANDHERI (E), MUMBAI, FOR THE ACTIVITY OF SUPPLYING MAN - POWER TO VESSEL S MANAGED BY THE DSCL (DOCKENDALE SHIPPING COMPANY LTD.) AND ALSO TO PROVIDE IN HOUSE TRAI NING TO THE SAID MAN POWER AND LIAISON WITH LOCAL UNION FOR SETTLING THE DISPUTE AND ALSO TO LOOK AFTER THE PAYMENT OF STAT UTORY DUES OF VARIOUS SCHEME A ND ADVISE THE PRINCIPAL REGARDING GLOBAL JOB MARKET AND ALSO TO PROVIDE WITH INTO PERTAINING TO THE PREVALENT WAGE STRUCTURE OF VARIOUS UNIONS. THE LIAISON OFFICE HAS CERTAIN POWER TO TAKE THE DECISION REGARDING APPOINTMENT OF MAN POWER AT VARIOUS POST THAT IS FOURTH ENGINEER , SECOND OFFICER, MARINE ENGINEERS, TRAINEE MEN, CADET ETC,. IT IS ALSO ARGUED T HAT THE WORK OF COMPANY WAS LIMITED TO FACILITATION FOR RECRUITMENT OF SEA FARERS FROM INDIA AND NOTHING MORE THAN WAS DONE BUT THE ASSESSING OFFICER WRONGLY ISSUED THE NOTICE U/S 147/148 I.T.ACT. IT IS ARGUED THAT AT THE ASSESSING OFFICER PROVIDED THE RE ASON FOR REOPENING BY VIERTUE OF LETTER DATED 17.4.2009 AND THE APPELLANT FILED THE OBJECTION BY VIRTUE OF LETTER DATED 25.2.2010 BUT THE OBJECTION WERE NOT DISPOSED OFF THEREFORE, THE ASSESSMENT ORDERS IN QUESTION ARE NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW SPECIFICALLY IN VIEW OF THE LAW SETTLED IN K.S.S PETRON PVT. LTD. VS. THE ASSISTANCE COMMISSIONER OF INCOME TAX CIRCLE - 2 IN ITA NO. 5 224/M/2014 . . IT IS ALSO ARGUED , THAT THE ASSESSING OFFICER NOWHERE SHOWN ANY INCOME EARNED BY THE ASSESSEE BUT ASSESSED THE INCOME ON THE BASIS OF THE INCOME OF ANOTHER COMPANY NAMELY, M/S FREEDOM COMPANY LTD. WHICH WAS DOING THE CONSISTENTLY BUSINESS ACCORDINGLY AND ILLEGAL. THEREFORE, THE ORDER U/S 148 IS NOT LIA BLE TO BE SUSTAINABLE IN THE EYE S OF LAW ON THE OTH ER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. W E NOTICE D THAT THE ASSESSEE COMPANY IS DOCKENDALE SHIPPING COMPANY LTD. WAS INCORPORATED IN NASSAU, BAHAMAS JUNE, 1973. THE LIAISON OFFICE WAS SET UP IN INDIA IN THE YEAR 1995 OF SUFFICIENT CHANCE AFTER DUE TAKEN THE PERMISSION ON THE RBI, WHICH LIES AT PAGE 10,11 & 12 OF THE PAPER BOOK . IT IS NOT IN DISPUTE THAT THE ASSESSEE OFFICE WAS ONLY DOING THE WORK OF LIAISON IN THE NATURE OF SUPPLYING MAN - POWER TO VESSEL S MANAGED BY THE DSCL (DOCKENDALE SHIPPING COMPANY LTD.) AND ALSO TO PROVIDE IN HOUSE TRAINING TO THE SAID MAN POWER AND LIAISON WITH LOCAL UNION FOR SETTLING THE DISPUTE AND ALSO TO LOOK AFTER THE PAYMENT OF STAT UTORY DUES OF V ARIOUS SCHEME AND ADVISE THE PRINCIPAL REGARDING GLOBAL JOB MARKET AND ALSO TO PROVIDE WITH INTO PERTAINING TO THE PREVALENT WAGE STRUCTURE OF VARIOUS UNIONS. THE LIAISON OFFICE HAS CERTAIN POWER TO TAKE THE DECISION REGARDING APPOINTMENT OF MAN POWER AT V ARIOUS POST THAT IS FOURTH ENGINEER, SECOND OFFICER, MARINE ENG INEERS, TRAINEE MEN, CADET ETC. THE ASSESSEE COMPANY HAS ALSO TAKEN THE PERMISSION F ROM THE RESERVE BANK OF INDIA TO DO THIS JOB BY VIRTUE OF LETTER DATED 19.05.1995 . ASSESSEE COMPANY DID NOT GENERATE ANY INCOME FROM THE LIAISON OFFICE TAXABLE IN INDIA . IT IS TO BE SEEN WHAT THE AO HAS CONCLUDED. 1. THE ACTIVITY UNDERTAKEN BY THE INDIAN LO DIRECTLY CONTRIBUTES TO THE EARNING OF INCOME BY DSCL. 6 2. THE INDIAN LO HAS A BUSINESS CONNECTION FROM WHI CH INCOME ACCRUES TO DSCL AND HENCE A REASONABLE ESTIMATION OF ATTRIBUTION OF INCOME TO THE ACTIVITIES CARRIED OUT BY THE INDIA LO SHOULD BE MADE. 3. THE INDIAN LO IS RENDERING HUMAN RESOURCE CONSULTANCY SERVICES TO DSCL. 4. FOR QUANTIFICATION OF THE INCOM E, THE AO CONSIDERED ANOTHER COMPANY VIZ. FREEDOM SHIPPING CO. LTD. WHICH SUPPORTED DSCL IN RESPECT OF THE TECHNICAL MATTERS FOR THE REPAIRS AND MAINTENANCE OF THE SHIPS MANAGED BY DSCL. FREEDOM SHIPPING CO. LTD. RECEIVED A LUMP SUM FEES OF USD 2000 PER SH IP PER MONTH FOR THE SERVICES RENDERED BY IT. 5. APPLYING THE SAME, THE AO HELD THAT THE INDIAN LO ALSO SHOULD GET USD 2000 PER MONTH PER SHIP FOR RENDERING HUMAN RESOURCE CONSULTANCY SERVICES AND CALCULATED THE TOTAL INCOME AT RS. 4,00,00,000/ - IN RESPECT OF 44 SHIPS. WHILE DOING SO, THE AO ALLOWED A DEDUCTION OF RS. 65,82,445/ - BEING THE EXPENSES INCURRED BY THE INDIAN LO AND THEREBY ASSESSED THE TOTAL INCOME AT RS. 3,34,17,555/ - THE ABOVE SAID FINDING OF THE ASSESSING OFFICER NO DOUBT CONFIRM BY THE CIT( A) BUT THE SAID FINDING NOWHERE SPEAKS ABOUT THE GENERATION OF INCOME OF ANY KIND BY THE ASSESSEE. NOTHING CAME INTO THE NOTICE THAT WHICH INCOME GENERATED BY THE ASSESSEE IS TAXABLE IN INDIA. THE PURPOSE OF THE LIAISON OFFICE FOR WHICH THE PERMISSION HAS DULY BEEN GRANTED BY THE RESERVE BANK OF INDIA NOWHERE THE SEEMS TO BE VIOLATED BY THE ASSESSEE AS NOTHING CAME INTO THE NOTICE IN THIS REGARD . THE CONTENTS OF THE LETTER IS HEREBY REPRODUCED AS UNDER DOCKENDALE SHIPPING COMPANY LIMITED. 2 ND FLOOR, BITO O BUILDING, P.O. BOX NO. 10455 BANK LANE, NASSAU, BAHAMAS. DEAR SIRS, PERMISSION UNDER SECTION 29(1) (A) OF THE FOREIGN EXCHANGE REGULATION ACT, 1973 FOR OPENING A LIAISON OFFICE IN INDIA -------------------------------------------------- 7 PLEASE REFER TO YOUR APPLICATION DATED 4 TH APRIL 1995 AND THE SUBSEQUENT OF RESPONDENCE ROOTING WITH YOUR LETTER DATED 2. WE ADVISE THAT WE ARE AGREEABLE TO YOUR ESTABLISHMENT A LIAISON OFFICE AT BOMBAY INITIALLY FOR A PERIOD OF THREE YEARS FOR THE PURPOSE OF UNDERTAKING SOLELY LIAISON ACTIVITIES VIZ. TO RECRUIT INDIAN CREWS FOR SHIPS MANAGED BY YOUR COMPANY. PLEASE NOTED TH AT THIS PERMISSION HAS BEEN GRANTED SUBJECT TO THE FOLLOWING CONDITIONS.: (I) EXCEPT THE PROPOSED LIAISON WORK, THE OFFICE IN INDIA WILL NOT UNDER TAKE ANY OTHER ACTIVITY OF A TRADING, COMMERCIAL OR INDUSTRIAL NATURE NOR SHALL IT ENTER INTO ANY BUSINESS CO NTRACTS IN ITS OWN NAME WITHOUT OUR PRIOR PERMISSION. (II) NO COMMISSION FEES WILL BE CHARGED OR ANY OTHER REMUNERATION RECEIVED/INCOME EARNED BY THE OFFICE IN INDIA FOR THE LIAISON ACTIVITIES/SERVICES RENDERED BY IT OR OTHERWISE IN INDIA. (III) THE ENTIRE EXPENSES OF THE OFFICE IN INDIA WILL BE MET EXCLUSIVELY OUT OF THE FUNDS RECEIVED FROM ABROAD THROUGH NORMAL BANKING CHANNELS. (IV) THE OFFICE IN INDIA SHALL NOT BORROW OR LEND ANY MONEY FROM/ TO ANY PERSON IN INDIA WITHOUT OUR PRIOR PERMISSION (V) THE OF FICE IN INDIA SHALL NOT ACQUIRE, HOLD, )OTHERWISE THAN BY WAY OF LEASE FOR A PERIOD NOT EXCEEDING FIVE YEARS) TRANSFER OR DISPOSE OF ANY IMMOVABLE PROPERTY IN INDIA WITHOUT OBTAINING PRIOR PERMISSION OF THE RESERVE BANK OF INDIA UNDER SECTION, 31 OF THE FO REIGN EXCHANGE REGULATION ACT, 1973 (VI)THE OFFICE IN INDIA WILL FURNISH TO OUR BOMBAY REGIONAL OFFICE (ON A YEARLY BASIS) (A) A CERTIFICATE FROM THE AUDITION TO THE EFFECT THAT DURING THE YEAR NO INCOME WAS EARNED BY/OR ACCRUED TO THE OFFICE, IN INDIA: (B) DETAIL S OF REMITTANCES RECEIVED FROM ABROAD DULY SUPPORTED BY INWARD REMITTANCE CERTIFICATE: (C) CERTIFIED COPY OF THE AUDITED FINAL ACCOUNTS OF THE OFFICE IN INDIA; AND (D) ANNUAL REPORT OF THE WORK DONE BY THE OFFICE IN INDIA, STATING THEREIN THE DETAILS OF ACTUAL EXP ORT OR IMPORT, IF ANY, EFFECTED DURING PERIOD IN RESPECT OF WHICH THE OFFICE HAD RENDERED LIAISON SERVICES. (VII) THE INCHARGE OF THE LIAISON OFFICE IN INDIA WILL NOT HAVE SIGNING/COMMITMENT POWERS EXCEPT THAN THOSE WHICH ARE REQUIRED FOR NORMAL FUNCTIONIN G OF LIAISON OFFICE ON BEHALF OF THE HEAD OFFICE. (VIII) THE LIAISON OFFICE WILL NOT RENDER ANY CONSULTANCY SERVICES DIRECTLY/INDIRECTLY WITH OR WITHOUT ANY CONSIDERATION. 8 3. IN CASE YOU DESIRE TO OPEN A HEAD OFFICE ACCOUNT IN THE BOOKS OF YOUR LIAISON OFF ICE IN INDIA, WE HEREBY GRANT YOU OUR APPROVAL TO MAINTAIN SUCH AN ACCOUNT SUBJECT TO THE CONDITIONS THAT THE CREDITS TO THE ACCOUNT SHOULD REPRESENT THE FUNDS RECEIVED FROM HEAD OFFICE THROUGH NORMAL BANKING CHANNELS FOR MEETING THE EXPENSES OF THE OFFICE AND NO OTHER AMOUNT SHOULD BE CREDITED WITHOUT PRIOR PERMISSION OF THE RESERVE BANK. SIMILARLY DEBITS TO THIS ACCOUNT COULD BE RAISED ONLY FOR MEETING THE LOCAL EXPENSES OF THE OFFICE. AUDITED TRANSCRIPT OF THE HEAD OFFICE ACCOUNT MAY BE FORWARDED TO OUR BOMBAY REGIONAL OFFICE ALONGWITH THE ANNUAL ACCOUNTS MENTIONEND ABOVE. 4. IT IS FURTHER CLARIFIED THAT THE PERMISSION GRANTED HEREBY IS LIMITED TO AND FOR THE PURPOSE OF THE CONSTRUED IN ANY WAY AS REGULARIZING, CONDONING OR IN ANY MANNER VALIDATING ANY IR REGULARITIES, CONTRAVENTIONS OR OTHER LAPSES IF ANY UNDER THE PROVISIONS OF ANY OTHER LAW FOR THE TIME BEING IN FORCE. 5. PLEASE NOT TO FURNISH TO US THE POSTAL ADDRESS OF YOUR LIAISON OFFICE IN DUE COURSE FOR OUR RECORD. YOU MAY PLEASE NOTE TO ADDRESS THE CORRESPONDENCE IN FUTURE TO OUR BOMBAY REGIONAL OFFICE. . 5 . A CCORDING TO THE SAID PERMISSION THE ASSESSEE COMPA NY WAS ONLY AUTHORIZED TO RECRUIT THE INDIAN CREW FOR SHIPS MANAGED BY THE ASSESSEE COMPANY. HOWEVER, CERTAIN WORK HAS SPECIFICALLY DENIED BY T HE RB I WHICH HAS BEEN MENTIONED ABOVE AT PARA NO. 1 TO 8 OF THE LETTER. THE ASSESSING OFFICER HAS REACHED AT THE CONCLUSION THAT THE ASSESSEE COMPANY HAS ESTABLISHED THE PERMANENT ESTABLISHMENT AND THE OFFICE OF THE ASSESSEE WAS ATTRIBUTION OF THE INCOME TO THE ASSESSEE COMPANY . HOWEVER, IT IS STRANGE THAT NO BUSINESS OF ANY KIND HAS BEEN SHOWN BY THE ASSESSING OFFICER AND NO INCOME OF THE ASSESSEE OF ANY KIND WAS SHOWN IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER PICK THE INCOME OF ANOTHER COMPANY M/S F REEDOM COMPANY SHIPPING LTD. WHICH WAS RECEIPT CONSULTATION OF THE FEES AT THE RATE OF US$2000 PER SHIP PER MONTH ON TOTAL 44 SHIPS MANAGED BY THE COMPANY ANY HOW THE INCOME OF THE M/S FREEDOM SHIPPING COMPANY LTD. WAS TAKEN INTO CONSIDERATION FOR ASSESSIN G THE INCOME OF THE ASSESSEE COMPANY AND ACCORDINGLY ASSESSED THE INCOME TO THE TUNE OF RS. 3,34,17,555/ - AND 9 ACCORDINGLY THE INCOME WAS ASSESSED FOR THE RELEVANT YEAR ALSO WHICH ARE QUESTION. NOTHING CAME INTO THE VIOLATION OF THE SAID LETTER NO INCOME ACC RUED, ARISED AND DEEMED TO BE ACCRUED IN INDIA AS IN THIS REGARD NOTHING CAME INTO THE NOTICE ON RECORD. THEREFORE, IT CANNOT BE SAID THAT THERE IS BUSINESS CONNECTION OF THE ASSESSEE COMPANY IN INDIA. IN THIS REGARD WE FIND SUPPORT OF LAW SETTLED IN CIT V /S. R.D. AGGARWAL & CO. (1965) 56 ITR 20 (SC) & CIT V/S. T.I. & M. SALES LTD. (1987) 166 ITR 93 (SC) & DCIT V/S. ARDESHI B. CURSETJEEF & SONS LTD. (2008) 24 SOT 48 (MUMBAI). THE MAIN POINT IS THAT THE AFTER THE SURVEY OF U/S 133 OF THE I.T. ACT. THE NOTICE U/S 147/148 WAS ISSUED ALONG WITH REASONS. THE ASSESSEE HAS ALSO FILED THE OBJECTION BUT THE SAID OBJECTION WAS NOT DISPOSED OF BY THE AUTHORITY AND THEREAFTER, THE ASSESSMENT OFFICER PASSED THE ORDER OF THE ASSESSMENT 2005 - 06, 2006 - 07 & 2007 - 08 IN QUESTION. IT IS TOTALLY WRONG AND CLEAR CUT VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE AND IN THIS REGARD AND THESE ORDER CANNOT BE JUSTIFIABLE IN ACCORDANCE WITH LAW . WE ARE ALSO FIND OF LAW SETTLED BY THE OUR OWN HIGH COURT IN IT A NO. 224/M/2014 KSS PETRON PVT, LTD. VS. ACIT CIRCLE - 10 - MUMBAI, LD. REPRESENTATIVE OF THE DEPARTMENT HAS PLACED RELIANCE ON LAW SETTLED IN 2014, 24 TAXMAN.COM 436 (DEL) TRIBUNAL & AND JEBON CORPORATION INDIA VS. CIT( INTERNATIONAL TAXATION) CITED AS 2011, 245 CTR PAGE 300. ON APPRAISAL OF THE ABOVE MENTIONED ORDER , WE FOUND THAT IN THE SAID AUTHORITIES THE ACTIVITY OF THE ASSESSEE COMPANY WAS COMMERCIAL IN NATURE AND THESE COMPANIES WERE PAYING CONSULTATION FEES WHILE IN THE INSTANT CASE, NOTHING WAS FOUND CONTRARY TO THE SUBJ ECT APPROVED BY THE RBI IN ITS LETTER DATED 19. 0 5.1995 . I N VIEW OF THE SAID DISCUSSION WE ARRIVED AT THIS CONCLUSION THAT THE NO ACTIVITY WAS DONE BY THE ASSESSEE OUT OF THE PURVIEW OF THE SANCTION OF THE RBI DATED 19.05.1995 AND THERE IS NO INCOME OF THE ASSESSEE ACCRUED WHICH IS TAXABLE IN INDIA . N OTHING CAME INTO NOTICE THAT THE OBJECTION WAS DISPOSED OF BY THE RELEVANT ASSESSING AUTHORITY, THEREFORE, VIEW OF THE SAID LAW SETTLED IN ITA NO. 224/M/2014 KSS PETRON 10 PVT, LTD. VS. ACIT CIRCLE - 10 - MUMBAI, WE ARE OF THE VIEW THAT NOTICE U/S 147/148 IS NO T LIABLE TO BE SUSTAINABLE IN THE EYE OF LAW, THEREFORE, WE SET ASIDE THE SAME AND ACCORDINGLY THIS ISSUE IS THE DECIDED THE APPEAL AGAINST THE REVENUE. ISSUE NO.1,3 & 8 6 . SINCE, WHILE DECIDING THE LEGAL IS SUE OF THE NOTICE U/S 147/148 HAS BEEN ORDER OF THE SET ASIDE, THEREFORE, THERE IS NO NEED TO DECIDE THE OTHER ISSUES ON THE FACTUAL GROUND IT WAS SAME WOULD BE ACADEMIC IN NATURE. ITA NO.2604/M/2014 , ITA NO.2605/M/2014 , ITA NO.3324/M/2014 & ITA NO.7524/M/2014 7 . IN ALL THE ABOVE MENTIONED APPEALS THE FACTS ARE SIMILAR BUT THE FIGURE IS DIFFERENT . THE ASSESSMENT ORDER S WERE PASSED ON THE BASIS OF THIS SURVEY U/S 133A OF THE I.T. ACT , 1961, DATED 31.01.2006 VIDE WITH IN NOTICE S U/S 147/148 WERE ISSUED IN ITA NO. 2603/M/2014. THEREFORE, THE FINDING IN THE SAID AP PEAL IS QUITE APPLICAB LE TO THESE APPEALS ALSO AND ACCORDINGLY, NOTI CE U/S 147/148 IS ALSO TO BE SET ASIDE AND THE LEGAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN BRIEF, THE APPEAL OF THE ASSESSEE ARE HEREBY ORDERED TO BE ALLOWED. 8 . IN THE RES ULT, APPEAL FILED BY THE ASSESSEE ARE ALLOWED . ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11.09.2017. SD/ - SD/ - (R.C. SHARMA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 11. 09. 2017 V.PSINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 11 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI