A.C.I.T.-Circle-35, Kolkata, Kolkata V. Kolkata Port Trust, Kolkata

ITA 2868/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4548 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 01-06-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 27-12-2013
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: N K PODDAR SR
• Keywords: Reopening of assessment; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 10; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NOS.2628 TO 2630/KOL/2013 ASSESSMENT YEARS: 2003-04 TO 2005-06 KOLKATA PORT TRUST VS. ASSISTANT COMMISSIONER OF INCOME-TAX, (PAN:AAAJK0361L) CIRCLE-35, KOLKATA. ( APPELLANT ) ( RESPONDENT ) & I.T.A NOS.2868 TO 2870/KOL/2013 ASSESSMENT YEAR: 2003-04 TO 2005-06 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. KOLKATA PORT TRUST CIRCLE-2(1), CIRCLE-35, KOLKATA. (APPELLANT) (RESPONDENT) DATE OF HEARING: 01.06.2016 DATE OF PRONOUNCEMENT: 08.07.2016 FOR THE ASSESSEE: SHRI N. K. PODDAR, SR. COUNSEL FOR THE REVENUE: SHRI NIRAJ KUMAR, CIT, DR ORDER PER BENCH: THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF SEPARATE ORDERS OF CIT(A)-XX, KOLKATA VIDE APPEAL NOS. 254-256/CIT(A)- XX/CIR-35/2010-11/KOL DATED 27.09.2013. ASSESSMENTS WERE FRAMED BY ACIT, CIRCL E-35, KOLKATA U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) FOR AYS 2003-04 TO 2005-06 VIDE HIS SEPARATE ORDERS ALL DATED 30.12.20 10. 2. THE ONLY ISSUE TO BE DECIDED IN THE APPEALS OF THE REVENUE IS THAT WHETHER THE ASSESSEE PORT TRUST COULD BE ASSESSED IN THE STATUS OF A LOCAL AUTHORITY OR IN THE STATUS OF A COMPANY IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. 3. THE FACTS OF THE CASE FOR THE ASST YEAR 2003-0 4 ARE STATED HEREIN AND CONSIDERED FOR ADJUDICATION. THE DECISION RENDERED IN ASST YEAR 2003-04 WOULD APPLY WITH EQUAL FORCE FOR OTHER ASST YEARS ALSO. AS IDENTICAL ISSU ES ARE INVOLVED FOR OTHER ASST YEARS EXCEPT VARIANCE IN FIGURES, ALL THE APPEALS ARE TAK EN UP TOGETHER FOR THE SAKE OF CONVENIENCE AND DISPOSED OF BY THIS COMMON ORDER. 2 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 4. THE RETURN OF INCOME FOR THE ASST YEAR 2003-04 WAS FILED ON 28.11.2003 DISCLOSING LOSS OF RS. 146,78,95,230/- AND ASSESSME NT WAS COMPLETED U/S 143(3) OF THE ACT ON 10.2.2006 ON THE ASSESSED INCOME OF RS. 231, 51,57,440/-. THE CASE WAS REOPENED BY THE LEARNED AO ON HAVING THE REASON TO BELIEVE T HAT THE ASSESSEE HAD BEEN ASSESSED CONSIDERING THE STATUS OF THE ASSESSEE AS LOCAL AUT HORITY AT A LOW RATE INSTEAD OF TREATING THE STATUS AS COMPANY, DUE TO FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULL AND TRUE PARTICULARS FOR THE ASST YEAR 2003-04 WITHIN THE ME ANING OF EXPLANATION 2(C )(II) OF SECTION 147 OF THE ACT. AFTER OBTAINING THE APPROVA L OF THE LEARNED CIT, THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 DATED 22.3.2 010 SERVED ON THE ASSESSEE ON 29.3.2010. THE ASSESSEE FILED RETURN IN RESPONSE T O NOTICE U/S 148 ON 28.4.2010 IN THE STATUS OF LOCAL AUTHORITY. THE ASSESSEE SOUGHT FOR THE REASONS RECORDED BY THE LEARNED AO FOR RE-OPENING THE ASSESSMENT AND LATER OBJECTED TO THE SAME BY STATING THAT NO NEW INFORMATION WAS AVAILABLE WITH THE LEARNED AO TO TR IGGER THE REASSESSMENT PROCEEDINGS WHICH IS ADMITTEDLY BASED ON CHANGE OF OPINION. TH E ASSESSEE ALSO STATED THAT NO EXEMPTION U/S 10(20) OF THE ACT WAS CLAIMED BY THE ASSESSEE AND THE EXPRESSION LOCAL AUTHORITY WAS DEFINED ONLY IN SECTION 10(20) OF TH E ACT WHICH IS RELEVANT ONLY FOR THE PURPOSES OF THAT SECTION. THE LD. AO FRAMED THE REA SSESSMENT IN THE STATUS OF A COMPANY REJECTING THE CLAIM OF STATUS OF LOCAL A UTHORITY. HOWEVER, THE LD CITA REVERSED THE DECISION OF THE LD AO ON MERITS BY HOL DING THE ASSESSEE TRUST AS A LOCAL AUTHORITY BUT DID NOT GIVE ANY FINDING ON THE GROU NDS RAISED ON THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. AGGRIEVED, THE R EVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. FOR THAT THE A.O. IS JUSTIFIED IN CONSIDERING OF KOLKATA PORT TRUST AS COMPANY IN PLACE OF LOCAL AUTHORITY, AS CONSIDERED BY THE ASSE SSEE. THE ASSESSEE ALSO IS IN CROSS APPEAL BEFORE US ON T HE FOLLOWING GROUNDS:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) ERRED IN NOT ADJUDICATING THE GROUNDS TAKEN BY THE APPELLANT PORT TRUST IN RE GARD TO THE INVALIDITY OF THE INITIATION OF REASSESSMENT PROCEEDINGS IN THE INSTANT CASE IN RESPECT OF THE ASSESSMENT YEAR 2003- 04. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) SHOULD HAVE ALSO HELD THAT THE INITIATION OF THE IMPUGNED REASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER, IN THE INSTANT CASE, BASED UPON THE REASONS RECORDED, AS C OMMUNICATED TO THE APPELLANT PORT TRUST VIDE HIS LETTER DATED 18TH MAY, 2010, WAS WHO LLY WITHOUT JURISDICTION, ILLEGAL, INVALID AND VOID AB-INITIO; AND CONSEQUENTLY ALL PR OCEEDINGS TAKEN IN PURSUANT TO THE 3 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 IMPUGNED NOTICE DATED 22ND MARCH, 2010 PURPORTEDLY ISSUED UNDER SECTION 148/ 147 OF THE INCOME TAX ACT, 1961, INCLUDING IN PARTICULAR T HE IMPUGNED REASSESSMENT ORDER DATED 30TH DECEMBER, 2010 PURPORTEDLY PASSED UNDER SECTION 147 / 143(3) OF THE SAID ACT, WERE ALSO ILLEGAL, INVALID AND NULLITY IN LAW. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) SHOULD HAVE ALSO HELD THAT THE INITIATION OF THE IMPUGNED REASSESSMENT PROCEEDINGS , ON A MERE CHANGE OF OPINION, ON ISSUES ALREADY EXAMINED IN COURSE OF THE ORIGINAL A SSESSMENT PROCEEDINGS FOR THE YEAR UNDER APPEAL, WAS WHOLLY IMPERMISSIBLE IN LAW; AND THEREFORE WHOLLY WITHOUT JURISDICTION, ILLEGAL, INVALID AND VOID AB-INITIO. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS), AS AN APPELLATE AUTHORITY, WAS BOUND IN LAW TO ALSO WHOLLY QUASH THE INITIATIO N OF THE IMPUGNED REASSESSMENT PROCEEDINGS, IN THE UNDISPUTED FACTS AND CIRCUMSTAN CES OF THE INSTANT CASE. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) SHOULD HAVE ALSO HELD THAT THE IMPUGNED ORDER DATED 18TH NOVEMBER, 2010 PASSED BY THE ASSESSING OFFICER, DISPOSING OF THE PRELIMINARY OBJECTIONS RAISED BY THE APPELLA NT PORT TRUST AS TO THE INVALIDITY OF THE INITIATION OF THE IMPUGNED REASSESSMENT PROCEEDINGS , WAS WHOLLY ARBITRARY, ILLEGAL AND INVALID IN LAW. 5. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF TH E LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA AND REITERATED THE SUBMISSIONS MADE BEFORE THE LD CITA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESS EE COMPRISING OF COPY OF ORDERS PASSED U/S 143(3) OF THE ACT IN ORIGINAL SCRUTINY A SSESSMENT PROCEEDINGS (PAGES 1 TO 23 OF PB) ; COPY OF IMPUGNED NOTICES U/S 148 OF THE AC T (PAGES 24 TO 29 OF THE PB) ; COPY OF REASONS RECORDED BY THE LD AO U/S 148(2) OF THE ACT (PAGES 30 TO 32 OF PB); COPY OF OBJECTIONS FILED BY THE ASSESSEE TO THE REASONS REC ORDED BY LD AO FOR REOPENING THE ASSESSMENTS (PAGES 33 TO 50 OF PB) ; COPY OF ORDER PASSED BY THE LD AO DISPOSING OFF THE PRELIMINARY OBJECTIONS RAISED BY THE ASSESSEE ( PAGES 51 TO 56 OF PB) ; COPY OF LETTER ADDRESSED TO THE ASSESSEE BY THE GOVERNMENT OF INDI A, MINISTRY OF SHIPPING & TRANSPORT, TRANSPORT WING, NEW DELHI (PAGE 57 OF PB ) ; COPY OF LETTERS ADDRESSED BY THE PRO, IT DEPARTMENT TO THE ASSESSEE INTIMATING TO IT THAT IT BEING A LOCAL AUTHORITY IS NOT ASSESSABLE TO INCOME TAX (PAGES 58 TO 59 OF PB) ; COPY OF LETTER ADDRESSED BY THE ASSESSEE TO THE LD AO IN COURSE OF ORIGINAL ASSESSM ENT PROCEEDINGS FOR AY 2003-04 (PAGES 60 TO 65 OF PB) ; COPY OF LETTER ADDRESSED B Y THE LD AO TO THE ASSESSEE IN COURSE OF SECTION 154 PROCEEDINGS INITIATED AFTER COMPLETI ON OF ORIGINAL ASSESSMENT PROCEEDINGS 4 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 FOR THREE YEARS (PAGES 66 TO 67 OF PB) ; COPY OF RE PLY ADDRESSED BY ASSESSEE TO THE LD AO IN RESPONSE TO HIS LETTER DATED 26.5.2009 (PAGES 68 TO 76 OF PB); COPY OF LETTER ADDRESSED BY CHENNAI PORT TRUST TO THE ASSESSEE INTIMATING TH AT THE CHENNAI PORT TRUST IS ALSO ASSESSED TO INCOME TAX AS A LOCAL AUTHORITY (PAGE 7 7 OF PB) ; COPY OF LETTER ADDRESSED BY MORMUGAO PORT TRUST TO THE ASSESSEE INTIMATING THA T THE MORMUGAO PORT TRUST IS ALSO ASSESSED TO INCOME TAX AS A LOCAL AUTHORITY (PAGE 7 8 OF PB) ; COPY OF LETTER ADDRESSED BY MUMBAI PORT TRUST TO THE ASSESSEE INTIMATING THAT T HE MUMBAI PORT TRUST IS ALSO ASSESSED TO INCOME TAX AS A LOCAL AUTHORITY (PAGE 7 9 OF PB) ; COPY OF LETTER ADDRESSED BY NEW MANGALORE PORT TRUST TO THE ASSESSEE INTIMATING THAT THE NEW MANGALORE PORT TRUST IS ALSO ASSESSED TO INCOME TAX AS A LOCAL AUTHORITY (PAGE 80 OF PB) ; COPY OF LETTER ADDRESSED BY COCHIN PORT TRUST TO THE ASSESSEE INTI MATING THAT THE COCHIN PORT TRUST IS ALSO ASSESSED TO INCOME TAX AS A LOCAL AUTHORITY (P AGE 81 OF PB) ; COPY OF LETTER ADDRESSED BY VISAKHAPATNAM PORT TRUST TO THE ASSESS EE INTIMATING THAT THE VISAKHAPATNAM PORT TRUST IS ALSO ASSESSED TO INCOME TAX AS A LOCAL AUTHORITY (PAGES 82 TO 83 OF PB) ; COPY OF NOTES OF ARGUMENTS AGAINST THE IMPUGNED INITIATION OF REASSESSMENT PROCEEDINGS FOR THE THREE ASSESSMENT Y EARS (PAGES 84 TO 100 OF PB) AND COPY OF ASSESSMENT ORDER PASSED BY THE LD AO U/S 14 3(3) OF THE ACT FOR THE ASST YEAR 2012-13 DATED 28.3.2015 ACCEPTING THE STATUS OF ASS ESSEE AS A LOCAL AUTHORITY (PAGES 101 TO 108 OF PB) . 6.1. WE FIND THAT THE ASSESSEE HAD FILED ITS RETUR N OF INCOME FOR THE FIRST TIME IN ASST YEAR 2003-04. PRIOR TO THIS YEAR, IT CLAIMED EXEMP TION U/S 10(20) OF THE INCOME TAX ACT. BY THE FINANCE ACT, 2002 W.E.F 1.4.2003 ( I.E FROM ASST YEAR 2003-04 ONWARDS) AN EXPLANATION WAS ADDED TO SECTION 10(20) OF THE ACT AS BELOW:- EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION LOCAL AUTHORITY MEANS (I) PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTICLE 2 43 OF THE CONSTITUTION; (II ) MUNICIPALITY AS REFERRED TO IN CLAUSE (E) OF ARTICLE 243 P OF THE CONSTITUTION; OR (III ) MUNICIPAL COMMITTEE AND DISTRICT BOARD, LEG ALLY ENTITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH, THE CONTROL OR MANAGEMENT OF A MU NICIPAL OR LOCAL FUND; OR (IV) CANTONMENT BOARD AS DEFINED IN SECTION 3 OF T HE CANTONMENTS ACT, 1924 (2 OF 1924) 5 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 6.2. WE FIND THAT THE EXPRESSION LOCAL AUTHORITY AS PER SECTION 3(31) OF GENERAL CLAUSES ACT SHALL MEAN A MUNICIPAL COMMITTEE, DIST RICT BOARD, BODY OF PORT COMMISSIONER OR OTHER AUTHORITY LEGALLY ENTITLED TO , OR ENTRUSTED BY THE GOVERNMENT WITH CONTROL OR MANAGEMENT OF MUNICIPAL OR LOCAL FU ND. ACCORDINGLY ALL MAJOR PORT TRUSTS, THEREFORE, FALL WITHIN THE MEANING OF THE EXPRESSION LOCAL AUTHORITY UNDER THE GENERAL CLAUSES ACT. 6.3. WE FIND THAT PURSUANT TO THE AMENDMENT WITH E FFECT FROM ASST YEAR 2003-04 BY WAY OF INSERTION OF EXPLANATION IN SECTION 10(20) O F THE ACT, THE ASSESSEE PORT TRUST THOUGH REMAINS A LOCAL AUTHORITY AS PER GENERAL CLA USES ACT BUT ITS EXEMPTION U/S 10(20) OF THE ACT HAS BEEN WITHDRAWN. HOWEVER, WE FIND THAT THE EXPRESSION LOCAL AUTHORITY HAS BEEN DEFINED ONLY FOR THE PURPOSE OF SECTION 10(20) OF THE ACT AND NOT OTHERWISE. IN OTHER WORDS, ANY PERSON CLAIMING EXE MPTION U/S 10(20) OF THE ACT WOULD HAVE TO FOLLOW THE NEWLY INSERTED EXPLANATION FOR T HE PURPOSE OF ASCERTAINING THE ELIGIBILITY OF EXEMPTION U/S 10(20) OF THE ACT. I N THE INSTANT CASE, THE ASSESSEE PORT TRUST HAD ADMITTEDLY NOT CLAIMED ANY EXEMPTION U/S 10(20) OF THE ACT AND HENCE THE NEWLY INSERTED EXPLANATION SUPRA CANNOT BE MADE APPLICABL E TO THE ASSESSEE PORT TRUST. INFACT FROM THE RETURNS AND THE ASSESSMENTS FRAMED IN ORIG INAL SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASST YEARS 2003-04 , 2004-05 & 2005-06, WE FIND THAT THE LD AO HAD ACCEPTED THE STATUS OF THE ASSESSEE AS A LOCAL AUTHORITY AND ASSESSEE IS PAYING TAXES ON ITS INCOME, IF ANY. FROM THE PERUSAL OF THE SCRUTINY ASSESSMEN T ORDERS PASSED FOR THE ASST YEARS 2003-04 TO 2005-06 U/S 143(3) OF THE ACT, WE FIND T HAT THE ASSESSEE HAD NOT CLAIMED ANY EXEMPTION U/S 10(20) OF THE ACT SO AS TO WARRANT TH E APPLICABILITY OF NEWLY INSERTED EXPLANATION IN SECTION 10(20) OF THE ACT. 6.4. WE HOLD THAT THE MEANING OF THE EXPRESSION L OCAL AUTHORITY AS INSERTED IN THE EXPLANATION TO SECTION 10(20) OF THE ACT WITH EFFEC T FROM ASST YEAR 2003-04 IS NOT APPLICABLE FOR DETERMINING THE STATUS IN WHICH THE ASSESSEE SHOULD BE ASSESSED NOR IT IS RELEVANT FOR DECIDING THE RATE OF TAX APPLICABLE. UP TO ASSESSMENT YEAR 2002-03, KOPT WAS EXEMPTED FROM PAYMENT OF TAX UNDER SECTION 10(2 0) OF THE ACT AS IT EXISTED UP TO ASSESSMENT YEAR 2002-03. AS PER SECTION 3(31) OF GE NERAL CLAUSES ACT, PORT TRUST IS A 6 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 LOCAL AUTHORITY. LOCAL AUTHORITY, ACCORDING TO SECT ION 3(31) OF THE GENERAL CLAUSES ACT SHALL MEAN A MUNICIPAL COMMITTEE, DISTRICT BOARD, B ODY OF PORT COMMISSIONERS OR OTHER AUTHORITY LEGALLY ENTITLED TO, OR ENTRUSTED BY THE GOVERNMENT WITH CONTROL OR MANAGEMENT OF MUNICIPAL OR LOCAL FUND. ALL MAJOR PO RT TRUSTS THEREFORE, FALL WITHIN THE MEANING OF THE EXPRESSION 'LOCAL AUTHORITY' UNDER T HE GENERAL CLAUSES ACT. BY THE FINANCE ACT 2002 W.E.F. ASSESSMENT YEAR 2003-04, E XEMPTION UNDER SECTION 10(20) OF THE ACT HAS BEEN RESTRICTED TO FEW LOCAL AUTHORITIE S VIZ. PANCHAYAT AS REFERRED TO IN CLAUSE (D) OF ARTICLE 243 OF THE CONSTITUTION, MUNICIPAL A S REFERRED TO IN CLAUSE (E) OF ARTICLE 243P OF THE CONSTITUTION, MUNICIPAL COMMITTEE & DIS TRICT BOARD AND CANTONMENT BOARD AS DEFINED IN SECTION 3 OF THE CANTONMENT'S A CT, 1924. THUS W.E.F. ASSESSMENT YEAR 2003-04, ONLY THESE LOCAL AUTHORITIES CONTINUE TO CLAIM EXEMPTION UNDER SECTION 10(20). HOWEVER, IT MAY BE NOTED THAT THE DEFINITIO N OF 'LOCAL AUTHORITY' AS PER GENERAL CLAUSES ACT HAS NOT UNDERGONE ANY CHANGE. THEREFORE , KOPT REMAINS AS A LOCAL AUTHORITY AS PER GENERAL CLAUSES ACT, BUT ITS EXEMP TION UNDER SECTION 10(20) OF THE ACT HAS BEEN WITHDRAWN W.E.F. ASSESSMENT YEAR 2003-04. IN VIEW OF THAT, RETURN HAS BEEN CORRECTLY FILED BY KOPT IN THE STATUS OF A LOCAL AU THORITY. KOPT IS GOVERNED BY THE MAJOR PORT TRUSTS ACT. 6.5. THE LD. AR APART FROM ARGUING THAT THE ASSESS EES STATUS SHOULD BE ASSESSED ONLY AS A LOCAL AUTHORITY ALSO OBJECTED TO THE REOPENING OF ASSESSMENT ON THE GROUND THAT NO NEW INFORMATION HAS BEEN BROUGHT INTO RECORD TO JUSTIFY INITIATION OF THE PROCEEDING UNDER SECTION 147 OF THE ACT. ALL INFORMATION REQUIRED FO R THE PURPOSE OF ASSESSMENT WERE PROVIDED IN THE COURSE OF ASSESSMENT U/S 143(3) OF THE ACT. MOREOVER, IN COURSE OF RECTIFICATION PROCEEDINGS U/S 154 OF THE ACT WHICH WAS SOUGHT BY THE ASSESSEE, A SPECIFIC QUERY WAS RAISED AS TO WHY KOPT WOULD BE ASSESSED A S A LOCAL AUTHORITY. THE ASSESSEE IN REPLY TO THE QUERY VIDE LETTER DATED 20.05.2009 EXPLAINED WHY IT HAD FILED RETURN OF INCOME IN THE STATUS OF A 'LOCAL AUTHORITY'. HE ARG UED THAT THE REOPENING HAS BEEN MADE MERELY ON THE BASIS OF CHANGE OF OPINION WITHOUT BR INGING ON RECORD ANY NEW FACTS OR MATERIALS. HE FURTHER ARGUED THAT THERE WAS NO FAI LURE ON THE PART OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF INCOME OF THE ASSESSEE OR PARTICULARS OF INCOME OF THE ASSESSEE. THIS IS MORE RELEVANT AS THE REOPENING W AS MADE BEYOND 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. HE ARGUED THAT NO MATERIAL EVIDENCE HAS BEEN BROUGHT 7 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 ON RECORD BY THE LD. AO TO PROVE THAT THERE WAS FAI LURE ON THE PART OF THE ASSESSEE FROM MAKING THE FULL AND TRUE DISCLOSURE OF ITS INCOME W ARRANTING REOPENING BEYOND 4 YEARS. WE FIND FROM PAGE 30 OF THE PAPER BOOK THAT THE LD AO HAD RECORDED THE FOLLOWING REASONS FOR REOPENING THE ASSESSMENT:- SUB.: REASONS FOR RE-OPENING UNDER SECTION 148 OF THE I. T. ACT FOR A.Y. 2003-04. REF.: YOUR LETTER NO. FIN/08/TAX DATED 29/04/2010 RECEIVED BY THIS OFFICER ON 03/05/2010. PLEASE REFER TO THE ABOVE. REASONS RECORDED FOR RE-OPENING FOR A.Y. 2003-04 IN YOUR CASE STAND AS UNDER: 'THE SUPREME COURT IN THE CASE OF ADITYAPUR INDUSTR IAL AREA DEVELOPMENT AUTHORITY V. UNION OF INDIA [2006] 283 ITR 97 HAS H ELD THAT INCOME OF AN AUTHORITY, EVEN CONSTITUTED BY A NOTIFICATION UNDER AN ACT ENACTED BY THE LEGISLATURE, IS NOT THE INCOME OF THE GOVERNMENT AN D THE AUTHORITY CANNOT CLAIM EXEMPTION FROM UNION TAXATION. THE PRIME MINISTER'S COUNCIL ON TRADE AND INDUSTRY IN ITS RECOMMENDATION ON PORTS UNDER INFRA STRUCTURE DEVELOPMENT HAS RECOMMENDED THAT 'TO ENSURE THAT THE PORT TRUSTS ST ART OPERATING ALONG MORE COMMERCIAL LINES, IT IS NECESSARY TO CORPORATISE TH EM'. FURTHER, SECTION 5 OF THE MAJOR PORT TRUST ACT, 1963 PROVIDES THAT 'EVERY BOA RD CONSTITUTED UNDER THIS ACT SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSI ON AND A COMMON SEAL WITH POWER, SUBJECT TO THE PROVISIONS OF THIS ACT, TO AC QUIRE, HOLD OR DISPOSE OF PROPERTY AND MAY BY THE NAME BY WHICH IT IS CONSTITUTED, SUE OR BE SUED'. FURTHER, THE MINISTRY OF SHIPPING GUIDANCE NOTE PROVIDES THAT 'T HE FORMAT OF FINANCIAL STATEMENTS PRESCRIBED BY THE INDIAN COMPANIES ACT, 1956 HAS BEEN USED AS THE BASIS FOR DEVELOPING THE ACCOUNTIN G FORMAT OF PORT TRUSTS TOGETHER WITH THE REQUIREMENT OF ACCOUNTING STANDARDS' VIDE MINISTRY OF SHIPPING [PORTS WING] LETTER NO. PR-20021/2/98-PG DATED 06/11/2002. THE PORT TRUSTS THUS FOLLOW ACCRUAL SYSTEM OF ACCOU NTING AND THE IDENTIFICATION OF REVENUE AND EXPENDITURE IS BASED ON THE PRINCIPLES CONTAINED IN THE COMPANIES ACT, 1956. FURTHER, STEPS HAVE ALREADY BEEN TAKEN F OR CORPORATISATION OF JNPT, NEW MANGALORE AND TUTICORIN PORT TRUSTS VIZ. REGIST ERING WITH THE JURISDICTIONAL REGISTRARS OF COMPANIES. IN VIEW OF ABOVE, I HAVE THE REASON TO BELIEVE THAT INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR IN QUESTION HAS BEEN ASSES SED CONSIDERING THE STATUS OF THE ASSESSEE AS LOCAL AUTHORITY AT A LOW RATE INSTE AD OF TREATING THE STATUS AS COMPANY, DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE PARTICULARS FOR A.Y. 2003-04 WITHIN THE MEANING OF EXPLANATION- 2(C)(II) OF SECTION 147 OF INCOME TAX ACT, 1961. PRIOR SANCTION OF C.I.T. KOL-XII, KOLKATA HAS ALREA DY BEEN OBTAINED BEFORE ISSUING THE SAID NOTICE'. 8 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 6.6. WE FIND THAT THE ASSESSEE HAD GIVEN REPLY TO THE ASSESSEE OBJECTING TO THE REASONS RECORDED ON MERITS OF THE ISSUE ALSO APART FROM QUE STIONING THE SAME ON LEGALITY OF THE SAME. WE FIND THAT THE ASSESSEE HAD GIVEN ITS OBJE CTIONS ON EACH AND EVERY AVERMENT MADE BY THE LD AO IN THE REASONS RECORDED AS UNDER: - (I) IN THE REASON FOR REOPENING PROVIDED BY YOU, YOU H AVE RELIED ON THE SUPREME COURT'S JUDGEMENT IN THE CASE OF ADITYAPUR INDUSTRI AL AREA DEVELOPMENT AUTHORITY VS. UNION OF INDIA (283 ITR 97). IN THE S AID JUDGEMENT THE APEX COURT HAS HELD THAT INCOME OF AN AUTHORITY EVEN THO UGH CONSTITUTED BY A NOTIFICATION UNDER AN ACT ENACTED BY THE STATE LEGI SLATURE, IS NOT INCOME OF THE STATE GOVERNMENT AND THE AUTHORITY CANNOT CLAIM EXE MPTION FROM UNION TAXATION. REPLY - IT IS SUBMITTED THAT THE FACT OF THAT CASE IS TO TALLY DIFFERENT FROM THAT OF THE ASSESSEE. THE ASSESSEE HAS NOT CLAIMED EXEMPTIO N FROM UNION TAXATION ON THE GROUND OF IT BEING 'GOVERNMENT' KOPT IS A LO CAL AUTHORITY UNDER THE GENERAL CLAUSES ACT BUT ITS EXEMPTION UNDER SECTION 10(20) OF THE INCOME TAX ACT HAS BEEN WITHDRAWN. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR IN QUESTION OFFERING ITS INCOME FOR TAX. IN TH E CASE CITED BY YOU THE ASSESSEE SOUGHT TO CLAIM EXEMPTION UNDER SECTION 10 (20) WHICH IS NOT IN THE CASE OF KOPT. (II) IN THE REASON FOR REOPENING PROVIDED BY YOU, YOU HA VE ALSO STATED THAT THE PRIME MINISTER'S COUNCIL ON TRADE AND INDUSTRY IN I TS RECOMMENDATION ON PORTS HAS RECOMMENDED THAT TO ENSURE THAT PORT TRUS TS START OPERATING ALONG MORE COMMERCIAL LINES, IT IS NECESSARY TO CORPORATI SE THEM. YOU HAVE ALSO COMMENTED THAT STEPS HAVE ALREADY BEEN TAKEN FOR CO RPORATISATION OF JNPT, NEW MANGALORE AND TUTICORIN PORT TRUSTS. REPLY - IN THIS CONNECTION IT MAY KINDLY BE NOTED THAT K OPT HAS NOT GONE FOR CORPORATISATION. IT IS STILL A LOCAL AUTHORITY. IF IN THE FUTURE IT IS CORPORATISED, IT 9 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 WILL BE FILING ITS RETURN IN THE STATUS A COMPANY A ND PAY TAX AT THE RATE APPLICABLE TO A COMPANY. (III) REGARDING YOUR OBSERVATION, IN THE REASON FOR REOPE NING THAT THE FORMAT OF FINANCIAL STATEMENTS PRESCRIBED BY THE COMPANIES AC T 1956 HAS BEEN USED AS THE BASIS FOR DEVELOPING THE ACCOUNTING FORMAT OF P ORT TRUSTS. REPLY - IT MAY BE NOTED THAT THE FORMAT OF FINANCIAL STA TEMENTS ADOPTED BY KOPT IS NOT THAT PRESCRIBED BY COMPANIES ACT 1956. THE FORMAT HAS BEEN DESIGNED TO MAKE THE FINANCIAL STATEMENTS MORE TRAN SPARENT AND MORE USEFUL FOR THE STAKE HOLDERS. EVEN BEFORE WITHDRAWAL OF EX EMPTION UNDER SECTION 10(20) OF THE INCOME TAX ACT, KOPT WAS FOLLOWING AC CRUAL SYSTEM OF ACCOUNTING AND THE SAME FORMAT FOR PREPARATION OF F INANCIAL STATEMENTS. THEREFORE, MERELY BECAUSE KOPT FOLLOWS ACCRUAL SYST EM OF ACCOUNTING, IT CANNOT BE DEEMED TO A COMPANY FOR INCOME TAX PURPOS ES. (IV) IN THE REASON FOR REOPENING, YOU HAVE REFERRED TO S ECTION - 5 OF THE MAJOR PORT TRUSTS ACT WHICH PROVIDES THAT EVERY BOARD CONSTITU TED UNDER THIS ACT SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL WITH POWER, SUBJECT TO THE PROVISIONS OF THIS ACT TO ACQUIRE, H OLD OR DISPOSE OF PROPERTY AND MAY BY THE NAME BY WHICH IT IS CONSTITUTED, SUE OR BE SUED. REPLY - IN THIS CONNECTION, IT MAY BE NOTED THAT BODY COR PORATE DOES NOT ALWAYS MEAN A COMPANY. THE DEFINITION OF BODY CORPO RATE AS PER THE LEGAL DICTIONARY IS AS FOLLOWS: BODY CORPORATE IS A LEGAL ENTITY (SUCH AS AN ASSOCI ATION, FIRM, GOVERNMENT, GOVERNMENT AGENCY, INSTITUTION) IDENTIF IED BY A PARTICULAR NAME. IT COMPRISES OF A COLLECTION OR SUCCESSION OF INDIVIDUALS WHO HAVE EXISTENCE, RIGHTS AND DUTIES DISTINCT FROM THEIR EX ISTENCE, RIGHTS AND DUTIES AS INDIVIDUALS AND IS ALSO CALLED CORPORATE BODY OR -CORPORATE ENTITY. 10 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 HENCE EVEN AN ASSOCIATION OR FIRM OR GOVERNMENT AGE NCY MAY BE REFERRED TO AS A BODY CORPORATE. (V) SECTION 2(17) OF THE INCOME TAX ACT, GIVES THE DEFI NITION OF 'COMPANY'. THE DEFINITION OF 'COMPANY' IS AN EXHAUSTIVE DEFINITION . AS PER THE SAID SECTION 'COMPANY' MEANS -- (I) ANY INDIAN COMPANY, OR (II) ANY BODY CORPORATE INCORPORATED BY OR UNDER TH E LAWS OF A COMPANY OUTSIDE INDIA, OR (III) ANY INSTITUTION, ASSOCIATION OR BODY WHICH IS OR WAS ASSESSABLE OR WAS ASSESSED AS A COMPANY FOR ANY ASSESSMENT YEAR UNDER THE INDIAN INCOME TAX ACT, 1922 (11 OF 1922), OR WHICH IS OR WAS ASSESSAB LE OR WAS ASSESSED UNDER THIS ACT AS A COMPANY FOR ANY ASSESSMENT YEAR COMME NCING ON OR BEFORE THE 1ST DAY OF APRIL, 1970, OR (IV) ANY INSTITUTION, ASSOCIATION OR BODY, WHETHER INCORPORATED OR NOT AND WHETHER INDIAN OR NON-INDIAN, WHICH IS DECLARED BY GENERAL OR SPECIAL ORDER OF THE BOARD TO BE A COMPANY: PROVIDED THAT SUCH INSTITUTION, ASSOCIATION OR BODY SHALL BE DEEMED TO BE A COMPANY ONLY FOR SUCH ASSESSMENT YEAR OR ASSESSMENT YEARS (WHETHER COMMENCING BEFORE THE 1ST DAY OF APRIL, 1971, OR ON OR AFTER THAT DATE) AS MAY BE SPECIFIED IN THE DECLARATION. THUS, KOPT IS NOT COVERED BY THIS DEFINITION OF COM PANY AS PER THE INCOME TAX ACT. (VI) SIMILARLY, SECTION 10(26) OF THE ACT GIVES THE DEFI NITION OF 'INDIAN COMPANY' WHICH IS AS UNDER --- 'INDIAN COMPANY' MEANS A COMPANY FORMED AND REGISTE RED UNDER THE COMPANIES ACT, 1956 (1 OF 1956), AND INCLUDES --- 11 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 (I) A COMPANY FORMED AND REGISTERED UNDER ANY LAW R ELATING TO COMPANIES FORMERLY IN FORCE IN ANY PART OF INDIA (OTHER THAN THE STATE OF JAMMU AND KASHMIR AND THE UNION TERRITORIES SPECIFIED IN SUB- CLAUSE (III) OF THIS CLAUSE) : (IA) A CORPORATION ESTABLISHED BY OR UNDER A CENTRA L, STATE OR PROVINCIAL ACT; (IB) ANY INSTITUTION, ASSOCIATION OR BODY WHICH IS DECLARED BY THE BOARD TO BE A COMPANY UNDER CLAUSE (17) ; (II) IN THE CASE OF THE STATE OF JAMMU AND KASHMIR, A COMPANY FORMED AND REGISTERED UNDER ANY LAW FOR THE TIME BEING IN FORC E IN THAT STATE; (III) IN THE CASE OF ANY OF THE UNION TERRITORIES O F DADRA AND NAGAR HAVELI, GOA, OAMAN AND DIU AND PONDICHERRY, A COMPANY FORME D AND REGISTERED UNDER ANY LAW FOR THE TIME BEING IN FORCE IN THAT U NION TERRITORY : PROVIDED THAT THE REGISTERED OR, AS THE CASE MAY BE PRINCIPAL OFFICE OF THE COMPANY, CORPORATION, INSTITUTION, ASSOCIATION OR B ODY IN ALL CASES IS IN INDIA: HENCE, KOPT IS NOT ALSO COVERED BY THIS DEFINITION. (VII) MOREOVER, IT MAY BE NOTED THAT THE ASSESSEE K OLKATA PORT TRUST HAS REGISTERED FOR SERVICE TAX AND VAT PURPOSES AS A 'L OCAL AUTHORITY' AND NOT AS 'COMPANY' AND THE SAME HAS BEEN ACCEPTED BY THE RES PECTIVE AUTHORITIES. 6.7. WE FIND THAT THE LD AO HAD PASSED AN INDEPEND ENT ORDER DATED 18.11.2010 DISPOSING OFF THE PRELIMINARY OBJECTIONS RAISED BY THE ASSESSEE ON REOPENING OF ASSESSMENT, WHEREIN, HE HAD JUSTIFIED THE REOPENING OF ASSESSMENT BY MAKING THE FOLLOWING OBSERVATIONS:- THE ONLY CRITERIA AT THIS JUNCTURE IS THAT, THE PR IME MINISTER'S COUNCIL ON TRADE AND INDUSTRY IN ITS RECOMMENDATION ON PORTS, UNDER THE INFRASTRUCTURE DEVELOPMENT HAS RECOMMENDED THAT TO ENSURE THAT THE PORT TRUSTS STA RT OPERATING ALONG MORE COMMERCIAL LINES, IT IS NECESSARY TO CORPORATISE THEM AND THE ASSESSEE (PORT TRUST) DOES FOLLOW ACCRUAL SYSTEM OF ACCOUNTING AND THE IDENTIFICATION OF REVENUE AND EXPENDITURE IS BASED ON THE PRINCIPLES CONTAINED IN THE COMPANIES ACT, 1 956. FURTHER, THE MINISTRY OF SHIPPING GUIDANCE NOTE PRO VIDES THAT, THE FORMAT OF FINANCIAL STATEMENTS PRESCRIBED BY THE INDIAN COMPANIES ACT, 1956 HAS BEEN USED AS THE BASIS FOR DEVELOPING THE ACCOUNTING FORMAT OF PORT TRUSTS TOG ETHER WITH THE REQUIREMENTS OF THE ACCOUNTING, STANDARDS VIDE MINISTRY OF SHIPPING (PO RTS WING) LETTER NO. PR-20021/2/98- 12 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 PG DATED 06/11/2002. STEPS HAVE ALREADY BEEN TAKEN FOR CORPORATIZATION OF JNPT, NEW MANGALORE AND TUTICORIN PORT TRUSTS VIZ. REGISTERIN G WITH THE JURISDICTIONAL REGISTERS OF COMPANIES. FURTHER, SECTION 5 OF THE MAJOR PORT TRUST ACT, 196 3 NOT ONLY PROVIDES EVERY BOARD UNDER THIS ACT TO BE A BODY CORPORATE BUT ALSO COMMON SEA L WITH POWER, SUBJECT TO THE PROVISION OF THIS ACT TO ACQUIRE; HOLD OR DISPOSE OF PROPERTY AND MAY BY NAME BY WHICH IT IS CONSTITUTED, SUE OR BE SUED. FURTHER SECTION 2(17)(I) OF THE INCOME TAX ACT STAT ES THAT COMPANY ALSO MEANS ANY INDIAN COMPANY AND WHEN READ WITH SECTION 2(26)(IA) WHICH STATES THAT 'INDIAN COMPANY' MEANS A COMPANY FORMED AND REGISTERED UNDER THE COM PANIES ACT, 1956 (1 OF 1956), AND INCLUDES A CORPORATION ESTABLISHED BY OR UNDER A CE NTRAL, STATE OR PROVINCIAL ACT. THE KOLKATA PORT TRUST ALSO COMES UNDER THE MAJOR PORT TRUST ACT, 1963. IN FACT THE COMMISSIONERS OF THE PORT WERE RESPONSIBLE FOR THE PORT TILL JANUARY 1975, AFTER WHICH THE RESPONSIBILITY IS ON MAJOR PORT TRUST ACT, 1963 WHI CH CAME INTO FORCE THEN. THEREFORE, THE ASSESSEE FULFILLS ALL THE CRITERIA O F A COMPANY BUT HAS BEEN ASSESSED AT A LOWER RATE AS A LOCAL AUTHORITY AND NOT AS A COMPAN Y. ON EXAMINATION OF THE ASSESSMENT RECORDS, IT EMERGED THAT THE ABOVE FACTS WAS NOT CO NSIDERED DURING ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT AFTER LOOKING INTO THE FACTS AS STATED ABOVE. THE SUBMISSIONS OF THE ASSESSEE WERE NOT EXAMINED IN PROPER AND RIGHT PERS PECTIVE AND THE ASSESSEE'S EXPLANATION AND CLAIM IN THIS REGARD WAS WRONGLY AC CEPTED. AFTER AMENDMENT TO SECTION 147 OF THE INCOME TAX: A CT W.E.F. ASSESSMENT YEAR 1989-90, THE SCOPE AND THE AMBIT OF PROVISIONS OF SECTION 14 7 HAVE BEEN ENLARGED AND THEREFORE IF THE A.O. IS SATISFIED THAT ANY EXCESS DEDUCTION OR RELIEF HAS BEEN ALLOWED, THEN IT IS PERMISSIBLE FOR HIM, TO REOPEN THE CONCLUDED ASSESS MENTS. IN THIS CASE THE FACTS ON RECORD GATHERED IN COURSE OF REGULAR ASSESSMENT EXCESS REL IEF HAS BEEN GRANTED BY COMPUTING THE TAX AT LOWER RATE. I THEREFORE REJECT THE OBJECTION S OF THE ASSESSEE TO THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 EXPLANATION 2(C)(II) OF THE INCOME TAX ACT. I, ACCORDINGLY, PROPOSE TO PROCEED WITH THE REASSESSMENT PROCEEDING S U/S 147 OF THE INCOME TAX ACT. 6.8. WE FIND THAT MINISTRY OF SHIPPING & TRANSPORT (TRANPORT WING), GOVERNMENT OF INDIA, VIDE ITS COMMUNICATION DATED 28.12.1977 ADDR ESSED TO THE ASSESSEE THAT IT BEING A LOCAL AUTHORITY IS NOT CHARGEABLE TO INCOME TAX AND THAT THIS VIEW WAS ALSO ENDORSED BY THE CENTRAL BOARD OF DIRECT TAXES VIDE THEIR OFFICE MEMORANDUM NO. 184/67/76-IT (AI) DATED 3.9.1977 WHEREIN THEY HAVE AGREED THAT P ORT TRUST IS A LOCAL AUTHORITY UNDER THE INCOME TAX ACT. WE FIND FROM ANOTHER CORRESPO NDENCE OF GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, OFFICE OF THE PUBLIC RELATIONS OFFICER, INCOME TAX DEPARTMENT, WEST BENGAL VIDE PROCEEDINGS NO. PRO-I/TC/PT.II/88-89/1301 DATED 29.3.1989 WHEREIN, IT WAS CATEGORICALLY STATE D THAT THE INCOME OF THE ASSESSEE PORT TRUST IS EXEMPT FROM TAX U/S 10(20) OF THE ACT. TH IS CORRESPONDENCE WAS GIVEN IN THE CONTEXT OF APPLICATION PREFERRED BY THE ASSESSEE TR UST FOR NON-DEDUCTION OF INCOME TAX AT SOURCE FROM STEVEDORING BILLS RAISED BY THE ASSESSE E. SIMILARLY IN YET ANOTHER 13 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 CORRESPONDENCE OF THE DEPARTMENT OF REVENUE, MINIST RY OF FINANCE, INCOME TAX DEPARTMENT, WEST BENGAL VIDE PROCEEDINGS NO. PRO/TC -1/94-95/75 DATED 23.6.1994 , IT WAS CATEGORICALLY STATED THAT THE ASSESSEE PORT TRUST BEING A LOCAL AUTHORITY IS NOT LIABLE FOR INCOME TAX U/S 10(20) OF THE ACT AND HENCE NO T AX NEED TO BE DEDUCTED ON THE RENTAL PAYMENTS MADE TO THE ASSESSEE TRUST. 6.9. ALL THESE CORRESPONDENCES PROVE BEYOND DOUBT THAT THE ASSESSEES STATUS TO BE ASSESSED AS A LOCAL AUTHORITY AND ITS INCOME WAS EX EMPT U/S 10(20) OF THE ACT WAS ACCEPTED BY THE INCOME TAX DEPARTMENT UPTO ASST YEA R 2002-03. ONLY PURSUANT TO AN AMENDMENT MADE IN SECTION 10(20) OF THE ACT WITH EF FECT FROM ASST YEAR 2003-04, THE SITUATION HAS UNDERGONE CHANGE WHEREIN THE ACTIVITI ES OF THE ASSESSEE PORT TRUST WOULD NOT FALL UNDER THE DEFINITION OF THE EXPRESSION LO CAL AUTHORITY. AT THE COST OF REPETITION, WE STATE THAT THE SAID DEFINITION INSERTED IN SECTI ON 10(20) IS ONLY APPLICABLE FOR THE PURPOSE OF SECTION 10(20) OF THE ACT AND FOR ASSESS EES CLAIMING EXEMPTION UNDER THAT SECTION. IT IS NOT IN DISPUTE THAT THE ASSESSEE HA D NOT CLAIMED ANY EXEMPTION U/S 10(20) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEARS UNDER APPEAL BEFORE US. HENCE THE AMENDMENT IN SECTION 10(20) IS NOT AT ALL APPLICABL E TO THE ASSESSEE PORT TRUST. WE ALSO FIND FROM THE PAPER BOOK FILED BY THE ASSESSEE VIDE PAGES 77 TO 83 OF PAPER BOOK THAT MAJOR PORT TRUSTS IN INDIA HAD GIVEN CONFIRMATION T O THE ASSESSEE PORT TRUST THAT THEY ARE BEING ASSESSED ONLY AS A LOCAL AUTHORITY AND NOT IN THE STATUS OF A COMPANY UNDER THE INCOME TAX ACT AND THE SAME HAS BEEN ACCEPTED BY TH E INCOME TAX DEPARTMENT AS BELOW:- CHENNAI PORT TRUST VIDE REF. LETTER NO. INCOME T AX CELL/6/2010/F DATED 28.12.2010 MORMUGAO PORT TRUST - VIDE REF. LETTER NO. FA/B.52/ 2010/176 DATED 28.12.2010 MUMBAI PORT TRUST - VIDE REF. LETTER NO. FA/A/IT/ MISC/1133 DATED 3.2.2011 NEW MANGALORE PORT TRUST - VIDE REF. LETTER NO. NMP T/FIN/ITA/2010-11 DATED 4.1.2011 COCHIN PORT TRUST - VIDE REF.LETTER NO. CAD/TAXES CELL/INCOME TAX/ 2010 DATED 31.12.2010 VISAKHAPATNAM PORT TRUST - VIDE REF.LETTER NO. FA?B &B/REOPENING OF ASST DATED 24.12.2010 14 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 6.10. WE FIND THAT THE INCOME TAX ACT DOES NOT DEFI NE THE EXPRESSION LOCAL AUTHORITY OTHER THAN WHAT IS MENTIONED IN THE EXPLANATION TO SECTION 10(20) OF THE ACT. THIS DEFINITION AS CLEARLY STATED IN THE SAID EXPLANATIO N IS ONLY FOR THE PURPOSE OF SECTION 10(2) OF THE ACT AND DOES NOT APPLY TO THE DEFINITI ON OF THE EXPRESSION PERSON CONTAINED IN SECTION 2(31) OF THE ACT, SUB-CLAUSE ( VI) WHEREOF, ALSO INCLUDES A LOCAL AUTHORITY AS A PERSON, WHO IS AN ASSESSEE WITHIN THE MEANING OF SECTION 2(7) OF THE ACT. WE ALSO FIND THAT THE DEFINITION OF THE EXPRES SION LOCAL AUTHORITY HAS TO BE DRAWN FROM THE GENERAL CLAUSES ACT HAS BEEN APPROVED BY T HE FOLLOWING DECISIONS:- BUDDHA VEERINAIDU VS STATE OF ANDHRA PRADESH REPORT ED IN (1983) 143 ITR 1021 AT 1024 (SC) IT WAS HELD THAT THE BODY OF PORT COMMISSIONERS ARE SPECIFICALLY MENTIONED IN SECTION 3(31) OF THE GENERAL CLAUSES A CT , AS LOCAL AUTHORITY. THE PORT COMMISSIONERS ARE APPOINTED SPECIFICALLY BY THE GOV ERNMENT TO ADMINISTER THE AFFAIRS OF THE PORTS AND THEY NED NOT AND DO NOT DISCHARGE ANY FUNCTIONS OF LOCAL SELF GOVERNMENT. CALCUTTA STATE TRANSPORT CORPORATION VS CIT REPORTE D IN (1977) 108 ITR 922 AT 929 (CAL) - THIS WAS AFFIRMED BY THE HONBLE SUPREME C OURT IN (1996) 219 ITR 515 (SC) - THE DEFINITION GIVEN IN THE GENERAL CLAUSES ACT, 18 97 GOVERN ALL CENTRAL ACTS AND REGULATIONS MADE AFTER THE COMMENCEMENT OF THAT ACT . THE DEFINITION GIVEN IN SECTION 3(31) WILL, THEREFORE, HOLD GOOD FOR CONSTRUING THE EXPRESSION LOCAL AUTHORITY OCCURRING IN THE LAND ACQUISITION ACT. UNION OF INDIA VS R.C.JAIN REPORTED IN (1981) 2 SCC 310 (SC) IN THIS DECISION, THEIR LORDSHIPS OF HONBLE SUPREM E COURT FOLLOWING THE DEFINITION OF THE EXPRESSION LOCAL AUTHORITY AS CONTAINED IN TH E GENERAL CLUASES ACT HELD AND OBSERVED THAT THE DELHI DEVELOPMENT AUTHORITY IS A LOCAL AUTHORITY FOR THE PURPOSES OF PAYMENT OF BONUS ACT, 1965, WHICH ACT ALSO DID NOT CONTAIN ANY DEFINITION OF THE EXPRESSION LOCAL AUTHORITY. ESPECIALLY IN PAGE 312 PARA 5, THE HONBLE SUPREME COURT NOTED THAT DELHI DEVELOPMENT AUTHORITY WAS CO NSTITUTED BY THE CENTRAL GOVERNMENT UNDER SECTION 3 OF THE DELHI DEVELOPMENT ACT, 1957. THE SAID ACT INTER ALIA PROVIDED THAT THE DELHI DEVELOPMENT AUTHORITY SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL, WITH THE US UAL CORPORATE ATTRIBUTES. CIT VS U.P.FOREST CORPORATION REPORTED IN (1998) 23 0 ITR 945 AT 951 (SC) THE HONBLE SUPREME COURT IN THE ABSENCE OF ANY DEF INITION OF THE EXPRESSION LOCAL AUTHORITY IN THE INCOME TAX ACT, 1961, ADOPTED AND APPLIED THE DEFINITION OF THAT EXPRESSION AS CONTAINED IN SECTION 3(31) OF THE GEN ERAL CLAUSES ACT, 1897 FOR THE PURPOSES OF EXAMINING WHETHER U.P.FOREST CORPORATIO N WAS OR WAS NOT A LOCAL AUTHORITY UNDER THE INCOME TAX ACT, 1961. 15 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 CIT VS AGRICULTURAL MARKETING PRODUCE COMMITTEE REP ORTED IN (2001) 250 ITR 369 (DEL) THE HONBLE DELHI HIGH COURT AFTER REITERATING THE AFORESAID DECISIONS OF THE HONBLE APEX COURT QUOTED INTER ALIA THE FOLLOWING THREE TE STS ARE RELEVANT FOR DETERMINING WHETHER AN AUTHORITY COULD BE HELD TO BE A LOCAL AU THORITY:- (A) IT MUST HAVE A SEPARATE LEGAL EXISTENCE AS A CORPOR ATE BODY AND AN AUTONOMOUS STATUS ; (B) IT MUST NOT BE A MERE GOVERNMENTAL AGENCY BUT MUST BE A LEGALLY INDEPENDENT ENTITY ; (C) THE CONTROL OR MANAGEMENT OF THE FUND MUST VEST IN THE AUTHORITY. KRISHI UTPANNA BAZAR SAMITI VS ITO REPORTED IN (198 6) 158 ITR 742 (BOM) THE HONBLE BOMBAY HIGH COURT APPLIED THE AFORESAID PRINCIPLES IN UPHOLDING THAT THE SAID ASSESSEE WAS ALSO A LOCAL AUTHORITY, AS DEFINE D IN SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1897, IN THE ABSENCE OF ANY DEFINITION OF THAT EXPRESSION IN THE INCOME TAX ACT, 1961. 6.11. WE FIND THAT THE DECISION OF THE HONBLE SUP REME COURT IN ADITYAPUR INDUSTRIAL AREA DEVELOPMENT AUTHORITY VS UNION OF INDIA & ORS REPORTED IN (2006) 283 ITR 97 (SC), REFERRED TO THE LD AO IN THE REASONS RECORDED AND IN THE RE-ASSESSMENT ORDERS DATED 30.12.2010, HAS NO APPLICATION WHATSOEVER IN DECIDI NG THE CONTROVERSY RAISED BY THE LD. AO. IN THAT CASE, THE QUESTION FOR CONSIDERATION B EFORE THE HONBLE SUPREME COURT WAS AS TO WHETHER ADITYAPUR INDUSTRIAL AREA DEVELOPMENT AUTHORITY GOVERNED BY THE BIHAR INDUSTRIAL AREA DEVELOPMENT AUTHORITY ACT, 1974 WAS PART OF THE STATE GOVERNMENT AND / OR THAT ITS INCOME WAS THE INCOME OF THE STATE GOVE RNMENT ENTITLED TO EXEMPTION FROM UNION TAXATION UNDER ARTICLE 289 OF THE CONSTITUTIO N. THEIR LORDSHIPS OF THE HONBLE SUPREME COURT HELD THAT IN VIEW OF THE INSERTION OF THE EXPLANATION U/S 10(20) OF THE INCOME TAX ACT, 1961, ADITYAPUR INDUSTRIAL AREA DEV ELOPMENT AUTHORITY WAS NOT A LOCAL AUTHORITY, AS DEFINED FOR THE PURPOSES OF SEC TION 10(20) OF THE SAID ACT; AND WITH THE FURTHER OMISSION OF SECTION 10(20A) OF THE SAID ACT FROM THE STATUTE BOOK, THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM ANY TAX EXEMPTIO N, PARTICULARLY IN VIEW OF THE FACT THAT ITS INCOME COULD NOT BE SAID TO BE THE INCOME OF TH E STATE SO AS TO BE EXEMPT FROM UNION TAXATION UNDER ARTICLE 289(1) OF THE CONSTITUTION. 6.12. WE ALSO FIND THAT THE LD. AO HAS ACCEPTED THE STATUS OF THE ASSESSEE PORT TRUST AS A LOCAL AUTHORITY EVEN IN THE RECENTLY CONCLUDED SCRU TINY ASSESSMENT FOR THE ASST YEAR 16 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 2012-13 U/S 143(3) OF THE ACT DATED 28.3.2015 WHICH COULD BE EVIDENT FROM PAGES 101 TO 108 OF THE PAPER BOOK OF THE ASSESSEE. WE FI ND THAT ALL THE PORT TRUSTS SUCH AS CHENNAI PORT TRUST, MORMUGAO PORT TRUST, MUMBAI POR T TRUST, NEW MANGALORE PORT TRUST, COCHIN PORT TRUST AND VISAKHAPATNAM PORT TRU ST WERE BEING ASSESSED TO INCOME TAX AS LOCAL AUTHORITY. 6.13. WE FIND THAT THE ASSESSMENTS COMPLETED U/S 1 43(3) OF THE ACT FOR THE ASST YEARS 2003-04 TO 2005-06 WERE REOPENED WITHOUT ANY TANGIB LE MATERIAL BROUGHT ON RECORD BY THE LD AO. WE ALSO HOLD THAT THE REASSESSMENT IS D ONE ONLY DUE TO CHANGE OF OPINION AND THE ABOVE FACTS AND VARIOUS CORRESPONDENCES ADD RESSED BY THE MINISTRY OF SHIPPING (UNDER WHICH ASSESSEE TRUST IS PRIMARILY ADMINISTER ED AND CONTROLLED) ; VARIOUS CORRESPONDENCES OF MINISTRY OF FINANCE, INCOME TAX DEPARTMENT, GOVERNMENT OF INDIA ; FROM THE REASONS RECORDED FOR RE-OPENING THE ASSE SSMENTS FOR THE THREE ASSESSMENT YEARS, WE HOLD THAT THE REASSESSMENT MADE FOR ALL THE THREE ASSESSMENT YEARS DESERVES TO BE QUASHED AND DECLARED VOID AB INITIO. WE ALSO P LACE RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINA TOR OF INDIA LTD REPORTED IN (2010) 320 ITR 561 (SC) IN THIS REGARD, WHEREIN IT WAS HELD THAT : AFTER THE AMENDMENT, THE AO HAS TO HAVE REASON TO B ELIEVE THAT INCOME HAS ESCAPED ASSESSMENT , BUT THIS DOES NOT IMPLY THAT T HE AO CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN IN-BUILT TEST TO CHECK THE ABUSE O F POWER. AT PAGE 564 OF THE SAID JUDGEMENT, THEIR LORDSHIPS FURTHER HELD AND OBSERVE D THAT ONE MUST BEAR IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW A ND POWER TO REASSESS. THE AO HAS NO POWER TO REVIEW; HE HAS ONLY POWER TO REA SSESS, WITHOUT THERE BEING ANY CHANGE OF OPINION ON HIS PART. ACCORDINGLY, THE REASSESSMENTS FRAMED BY THE LD AO FOR THE ASST YEAR 2003-04 IS QUASHED AND DECLARED VOID AB INITIO. EVEN ON MERIT S, THE AFORESAID FACTS AND FINDINGS WOULD CLEARLY PROVE BEYOND DOUBT THAT THE ASSESSEE PORT TRUST HAS TO BE ASSESSED ONLY AS A LOCAL AUTHORITY AND NOT IN THE STATUS OF A COM PANY. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON VALIDITY OF ASSUMPTION OF JURISD ICTION U/S 147 OF THE ACT ARE ALLOWED AND GROUNDS RAISED BY THE REVENUE ON THE STATUS OF THE ASSESSEE PORT TRUST ARE DISMISSED. 17 ITA NOS.2628-2630/K/2013 & ITA NOS. 2868-2870/K/2013 KOLKATA PORT TRUST AYS 2003-04 2005-06 THE DECISION RENDERED FOR THE ASST YEAR 2003-04 WOU LD APPLY WITH EQUAL FORCE FOR THE ASST YEARS 2004-05 AND 2005-06 ALSO. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THAT OF THE REVENUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.201 6 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8 TH JULY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT KOLKATA PORT TRUST, 15, STRAND ROAD, KO LKATA-700 001. 2 RESPONDENT ACIT, CIRCLE-35, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .