The ITO, Range-1, Bhavnagar V. M/s. H.K.Dave Limited, Bhavnagar

MA 55/AHD/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3523 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-11-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Recovery proceedings; Period of limitation; Time period of passing order

Judgement Text

MA NO.55/AHD/2015 ARISING OUT OF I.T.A. NO.1049/AHD/2006: ASSESSMENT YEAR: 2001-02 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD. [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] M.A. NO.55/AHD/2015 ARISING OUT OF I.T.A. NO.1049/AHD/2006 ASSESSMENT YEAR: 2001-02 INCOME-TAX OFFICER, RANGE-1, BHAVNAGAR. ....................APPELLANT VS. H. K. DAVE LIMITED, AS AGENT OF TRAMP SHIPPING LTD., UK, PLOT NO.51, PARAM BEHIND SATYANARAYANA ROAD, BHAVNAGAR. . .RESPONDENT PAN - AAACH 53971L APPEARANCES BY: NARENDRA SINGH......FOR THE APPELLANT TUSHAR HEMANI,...... F OR THE RESPONDENT DATE OF CONCLUDING THE HEARING: 6 TH NOVEMBER, 2015 DATE OF PRONOUNCING THE ORDER: 16 TH NOV, 2015 O R D E R PER PRAMOD KUMAR, AM: BY WAY OF THIS APPLICATION THE ASSESSING OFFICER HAS POINTED OUT, IN OUR ORDER DATED 1 ST MAY, 2015, THE FOLLOWING ERROR :- HONBLE ITAT VIDE ITS ORDER IN ITA NO.1049/AHD/2 006 DATED 01.05.2015 ALLOWED THE APPEAL OF THE ASSESSEE. THE HONBLE ITAT AT PARA 10 OF THE ORDER HAS CONSIDERED THE ISSUE RAISE D BY THE ASSESSEE REGARDING THE TIME LIMIT FOR COMPLETION OF THE ASSE SSMENT ORDER AND MADE OBSERVATION THAT THE TIME PERIOD OF 9 MONTHS F ROM THE END OF THE FINANCIAL YEAR OF FILING OF ETURN SHOULD BE CONSIDE RED AS A STATUTORY TIME LIMIT FOR A PERIOD PRIOR TO 1.4.2007 FOR COMPLETION OF ASSESSMENT U/S 172(4) OF THE ACT. MA NO.55/AHD/2015 ARISING OUT OF I.T.A. NO.1049/AHD/2006: ASSESSMENT YEAR: 2001-02 PAGE 2 OF 4 2. THE AMENDMENT IN THE PROVISIONS OF SECTION 172 (4) WAS INSERTED W.E.F. 1.4.2007 AND TIME LIMIT OF 9 MONTHS WAS IMPO SED FOR COMPLETION OF ASSESSMENT. THE PROVISION OF SECTION 172(4) ARE REPRODUCED AS UNDER :- 172(4A) NO ORDER ASSESSING THE INCOME AND DETERMIN ING THE SUM OF TAX PAYABLE THEREON SHALL BE MADE UNDER SUB-SECTION (4) AFTER THE EXPIRY OF NINE MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN UNDER SUBSECTION (3) IS FURNISHED. PROVIDED THAT WHERE THE RETURN UNDER SECTION (3) HA S BEEN FURNISHED BEFORE THE 1 ST DAY OF APRIL, 2007 SUCH ORDER SHALL BE MADE ON OR BEFORE THE 31 ST DAY OF DECEMBER, 2008. THEREFORE, THE PROVISO WITH THE AMENDMENT WAS INS ERTED TO LEGALIZE THE ASSESSMENT MADE ON OR BEFORE 31.12.2008 IN RESPECT OF THE RETURN FURNISHED BEFORE THE 1.4.2007. 3. IN THIS CASE, THE ASSESSEE HAS FURNISHED THE R ETURN OF INCOME U/S 172(3) ON 23.10.2001 AND THE ASSESSMENT WAS COMPLET ED ON 29.3.2005. THEREFORE THE ASSESSMENT WAS COMPLETED W ITHIN THE TIME LIMIT AND AS PER THE PROVISIONS OF THE ACT (AS PER AMENDMENTS). PRAYER OF THE DEPARTMENT IT IS THEREFORE HUMBLY PRAYED THAT THE HON. ITA T MAY RECALL THE ORDER PASSED ON 1.5.2015 AND DECIDE THE CASE ON MERITS ON THE BASIS OF FACTS MENTIONED HEREIN ABOVE AND AMEND THE ORDER ACCORDIN GLY. 2. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 3. A PLAIN READING OF THE IMPUGNED ORDER WOULD SHOW THAT THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE, ON MERITS. THE R ELEVANT OBSERVATIONS ARE AS FOLLOWS :- 9. AS EVIDENT FROM A PLAIN READING OF SECTION 172( 1), WHICH HIGHLIGHTS THE FACT THAT THE PROVISIONS OF SECTION 172 APPLY FOR THE PURPOSE OF THE LEVY AND RECOVERY OF TAX IN THE CASE OF ANY SHIP BELONGING TO OR CHARTERED B Y, A NON-RESIDENT, WHICH CARRIES PASSENGERS, LIVESTOCK, MAIL OR GOODS (EMPHASIS BY UNDERLINING SUPPLIED BY US) SHIPPED AT A PORT IN INDIA, SHOWS THAT THE TAXABILITY UNDER SECTION 172 IS QUA A SHIP AND NOT QUA THE ENTERPRISE OWNING OR USING IT UNDER A CHARTER AGREEMENT. SECTI ON 172(4) THEN REFERS TO MA NO.55/AHD/2015 ARISING OUT OF I.T.A. NO.1049/AHD/2006: ASSESSMENT YEAR: 2001-02 PAGE 3 OF 4 THE PAYMENT OF THE TAX LIABILITY BY THE MASTER OF T HE SHIP WHICH AGAIN SHOWS THAT THE TAXABILITY UNDER SECTION 172 IS QUA THE SH IP RATHER THAN QUA OWNER OF CHARTERER OF THE SHIP. WHAT IS THUS CLEAR IS THAT T HE SCHEME OF TAXATION 172 LAYS EMPHASIS THE TAX OBJECT, I.E. THE ACTIVITY WHI CH IS TO BE TAXED, AND NOT THE TAX SUBJECT, I.E. THE PERSON WHO IS TO BE TAXED. TH EREFORE, WHEN A PERSON ASSUMES LIABILITY, BY FILING RETURN UNDER SECTION 1 72(3) IN RESPECT OF TAX LIABILITY UNDER SECTION 172(2), SUCH A LIABILITY IS QUA THE TAXABILITY OF INCOME IN RESPECT OF THE AMOUNT PAID OR PAYABLE ON ACCOUNT OF CARRIAGE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS ON THE SHIP. THE SCHEME OF THIS SECTION, IN OUR HUMBLE UNDERSTANDING, DOES NOT ALLOW SUCH A PERSON TO CHOOSE BEING ACCOUNTABLE IN RESPECT OF A PARTICULAR PERSON, IN R ESPECT OF OWNER OF THE SHIP OR IN RESPECT OF CHARTERER OF THE SHIP. IF HE ASSUM ES THE LIABILITY UNDER SECTION 172(3), IT IS IN RESPECT OF THE INCOME EARNED BY TH E ACTIVITIES OF THE SHIP. THE ASSESSEES CLAIM THAT HE IS ONLY RESPONSIBLE FOR TH E TAX LIABILITY OF THE OWNER, AND NOT THE CHARTERER, IS ONLY TO BE STATED AND REJ ECTED. HAVING SAID THAT WE MAY ALSO POINT OUT THAT THE ASSESSING OFFICER HIMSE LF HAS ASSESSED THE UK BASED COMPANY, I.E. OWNER OF THE SHIP AND NOT THE C HARTERER OF THE SHIP. BY IMPLICATION, THUS, HE ACCEPTS THAT THE INCOME WAS E ARNED BY THE UK BASED COMPANY AND, IF THAT BE SO, THE PROVISIONS OF ARTIC LE 9(1) OF THE INDO UK TAX TREATY UNAMBIGUOUSLY PROVIDES THAT INCOME OF AN ENT ERPRISE OF A CONTRACTING STATE (I.E. TRAMP SHIPPING LTD. UK) FROM THE OPERAT ION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THAT STATE (I.E. UK). IN THIS VIEW OF THE MATTER AND IN VIEW OF THE FACT THAT IT HAS NOT BEEN THE CASE OF ANY OF THE AUTHORITIES BELOW THAT THE INCOME BELONGED TO THE C HARTERER BASED IN BAHAMAS AND NOT THE OWNER BASED IN UK WE ARE UNABLE TO SEE ANY LEGALLY SUSTAINABLE REASON TO DECLINE THE BENEFIT OF ARTICL E 9 TO THE ASSESSEE BEFORE US. THE GRIEVANCE OF THE ASSESSEE MUST THEREFORE, B E UPHELD. 10. HOWEVER, BEFORE PARTING WITH THE MATTER, WE MAY ALSO DEAL WITH AN INTERESTING LEGAL ISSUE RAISED BY THE LEARNED COUNS EL. WE HAVE NOTED THAT AS POINTED OUT BY SHRI HEMANI, THE ASSESSMENT UNDER SE CTION 172(4) WAS FRAMED ON 29 TH MARCH, 2005, WHEREAS THE SHIP HAD LEFT INDIAN PORT ON 29 TH OCTOBER, 2001. THE ASSESSMENT WAS THUS FRAMED ALMOST THREE Y EARS AFTER THE END OF THE RELEVANT PREVIOUS YEAR. UNDOUBTEDLY, AS THE REL EVANT POINT OF TIME, THERE WAS NO TIME PRESCRIBED UNDER THE STATUTE FOR FRAMIN G THE ASSESSMENT UNDER SECTION 172(4) AND THE PROVISIONS OF SECTION 172(4A ), WHICH SET THIS TIME LIMIT AS NINE MONTHS FROM THE END OF THE FINANCIAL YEAR I N WHICH RETURN UNDER SECTION 172(3) IS FILED, CAME INTO EFFECT FROM 1 ST APRIL, 2007, BUT THAT DOES NOT MEAN THAT IN THE ABSENCE OF THIS TIME LIMIT UNDER S ECTION 172(4), THE ASSESSMENT UNDER SECTION 172(4) COULD HAVE BEEN DON E AT ANY POINT OF TIME. AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) VS. MAHINDRA & MAHINDRA LI MITED (2014) 365 ITR 560 (BOM) EVEN WHEN A LEGAL PROVISION, SUCH AS CONTAINE D IN SECTION 201 DOES NOT PRESCRIBE ANY LIMITATION PERIOD, THE REVENUE AU THORITIES WILL HAVE TO EXERCISE THE POWERS IN THAT REGARD WITHIN A REASONA BLE TIME, AND THE TRIBUNAL IS QUITE JUSTIFIED, IN PRINCIPLE, IN DECIDING WHAT WOULD CONSTITUTE A REASONABLE TIME LIMIT. IT IS THUS CLEAR THAT EVEN WHEN THE STA TUTE DID NOT PRESCRIBE A TIME LIMIT FOR COMPLETING ASSESSMENT UNDER SECTION 172(4 ) WE HAVE TO HOLD THAT MA NO.55/AHD/2015 ARISING OUT OF I.T.A. NO.1049/AHD/2006: ASSESSMENT YEAR: 2001-02 PAGE 4 OF 4 SUCH ASSESSMENT COULD BE FRAMED ONLY WITHIN A REASO NABLE TIME. WE HAVE ALSO NOTED THAT, SUBSEQUENTLY WITH EFFECT FROM 1 ST APRIL, 2007 THE STATUTE ITSELF HAS CONSIDERED THE PERIOD OF NINE MONTHS FROM THE E ND OF FINANCIAL YEAR, IN WHICH RETURN UNDER SECTION 172(3) IS FILED AS REASO NABLE TIME LIMIT WITHIN WHICH ASSESSMENT ORDER UNDER SECTION 172(4) IS TO B E FRAMED. WHEN THIS TIME LIMIT IS STATUTORILY TREATED AS A REASONABLE TIME L IMIT FOR THE RETURNS FILED AFTER 1 ST APRIL, 2007, IN OUR CONSIDERED VIEW, THIS TIME LIM IT CAN ALSO BE TREATED AS A REASONABLE TIME LIMIT FOR THE RETURNED FILED PRIOR TO 1 ST APRIL, 2007 AS WELL. WE DO SO. VIEWED IN THIS PERSPECTIVE, THE IMPUGNED ORD ER UNDER SECTION 172(4) WAS INDEED BARRED BY LIMITATION. FOR THIS REASON AL SO THE ASSESSEE MUST SUCCEED IN THIS APPEAL. 4. THE ISSUE REGARDING THE ORDER BEING HELD TO BE T IME BARRED IN THE ABOVE CONTEXT, IS WHOLLY ACADEMIC. IN ANY CASE, THE TIME LIMIT UNDER SECTION 172(4A) BEING EFFECTIVE FROM 1 ST APRIL, 2007 WAS DULY TAKEN INTO ACCOUNT AND IT WAS HELD THAT WHEN THIS TIME LIMIT IS STATUTORILY TREA TED AS A REASONABLE TIME FOR THE RETURNS FILED AFTER 1 ST APRIL, 2007, THIS LIMIT CAN ALSO BE TREATED AS A REASONABLE TIME LIMIT FOR THE RETURNS FILED PRIOR T O 1 ST APRIL, 2007 AS WELL. CLEARLY, THEREFORE, THE RECTIFICATION PETITION FILE D BY THE ASSESSING OFFICER IS ILL CONCEIVED AND DEVOID OF ANY LEGALLY SUSTAINABLE MER ITS. WE REJECT THE PETITION. 5. IN THE RESULT, MISCELLANEOUS PETITION IS DISMISS ED. PRONOUNCED TODAY ON 16 TH DAY OF NOVEMBER, 2015. SD/- SD/- (S. S. GODARA) PRAMOD KUMAR (JUDICIAL MEMBER) (AC COUNTANT MEMBER) AHMEDABAD, THE 16 TH DAY OF NOVEMBER, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD