TMI Blog1995 (7) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the correct rate of exchange intimated by the Central Board of Direct Taxes, New Delhi. Aggrieved by the said reassessments, the assessees took up the matter in appeal before the Commissioner (Appeals) contending that the Incometax Officer was not justified in reopening the assessments under section 147(b) of the Income-tax Act, 1961. At the time of hearing before the learned Commissioner (Appeals), the various grounds raised in the grounds of appeal as per the memo of appeal filed before him were not properly highlighted. The learned Commissioner (Appeals) held the reopening to be invalid. According to him, an order under section 172(4) does not fall under the category of cases which can be reopened under the provisions of section 147. Section 147 applies only to those orders which are based upon the returns filed under section 139 and not under any other section. Accordingly, the learned Commissioner of Income-tax (Appeals) held that the provisions of section 147 are not applicable and, hence the reassessment proceedings become invalid. He, accordingly, set aside the reassessment proceedings and restored the original orders under section 172(4) of the Income-tax Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent in India. It has been the contention of learned counsel for the assessee that the provisions of section 172 are not only self-contained provisions, the assessment is to be made with reference to the visit of the ship and not on the basis of the assessment year. In other words, there could be a number of assessments of a particular ship on the basis of the number of visits during the year. In any case, the option for regular assessment is only given to the assessee under sub-section (7) of section 172. Unless the assessee makes a claim for an assessment to be made of the total income of the previous year, the Income-tax Officer cannot invoke the general provision in view of the non obstante clause. Since the section begins with the term "Notwithstanding anything contained in the other provisions of this Act", the Income-tax Officer cannot fall back upon the other provisions of the Act so as to reopen the assessment already concluded under section 172. The only option that is given is to the assessee who can demand reassessment in terms of section 172(7). Alternatively, it is submitted by learned counsel for the assessee that the learned Commissioner (Appeals) did not dispose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 44C of the Act. Their Lordships have not gone into the question whether the Income-tax Officer has got the power to reopen the assessment under section 147 of the Income-tax Act. It is, therefore, not possible to draw any inference from the said decision. We are, therefore, of the view that the power of the Income-tax Officer to initiate proceedings under section 147 of the Income-tax Act is not barred even where assessment has been completed under section 172(4) of the Income-tax Act if there is evidence to show that there is escapement of income under the Income tax Act. We, accordingly, uphold the validity of the order of the Income tax Officer under section 147 reopening the assessment and vacate that of the Commissioner (Appeals). However, the learned Commissioner (Appeals) has not considered the appeals on the merits including the various grounds raised before him. It will, therefore, be fair and proper to restore the appeals to his file for fresh disposal in accordance with law and to deal with all the grounds raised in the memo of appeal. The appeals are, accordingly, restored to the file of the Commissioner (Appeals) for fresh disposal as indicated above. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals) should be sustained. The learned author, Sri Sampath Iyengar in his Law of Income-tax, (Seventh edition, page 3831), points out that section 172 and sections 174 to 176 constitute exceptions to the concept of income of the previous year. Chapter XIV deals with procedure for assessment of income of a previous year. In an assessment under section 172(4), there is no previous year. It is an ad hoc assessment made in respect of shipping on each call of a ship at an Indian port. Thus, there may be any number of assessments in a year under section 172(4) which is conceptionally different from the assessment made in respect of the whole of the income in the previous year under the general provisions relating to assessment. Even section 172(7) only gives an option to the owner or the charterer of the ship to be assessed in the normal course on his total income, for, in some cases, it may be advantageous to the assessee. Else, the assessment under section 172(4) is final. Chapter XIV deals with procedure for assessment. Section 139 specifies return of income of the previous year. Sections 140A to 144B are the provisions underlying an assessment. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable in the assessment. In an assessment under section 172(4), there is no previous year. Therefore, the general provisions of section 147 are not applicable to a special type of assessment for shipping business. In an assessment under the general provisions of the Act, there could be only one assessment in respect of the whole of the previous year whereas there could be any number of assessments under section 172(4) even within a year. Indeed, for each visit of a ship to a port, there will have to be an assessment in respect of the freight earned. The agent of the non-resident had declared the income earned by way of freight in foreign currency. The Income-tax Officer applied the telegraphic transfer rate as supplied by the State Bank of India. The basis for reopening is that the rate as intimated by the Central Board of Direct Taxes or the Reserve Bank of India should have been taken and that the rate intimated by the Board constituted "information". There had been no escapement of income chargeable to tax at all. Rule 115 prescribed that conversion of income expressed in foreign currency into rupees shall be at the "telegraphic transfer buying rate" of such currency on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer adopted the rate of exchange per U. S. dollar on the basis of telegraphic transfer as certified by the local branch of the State Bank of India. Subsequent to the completion of the assessments, the Central Board of Direct Taxes issued a circular in which a different rate of exchange was indicated. On receipt of the circular of the Board, the Assessing Officer reopened the assessments under section 147(b) of the Act. The reassessments were completed by him on the basis of the rate of exchange intimated by the Central Board of Direct Taxes in the circular mentioned above. The assessee was aggrieved and filed an appeal before the Commissioner of Income-tax (Appeals) who was of the opinion that the assessment made under section 172(4) could not be reopened under section 147 of the Act. The Commissioner of Income-tax (Appeals) accordingly cancelled the assessment. Aggrieved, the Revenue has come up in appeal before the Tribunal. The learned Accountant Member examined the issue in the light of the arguments advanced by the parties to the dispute and was of the view that the assessment completed under section 172(4) could be reopened under section 147 of the Act. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d recovery of tax in the case of any ship belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. Section 172 occurs in Chapter XV which is entitled "Liability in special cases" and the sub-heading of the section is "Profits of non-residents from occasional shipping business". It creates a tax liability in respect of occasional shipping by making a special provision for the levy and recovery of tax in the case of a ship belonging to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India. In addition to section 172, section 44B also contains a special provision for computing profits and gains of shipping business in the case of non-residents. There is, however, a difference between section 44B and section 172 of the Act. In section 44B no procedure for assessment and collection of tax is provided. The use of a non obstante clause refers only to sections 28 to 43A. In other words, income from shipping accrued or deemed to have accrued to a non-resident shipowner or charterer falls outside the scope of trade and business normally so understood. The incidence of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip to an Indian port. These provisions are self-contained and the determination of the recovery of tax is governed by the procedure laid down in section 172 of the Act. Section 147 of the Act, as it stood at the relevant time, had clauses (a) and (b) which were as under : " If- (a) the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income .'' The assessment or reassessment proceedings under these provisions are initiated by the issue of notice which must relate to a particular assessment year. It is wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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