TMI Blog1997 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT Rules, 1962 (hereinafter to be referred to as 'the Rules'), and not Rs. 7.279 adopted in the order of assessment. The sum of Rs. 7.279 was adopted on the basis that it was the current exchange rate. On the basis that the report of the audit constituted information for the purpose of the reopening the assessment, the ITO initiated proceedings and issued notice under s. 148 of the Act to the assessee for reopening the assessment made under s. 172 of the Act. The assessee thereupon filed a return in response to the notice under s. 148 of the Act, disclosing the same income as was disclosed in the return filed under s. 172 of the Act. The ITO completed the reassessment on 22nd March, 1979, and determined the total income of the non-resident at Rs. 4,79,570 and the tax payable thereon at Rs. 3,53,484. After deducting the tax originally paid, the assessee was called upon to pay the difference of Rs. 10,386. 3. The assessee filed an appeal before the CIT(A). The CIT(A) pointed out that the provisions of s. 172 of the Act is a special provision for the assessment on the shipping agent and according to him, the assessee would not automatically be treated as a representative assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng it as an agent of the non-resident owner under s. 163, the first assessment having been made on the assessee representing the master of the ship under s. 172(4) of the Act ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal's view that the reassessment made under s. 147(b) was time-barred in view of the provisions of s. 149(3) is sustainable in law ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal's finding that the decision reported in Indian Eastern Newspaper Society vs. CIT (1979) 12 CTR (SC) 190 : (1979) 119 ITR 996 (SC): TC 51R. 1371 would apply to the assessee's case and, therefore, the reopening of the assessment was invalid, is sustainable in law ?" 5. Mr. S.V. Subramaniam, learned senior counsel appearing for the Revenue, made an elaborate argument and submitted that the provisions of r. 115 of the Rules are mandatory in nature and prevailing market exchange rate would apply only when the dollar is brought to India and where, the foreign exchange was not brought to India which is otherwise liable to be taxed in India, he submitted, the provisions of r. 115 of the Rules would apply. He submitted that the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the assessee was served, there was no representation on behalf of the assessee. 7. We have carefully considered the submissions of the learned senior counsel for the Revenue, and perused the record. 8. Before considering the arguments, it is necessary to examine the scope of s. 172 of the Act. The scope of s. 172 of the Act has been elaborately discussed and set out by a decision of the Supreme Court in the case of Union of India vs. Gosalia Shipping (P) Ltd. 1978 CTR (SC) 76 : (1978) 113 ITR 307 (SC) : TC 47R.289 as under : "Sec. 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. The object of the section is to ensure the levy and recovery of tax in the case of ships belonging to or chartered by non-residents. The section brings to tax the profits made by them from occasional shipping, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the tax will be recoverable under the other provisions of this Act." The last portion of s. 172 of the Act beginning from the words, 'unless the ITO....' was omitted by the Finance Act, 1975, w.e.f. 1st June, 1975. 10. The unamended provisions of s. 172 was subject-matter of consideration before the Calcutta High Court in the case of Czechoslavak Ocean Shipping International Joint Stock Co. Anr. vs. ITO (1971) 81 ITR 162 (Cal): TC 5R.433 and the Calcutta High Court held that s. 172 of the Act provided for a provisional assessment and recovery of tax from a tramp-steamer belonging to a non-resident which has loaded carge and taken in passengers in an Indian port before the ship is allowed to leave the Indian port so that there may not be any evasion of tax due on the freight and passenger fare earned which would be income accruing or arising in India. The Court also held that where there is an agent for the non-resident in India by whom expenses can be made on annual basis, no resort under s. 172 is permissible. In other words, according to Calcutta High Court, the provisions of s. 172 of the Act would not be applicable where a non-resident owner has an agent in India as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le indicates that the provisions of s. 172 of the Act would apply notwithstanding any other provisions of the Act and it has an overriding effect over other provisions of the Act. The master of the ship is empowered to file the return before the ship leaves India, and if it is not possible for the master to file the return, it is open to the master to make satisfactory arrangements for the filing of the return or for the payment of tax on behalf of the master. Under the statutory scheme, when the assessee filed the return under s. 172(3) of the Act, it must be taken that the assessee filed the return as an agent of the master as s. 172 of the Act makes a difference between the agent of a non-resident and the agent of the master. It is also not possible to accept the contention of the learned senior counsel for the Revenue that when the assessee filed the return under sub-s. (3) of s. 172 of the Act, it filed the return on behalf of non-resident principal. Sub-s. (3) of s. 172 of the Act makes it clear that the assessee was representing only the master of the ship in the summary assessment made on the non-resident principal and in the absence of any notice to the assessee treating h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, the decision of the Bombay High Court has no application to the facts of the case. 14. As already seen, the scheme under s. 172 is clear that when the assessee filed return under sub-s. (3) of s. 172 of the Act, he filed the return as an agent of the master of the ship and it cannot be held that the assessee voluntarily treated himself as an agent of the non-resident, No doubt, it may be true the ITO is ultimately assessing a non-resident principal or the charterer, but the scheme of s. 172 does not provide for the assessee to treat himself as an agent of the non-resident by filing return under sub-s. (1) of s. 172 of the Act. The proviso to sub-s. (3) of s. 172 of the Act provides that if the master of the ship is not able to furnish the return before the departure of the ship from the port, the master of the ship can make satisfactory arrangements for filing the return and payment of tax by any other person on his behalf. The words underlined (italicised) clearly show that the assessee filed the return on behalf of the master. Further, under the same proviso, the ITO may deem that the filing of the return by the assessee was so authorised by the master and that would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the notice was issued within the period of 2 years from the end of the relevant assessment year namely, 1975-76. There are more than one difficulties in accepting the contention of the learned senior counsel. As already stated, the assessment was made for the asst. yr. 1974-75 both in the original assessment and in the subsequent assessment made by the ITO. Secondly the notice under s. 148 of the Act was issued only for the asst. yr. 1974-75 and not for the asst. yr. 1975-76 and without a valid notice for 1975-76, it cannot be held that the assessment for 1975-76 was validly reopened. Thirdly, under provision of s. 172 of the Act, the provisional assessment could be made for the asst. yr. 1974-75 and it cannot be stated that the ITO when he so made the assessment, he made the assessment for the year 1975-76. Fourthly, the option to opt for making an assessment in the regular assessment procedure is available to the owner of the charterer of the ship. As already seen, it is always open to the ITO not to proceed under s. 172 of the Act, but to proceed to make the assessment against the non resident principal, and if there is any agent for him in India to proceed against the ..... 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