Shipping Business :Reassessment Possible in Case of Section 172

Reassessment proceeding u/s 147 can be initiated against a non resident shipping company who are assessed u/s 172 of the Income Tax Act , so held by Delhi High court in Emirates Shipping Line FZE vs ADIT [2012] 23 taxmann 400 (Delhi)

Facts of the Case : Reassessment in case of Section 172

Emirates Shipping Line, FZE, is a foreign company incorporated under the laws of United Arab Emirates (UAE, for short). It is a shipping company engaged in the business of transport of containers by sea. Some of their ships visit India and ship cargo to and from India.

The assessee challenged initiation of reassessment proceedings under Section 147 read with Section 148 of the Income Tax Act, 1961 (Act, for short) for the assessment year 2007-08 by notice dated 23rd March, 2009, issued by the Assistant Director of Income Tax, Circle 1(2), International Taxation, New Delhi3.

One of the issue before Delhi High Court was

Whether reassessment proceedings under Section 147/148 of the Act cannot be initiated in case of case falling u/s section 172 of the Act .

The Hon’ble Delhi High court held as under

20. This decision was referred to by the Kerala High Court in Commissioner of Income Tax vs. Taiyo Gyogyo Kabhushiki Kaisha, (2000) 244 ITR 177 (Ker.). The said case pertains to the Companies (Profits) Surtax Act, 1964. On the basis of assessment under Section 172(4) of the Income Tax Act, 1961, the Assessing Officer had computed levy of surtax. The High Court pointed out the difference between an assessment under Section 172(4) of the Act which was classified and regarded as provisional, ad-hoc or for special purpose assessment and observed that this does not preclude the Assessing Officer from resorting to Section 44B of the Act in regular assessment proceedings, which could be resorted to and enforced by the Assessing Officer. It was observed that even when an ad-hoc assessment is made under Section 172(4), the assessee can exercise option under Section 172(7) or the Assessing Officer could have made regular assessment in terms of Section 44B of the Act. We need not examine the legal ratio but what is relevant and material for us is a factum and acceptance of the principle that Section 172 does not preclude operation of all provisions of the Act. Provisions which are in consonance and do not come into conflict with Section 172 continue to apply and can be enforced.

21. Accordingly, the first contention of the petitioner that provisions of Section 147/148 cannot be invoked, has to be rejected. We also rely upon decision of a Division Bench of this Court in Areva T&D, SA vs.ADIT, 179(2011)DLT314. The following quote in the decision in Areva T&D SA (supra), is relevant and material:-

“28. Explanation 2(a) of the aforesaid Section clearly takes care of the situation where no return has been filed. On a conjoint reading of Sections 195 and 197 of the Act, we are of the view that if any opinion is expressed at the time of grant of certificate it is tentative or provisional or interim in nature and the same would not debar the assessing officer from initiating a proceeding under Section 147 of the Act on the ground that there has been a change of opinion…

The overall decision was in favour of the assessee , however on point of the issue whether reassessment proceeding u/s 147 possible in a case of section 172, assessee lost.