COMMISSIONER OF INCOME TAX Vs. NIPPON YUSEN KAISHA

JUDGEMENT

(1.) At the instance of the Commissioner of Income-tax, West Bengal-II, the following question of law has been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1974-75 :

(2.) The short question which calls for determination in this case is whether the Tribunal was justified in holding that there was no information in the possession of the Inspecting Assistant Commissioner to form a reasonable belief that income had escaped assessment.

(3.) The assessee is a non-resident shipping company. The assessee-company derived income from India and abroad. Originally, the assessment was completed by applying Rule 10(ii) of the Income-tax Rules, 1962, but, subsequently, the assessment was reopened under Section 147(b) of the Act on the ground that in other non-resident shipping companies, the proviso to Section 145 was applied and 1/6th of the freight earnings in India was treated as Indian income and on that basis excess relief was given. The application of the proviso to Section 145(1) was upheld by the Commissioner of Income-tax (Appeals) but the total income was reduced from 1/9th to 1/8th of the gross freight earnings. Therefore, the Assessing Officer (in this case, the Inspecting Assistant Commissioner, performing the duties of an Income-tax Officer) was of the view that the income of the assessee was under assessed. He, consequently, determined the income at 1 /8th of the Indian freight earnings and completed the assessment.