Revision not justified only because A.O .has taken a view ..

FACTS An issue came up for consideration in the assessment year 1994-95 as to whether the vessel called a Deep Sea Matdrill purchased by the assessee-company was a ship or not since it claimed depreciation thereon. In the assessment order passed for that year, the Assessing Officer, after discussing the matter with the assessee, held that the vessel in question was a ship; that it was actually a barge with a drilling rig installed on it which was mobile and could be used for offshore drilling; and that therefore, the assessee was entitled to claim a deduction under section 33AC. For the subsequent assessment years in question, the assessee filed its returns which were accepted but the same were subsequently reopened on the ground that the assessee had wrongly claimed a deduction under section 80-IA(3). In response to the notice issued under section 148, the assessee explained that the said vessel was never used in the Indian territorial waters prior to its acquisition so the deduction claimed under section 80-IA(3) could not be denied to it. The Assessing Officer accepting the assessee’s said claim passed a re-assessment order, which according to the Commissioner of Income-tax, was prejudicial to the interest of the revenue. Consequently, he rejected the assessee’s said contention and passed orders under section 263. On appeal, the Tribunal set aside the impugned orders. Before the High Court, the revenue contended, inter alia, that there was no application of mind by the Assessing Officer to the fact that the ship was or was not used in the Indian territorial waters prior to its acquisition by the assessee and that as per the decision of the High Court in Gee Vee Enterprises v. Asstt. CIT [1975] 99 ITR 375 it is the duty of the Assessing Officer, to ascertion the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry, if no such enquiry is made, then the order passed by the Assessing Officer can be said to be erroneous. HELD It did appear quite clearly that the drilling rig was placed on a vessel described as a barge, which could be moved out from place to place for offshore drilling. The Tribunal considered that aspect of the matter and came to the conclusion that the ‘Deep Sea Matdrill’ was nothing but a ship. It is a barge, which can be moved from place to place like any other ship. When the drilling rig is in use, then apparently to save some expenses the ship’s propeller is removed; but whenever it is required to be shifted, the propeller is refixed and the ship is made mobile. On merits, therefore the claim made by the assessee in respect of section 33AC was quite justified. [Para 14] Even if the revenue was right in contending that the ‘Deep Sea Matdrill’ was not a ship exercise of power under section 263 by the Commissioner would not be justified only because the Assessing Officer has taken a view in favour of the assessee. The law requires the view to be erroneous also - and that had not been substantiated by the revenue. [Para 16] Insofar as the issue relating to section 80-IA(3) was concerned, which was to the effect whether the ‘Deep Sea Matdrill’ was used in the Indian territorial waters before its acquisition by the assessee, the same was essentially a question of fact. That apart, it was found that under section 148 the Assessing Officer had specifically mentioned in the reasons recorded that he was prima facie of the view that the vessel had been used in the Indian territorial waters prior to its acquisition by the assessee. A response was given by the assessee to the notice in which it was categorically mentioned that the ship was never used in India so deduction under section 80-IA(3) could not be denied to the assessee. [Para 17] The Assessing Officer in the reassessment order did not deal with the issue apparently because he was satisfied with the explanation given by the assessee. [Para 18] It was found from the facts of the instant case that the Assessing Officer had specifically raised the issue of the applicability of section 80-IA(3) in the notice given by him under section 148 and that issue was responded to by the assessee. It did appear that the Assessing Officer did not conduct any further inquiry apparently because he was satisfied with the explanation given. One cannot understand the decision of the High Court in ‘Gee Vee Enterprises’ case (supra) to mean that even when the Assessing Officer is satisfied with the explanation given by the assessee, he must make a further investigation so as to unearth something against the assessee. [Para 20] That apart, the Tribunal had noted that there was no material at all before the Commissioner to take a different view of the matter particularly since the Assessing Officer had dropped the objection. It is true that if there was material before the Commissioner to have the issue reconsidered, he could have done so but it was noted by the Tribunal that there was no material before the Commissioner to contradict the view taken by the Assessing Officer. No such material had been shown to the High Court also. [Para 21] Consequently, the Tribunal had not erred in interpreting section 80-IA(3) in favour of the assessee. [Para 22] A bare reading of section 80-IA(4) shows that what was required to be determined was essentially factual and there was no legal issue which was involved, much less a substantial question of law. [Para 24] The same issue was raised by the Assessing Officer during the course of reassessment proceedings and it was replied to by the assessee. The Assessing Officer was satisfied with the explanation and did not raise any further questions. [Para 25] In all the issues that had been urged by the Revenue, no substantial question of law would arise. [Para 28] The appeal was to be dismissed. [Para 29]