HC Quashes Reassessment Notice Against Chennai Container Terminal; Holds No Failure to Disclose Material Facts

The Bombay High Court set aside a reassessment notice issued under Section 148 of the Income Tax Act to Chennai Container Terminal Pvt. Ltd. for AY 2014-15, holding that the reopening was based on an incorrect interpretation of Section 80-IA and was initiated beyond four years without establishing any failure by the assessee to fully and truly disclose material facts.

The assessee, engaged in developing, operating and maintaining the container terminal at Bharathi Dock, Chennai Port, had been claiming deduction under Section 80-IA since AY 2008-09. Its return for AY 2014-15 was scrutinized under Section 143(3), and the deduction was accepted. However, in March 2021, the Assessing Officer reopened the assessment on the ground that the undertaking was allegedly owned by a Mauritius-based company and therefore did not satisfy the conditions of Section 80-IA. The Revenue also alleged that the assessee was merely operating an existing port facility and had not developed a new infrastructure facility.

The Court found both reasons unsustainable. It observed that the Revenue had wrongly equated the assessee company with the “enterprise” referred to in Section 80-IA. The relevant enterprise was the Bharathi Dock undertaking, which was owned by the assessee company registered in India.

The Court further noted that the assessee had made substantial investments in port infrastructure, including quay gantry cranes and rubber tyred gantry cranes, and that the Revenue had consistently recognized the assessee’s business as involving development of the container terminal in earlier assessments.

Importantly, the Court held that the reassessment notice was issued after expiry of four years from the end of the relevant assessment year. Therefore, reopening was permissible only if income had escaped assessment due to the assessee’s failure to disclose fully and truly all material facts. The Court found that all relevant facts, including the shareholding structure, business activities, licence agreement and Section 80-IA claim, had been disclosed in the annual reports, audit reports and income tax returns. The Revenue failed to identify any material fact that had not been disclosed.

Thus, the High Court quashed the Section 148 notice, the order rejecting objections, and the consequential show cause notice and draft assessment order.

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