Delhi H.C : Where Assessing Officer issued on assessee a notice under section 148 seeking to reopen assessment and assessee directly filed writ petition against issue of notice, assessee was directed to file objections before Assessing Officer and in case objections were rejected, it would be open to it to approach High Court

High Court Of Delhi

Samsung India Electronics (P.) Ltd. VS. DCIT, Circle – 7(I)

Assessment Year : 2006-07

Section : 147, 148

Sanjiv Khanna And Sanjeev Sachdeva, Jj.

Writ Petition (Civil) No. 2892 Of 2013

November 8, 2013

JUDGMENT

Sanjiv Khanna, J. – The present writ petition impugns re-assessment notice under Section 148 of the Income Tax Act, 1961 (Act, for short) dated 30th March, 2013 relating to Assessment Year 2006-07. The petitioner after receipt of the said notice filed the present writ petition on 2nd May, 2013. Reasons to believe were supplied on 8th April, 2013 and have been enclosed as Annexure P-16 to the present writ petition.

2. In GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963 the Supreme Court after referring to the decision of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), had laid down the following procedure:—

“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years.”

3. In the present case, the petitioner has not filed objections before the Assessing Officer and has directly approached the court by way of the present writ petition. Learned counsel for the petitioner submits that they are justified in approaching the Court directly as the re-assessment proceedings ex facie are unjustified and illegal. He relies upon the decision of the Delhi High Court in Techspan India (P.) Ltd. v. ITO [2006] 283 ITR 212/[2007] 158 Taxman 182 wherein reference was made to the decision of the Gujarat High Court in Garden Finance Ltd. v. Asstt. CIT [2004] 268 ITR 48/137 Taxman 49 (Guj.) and in the judgment of Badar Durrez Ahmed, J. it has been observed as under:—

“May be in a given case, the exercise of the powers under Section 148 may be so arbitrary or mala fide that the court may entertain the petition without requiring the assessee to approach the Assessing Officer but such cases would be few and far between….”

4. It is highlighted that in the present case the Korean Company, namely, Samsung Electronics Company Limited, South Korea was subjected to regular assessment proceedings by issue of notice and assessment order dated 18th October, 2012 stands passed. The said order, it is submitted, is pursuant to directions under Section 144C(5) made by the Dispute Resolution Panel. It is highlighted that after examining the merits it has been held that remuneration cost of expatriate employees of Rs.10,72,24,310/- should be taken as the base and mark up of 10% be applied on it and, therefore, addition of Rs.1,07,22,431/- was made and treated as business income. No other addition was directed or was made. It is submitted that the “reasons to believe” do not meet legal and statutory parameters.

5. Learned counsel for the respondents, on the other hand, has drawn our attention to the following portion of the directions issued under Section 144C(5) of the Act:—

“The above submissions have been considered by this Panel. We have not accepted any of the propositions made by the A.O. regarding holding SIEL as the P.E of the assessee, except for ‘fixed place P.E’ proposed in the original order. The reasons for treating SIEL as a deemed fixed place P.E of SEC have been mentioned earlier. It had nothing to do with provision of royalty and fees for technical services. There is nothing on record and the A.O. too has not brought any material on record on the basis of which it could be said that the royalty/fees for technical services rendered by the assessee from Korea are ‘effectively connected with the P.E.’. Therefore, this proposition deserves to be rejected.

5.4.4.8 Attribution of Income: As mentioned earlier, this Panel has not agreed with any of the propositions made by the A.O. in his remand report about treating SIEL as the PE of SEC. We have however upheld the proposal in the draft order to treat SIEL as a deemed P.E of SEC. In view of this the various proposals made by the A.O to attribute the profits based on various parameters do not need to be considered by us. As regards the attribution of income to the ‘fixed place of P.E’ it may be recalled that a rough and ready function analysis that is possible given the facts of the case and the lack of time available, (considering that the directions are to be issued by us by 30.9.2012) was performed by us and the attribution made by the A.O. was confirmed (para 5.4.3 above). In view of this position, this issue does not need to be examined further.

With the above directions, the objections made by the assessee to the draft order are treated as disposed. The A.O. is directed to complete the assessment keeping in view the above directions.”

6. Having considered the contentions, we feel that it will not be appropriate and proper in the facts of the present case to permit and allow the petitioner to bypass and forgo the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. (supra). We observe that the said procedure has been almost universally followed and has helped cut down litigation and crystallise the issues, if and when the question comes up before the Court. In Techspan India (P.) Ltd. (supra) also the assessee had followed the said procedure and had filed objections before the Assessing Officer. Thereafter, the petitioner therein had approached the Court by way of a writ petition challenging the re-assessment proceedings. We do not think the present case, occasions or requires a different treatment from the procedure followed in other cases in which re-assessment proceedings were/are initiated. Petitioner submits and contends that the jurisdictional pre-conditions for initiation of re-assessment proceedings are absent or missing. This question/ issue invariably arises in all writ petitions challenging re-assessment action. In Techspan India (P.) Ltd. (supra), T.S. Thakur, J. (as his Lordship then was) had given concurrent reasons and made observations when a writ court should interfere. However, we need not go into the said question and controversy in the present case.

7. In order to protect the interest of the petitioner, as some apprehension has been expressed that the Assessing Officer may directly pass the re-assessment order, we are inclined to pass directions. It is directed that the petitioner will file objections before the Assessing Officer within a period of two weeks from today. The petitioner through their authorised representative will appear before the Assessing Officer on 28th November, 2013, when a date of hearing will be fixed for addressing arguments on the said objections. The Assessing Officer will first dispose of the objections by a speaking order meeting the contentions and issues raised by the petitioner. In case the objections are rejected, the Assessing Officer will give at least three weeks’ time to the petitioner to approach the court before taking up the re-assessment proceedings on merits. The aforesaid directions will protect the interest of the petitioner and in case the objections are rejected, it will be open to them to approach the court and raise all contentions and issues, including the contentions and issues raised in the present writ petition. We have deliberately only referred to the contentions of the counsel for the parties and not expressed our opinion on any contention raised to avoid prejudice to any party as an order of remit is being passed.

8. With the aforesaid observations, the writ petition is disposed of without any order as to costs.

[Citation : 362 ITR 460]