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SAMSUNG INDIA ELECTRONICS PVT LTD. Vs. DY. COMMISSIONER OF INCOME-TAX, CIRCLE-7 (I) & ORS
January, 10th 2014
$~4.
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+                WRIT PETITON (CIVIL) NO.2892/2013
                                   Date of decision: 8th November, 2013
        SAMSUNG INDIA ELECTRONICS PVT LTD.
                                                          ..... Petitioner
                          Through Mr. S.C. Dastur, Sr. Advocate with
                          Mr. Satyen Sethi, Mr. Madhu Agarwal & Mr.
                          Arta Trana Panda, Advocates.

                          versus

        DY. COMMISSIONER OF INCOME-TAX, CIRCLE-7 (I) &
        ORS.
                                          ..... Respondents
                          Through Mr. Amol Sinha, Sr. Standing
                          Counsel & Mr. Rahul Kochar, Advocate for
                          respondent Nos. 1 to 3.
                          Mr. Aditya Malhotra, Advocate for
                          respondent No. 4-UOI.
        CORAM:
        HON'BLE MR. JUSTICE SANJIV KHANNA
        HON'BLE MR. JUSTICE SANJEEV SACHDEVA

 SANJIV KHANNA, J. (ORAL):

        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 2 nd

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) Limited versus ITO, (2003) 259

W.P. (C) No. 2892/2013                                           Page 1 of 6
ITR 19 the Supreme Court after referring to the decision of the

Supreme Court in Calcutta Discount Company Limited versus ITO,

(1961) 41 ITR191 (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 Privaate

Limited and Another versus Income Tax Officer, (2006) 283 ITR 212

(Delhi) wherein reference was made to the decision of the Gujarat

High      Court          in   Garden   Finance   Limited   versus   Assistant

Commissioner of Income Tax, (2004) 268 ITR 48 (Guj.) and in the

judgment of Badar Durrez Ahmed, J. it has been observed as under:-

W.P. (C) No. 2892/2013                                                Page 2 of 6
          "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

W.P. (C) No. 2892/2013                                              Page 3 of 6
              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) Limited (supra).                      We

observe that the said procedure has been almost universally followed


W.P. (C) No. 2892/2013                                                  Page 4 of 6
and has helped cut down litigation and crystallise the issues, if and

when the question comes up before the Court. In Techspan India

Privaate Limited (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 Privaate

Limited (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

W.P. (C) No. 2892/2013                                             Page 5 of 6
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.

        DASTI.


                                       SANJIV KHANNA, J.



                                       SANJEEV SACHDEVA, J.
        NOVEMBER 08, 2013
        VKR


W.P. (C) No. 2892/2013                                           Page 6 of 6

 
 
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