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*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
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