Directi Services Pvt Ltd v. Bharucha For

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO. 1439 OF 2021 Directi Services Pvt Ltd. ….Petitioner V/s.The Assistant Commissioner of IncomeTax, International Tax, Circle-2(1)(2) Mumbai…Respondent ---- Mr. Jehangir D. Mistri, Senior Advocate i/b Mr. Atul K. Jasani for PetitionerMs Shehnaz V. Bharucha for Respondent ---- CORAM : K.R. SHRIRAM &AMIT B. BORKAR, JJ DATED : 25[th] OCTOBER 2021 P.C. : 1Petitioner is impugning an order dated 30[th] March 2021 passed underSection 201(1) and 201(1A) of the Income Tax Act, 1961 (the said Act) forA.Y.-2016-2017 on various grounds including that the order is contrary tothe principles of natural justice, beyond period of limitation, it is arbitraryand unreasonable etc. 2Petitioner is wholly owned subsidiary of one Endurance InternationalGroup (India) pvt Ltd. which in turn is a subsidiary of Endurance Singapore Holdings 2 Pte Ltd. Petitioner carries on business as a collection agent inrespect of monies receivable from Indian customers by its AssociatedEnterprise – PDR Solutions FZC, UAE registered entity. 3Respondent No.1 who is also the TDS Officer of Petitioner passed theimpugned order dated 30[th] March 2021 holding petitioner to be an assessee-in-default for deduction of tax under the provisions of the Act, on payments made by petitioner to PDR Solutions. We do not have to go into furtherdetails which petitioner has narrated in the petition but can fast forwardstraight to notice dated 11[th] February 2021 issued by respondents topetitioner under Section 133(6) of the Act, verification of details furnishedin form No.15CA in view of non deduction / lower deduction of tax atsource . This is followed by notices dated 18[th] February 2021, 4[th] March2021, 9[th] March 2021 and 16[th] March 2021 under Section 201 of the Act.Petitioner replied to these show cause notices by its letters dated 22[nd]February 2021, 10[th] March 2021, 18[th] March 2021 and a comprehensivereply dated 26[th] March 2021. 4Respondent no.1 passed order dated 30[th] March 2021 under Section201(1) and 201(1A) read with Section 195 of the Act holding petitionerliable to pay a sum of Rs.5,24,92,294/- under Section 201(1) of the Act andsum of Rs.3,24,47,398/- under Section 201(1A) of the Act and made a totaldemand of Rs.8,45,12,593/-. The notice of demand under Section 156 forRs.8,49,39,692/- was also made on account of default in not deducting thetax as shown under Section 195 of the Act on the sums credited. 5In the impugned order, respondents have referred to the five noticesissued namely; notice dated 11[th] February 2021, 18[th] February 2021, 4[th]Mrach 2021, 9[th] March 2021 and 16[th] March 2021. There is also referencein the impugned order to reply dated 22[nd] February 2021 and 18[th] March2021. The impugned order, however, is totally silent about the reply dated10[th] March 2021 and the comprehensive reply dated 26[th] March 2021. Not 5In the impugned order, respondents have referred to the five noticesissued namely; notice dated 11[th] February 2021, 18[th] February 2021, 4[th]Mrach 2021, 9[th] March 2021 and 16[th] March 2021. There is also referencein the impugned order to reply dated 22[nd] February 2021 and 18[th] March2021. The impugned order, however, is totally silent about the reply dated10[th] March 2021 and the comprehensive reply dated 26[th] March 2021. Not only respondent no.1 has failed to deal with these replies in the impugnedorder there is not even a reference to the said replies. Moreover, in theimpugned order, respondent no.1 states that petitioner is not anindependent person and its activities are devoted wholly on behalf of PDRand thus a dependent agent within the meaning of Article 5(4) of the DTAAbetween India and UAE. In the show cause notice issued, petitioner has notbeen called upon to show cause as to why petitioner should not be held asthe dependent agent within the meaning of Article 5(4) of Indo-UAE DTAA. 6Ms Bharucha submitted that the agreement between PDR SolutionsUAE and petitioner are both signed by the same person and, therefore, areone and the same and both are related and Associated Enterprises. MsBharucha submitted that the role of petitioner is not only restricted tocollection and payment but it is a group company floated by Singaporebased company and solely dedicated for the work assigned by the PDRsolutions. In our view, these are going into the merits of the matters butdoes not answer the moot point as to why all the replies given by petitionerto show cause notices issued have not been considered and dealt with in theimpugned order. Ms Bharucha also referred to the affidavit in reply andsubmitted that petitioner was dependent PE for PDR Solutions UAE and thusthere was dependent PE in India and remittance of tax in India as businessincome. To a query posed by the court, Ms Bharucha in fairness stated thatthe show cause notice does not refer to this issue and petitioner has notbeen called upon to show cause why it should not be held that petitioner was dependent PE for PDR Solutions UAE etc. 7 Issuance of a show cause notice is the preliminary step which isrequired to be undertaken. The purpose of show cause notice is to enable aparty to effectively deal with the case made out by respondents (Om ShriJigar Association Vs Union of India11) Jigar Association Vs Union of India11 8In the circumstances, without making any observations on the meritsof the case, we are quashing the impugned order dated 30[th] March 2021 andany consequential demand notice issued therein and remand the matter torespondent no.1 to pass fresh orders after hearing petitioner. If respondentno.1 feels need to add any further points in the show cause notice,respondent no.1 shall issue fresh show cause notice to petitioner andpetitioner may respond to the said show cause notice. We keep open allrights and contentions of the parties including petitioner’s right to raise theissue of limitation. 8Since we have quashed the impugned order, Mr. Mistry undertakes towithdraw the appeal filed by petitioner within two weeks from today.Statement accepted. (AMIT B. BORKAR, J) (K.R. SHRIRAM, J.)