Wp/32616/2018 Of M/S.redington India Ltd v. The Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 30.09.2019 CORAM THE HONOURNABLE MR.JUSTICE K.RAVICHANDRABAABU W.P.No.32616 of 2018and W.M.P.No.37819 of 2018 M/s.Redington India Ltd.,95, SPL Guindy House,Chennai - 600 032represented by its Vice President-TaxationMr.V.Ramesh...Petitioner The Assistant Commissioner of Income Tax,Corporate Circle - 5(1),No.121, M.G.Road,Chennai - 34. ...Respondent Writ Petition filed under Article 226 of the Constitutionof India to issue a Writ of Certiorarified Mandamus to call forthe records of the respondent and quash the impugned noticeu/s.148 of the Act in ITBA/AST/S/148/2017-18/1009578651(1) inPAN No.AABCR0347P dated 30.03.2018 for the assessment year 2011-12 and the consequential Order dated 09.10.2018 in PANNo.AABCR0347P and direct the Respondent to drop the reassessmentproceedings for the assessment year 2011-12. For Respondent : Mrs.Hema Mualikrishnan Senior Standing Counsel The present Writ Petition is filed challenging the noticeissued under Section 148 of the Income Tax Act dated 30.03.2018and the consequential order dated 09.10.2018 rejecting theobjections filed by the petitioner against the reasons forreopening the assessment. Consequently, the petitioner seeks fora direction to the respondent to drop the re-assessment proceedings. The relevant assessment year is 2011-12. 2. The case of the petitioner in short is as follows: For Respondent : Mrs.Hema Mualikrishnan Senior Standing Counsel The present Writ Petition is filed challenging the noticeissued under Section 148 of the Income Tax Act dated 30.03.2018and the consequential order dated 09.10.2018 rejecting theobjections filed by the petitioner against the reasons forreopening the assessment. Consequently, the petitioner seeks fora direction to the respondent to drop the re-assessment proceedings. The relevant assessment year is 2011-12. 2. The case of the petitioner in short is as follows: It is engaged in the business of distribution of informationtechnology products, telecom products, consumer durables andafter sales services. For the assessment year 2011-12, thepetitioner filed its return of income on 29.11.2011 and furthera revised return on 30.03.2013. The case was selected forscrutiny and notice under section 143(2) dated 12.08.2013 andnotice under section 142(1) dated 13.02.2015 were issued. Thecase was referred to Transfer Pricing Officer(TPO) under section92CA of the Act for computation of Arms Length Price in relationto international transaction. The Transfer Pricing Officerpassed an order under section 92CA(3) dated 28.01.2015suggesting an upward adjustment. The petitioner, through theirletter dated 19.03.2015, informed its proposal to fileobjections with the Dispute Resolution Panel(DRP). Therespondent passed the draft Assessment Order dated 23.03.2015under Section 143(3) read with Section 92CA read with Section144C(1), determining the assessed income by adding theadjustments as suggested by Transfer Pricing Officer and makingdisallowance under section 14A. As against the addition anddisallowance made in the draft assessment order, the petitionerfiled their objections before the Dispute Resolution Panel. Byorder dated 22.12.2015, the Dispute Resolution Panel directedthe Transfer Pricing Officer to delete the upward adjustmentin respect of old corporate guarantee and rejected theobjections raised by the petitioner in relation to freshcorporate guarantee. The Dispute Resolution Panel sustained thedownward adjustment with regard to trade mark fees and thedisallowance made under section 14A. Consequently, therespondent passed a final assessment order under section 143(3)read with 92CA r/w section 144C(1) on 05.02.2016 determining thetotal income. Challenging the said final assessment order, thepetitioner filed an appeal before the Income Tax AppellateTribunal. The Tribunal, by its order dated 18.10.2016, deletedthe adjustment made towards Corporate Guarantee and Trademarklicense fee and remanded back the issue to consider Section14A disallowance. The respondent passed the giving effect orderdated 29.03.2017 allowing the above section 14A disallowance.The survey under section 133A of the Act was conducted on 12thand 13th December 2017 in the premises of the petitioner. Therespondent sought to reopen the assessment under section 147,by issuing notice under section 148 dated 30.03.2018. Thepetitioner filed their reply dated 03.05.2018 informing that thetime limit for issuing notice for re-assessment would expire on31.03.2018, whereas the notice under section 148 was issued on02.04.2018 and the same was received by the petitioner on 03.04.2018. The respondent vide letter dated 19.07.2018furnished the reasons for reopening the assessment. Thepetitioner, through letter dated 14.09.2018, submitted theirobjections against the reasons for reopening. The respondent,however, passed the order on 09.10.2018 rejecting theobjections, which is non-speaking. 3. The respondent filed a counter affidavit wherein it isstated as follows: 03.04.2018. The respondent vide letter dated 19.07.2018furnished the reasons for reopening the assessment. Thepetitioner, through letter dated 14.09.2018, submitted theirobjections against the reasons for reopening. The respondent,however, passed the order on 09.10.2018 rejecting theobjections, which is non-speaking. 3. The respondent filed a counter affidavit wherein it isstated as follows: It is wrong to state that notice under Section 148 wasissued on 02.04.2018. On the other hand, it was issued on30.03.2018, also by e-mail on the very same day. Therefore, thenotice was issued within the period of limitation. The reasonswere furnished to the petitioner and their objections were alsodisposed of by the respondent on 09.10.2018. Therefore, themandate of the Hon'ble Supreme Court stipulated in GKNDriveshafts India Pvt.Ltd. case (259 ITR 19 (SC)) has beencomplied with. 4. Learned counsel for the petitioner contended that theimpugned reopening is hopelessly barred by limitation as thesame was issued not only beyond the period of four years butalso beyond the period of six years. He further contended thatthe reply/objections filed by the petitioner to the reasons forreopening were not considered by passing a speaking order.Therefore, he submitted that the respondent has failed to followthe procedure laid down by the Supreme court in GKN DriveshaftsIndia Pvt.Ltd. case. 5. On the other hand, the learned Senior Standing Counselfor the respondent submitted that the objections filed by thepetitioner against the reasons for reopening were considered andthus, the impugned order dated 09.10.2018 rejecting thoseobjections was passed. She further submitted that though it isnot stated in so many words, the respondent has stated that thebusiness activities are carried out in India by Redington IndiaP.Ltd. employees on behalf of RDPL, Singapore and that the RDPLhas earned profits from India and such conclusion was arrived atbased on information and analysis of financial RDPL, Singapore. 6. Heard both sides. Perused the materials placed beforethis Court. 7. The impugned proceedings is for reopening the assessmentfor the relevant assessment year 2011-12. A notice dated30.03.2018 was issued to the petitioner under section 148 of theIncome Tax Act, 1961. Further, the reasons for reopening the assessment were furnished through proceedings dated 19.07.2018,which only reads as follows: "As the assessee failed to furnish the true andcorrect details of income and expenditure incurred Ihave reasons to believe that income chargeable to taxhas escaped assessment" 8. It is seen that on receipt of such reasons, thepetitioner has filed their objections in detail on 14.09.2018.The said reasons were rejected/ disposed of on 09.10.2018 bypassing the following order. "The notice for reopening the assessment wasdispatched by e-mail on 30.03.2018 and by speed poston 31.03.2018. Further, based on information and analysis offinancials of RDPL Singapore, the RDPL has earnedprofits from India and business activities are carriedout in India by Redington India employees on behalf ofRDPL." 9. A bare perusal of the above proceedings would undoubtedlyindicate that the respondent, while rejecting the objectionsraised by the petitioner, has not passed a speaking order and onthe other hand, rejected the same with a single line observationas discussed supra. 10. In my considered view, such order of rejection of theobjections is not in conformity with the law laid down by theApex Court in GKN Driveshafts India Pvt.Ltd. case reported in259 ITR 19 (SC) wherein it is observed as follows: Further, based on information and analysis offinancials of RDPL Singapore, the RDPL has earnedprofits from India and business activities are carriedout in India by Redington India employees on behalf ofRDPL." 9. A bare perusal of the above proceedings would undoubtedlyindicate that the respondent, while rejecting the objectionsraised by the petitioner, has not passed a speaking order and onthe other hand, rejected the same with a single line observationas discussed supra. 10. In my considered view, such order of rejection of theobjections is not in conformity with the law laid down by theApex Court in GKN Driveshafts India Pvt.Ltd. case reported in259 ITR 19 (SC) wherein it is observed as follows: The assessing officer is bound to furnish reasonswithin a reasonable time. On receipt of reasons, thenoticee is entitled to file objections to issuance ofnotice and the assessing officer is bound to disposeof the same by passing a speaking order. In theinstant case, as the reasons have been disclosed inthese proceedings, the assessing officer has todispose of the objections, if filed, by passing aspeaking order, before proceeding with the assessmentin respect of the abovesaid five assessment years. 11. Considering the fact that the order dated 09.10.2018rejecting the objections is not a speaking order, this Court isinclined to remit the matter back to the respondent for passinga speaking order, however, by not expressing any view on themerits of the claim made by the respective parties including thelimitation issue. 12. Accordingly, this Writ Petition is allowed in part andthe impugned order dated 09.10.2018 alone is set aside and thematter is remitted back to the Assessing Officer to pass aspeaking order on the objections filed by the petitioner againstthe reasons for reopening. Such order shall be passed within aperiod of three weeks from the date of receipt of a copy of thisorder. Since this Writ Petition is allowed in part only for thepurpose of remitting the matter back to the Assessing Officer topass a specking order as stated supra, all other questionsraised in this writ petition by the petitioner including thelimitation are left open to be agitated at appropriate stage,if it is so warranted. No costs. Consequently, connectedmiscellaneous petition is closed. vsi ToThe Assistant Commissioner of Income Tax,Corporate Circle - 5(1),No.121, M.G.Road,Chennai - 34. +1 cc to Mrs.Hema Muralikrishnan Advocate sr83479 +1 cc to Mr.Subbaraya Diyar Padmanabhan Advocate sr83468 W.P.No.32616 of 2018 pp(co)aa01/11/2019