Wp/43994/2019 Of Essilor India Private Limited v. The Assistant Commissioner Of Income Tax

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THR 12 DAY OF NOVEMBER, 2019. BEFORE: THR HON’BLE MRS. JUSTICK S.SUJATHA WRIT PETITION No.43994/2019 (T IT) BETWEEN: BESSILOR INDIA PRIVATE LIMITEDPRESTIGE TRADE TOWERS, 10 FLOOR.46, PALACE ROAD, HIGH GROUNDSSAMPANGIRAMNAGAR, BENGALURU-S60001RBP. HBRBIN BY ITS DIRECTORRAMACHANDRAN PARTHASARATHY... PETITIONER | (BY SRI SURYANARAYANA.T., ADV.) AND: 1]THE ASSISTANT COMMISSIONEROF INCOME TAX, CIRCLE 2]/1]/2]ROOM No.218, Il FLOOR, BMTC BUILDING80 FEET ROAD, KORAMANGALA 6[‘L]BLOC KBANGALORE -560095.OF INCOME TAX, CIRCLE 2]/1]/2]ROOM No.218, Il FLOOR, BMTC BUILDING80 FEET ROAD, KORAMANGALA 6[‘L]BLOC KBANGALORE -560095. «|THE ASSISTANT COMMISSIONEROF INCOME-TAX, -1]1] 1}2] AND 1/3], ROOM No.3409, HI FLOOR|BMTC BUILDING, 380 FEET ROADKORAMANGALA 6 BLOCKBANGALORE-560095.OF INCOME-TAX, -1]1] 1}2] AND 1/3], ROOM No.3409, HI FLOOR|BMTC BUILDING, 380 FEET ROADKORAMANGALA 6 BLOCKBANGALORE-560095. 3.)THE COMMISSIONBR OF INCOME TAX - IIBMTC BUILDING, 80 FEET ROADKORAMANGALA 6 BLOCKBANGALORE -560095.~ RESPONDENTSBMTC BUILDING, 80 FEET ROADKORAMANGALA 6 BLOCKBANGALORE -560095.~ RESPONDENTS (BY SRI JEEVAN J. NEERALGI, ADV. A/WORI T.N.C. SRIDHAR, ADV.) -9.- THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND22/ OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THENOTICK DATED 18.09.2017 VIDE ANNEXURE-A ISSUED BY THE!RESPONDENT No.1 UNDEBR SBCTION 148 RBEAD WITH SBCTIO147 OF THE ACT FOR THE ASSESSMENT YEAR 2015-16. QUASHTHERE NOTICKHK DATED 23.10.2018 VIDE ANNEXURE-E ISSUEDTHE RESPONDENT No.2 UNDER SECTION 92CA OF THE ACT;|AND ETC., THIS PETITION COMING ON FOR PRELIMINARY HEARING,THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER The petitioner has challenged the notice dated18.09.2017 issued by the respondent No.1 underSection 148 read with Section 147 of the Income Tax Act, 1961 |‘Act’ for short] relating to the assessmentyear 2015-16 as well as the notices dated 23.10.2018and 24.07.2019 issued by the respondent No.2 underSection OYCA of the Act. oD The petitioner is engaged in the business oftrading in ophthalmic lenses, optical meters andprocessing of semi-finished ophthalmic lenses. Relatingto the assessment year 2015-16, the petitioner has fileda return of income which was assessed under Section| -3- 143}/1} of the Act and thereaiter the first respondentissued notice under Section 148 of the Act seeking to re-open the assessment of the petitioner under Section 147.of the Act on the ground that certain income hasescaped assessment. The petitioner has filed reply inresponse to the aforesaid notice. On filing of such replyand on the request made by the petitioner to furnish thereasons recorded for re-opening of the assessment, thefirst respondent has furnished the reasons recorded forre-opening of the assessment. 3.|In terms of the said reasons recorded, thefirst respondent was of the opinion that the petitionerhadearnedexemptincomeCO theexten.|OT Rs.2,093,16,921/- but had not made any disallowance ofexpenses corresponding to the same. Objecting thesame, the petitioner had filed objections questioning thejurisdiction of the officer to re-open the assessmentunder Section 147 of the Act. The respondent No.1. -4- without passing order on the objections submitted bythe petitioner has made reference to the Transfer PricingOfficer to make the TP adjustment with regard toadvertising,marketingandpromotional|CXPCIISCGincurred by the petitioner. The Transfer Pricing Officerhas passed an order on the reference made. Beingaggrieved, the petitioner is before this Court. 3.|In terms of the said reasons recorded, thefirst respondent was of the opinion that the petitionerhadearnedexemptincomeCO theexten.|OT Rs.2,093,16,921/- but had not made any disallowance ofexpenses corresponding to the same. Objecting thesame, the petitioner had filed objections questioning thejurisdiction of the officer to re-open the assessmentunder Section 147 of the Act. The respondent No.1. -4- without passing order on the objections submitted bythe petitioner has made reference to the Transfer PricingOfficer to make the TP adjustment with regard toadvertising,marketingandpromotional|CXPCIISCGincurred by the petitioner. The Transfer Pricing Officerhas passed an order on the reference made. Beingaggrieved, the petitioner is before this Court. 4Learned counsel for the petitioner wouldsubmit that the preliminary objection raised by thepetitioner regarding the jurisdiction of the officer hasnot been redressed by the respondent No.1. The reasons—recorded would not disclose about the TP adjustment.The reference made to the second respondent to make aTP adjustment is wholly illegal. The consequential orderpassed by the respondent No.2 under Section 92CA|3}] ofthe Act is bad in law. 5Learned counsel for the Revenue justifyingthe impugned action of the respondent-Authorities -5- submitted that the respondent No.l indeed hasjurisdiction to re-open the assessment under Section147 of the Act and refer the matter to the Transfer|Pricing Officer. 6.||havecarefullyconsideredtherival submissions of the learned counsel appearing for theparties and perused the material on record. T |It is well settled that the respondent No.1 isrequired to adjudicate upon the preliminary objectionsraised by the petitioner inasmuch as the jurisdictionaspect is concerned, without disposing of the objectionsraised by the petitioner, no further proceedings can beinitiated by the respondent No.1. It is pertinent to notethat the action of the respondent No.1 in referring thematter to the respondent No.2 appears to be withoutapplication of mind and is premature at this stage. — -6- 8.|The reasons recorded for re-opening of theassessment under Section 147 of the Act do not indicateany escapement of income due to the wrong TPadjustment/arms length price. On the other hand, it iscontined to the disallowance under Section 14A of the!Act. The action of the respondent No.1 in referring thematter to the respondent No.2 for TP adjustment cannotbe countenanced at this stage. — OQ Hence,thenoticeimpugned=Annexures-E and K issued by the second respondentunder Section 92CA of the Act are quashed. Therespondent No.1 shall consider the objections submittedby the petitioner dated 15.10.2018 and dispose of thesame in accordance with law in an expedite manner. 10.|Any order passed by the TPO subsequent tothe reference made by the respondent No.1 shallnot be given effect to, until a decision is taken by the | �/�#�� 83:4+7>375��+���97>�:29<<�@3�:?@I3;5�5+�523�>3;6:6+7�5+� @3�59G37�67�9;;+8>97;3�B652�<9B�9:�>683;53>�238367� 9@+J3���� 865�435656+7�:597>:�>6:4+:3>�+C�67�538D:�+C�523� 9@+J3�� ���� �����������