IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF NOVEMBER, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.43994/2019 (T – IT) BETWEEN:
ESSILOR INDIA PRIVATE LIMITED PRESTIGE TRADE TOWERS, 10TH FLOOR 46, PALACE ROAD, HIGH GROUNDS SAMPANGIRAMNAGAR, BENGALURU-560001 REP. HEREIN BY ITS DIRECTOR RAMACHANDRAN PARTHASARATHY. …PETITIONER (BY SRI SURYANARAYANA.T., ADV.) AND:
1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2[1][2] ROOM No.218, II FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA 6TH BLOCK BANGALORE-560095.
2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, [TRANSFER PRICING] -1[1] 1[2] AND 1[3], ROOM No.345, III FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA 6TH BLOCK BANGALORE-560095.
3. THE COMMISSIONER OF INCOME TAX - II BMTC BUILDING, 80 FEET ROAD KORAMANGALA 6TH BLOCK BANGALORE-560095. …RESPONDENTS (BY SRI JEEVAN J. NEERALGI, ADV. A/W SRI T.N.C. SRIDHAR, ADV.) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE NOTICE DATED 18.09.2017 VIDE ANNEXURE-A ISSUED BY THE RESPONDENT No.1 UNDER SECTION 148 READ WITH SECTION 147 OF THE ACT FOR THE ASSESSMENT YEAR 2015-16. QUASH THE NOTICE DATED 23.10.2018 VIDE ANNEXURE-E ISSUED BY THE 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:-
O R D E R The petitioner has challenged the notice dated 18.09.2017 issued by the respondent No.1 under Section 148 read with Section 147 of the Income Tax Act, 1961 [‘Act’ for short] relating to the assessment year 2015-16 as well as the notices dated 23.10.2018 and 24.07.2019 issued by the respondent No.2 under Section 92CA of the Act.
2. The petitioner is engaged in the business of trading in ophthalmic lenses, optical meters and processing of semi-finished ophthalmic lenses. Relating to the assessment year 2015-16, the petitioner has filed a return of income which was assessed under Section 143[1] of the Act and thereafter the first respondent issued 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 has escaped assessment. The petitioner has filed reply in response to the aforesaid notice. On filing of such reply and on the request made by the petitioner to furnish the reasons recorded for re-opening of the assessment, the first respondent has furnished the reasons recorded for re-opening of the assessment.
3. In terms of the said reasons recorded, the first respondent was of the opinion that the petitioner had earned exempt income to the extent of Rs.2,53,16,921/- but had not made any disallowance of expenses corresponding to the same. Objecting the same, the petitioner had filed objections questioning the jurisdiction of the officer to re-open the assessment under Section 147 of the Act. The respondent No.1 without passing order on the objections submitted by the petitioner has made reference to the Transfer Pricing Officer to make the TP adjustment with regard to advertising, marketing and promotional expenses incurred by the petitioner. The Transfer Pricing Officer has passed an order on the reference made. Being aggrieved, the petitioner is before this Court.
4. Learned counsel for the petitioner would submit that the preliminary objection raised by the petitioner regarding the jurisdiction of the officer has not 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 a TP adjustment is wholly illegal. The consequential order passed by the respondent No.2 under Section 92CA[3] of the Act is bad in law.
5. Learned counsel for the Revenue justifying the impugned action of the respondent-Authorities submitted that the respondent No.1 indeed has jurisdiction to re-open the assessment under Section 147 of the Act and refer the matter to the Transfer Pricing Officer.
6. I have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
7. It is well settled that the respondent No.1 is required to adjudicate upon the preliminary objections raised by the petitioner inasmuch as the jurisdiction aspect is concerned, without disposing of the objections raised by the petitioner, no further proceedings can be initiated by the respondent No.1. It is pertinent to note that the action of the respondent No.1 in referring the matter to the respondent No.2 appears to be without application of mind and is premature at this stage.
8. The reasons recorded for re-opening of the assessment under Section 147 of the Act do not indicate any escapement of income due to the wrong TP adjustment/arms length price. On the other hand, it is confined to the disallowance under Section 14A of the Act. The action of the respondent No.1 in referring the matter to the respondent No.2 for TP adjustment cannot be countenanced at this stage.
9. Hence, the notice impugned at Annexures-E and K issued by the second respondent under Section 92CA of the Act are quashed. The respondent No.1 shall consider the objections submitted by the petitioner dated 15.10.2018 and dispose of the same in accordance with law in an expedite manner.
10. Any order passed by the TPO subsequent to the reference made by the respondent No.1 shall not be given effect to, until a decision is taken by the respondent No.1 and shall be subject to the decision to be taken in accordance with law as directed herein above.
Writ petition stands disposed of in terms of the above.
Sd/- JUDGE NC.