1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 14TH DAY OF FEBRUARY, 2019 BEFORE HON'BLE MRS. JUSTICE S.SUJATHA WRIT PETITION NO.3533 OF 2019 (T-IT) Between: Mphasis Ltd. Bagamane World Technology Centre, WTC-3, 1st Floor, K.R. Puram, Marathahalli Outer Ring Road, Doddanekundi, Bengaluru 560 048. Represented by its Executive Vice President & CFO Mr. Venkatasubramnian Suryanarayanan, Aged about 59 years. Petitioner (By Sri. T. Suryanarayana, Advocate) And: 1. Assistant Commissioner of Income-Tax, Circle-4(1)(2) Room No.230, 2nd Floor, BMTC Depot Building, 80 Feet Road, Koramangala, Bengaluru 560 095. 2. Joint Commissioner of Income Tax Special Range-4, Room No.245, 2nd Floor, BMTC Depot Building, 80 Feet Road, Koramangala, Bengaluru 560 095. 3. Principal Commissioner of Income-tax -4 BMTC Building, 2 Koramangala 6th Block, Bengaluru 560 085. Respondents (By Sri. E.I. Sanmathi, Advocate) This Writ petition is filed under Article 226 of Constitution of India praying to declare that impugned proceedings initiated by respondent No.1 under Section 147 read with Section 148 of Act barred by limitation and opposed to said provisions and therefore without jurisdiction and etc., This Writ Petition coming on for Preliminary Hearing this day, Court made following: ORDER petitioner has challenged proceedings initiated by respondent No.1 under Section 147 read with Section 148 of Income Tax Act, 1961 ( Act for short) inter alia challenging re- assessment order dated 28.12.2018 at Annexure-F relating to Assessment Year 2011-2012 and demand notice dated 28.12.2018 at Annexure-G issued by respondent No.2 under Section 156 of Act. 2. petitioner during course of its business made certain payments in nature of sub-contracting charges and sales commission to its 3 associated enterprises situated outside India for services rendered by said associated enterprises in nature of on-site development of software and marketing/sales services. order came to be passed by Additional Commissioner of International Taxation, Range-19 under Section 195(2) of Act approving remittance of payments in nature of sub-contracting by petitioner to its associated enterprises outside India without deducting tax at source in terms of Section 195 of Act, which was till 30.09.2004. Assessing Officer passed order under Section 201 (1) of Act treating petitioner to be assessee-in-default for non- deduction of tax at source under Section 195 of Act in respect of above payments on basis that they were taxable in India and levied consequential interest under Section 201(1A) of Act. return of income filed by Assessee for assessment year 2011-2012 was taken up for assessment under Section 143(3) of Act and 4 reference was made to Transfer Pricing Officer (TPO) for determination of Arm s Length Price. Respondent No.1 passed order under Section 143(3) of Act on 29.05.2015 subsequent to order passed by TPO under Section 92CA (3) of Act. 3. Respondent No.1 issued notice dated 23.03.2018 under Section 148 of Act proposing to re-assess petitioner for assessment year 2011-2012. Thereafter, petitioner filed letter in response to notice issued under Section 148 of Act requesting respondent No.1 to treat return of income filed on 29.03.2013 as return of income filed in response to notice and called upon officer to furnish copy of reasons recorded for re-opening assessment for assessment year 2011-12 and sanction accorded in terms of Section 151 of Act. Respondent No.2 vide letter dated 28.09.2018 furnished summary of reasons recorded for re-opening of assessment 5 for Assessment Year 2011-12, together with copy of sanction accorded by Principal Commissioner of Income Tax, Bengaluru 4. petitioner filed its objections inter alia challenging action of respondent Nos.1 and 2 in invoking provisions of Section 147 on ground that such proceedings are without jurisdiction and barred by limitation. Respondent No.2 has passed re- assessment order under Section 143(3) read with Section 147 of Act negating all objections raised by petitioner as to limitation, jurisdiction and recomputing total income of petitioner. Aggrieved by same, this petition is filed by assessee. 4. Heard learned counsel Sri.T.Suryanarayana, for petitioner as well as learned counsel Sri. E.I. Sanmathi, for respondents. 5. arguments of learned counsel for petitioner are: firstly, re-assessment order 6 impugned herein is passed without jurisdiction and it is barred by limitation and secondly, that objections filed pursuant to notice issued under Section 148 of Act has not been considered and disposed of by Assessing officer prior to passing of re-assessment order. 6. Learned counsel placing reliance on Division Bench judgment of this Court in case of Deepak Extrusions (P.) Ltd., Vs. Deputy Commissioner of Income Tax, Central Circle 1(4), Bengaluru reported in (2017) 80 taxmann.com 77 (Karnataka) would submit that law is well settled that if assessee desires to seek reasons for issuing notice, Assessing Officer is bound to furnish reasons and upon receipt of such reasons, assessee is entitled to file objections to issuing of notice and Assessing Officer thereafter is bound to dispose of same by passing speaking order. In instant case, re-assessment order passed by 7 Assessing Officer without passing speaking order on objections filed by assessee is unjustifiable and cannot stand test of well settled law as aforesaid. 7. Learned counsel for Revenue- respondents inviting attention of Court to letter dated 28.09.2018 at Annexure-D to writ petition would submit that primary objections filed by assessee as per letter dated 20.12.2018 has been considered by Assessing Officer and same is reflected in said letter, which requires to be considered by this Court. objections filed by assessee being disposed of by Assessing Officer prior to passing of re- assessment order, subsequent objections filed by petitioner to main, same was considered while drawing assessment order. Hence, no interference is called for by this Court and re- assessment order requires to be confirmed dismissing writ petition. 8 8. I have given my careful consideration to arguments advanced by learned counsel for parties and perused material on record. petitioner by letter dated 10.04.2018 requested Assessing Officer to disclose reason for invoking provisions of Section 147 read with Section 148 of Act by issuing notice. letter dated 28.09.2018 of Assessing Officer (Annexure- D) refers to letter dated 10.04.2018 and it is apt to quote relevant paragraph of said letter which reads thus:- case has thus been picked up for reopening on account of non-deduction of TDS on payments made on account of Software development services and marketing services as laid above, with due approval of competent authority, copy of which is enclosed herewith. reply to query raised in letter under reference thereby stands disposed from our end. aforesaid letter indicates that Assessing Officer has considered query raised in letter dated 10.04.2018 and same was disposed of. But, by no stretch of imagination it can be held to be 9 speaking order passed by Assessing Officer considering objections raised by assessee. Indeed it was request made by assessee to furnish reasons recorded for initiating proceedings under Section 147 read with Section 148 of Act. objections raised by petitioner on 20.12.2018 to summary of reasons recorded provided by Assessing Officer has not been disposed of by speaking order. However, Assessing Officer proceeded to pass re- assessment order impugned herein, which clearly demonstrates that mandatory requirement of disposing of objections by Assessing Officer has not been complied with and on this ground alone, order impugned deserves to be set aside. 9. This view is fortified by division bench judgment of this Court in Deepak Extrusions (P.) Ltd., s case (supra), wherein this Hon ble Court has observed thus:- 10 11. If facts of present case are examined in light of aforesaid legal position, it is admitted position that reasons for re-opening of assessment by issuing of notice under Section 148 of Act were supplied to appellant assessee. It is also admitted position that appellant assessee after receipt of such reasons raised objections. It is also undisputed position that Assessing Officer did not dispose of objections prior to proceeding with assessment further and proceeded to pass order for assessment. Under circumstances, it cant be said that mandatory procedure of disposal of objection by Assessing Officer before proceeding with assessment has not been followed and exercise of power can be said as not only vitiated, but order of assessment cannot be sustained. 12. If decision of Assessing Officer is illegal on face of it, in our view, it would fall in exceptional category of making departure from normal principles of self impose limitation of not to interfere in matter where there is existence of alternative statutory remedy. 10. aforesaid judgment has been followed by this Court in M/s. Wartyhully Estates Limited Vs. Income Tax Officer and another (W.P. No.4679/2018) and in M/s. Mindtree Limited Vs. Assistant Commissioner of Income Tax (W.P. 11 No.63236/2016) wherein re-assessment order passed by Assessing Officer as well as demand notice have been set aside. 11. In view of aforesaid, writ petition stands allowed. assessment order at Annexure-F dated 28.12.2018 and demand notice at Annexure-G dated 28.12.2018 are quashed. However, Assessing Officer shall be at liberty to proceed with matter in accordance with law. All rights and contentions of parties are left open. Sd/- JUDGE MBM Mphasis Ltd. v. Assistant Commissioner of Income-tax, Circle-4(1)(2), Bengaluru / Joint Commissioner of Income-tax, Special Range-4, Bengaluru / Principal Commissioner of Income-tax-4, Bengaluru