ORACLE SYSTEMS CORPORATION V. DEPUTY DIRECTOR OF INCOME TAX CIRCLE 2(1), INTERNATIONAL TAXATION NEW DELHI

W.P.(C)/4729/2014

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The case involves Oracle Systems Corporation, a subsidiary of an overseas company, which faced a re-assessment notice from the Deputy Director of Income Tax, Circle 2(1), International Taxation, New Delhi, concerning the Assessment Year 2006-07. The notice was based on information suggesting that the petitioner had a dependent Permanent Establishment (PE) in India, subject to Arms Length Price (ALP) determination under Section 92CA of the Income Tax Act, 1961. The petitioner contested the re-assessment, highlighting that the issue had been previously considered and was inconclusive regarding the existence of PE. Furthermore, the petitioner pointed out the procedural flaw of the late issuance of the notice under Section 143(2), which was critical for the validity of the re-assessment proceedings.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 751664 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 23-08-2018
• Assessment Year: misc
• Other Referred Cases: Pr. Commissioner of Income Tax vs. Silver Line
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ASHEESH JAIN; SHAHRUKH EJAZ; ANIL KUMAR
• Assessee Lawyers: S SYALI; MAYANK NAGI; VIKRANT MAHESHWARI
• Keywords: Arms' length price; Income Tax; Permanent establishment; Re-assessment notice; Transfer Pricing Officer; Dispute Redressal Panel
• Section: 143(2); 92CA

Judgement Text

"$~10 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 4729/2014 & CM No.27598/2018 ORACLE SYSTEMS CORPORATION ..... Petitioner Through: Mr. S. Syali, Sr. Advocate with Mr. Mayank Nagi and Mr. Vikrant A. Maheshwari, Advocates. versus DEPUTY DIRECTOR OF INCOME TAX CIRCLE 2(1), INTERNATIONAL TAXATION NEW DELHI ..... Respondent Through: Mr. Asheesh Jain, Sr. Standing Counsel with Mr. Shahrukh Ejaz, Advocate and Mr. Anil Kumar, Inspector, Income Tax Department. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MS. JUSTICE ANU MALHOTRA O R D E R % 23.08.2018 The petitioner’s grievance is with respect to the re-assessment notice issued on 15.02.2013 for Assessment Year (A.Y.) 2006-07. The re-assessment notice was premised upon the information received by the Office of the Commissioner of Income Tax, Delhi-V through a letter dated 23.11.2012 stating that the petitioner/assessee, subsidiary of an overseas company, had a dependent Permanent Establishment (PE) in India whose activities were subject to Arms Length Price (ALP) determination under Section 92CA of the Income Tax Act, W.P.(C) 4729/2014 Page 1 of 3 1961 (hereinafter ‘the Act’) and the relevant rules pursuant to it. The assessee resisted this contending that this very issue had been considered by the Assessing Officer (AO) and a reference to the concerned Transfer Pricing Officer (TPO) which ultimately was reviewed by the Dispute Redressal Panel (DRP). It was stressed that the DRP’s order was inconclusive as to the existence of PE. Notice was issued in these proceedings; the interim order permitted the Revenue to continue with the re-assessment proceedings provided no final order was made. Consequently, the reference made to the TPO (consequent to the orders of reference) resulted in TPO determination on 29.01.2015. The TPO held that no adjustment was called for having regard to the overall circumstances of the case. This fact – though subsequent to the filing of the petition is relied upon by the assessee. Additionally, it is contended that pursuant to the re- assessment notice the AO did not issue any further notice as called for by law under Section 143(2) of the Act, within the time prescribed, proposing to take further proceedings in the re-assessment. This aspect too is undisputed. The notice under Section 143(2) of the Act ought to have been issued within six months prescribed period (which in this case ended on 30.09.2013), however, that notice was issued on 09.01.2014. This aspect was highlighted not in the petition but in the course of the proceedings in the rejoinder filed by the assessee sometime in July, 2016. It sought to follow this up through an amendment application (CM No.27598/2018). In the light of these events, which are both subsequent to the initiation of the re- W.P.(C) 4729/2014 Page 2 of 3 assessment proceedings, the entire purpose for re-assessment, assuming that there was any, can no longer be achieved. The judgment of this Court in ‘Pr. Commissioner of Income Tax vs. Silver Line’, (2016) 383 ITR 455 and the other subsequent decisions have ruled that omission to issue notice under Section 143(2) of the Act within the time stipulated in respect of any assessment is fatal. As a result of the above discussion, the reassessment notice dated 15.02.2013 and all consequent proceedings emanating from it are hereby quashed. The writ petition is allowed in the above terms. Pending application stands disposed of. S. RAVINDRA BHAT, J ANU MALHOTRA, J AUGUST 23, 2018 nn W.P.(C) 4729/2014 Page 3 of 3 "