1987 (2) TMI 34 - HC - Income Tax

High Court Dismisses Petitions Challenging Income Tax Demands, Emphasizes Jurisdiction

The Delhi High Court dismissed the writ petitions challenging demands raised by the Income-tax Officer for incorrect interest calculation under section ... CBDT Circulars, High Court, Jurisdiction, Writ ISSUES PRESENTED AND CONSIDERED 1. Whether the High Court before which writ petitions are filed has territorial jurisdiction under Article 226 to entertain challenges to assessment-related orders and demands when the assessing authority and the assessee's registered office are within the territorial jurisdiction of another High Court. 2. Whether a Circular of the Central Board of Direct Taxes (relating to computation of interest under section 220(2)) can, by itself, confer jurisdiction on a High Court outside the territorial forum of the assessing authority where the assessing officer's order does not expressly rely on that Circular. 3. Whether orders purportedly passed under section 154 (rectification of mistake apparent from the record) can be challenged by writ petition in a High Court outside the territorial jurisdiction merely because the petitioner contends that section 154 is inapplicable or that the point is 'controversial' (i.e., raises questions of law on applicability of section 220(2)). 4. Ancillary: the legal effect and force of a Board Circular vis-à-vis judicial decisions on the statute - specifically whether a Circular operates proprio vigore to displace or bind the Income-tax Officer notwithstanding contrary judicial precedents. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Territorial jurisdiction under Article 226 Legal framework: Article 226 confers power on a High Court to issue writs for enforcement of fundamental rights and for other purposes; territorial jurisdiction is determined by the location of the authority whose order is impugned and the residence/registered office of the petitioner. Precedent Treatment: The Court relied on principles (as recently reiterated by the Supreme Court) that High Courts should be reluctant to exercise writ jurisdiction where territorial jurisdiction and convenience render it appropriate that the petition be entertained by another High Court. Interpretation and reasoning: The impugned orders and demands were passed by an authority located in the other High Court's territory and the assessee's registered office was also located there. No material was shown to justify displacement of the territorial rule. The mere fact that a nationwide Board Circular exists does not, without more, transfer or create jurisdiction in another High Court where the local facts and orders fall squarely within the territorial jurisdiction of the other High Court. Ratio vs. Obiter: Ratio - Territorial jurisdiction under Article 226 must be respected and is not displaced merely by the existence of a Board Circular; a petitioner should ordinarily approach the High Court within whose territorial jurisdiction the impugned order was passed. Conclusion: The Court has no jurisdiction to entertain the petitions; they must be dismissed for want of territorial jurisdiction and the petitioner should move the territorially competent High Court. Issue 2 - Effect of the Board Circular on jurisdiction when the assessing officer did not rely on it Legal framework: Administrative Circulars of the Central Board of Direct Taxes provide guidance and are binding on officers in matters of general interpretation, but must be read in the light of statutory provisions and judicial decisions. Precedent Treatment: The Court treated Board Circulars as authoritative guidance but not as overriding judicial pronouncements; where an officer's order does not refer to or rely upon the Circular, jurisdiction cannot be premised upon an assumed application of that Circular. Interpretation and reasoning: The assessing officer's demand and his order rejecting the s.154 application made no reference to the Board Circular; the record demonstrated the officer applied his mind independently and based his conclusion on judicial decisions. Presumption that the officer applied the Circular cannot be indulged without express reference in the order or in the proceedings. Even if the Circular was 'in mind,' it was not applied proprio vigore; the officer preferred to rely on judicial authorities. Ratio vs. Obiter: Ratio - An administrative Circular not relied upon in the impugned order cannot be the basis for conferring jurisdiction on another High Court; one cannot presume its application where the order demonstrates reliance on other grounds. Conclusion: The Circular does not furnish a ground for assuming jurisdiction in the court addressed; absence of reliance on the Circular by the assessing officer negates any attempt to invoke extraterritorial jurisdiction on that basis. Issue 3 - Maintainability of writs challenging orders under section 154 and the alleged absence of an appellate remedy in respect of interest Legal framework: Section 154 permits rectification of mistakes apparent from the record; statutory scheme and appellate remedies determine availability of appeal against assessment relief and consequential demands (including interest under section 220(2)). Precedent Treatment: The Court did not decide finally on whether an appeal lies against the orders in question; it noted conflicting judicial authorities and observed that even assuming no appeal is available, territorial propriety requires approach to the territorially competent High Court. Interpretation and reasoning: The petitioner argued futility of pursuing appellate remedy because the officer asserted s.154 was inapplicable and because interest may not be separately appealable. The Court found these contentions immaterial to the jurisdictional question: even if appellate remedy were unavailable or futile, the proper forum is the High Court within whose territorial jurisdiction the assessing authority sits. The order under s.154 itself showed no issue about the Board Circular; the officer rejected the application on merits referring to judicial decisions. Ratio vs. Obiter: Obiter - The Court expressly refrained from expressing a definitive view on whether an appeal lies against the demands or the section 154 orders, treating the point as unnecessary to dispose of the petitions for lack of territorial jurisdiction. Conclusion: Whether or not an appellate remedy exists, the remedy (writ) if sought must be pursued in the territorially competent High Court; the present petitions are not maintainable on the ground asserted. Issue 4 - Binding force of Board Circular vis-à-vis judicial decisions and the assessing officer Legal framework: Administrative Circulars bind subordinate revenue officers in interpreting the statute but cannot displace or overrule judicial decisions; circulars must yield to court pronouncements on statutory interpretation. Precedent Treatment: The Court reaffirmed that where judicial decisions cover the field, the Circular is not conclusive even upon the Income-tax Officer. Interpretation and reasoning: The assessing officer relied upon subsequent judicial decisions when rejecting the s.154 application, thereby demonstrating that in matters covered by judicial precedent the officer will follow law as declared by courts rather than treat a Board Circular as overriding. Accordingly, a Circular cannot be treated as determinative where judicial authorities have spoken. Ratio vs. Obiter: Ratio - A Board Circular cannot override judicial decisions; in fields covered by judicial decisions the Circular is not conclusive for the assessing officer. Conclusion: The Circular does not operate to displace judicial decisions and, where the officer has applied judicial authority, the Circular cannot be invoked to alter forum or outcome. Cross-references For Issues 1-3: The territorial-jurisdiction conclusion (Issue 1) is reinforced by the findings under Issues 2 and 4 that the assessing officer did not base his order on the Board Circular and that judicial decisions governed the outcome; therefore the existence of the Circular did not create a sufficient basis to invoke extraterritorial writ jurisdiction.